Genberg v. Porter
United States Court of Appeals for the Tenth Circuit
882 F.3d 1249 (2018)
Carl Genberg (plaintiff) worked as an executive for Ceragenix Corporation after a company that he worked for merged with Ceragenix. As a result of the merger, a number of new shares went into escrow. The Ceragenix board obtained a proxy over these shares and exercised voting rights over the shares for five years. Eventually, Genberg and a group of investors objected to the continued use of the proxy. Genberg drafted an email under the name of a large Ceragenix shareholder, urging the board to stop using the proxy. The email did not mention a particular Securities and Exchange Commission (SEC) rule, but Genberg later testified that he believed Ceragenix’s board was violating SEC Rule 14 (barring the use of a proxy for shareholder votes after the next annual meeting). The email was sent to Ceragenix’s board on March 2. The board met to discuss the email the next day. Steven Porter (defendant), Ceragenix’s CEO, stated that the email had been written by Genberg with the purpose of aiding another company in the purchase of Ceragenix. On March 4, Genberg sent an email to a board member accusing Porter of insider trading, so the board hired an attorney to investigate both the allegations of insider trading and Genberg’s involvement in an attempt to acquire Ceragenix. The investigation found no insider trading by Porter, but it found that Genberg had been involved in an effort to acquire Ceragenix. The board fired Genberg for cause. Genberg sued Porter for retaliation under the Sarbanes-Oxley Act of 2002 (SOX). The district court granted summary judgment in favor of Porter. The appellate court reversed.
Rule of Law
Holding and Reasoning (Bacharach, J.)
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