On March 8, 2017, a divided panel of the Ninth Circuit Court of Appeals held that the Dodd-Frank Act’s anti-retaliation protections extend to whistleblowers who have not reported to the SEC. By way of background, the Ninth Circuit’s decision affirmed the trial court’s denial of Digital Realty Trust’s motion to dismiss its former Vice President of Portfolio Management, Paul Somers’s claims that the company discriminated against him based on his sexual orientation, and then fired him in retaliation for complaining about his supervisor’s actions. The trial court also certified the issue of whether Somers qualified as a whistleblower under the Dodd-Frank Act for interlocutory appeal to the Ninth Circuit.
In its decision, the Ninth Circuit acknowledged that the Dodd-Frank Act defines a “whistleblower” as “any individual who provides, or two or more individuals acting jointly who provide, information relating to a violation of the securities laws to the commission, in a manner established, by rule or regulation, by the commission.” (emphasis added). The Ninth Circuit then considered that definition against the language of the Dodd-Frank Act’s anti-retaliation provision, which appears later in the statute. The anti-retaliation provision prohibits retaliation against individuals who make disclosures that are required or protected under the Sarbanes-Oxley Act. In reviewing the statute, the Ninth Circuit agreed with the reasoning of the Second Circuit that reading the Dodd-Frank Act’s definition of “whistleblower” into its anti-retaliation provision would create too narrow a scope of protection. The Ninth Circuit further reasoned that reading the statute in that way would only protect whistleblowers who report both internally and to the SEC.
Judge Mary M. Schroeder, writing for the panel, summed up the court’s reasoning as follows: “[The Dodd-Frank Act’s] anti-retaliation provision unambiguously and expressly protects from retaliation all those who report to the SEC and who report internally. Its terms should be enforced.” Judge John B. Owens, in a brief dissenting opinion, stated that he would agree with the Fifth Circuit’s reasoning on this issue. The Fifth Circuit previously held that the anti-retaliation provisions of the Dodd-Frank Act should be read using the same definition of “whistleblower” as stated earlier in the statute.
This decision from the Ninth Circuit widens the circuit split between the Fifth Circuit, which held in 2013 that only those who report to the SEC qualify as whistleblowers, and the Second Circuit, which held in 2015 that the anti-retaliation provision was ambiguous and that courts must defer to SEC guidance. The Sixth Circuit was faced with the issue in an appeal brought by a former Morgan Stanley employee, but avoided ruling on it because the underlying claims were too vague to qualify for whistleblower protection. The Third Circuit is currently considering the issue in an appeal brought by a former in-house tax attorney for Vanguard Group, Inc.
The case is Paul Somers v. Digital Realty Trust, Inc., case number 15-17352, 850 F.3d 1045 (9th Cir. 2017).