As we reported in our October and July 2017 newsletters, the U.S. Supreme Court is currently reviewing a circuit split concerning whether the Dodd-Frank Act prohibits retaliation against internal whistleblowers who did not report their concerns regarding securities law violations directly to the SEC prior to filing suit. By way of brief background, the appeal involves a federal trial court declining to dismiss a former Digital Realty Trust employee’s whistleblower retaliation claims. The basis for Digital Realty Trust’s attempt to have the suit dismissed was that the former employee failed to take his concerns directly to the SEC before he initiated his lawsuit under the Dodd-Frank Act’s whistleblower provisions. The Ninth Circuit Court of Appeals agreed with the trial court and upheld its decision. Thereafter, Digital Realty Trust appealed the case to the U.S. Supreme Court, which agreed to review it.
The central issue in this appeal is whether the definition of “whistleblower” in the Dodd-Frank Act includes individuals who only report their concerns of securities law violations internally with their employer, rather than externally to the SEC. Since the U.S. Supreme Court accepted the appeal, several entities, including the U.S. Chamber of Commerce, submitted friend-of-the-court briefs.
In late October 2017, the SEC offered its own brief, which advocates for a more broad reading of the Dodd-Frank Act that would cover internal whistleblowers like Digital Realty Trust’s former employee. In its brief, the SEC reasons that “[e]xcluding such persons from Dodd-Frank’s protections would depart from usual understandings of the term ‘whistleblower’ and would undermine Congress’ effort to promote more rigorous and effective internal compliance programs.”
At oral argument in November, Justices Kagan, Breyer, and Gorsuch seemed to express skepticism in response to both the former employee’s and the SEC’s appeals for a broader definition of the term “whistleblower” under the Dodd-Frank Act.
We will continue to provide updates as this appeal develops before the U.S. Supreme Court.