As we reported in our last newsletter, the U.S. Supreme Court agreed to review and resolve the circuit split concerning whether the Dodd-Frank Act prohibits retaliation against internal whistleblowers who have not reported their concerns regarding securities law violations to the SEC before filing suit. By way of background, Digital Realty Trust moved to dismiss a former employee’s whistleblower retaliation claim because he had not taken his concerns to the SEC before he filed suit. The trial court denied Digital Realty Trust’s motion, and the Ninth Circuit affirmed the trial court’s decision.
In its opening appellate brief to the Supreme Court, Digital Realty Trust argued that the Ninth Circuit and the SEC have expanded the definition of “whistleblower” under the Dodd-Frank Act beyond Congress’s legislative intent, thereby minimizing the role of a parallel whistleblower regime provided in the Sarbanes-Oxley Act. Digital Realty Trust further emphasized that, if the Ninth Circuit’s opinion stands, it would render the whistleblower protections of the Sarbanes-Oxley Act nearly obsolete because the whistleblower filed a claim in federal court under the Dodd-Frank Act’s whistleblower provisions, even though he claimed he was fired in retaliation for internally reporting violations of the Sarbanes-Oxley Act. Digital Realty Trust claims whistleblowers under the Sarbanes-Oxley Act are thereby dis-incentivized from suing under its provisions because the Dodd-Frank Act allows for the recovery of double back pay, and has a longer statute of limitations.
While the SEC has promulgated a rule providing that the Dodd-Frank Act’s anti-retaliation provisions extend to internal whistleblowers, Digital Realty Trust argues that the SEC’s guidance is not entitled to deference. This is because the Dodd-Frank Act, according to Digital Realty Trust, unambiguously defines “whistleblower” as someone who reports their concerns directly to the SEC.
We will continue to provide updates as this appeal develops before the U.S. Supreme Court.