Supreme Court justices struggled Tuesday to interpret whistleblower provisions of a federal law in a way that would protect some private company employees who do work for public companies, but not all—not, for example, the gardener who mows the company’s lawn.

Business groups say the outcome of the case Lawson v. FMR could mean the difference between protection under the Sarbanes-Oxley Act for whistleblowers at 4,000 publicly traded companies versus the same protection for workers at as many as eight million private firms that may have dealings with public companies.

The Chamber of Commerce warned in a brief against a broad interpretation that would subject millions of small businesses to “burdensome and expensive” whistleblower litigation.

Some justices who would usually be sympathetic to such a plea seemed skeptical. Gibson, Dunn & Crutcher partner Mark Perry, arguing for the employer in the case, said “Congress never contemplated covering private companies,” even though the law does mention contractors and subcontractors. Congress was focused on “the failure of Enron,” a public company, when it passed the law in 2002, Perry said.

Congress, Perry added, intended to leave disputes involving private contractors to be handled under other federal and state laws.

Reading the statute in such a limited way, Justice Antonin Scalia said at one point, would be “very sensible,” but “unfortunately it’s not there” in the words of the legislation. Justice Samuel Alito Jr. also said such an interpretation would give the law “such a narrow meaning” that it might render the provisions meaningless.

But justices also seemed to reject the other extreme, which would protect whistleblowers from retaliation or firing even at private companies with little or no direct involvement in possibly fraudulent activities at the publicly held companies for whom they work.

Justice Stephen Breyer asked about a gardening company that mows a company’s lawn once a week. Would a disgruntled employee be able to invoke Sarbanes-Oxley by claiming the company was involved in fraud—even if the fraud had nothing to do with the public company?

University of Washington School of Law professor Eric Schnapper, representing the whistleblowers in the case, struggled to answer. In the end, he did not rule out the gardener example, asserting that said Congress meant the law to be “an antifraud statute” with broad scope.

Schnapper declined to join a middle-ground approach offered by the Obama administration that would cover private company whistleblower employees only when they report wrongdoing that directly relates to the work being done for the public company. “We think it’s not the correct reading,” Schnapper said.

Nicole Saharsky, assistant to the solicitor general, argued on the side of the whistleblowers, gamely trying to defuse the gardener hypothetical. The best interpretation of the law, she said, would cover whistleblowers who “have information about fraud or securities law violations and are in a position to report it.” She added, “it is very unlikely that it would be the gardener.”

After the argument Gregory Keating, who co-chairs Littler Mendelsohn’s employer-side whistleblower practice, said, “it’s a head-scratcher” to predict which side will win. The business argument “met with some cynicism and questioning by plain-language advocates like Justice Scalia,” Keating said. On the other hand, he added, justices seemed “aware of the consequences” of a broad interpretation of the law on millions of employers.

Lloyd Chinn of Proskauer Rose, who also defends companies in whistleblower cases, agreed some members of the court showed “concern” about leaving all private firms out of the equation, but said justices across the spectrum seemed “uncomfortable about placing no limitations” on the scope of the law.

The case originated with actions taken against two employees of a private subcontractor that advised the mammoth Fidelity mutual fund group. Jackie Lawson resigned under pressure in 2007 after she told her superiors and then the U.S. Securities and Exchange Commission about irregularities in Fidelity’s calculation of expenses, which affected the fees Fidelity could charge clients. Jonathan Zang was fired in 2005 after complaining about misleading statements Fidelity was making to the SEC.

Fidelity sought dismissal of the claims, asserting that the law did not cover employees of the private company. Fidelity’s mutual funds, like other entities in the mutual fund industry, have no employees as such; directors of the funds contract with companies that provide investment advice such as the one that employed Lawson and Zang.

The U.S. Court of Appeals for the First Circuit sided with Fidelity, which claimed Sarbanes-Oxley did not protect Lawson or Zang because they were employed by contractors, not publicly held Fidelity itself.

Contact Tony Mauro at