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BREAKING: Supreme Court Narrows Definition Of Whistleblower
Share us on: By Dunstan Prial
Law360, New York (February 21, 2018, 10:33 AM EST) -- The U.S. Supreme Court on Wednesday ruled in favor of a narrow definition of the term "whistleblower," a decision that will significantly limit the scope of anti-retaliation measures meant to protect whistleblowers under the Dodd-Frank Act.
The justices ruled in favor of petitioner Digital Realty Trust, finding that employees who bring securities law complaints against their companies must first take their allegations to the U.S. Securities and Exchange Commission to be protected by anti-retaliation measures afforded under Dodd-Frank.
The ruling in Digital Realty Trust Inc. v. Paul Somers says the definition of whistleblower should be interpreted through the specific wording included in Dodd-Frank and not expanded to include employees who report internally. The case had focused on whether employees can bring whistleblower claims under Dodd-Frank's anti-retaliation provision even if they didn't report their concerns to the SEC.
"Dodd-Frank’s anti-retaliation provision does not extend to an individual, like Somers, who has not reported a violation of the securities laws to the SEC," the court ruled.
Justice Ruth Bader Ginsburg wrote the opinion, joined by Chief Justice John G. Roberts and Justices Anthony M. Kennedy, Stephen G. Breyer, Sonia Sotomayor and Elena Kagan. Justice Sotomayor filed a concurring opinion joined by Justice Breyer. Justice Clarence Thomas filed an opinion concurring in part and concurring in the judgement, which Justices Samuel A. Alito and Neil M. Gorsuch joined.
The Dodd-Frank Act, passed in 2010, expanded whistleblower incentives and protections created under the 2002 Sarbanes-Oxley Act. At issue before the justices was the wording of Dodd-Frank, which defined whistleblowers as employees who provide "information relating to a violation of the securities laws to the commission."
By narrowing the definition to whistleblowers who take their allegations “to the commission,” the high court excludes from Dodd-Frank protections employees who report internally, historically a much larger category than those who report to the SEC.
"The Court’s understanding is corroborated by Dodd-Frank’s purpose and design. The core objective of Dodd-Frank’s whistleblower program is to aid the Commission’s enforcement efforts by “motivat[ing] people who know of securities law violations to tell the SEC,” the high court found.
The ruling settled a circuit split between the Ninth and Fifth Circuits, reversing the Ninth Circuit's decision.
The Ninth Circuit found in March that former Digital Realty executive Paul Somers was entitled to protection under Dodd-Frank after being fired because he complained to upper management that a senior vice president had eliminated some internal corporate controls in violation of the Sarbanes-Oxley Act. A Fifth Circuit ruling in a similar case, Asadi v. G.E. Energy, found in 2013 that whistleblowers must take their complaints to the SEC to be eligible for protection under Dodd-Frank.
Digital Realty, a San Francisco-based real estate investment trust, appealed the Ninth Circuit's ruling to the high court.
Justice Elena Kagan had hinted during oral arguments in November that she was leaning toward a narrow definition, pointing to the statutory wording included in the Dodd-Frank Act.
"You have this definitional provision, and it says what it says," Justice Kagan said, according to a transcript of the hearing.
Justice Kagan wasn't alone during oral arguments in seeming to lean toward the narrower definition included in Dodd-Frank, foreshadowing the court’s decision Monday.
Digital Realty is represented by Kannon K. Shanmugam, Amy Mason Saharia, A. Joshua Podoll and Meng Jia Yang of Williams & Connolly LLP, and Brian T. Ashe, Kiran A. Seldon, Shireen Y. Wetmore and Kyle A. Petersen of Seyfarth Shaw LLP.
Somers is represented by Peter K. Stris, Brendan S. Maher, Daniel L. Geyser and Douglas D. Geyser of Stris & Maher LLP, and by Stephen F. Henry.
The case is Digital Realty Trust Inc. v. Paul Somers, case number 16-1276, in the Supreme Court of the United States.