The New York Court of Appeals has rejected a wrongful discharge cause of action brought by a hedge fund compliance officer who claimed that he was terminated for questioning a series of personal stock trades by the company’s president. Sullivan v. Harnisch, No. 82 (N.Y. May 8, 2012) (PDF)
Sullivan, who was the Chief Compliance Officer, Executive Vice President, Treasurer, Secretary and Chief Operating Officer of the hedge fund, was terminated after confronting the hedge fund’s president about stock trades that Sullivan believed amounted to “front-running.” In other words, Sullivan claimed that the trades took advantage of an opportunity from which the firm’s clients were excluded. Sullivan argued that his termination constituted a breach of implied contract. Based on the legal and ethical duties of his securities firm and his position as a compliance officer, Sullivan asserted that the Court should expand an existing exception to the employment-at-will doctrine to his situation as a compliance officer who was fired for objecting to misconduct.