NATION-NOW Supreme Court deals blow to Wall Street whistle-blowers with unanimous ruling
Supreme Court limits Wall Street whistleblowers
23 February, 2018, 02:16
In the company's reply brief, the real estate investment trust repeated its primary argument that the statutory language of Dodd-Frank's whistleblower provisions limits anti-retaliation protection to employees who report their concerns to the Securities and Exchange Commission, not those who follow the Sarbanes-Oxley directive to report problems to bosses.
The law's anti-retaliation provisions apply only if the whistleblower makes a complaint to the Securities and Exchange Commission, the justices said in ruling against Paul Somers, a former employee of a real estate trust who claimed he was sacked after he complained to top executives about possible misconduct in an Asian branch office.
The Court held in favor of Digital Realty Trust, stating that the whistleblower anti-retaliation provision under the Dodd-Frank Act does not protect individuals who have reported alleged misconduct internally to their employer, but not to the SEC.
Justice Ginsburg said a plain-text reading of Dodd-Frank "undoubtedly shields fewer individuals from retaliation", but she disagreed with the government that "this effect 'vitiate [s]'" the law's protections.
The justices said that a part of the Dodd-Frank Act that protects whistleblowers from being fired, demoted or harassed only applies to people who report legal violations to the SEC.
He did not take his complaint to the SEC before he was sacked, but sued in federal court alleging he was sacked for revealing possible wrongdoing.
The SEC received over 4,200 reports of alleged misconduct in 2016, according to Bloomberg.
Somers and his attorney argued his employment should have been protected under the Dodd-Frank rule. See Asadi v. G.E. Energy (USA), L.L.C.
The case focused on Dodd-Frank's definition of a whistleblower as "any individual who provides ... information relating to a violation of the securities laws to the Commission". "N$3 ow individuals who suspect a securities law violation would be well advised to report directly to the SEC lest they forfeit fundamental anti-retaliation protections".
Moving forward, employees will not be able to invoke whistleblower protections under Dodd-Frank unless they report wrongdoing directly to the SEC. If concerned employees are not entitled to those Dodd-Frank benefits without reporting concerns to the commission, their incentive is to call the SEC hotline.
Note that internal whistleblowers will still be able to bring Sarbanes-Oxley suits-assuming they have complied with the 180-day administrative complaint filing deadline and have exhausted all administrative remedies.