In an encouraging development for whistleblowers, a prominent federal appellate court recently expanded anti-retaliation protections for workers in the financial industry. In Somers v. Digital Realty Trust, Inc., a three-judge panel of the U.S. Court of Appeals for the Ninth Circuit held that the Dodd-Frank Act’s anti-retaliation provision protects whistleblowers who report securities violations internally to management.

The Ninth Circuit’s holding directly contradicts that of an earlier decision of the U.S. Court of Appeals for the Fifth Circuit, Asadi v. G.E. Energy (USA), L.L.C., 720 F.3d 620 (5th Cir. 2013). In Asadi, the Fifth Circuit held that the Dodd-Frank Act’s anti-retaliation provision protects only those whistleblowers who report activities externally to the U.S. Securities and Exchange Commission (“SEC”).

By allowing whistleblowers to rely on internal or external reports of securities violations, the Ninth Circuit joined the Second Circuit, which held similarly in Berman v. Neo@Ogilvy LLC, 801 F.3d 145 (2d Cir. 2015). This widening split of authority among these important federal appellate courts only further underscores the need for the U.S. Supreme Court to step in and address the issue soon.

Facts of the Case

Paul Somers worked as a vice president for Digital Realty Trust. During his time at the company, Somers allegedly discovered that his direct supervisor had engaged in potential securities violations, including the alleged concealment of millions of dollars of cost-overruns on a project in Hong Kong. When Somers reported his concerns to senior management, Digital Realty quickly terminated him, prompting him to file a lawsuit alleging retaliation under the Dodd-Frank Act’s whistleblower protection provision. The company moved to dismiss Somers’ Dodd-Frank Act retaliation claim, arguing that the law did not protect him because he had reported his concerns internally, and not externally to the SEC.

The U.S. District Court for the Northern District of California considered and then denied Digital Realty Trust’s motion to dismiss. The employer quickly moved for an interlocutory appeal, asking that the Ninth Circuit address this legal issue before Somers’ lawsuit proceeded any further.

The Ninth Circuit’s Decision

Although Somers’ case marks the first time that the Ninth Circuit has directly considered the issue, other federal circuit courts of appeal and district courts have reached different conclusions regarding the scope of the Dodd-Frank Act’s anti-retaliation protections. Some federal courts, like the Fifth Circuit in Asadi, have interpreted the Dodd-Frank Act’s whistleblower provision narrowly. That narrow interpretation leads those courts to conclude that only those employees who report securities violations externally to the SEC have the right to prosecute a claim of retaliation under the Dodd-Frank Act. Other courts, like the Second Circuit in Berman, adopt a more whistleblower-friendly approach. Those courts find that the ambiguity in the Dodd-Frank Act’s statutory language suggests that Congress intended for the Dodd-Frank Act to cover both internal and external reports of securities violations.

The Ninth Circuit opinion, authored by the Honorable Mary M. Schroeder, sided with the latter approach and found that Congress did not intend to limit the Dodd-Frank Act’s anti-retaliation protections to whistleblowers who report wrongdoing to the SEC. As did the Second Circuit before it in Berman, the Ninth Circuit in Somers resolved the statutory ambiguity in part by considering the SEC’s whistleblower-friendly interpretation of the law.

These differing judicial conclusions have big implications for American workers. The split of authority between the federal appellate courts means that a financial services executive in Texas does not have the same protections under the Dodd-Frank Act as does a bond trader in New York City. And the Supreme Court does not seem terribly interested in addressing the matter, at least for the time being; recently, on March 20, 2017, the Supreme Court declined an arguable opportunity to address the issue in a Sixth Circuit case, Verble v. Morgan Stanley Smith Barney, LLC.

Until the Supreme Court decides to clearly explain the scope of the Dodd Frank Act’s anti-retaliation protections, it is likely that lower courts will reach different results.