Last week, the United States Supreme Court released its decision in Digital Realty Trust v. Somers, where the Court unanimously adopted a narrow reading of the Dodd-Frank Act’s anti-retaliation “whistleblower” provision. The Court held that the provision applies only to individuals who report securities violations directly to the Securities and Exchange Commission.

The case involved Paul Somers, a former employee of Digital Realty Trust, who alleged that the company terminated him after he internally reported suspected violations of securities law by the company. Somers, however, never reported any of the suspected securities violations to the SEC.

Somers brought suit in a California federal court alleging, among other things, a claim of whistleblower retaliation under Dodd-Frank. Digital Realty Trust moved to dismiss this claim on the grounds that “Somers does not qualify as a ‘whistleblower’ under [Dodd-Frank] because he did not report any alleged law violations to the SEC.” The district court denied the motion, holding that Dodd-Frank “does not necessitate recourse to the SEC prior to gaining ‘whistleblower’ status.” The Ninth Circuit affirmed this holding.

In holding that Dodd-Frank’s anti-retaliation whistleblower provision requires SEC reporting, the Court relied on: (1) Dodd-Frank’s “explicit” definition of the term “whistleblower” and (2) the purpose and design of Dodd-Frank. First, the Court reasoned that because Dodd-Frank explicitly defines the term “whistleblower,” the Court is required to follow that definition. The anti-retaliation provision of Dodd-Frank defines a “whistleblower” as “any individual who provides . . . information relating to a violation of the securities laws to the Commission.” Because a plain reading requires an individual to provide information directly to the Commission, the Court held that “[c]ourts are not at liberty to dispense with the condition—tell the SEC—Congress imposed.”

To provide further support for its narrow interpretation, the Court cited excerpts from a Senate Report discussing the purpose behind Dodd-Frank’s anti-retaliation regime. The Court noted that the Senate Report states that “[t]he ‘core objective’ of Dodd-Frank’s robust whistleblower program . . . ‘is to motivate people who know of securities violations to tell the SEC.’

The Court’s decision resolved a circuit split on this issue. The Fifth Circuit, like the Supreme Court in Digital Realty Trust, held that “employees must provide information to the SEC to avail themselves of Dodd-Frank’s anti-retaliation safeguard,” whereas the Second Circuit reached the same conclusion as the Ninth Circuit.

This decision is welcome news to employers as it will significantly limit the number of claims that can be brought under Dodd-Frank’s anti-retaliation provision. Employers may, however, see an increase in reporting to the SEC.