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E.D. Pennsylvania Dismisses Dodd-Frank Whistleblower Claim After Plaintiff Fails to Qualify as a Whistleblower

On July 6, 2017, the U.S. District Court for the Eastern District of Pennsylvania dismissed a whistleblower claim after determining that the plaintiff did not qualify as a whistleblower under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). Reyher v. Grant Thornton, LLP, No. 16-1757 (E.D. Pa. July 6, 2017).

Background

The plaintiff, Ann Marie Reyher, is a Certified Public Accountant that was hired as a Managing Director in Grant Thornton’s Philadelphia office. Reyher allegedly discovered accounting irregularities within the statements and filings of certain Grant Thornton clients and complained internally to Grant Thornton administrators that such irregularities “amounted to bank fraud, mail fraud, wire fraud, and/or fraud against shareholders.”  Notably, none of the clients implicated in Reyher’s allegations were publicly traded companies.  After seven weeks, Reyher was terminated by the organization.  Reyher alleged that the termination was retaliation for her internal complaints about the accounting irregularities and her refusal to participate in such activities, in violation of section 922 of Dodd-Frank.

Decision

The Eastern District of Pennsylvania dismissed Reyher’s Dodd-Frank whistleblower claim with prejudice, as Reyher did not qualify as a whistleblower. Section 922 of Dodd-Frank lists the different types of whistleblower disclosures that are protected, one being those protected under the Sarbanes-Oxley Act of 2002 (“SOX”). Reyher alleged that her complaints were protected under SOX, specifically 18 U.S.C. § 1514A, titled “Protection for Employees of Publicly Traded Companies Who Provide Evidence of Fraud.”

However, Reyher’s complaints only involved non-publicly traded entities (partnerships, S corporations, private corporations, individuals, etc.). She failed to allege that there was any connection between Grant Thornton’s work for their publicly traded company clients and her internal complaints.  While Reyher argued that § 1514A applied because Grant Thornton was a contractor to other publicly traded companies, the court explained that “a purported whistleblower employed by a private company cannot invoke the protections of § 1514A simply because her employer happens to contract with public companies on matters unrelated to the whistleblowing” and that “the connection between Grant Thornton and its public company clients is little more than a coincidence.”

The remaining state law claims were then dismissed without prejudice.

Implications

The decision aligns with a Gibney v. Evolution Marketing Research, LLC, another case in the Eastern District of Pennsylvania that refused to extend the scope of SOX to scenarios where the reported fraud is tangentially related to a publicly traded company.  25 F. Supp. 3d 741 (E.D. Pa. 2014).  Also notable is that the court refused address the question of whether an employee who only reports violations internally may qualify as a whisteblower under Dodd-Frank.  There is currently a circuit split on this issue and the Third Circuit has not yet addressed this question.

© 2019 Proskauer Rose LLP.

TRENDING LEGAL ANALYSIS


About this Author

Lloyd B Chinn, Financial, Whistleblower Attorney, Proskauer Law Firm
Partner

Lloyd B. Chinn is a Partner in the Labor & Employment Law Department and co-head of the Whistleblowing & Retaliation Group. He litigates employment disputes of all types before federal and state courts, arbitration tribunals (e.g., FINRA, JAMS and AAA), and before administrative agencies in New York and across the country. Lloyd's practice ranges from litigating compensation disputes to defending whistleblower, discrimination and sexual harassment claims. Although he represents employers in a wide range of industries, including law, insurance, health care, consulting, media,...

212-969-3341
Harris M Mufson, Class/Collective Action Attorney, Proskauer
Senior Counsel

Harris Mufson is a senior associate in the Labor & Employment Law Department and a member of the Employment Litigation & Arbitration and Whistleblowing & Retaliation Groups.

Adept at counseling clients at every turn of the litigation process, Harris represents employers in a variety of industries, including financial services, health care, entertainment, sports and legal, with respect to a wide range of labor and employment law matters. These include compensation disputes, employment discrimination and retaliation, whistleblowing, sexual harassment, wrongful discharge, defamation, breach of contract, non-competition agreements and wage-and-hour issues. He regularly appears in state and federal courts, as well as in proceedings before the American Arbitration Association, the Financial Industry Regulatory Authority, JAMS, the Equal Employment Opportunity Commission, and other federal and state agencies.

212-969-3794
Brett Schwab, Proskauer Law Firm, Labor and Employment Attorney
Associate

Brett Schwab is an associate n the Labor & Employment Law Department.

While attending the University of Pennsylvania Law School, Brett served as the Co-President of the Entertainment & Sports Law Society. Brett was also a Senior Editor for the Journal of Business Law and a Senior Advocate for the Employment Advocacy Project.

Brett’s professional experience includes placements with the Philadelphia 76ers, Wells Fargo Bank, and Comcast-Spectacor. His ideas on NBA Draft Lottery reform have been published...

212-969-3659