On the last day of its current session, the Supreme Court announced it will consider whether the Dodd-Frank whistleblower protections extend to corporate insiders who blow the whistle on their employers by reporting the alleged misconduct internally only rather than to the Securities and Exchange Commission. The Court will hear the appeal of Digital Realty Trust Inc. arising from an opinion of the 9th Circuit that held that the whistleblower protections of Dodd-Frank applied when the company allegedly fired its former executive for reporting alleged misconduct of his supervisor internally, but not to the SEC.
The case arises under the Dodd-Frank Whistleblower Program, implemented in 2011, that prohibits corporate employers from retaliating against whistleblowers who attempt to report violations of securities law. Under the Program, eligible whistleblowers may receive awards of between 10% and 30% of the sanctions collected in actions brought by the SEC and related actions brought by other authorities. Since the program was created, more than $154 million has been awarded to 44 whistleblowers out of an investor protection fund established by Congress financed entirely through monetary sanctions paid to the SEC by securities law violators.
Review by the Supreme Court will address a current split between the 2nd and 9th Circuits, both of which have held a report to the SEC is not necessary, and the 5th Circuit which previously held that whistleblowers must report alleged misconduct to the SEC to be afforded the Dodd-Frank whistleblower protections. The Court will hear arguments in the case when it re-convenes in October. A ruling in Digital Realty Trust’s favor will force whistleblowers to report alleged securities violations to the SEC or other federal authorities in order for the Dodd-Frank whistleblower protections to apply.