In an increasingly rare show of unanimity, the U.S. Supreme yesterday issued a ruling that very narrowly interpreted the whistleblower protections of the Dodd-Frank Act, declining to follow the Securities and Exchange Commission (SEC) and lower courts in their more expansive view of the Act and its protections. Dodd-Frank was passed in 2010 as part of Congress’s attempt to rein-in Wall Street following the 2008 economic crash.

The case that led to the Court’s ruling arose from a lawsuit filed by Paul Somers, who claimed he was fired from Digital Realty Trust Inc.  (Digital Realty) in 2014 after reporting accounting irregularities committed by his boss in the company’s Singapore office. Mr. Somers argued he was protected by Dodd-Frank even though he didn’t report the alleged problems to the SEC. Digital Realty’s position was that Somers was not a whistleblower as defined in Dodd-Frank and was therefore not protected from termination of his employment with the company, an argument with which the Supreme Court ultimately agreed.

The Court decided that whistleblowers must report any alleged financial irregularities to the SEC, not just to their employers, in order to trigger the anti-retaliation and other protections of Dodd-Frank.  Justice Ruth Bader Ginsberg, writing for the Court, indicated that the definition section of the statute provides an unambiguous description of a “whistleblower” as, “any individual who provides … information relating to a violation of the securities laws to the Commission.” [emphasis added]. The decision represents a significant departure from the SEC’s interpretation, an interpretation followed in this case by the lower courts, which had extended protections even to those who hadn’t reported issues directly to the SEC.

The Wall Street Journal notes that the SEC and Justice Department report that “80% of whistleblowers report internally before they tell the SEC about a violation” and that the SEC received more than 4,400 whistleblower complaints in 2016.  Given yesterday’s decision and the Supreme Court’s narrow interpretation of Dodd-Frank’s whistleblower protections, it seems likely (and a wise decision by any potential whistleblowers) that the number of reports to the SEC will rise as whistleblowers and lawyers absorb the lesson of the Digital Realty case.

The legal team at FisherBroyles welcomes your questions on this decision and all issues of federal and state financial regulation compliance. Please contact any of the following attorneys:
Brian Dickerson, FisherBroyles Partner
Brian E. Dickerson

Anthony Calamunci, FisherBroyles Partner
Anthony Calamunci

Nicole Waid, FisherBroyles Partner
Nicole Hughes Waid

Amy Butler, FisherBroyles Partner
Amy Butler

Katy Wane, FisherBroyles Partner
Katy Wane