Supreme Court Rules that Dodd-Frank Whistleblower Protections Do Not Apply to Internal Reporting

LedgerEnforcement of a wide range of laws and regulations depends on reporting by people with knowledge of possible violations, often known as “whistleblowers.” In cases involving suspected wrongdoing by an employer, many potential whistleblowers may hesitate to speak out, for fear of losing their jobs. In New Jersey, employment statutes protect whistleblowers against retaliation by their employers. The U.S. Supreme Court recently ruled on a dispute over the whistleblower protections in the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”). It held that, unlike many other whistleblower protection laws, Dodd-Frank protects people who report their concerns to the government, but not those who only report internally. Digital Realty Trust, Inc. v. Somers, 583 U.S. ___ (2018).

New Jersey whistleblowers may report their concerns to government regulators or to internal control officers. The New Jersey Conscientious Employee Protection Act (CEPA) protects public and private employees who disclose suspected legal violations, or who refuse to take part in acts that they reasonably believe are illegal or unethical. This includes disclosures made “to a supervisor or to a public body.” N.J. Rev. Stat. § 34:19-3(a). The language of Dodd-Frank, however, is not as clear on this issue.

Congress passed Dodd-Frank as a response to the financial crisis of 2008. The statute defines “whistleblower” as one or more individuals who report alleged violations of securities laws or regulations “to the Commission, in a manner established, by rule or regulation, by the Commission.” 15 U.S.C. § 78u-6(a)(6). The term “Commission” is defined elsewhere in the same chapter as the Securities and Exchange Commission (SEC), with an exception when “the context otherwise requires” a different interpretation. Id. at § 78c(a)(15). The question for the Supreme Court was whether Dodd-Frank’s whistleblower protections apply to someone who makes a report to someone other than the SEC.

The plaintiff in Digital Realty was a vice president who reported suspected securities violations to upper management in 2014. He did not go to the SEC with his suspicions. The company fired him shortly after he made this report. He filed suit under Dodd-Frank for unlawful retaliation. The defendant moved to dismiss the case on the ground that Dodd-Frank does not apply to internal whistleblowing. The district court denied the motion, based in part on the SEC’s interpretation of the statute as having broad application to whistleblowing activities. The Ninth Circuit affirmed this ruling in Somers v. Digital Realty Trust, Inc., 850 F.3d 1045, 1047 (9th Cir. 2017).

The Supreme Court reversed the appellate court’s ruling, finding that Dodd-Frank’s whistleblower protections only apply to reports made to the SEC. In addition to using a plain-language interpretation of the statute’s definition of “whistleblower,” the court found that Dodd-Frank specifically limits unlawful retaliation to reports made to the SEC. See 15 U.S.C. § 78u-6(h)(1)(A). The court also compared Dodd-Frank to other financial statutes. The Sarbanes–Oxley Act of 2002, for example, expressly extends whistleblower protections to employees who report suspicions to the government or “a person with supervisory authority over the employee.” 18 U.S.C. § 1514A(a)(1).

The whistleblower lawyers at the Resnick Law Group represent employees and job applicants in claims of unlawful employment practices in New Jersey or New York. To schedule a confidential consultation with a member of our team, contact us today online, at 973-781-1204, or at 646-867-7997.

More Blog Posts:

New Jersey Whistleblower Lawsuit Not Preempted by Federal Law, State Supreme Court Rules, The New Jersey Employment Law Firm Blog, January 26, 2018

Supreme Court to Address Ambiguity in Whistleblower Provisions of Dodd-Frank, The New Jersey Employment Law Firm Blog, November 3, 2017

Second Circuit Adopts Broad Definition of “Whistleblower” in Dodd-Frank Retaliation Lawsuit, The New Jersey Employment Law Firm Blog, October 20, 2015

Photo credit: RaphaelQS (Own work) [CC0], via Wikimedia Commons.

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