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Appeals court upholds AIG win in whistleblower case

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American International Group Inc.’s win against the former head of its legal operations center was upheld Thursday by the 2nd U.S. Circuit Court of Appeals.

The appellate court in Aaron Katzel v. American International Group Inc., et al. said Mr. Katzel failed to clear the “relatively low bar” in his lawsuit contending the insurer violated the Sarbanes-Oxley Act of 2002 when it refused to pay him more than $1 million of performance-related equity awards after he filed a complaint with the Occupational Safety and Health Administration in October 2017.

The three-judge panel also found that Mr. Katzel failed to sufficiently state claims that AIG violated New York law when terminating his employment.

Mr. Katzel began working for AIG in 2006 and was later named head of the insurer’s legal operations center, where he was tasked with lowering the company’s external legal costs. In 2015, Mr. Katzel proposed that AIG spin off the department’s work into its own consulting firm to reduce external legal costs. The company rejected the idea, court records show.

In December 2016, Mr. Katzel spoke with AIG’s compliance department about concerns he had about its evaluation of his proposal as well as its controls on record preservation and enforcement of sensitive information policies. The department investigated Mr. Katzel’s concerns and found that while they were valid, there was no reason to take further action.

AIG terminated Mr. Katzel’s employment in May 2017, and he submitted a whistleblower complaint with OSHA. The agency said in November 2018 that his alleged protective activity was not covered by Sarbanes-Oxley, and he sued AIG in federal court in New York in September 2020.

The trial judge dismissed the suit after finding that Mr. Katzel failed to sufficiently state claims for relief.

Representatives for the parties did not respond to requests for comment.