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Does Dodd-Frank Act Protect Whistleblower Who Did Not Report to SEC?

Whether a claimant qualifies as a whistleblower under the  language of the Dodd-Frank Act when he  does not complain directly to the SEC is the question the Eighth Circuit Court of Appeals in St. Louis may attempt to answer.

Securities clearing and settlement firm COR Clearing LLC has appealed a Nebraska District Court’s denial of its motion to dismiss a claim  brought  by a former executive of the firm.

The executive plaintiff, Julie Bussing, was terminated in May 2012 and sued  her former employer, alleging her firing violated Dodd-Frank’s whistleblower protection provision.  COR moved to dismiss the Dodd-Frank claim for failure to state a claim and a federal magistrate recommended the dismissal.  The plaintiff objected.  The District Court ruled in favor of the plaintiff, finding the intent of Dodd-Frank was to provide broad whistleblower protection to informers who complain to an audience wider than just the SEC.  Now, the former employer is asking the appeals court to accept its mid-case appeal and to overrule the District Court, halting the litigation.

A “whistleblower” under the Dodd-Frank Act is “any individual who provides . . . information relating to a violation of the securities law to the Commission . . . .”  In apparent tension with this definition is Dodd-Frank’s prohibition of any discharge of a “whistleblower in the terms and conditions of employment because of any lawful act done by the whistleblower . . . (iii) in making disclosures that are required or protected under the Sarbanes-Oxley Act of 2002 . . . and any other law, rule or regulation subject to the jurisdiction of the Commission.”  The District Court, however,  determined the foregoing language was consistent  when it is “read using the word ‘whistleblower’ in its everyday sense.”

As we previously discussed, this very issue was addressed by the Fifth Circuit in Asadi v. G.E. Energy (USA) LLCwhich reached a different conclusion, ruling that section iii of Dodd-Frank’s whistleblower provisions protected only individuals who already had disclosed the alleged wrongdoing  to the SEC and then were retaliated against on the basis of that disclosure.  The Fifth Circuit (New Orleans) disagreed with other courts and concluded the plain language and structure of the statute compelled the conclusion that internal communications alone were not protected.

Should the Eighth Circuit accept the case at this time and find in COR’s favor, a split among the federal courts of appeals will arise as to the meaning of  Dodd-Frank’s whistleblower standing, setting the stage for possible Supreme Court review.  We are monitoring this developing issue.

Jackson Lewis P.C. © 2021National Law Review, Volume IV, Number 216
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About this Author

Nick Beerman, Employment and Labor Law, Shareholder Jackson Lewis
Shareholder

Nick M. Beermann is a Shareholder in the Seattle, Washington office of Jackson Lewis P.C.  Mr. Beermann practices in all areas of employment and labor law with emphasis in employment contracting and dispute resolution, corporate governance and internal investigations, Sarbanes-Oxley compliance and litigation, trade secret and non-competition advice and litigation, discrimination and harassment advice and litigation, ERISA litigation, OSHA investigations and charge resolution, business entity disputes, WARN advice, wage and hour compliance and...

206-405-0404
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