## Facts

- Carl Genberg, a Ceragenix executive, believed the company’s board improperly retained proxy voting rights over escrowed shares to maintain control and increase compensation.
- On March 2, Genberg ghostwrote an email for a large shareholder urging the board to stop using the proxy and restore voting rights; Genberg later said he believed the proxy practice violated SEC proxy rules.
- The board discussed the email on March 3; CEO Steven Porter and other directors suspected Genberg of disloyalty and of aiding a group seeking to take control of Ceragenix.
- On March 4, Genberg emailed a board member in his own name accusing Porter of insider trading.
- The board hired outside counsel to investigate the insider-trading accusation and Genberg’s alleged involvement with an acquisition group; the investigation found no insider trading but concluded Genberg was involved with an outside group interested in acquiring Ceragenix.
- Ceragenix terminated Genberg “for cause.”
- After termination, Porter made statements to individuals with corporate interests in the matter characterizing Genberg as disloyal and involved in a control-seizure effort.
- Genberg sued Porter individually for Sarbanes–Oxley (SOX) retaliation and for defamation under Nevada law.
- The district court granted summary judgment to Porter on both claims; Genberg appealed.

## Issues

1. Whether Genberg’s March 2 proxy-related ghostwritten email and March 4 insider-trading email could constitute SOX-protected activity based on a subjectively held and objectively reasonable belief of a securities-law violation.
2. Whether a reasonable jury could find Genberg’s protected activity was a contributing factor in his termination, and whether the same-action defense defeated the claim at summary judgment.
3. Whether Porter’s statements about Genberg were privileged under Nevada’s common-interest privilege and, if so, whether Genberg produced evidence of malice or reckless disregard sufficient to overcome the privilege.

## Decision

- The Tenth Circuit reviewed summary judgment de novo, viewing evidence and reasonable inferences in Genberg’s favor.
- The court reversed summary judgment on the SOX retaliation claim and remanded.
- The court held that SOX does not require an employee’s complaint to be “definitive and specific” or to cite a particular rule; a jury could find Genberg had a subjectively and objectively reasonable belief that misconduct implicated federal securities law.
- The court held a jury could find Genberg’s disclosures were a contributing factor in the termination decision based on the sequence of events, timing, and evidence that board members viewed Genberg negatively after the communications.
- The court held Porter had not preserved the same-action affirmative defense for summary judgment and, in any event, the record did not compel a same-action finding under the clear-and-convincing standard.
- The court affirmed summary judgment on the Nevada defamation claim, holding the statements fell within the common-interest privilege and Genberg failed to show malice or reckless disregard.

## Legal Principles

- SOX protected activity requires the employee to show a subjectively held and objectively reasonable belief that the reported conduct violated federal securities laws or SEC rules; the report need not articulate the violation with technical precision or cite a specific provision.
- SOX retaliation requires proof that protected activity was a “contributing factor” to the adverse action; temporal proximity and circumstantial evidence can suffice to create a fact issue.
- Once a prima facie SOX case is shown, the employer may avoid liability only by proving by clear and convincing evidence it would have taken the same action absent the protected activity; this same-action showing functions as an affirmative defense that must be properly raised and supported.
- Nevada’s common-interest privilege protects good-faith communications among parties sharing a legitimate common corporate interest; the privilege is defeated only by evidence of malice or reckless disregard for truth.

## Conclusion

The Tenth Circuit held that Genberg presented triable issues that his proxy and insider-trading communications were SOX-protected and contributed to his termination, requiring reversal of summary judgment on retaliation, while Porter’s internal corporate statements about Genberg were privileged under Nevada law, warranting affirmance on defamation.


Genberg v. Porter, 882 F.3d 1249 (10th Cir. 2018)