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N.D. Illinois Dismisses Dodd-Frank Whistleblower Claim For Lack Of Complaint To The SEC

On June 7, 2017, the U.S. District Court for the Northern District of Illinois dismissed a whistleblower retaliation claim under the Dodd-Frank Act because the plaintiff failed to report his complaint of alleged securities violations to the SEC. Martensen v. Chicago Stock Exchange, Case No. 17-cv-1494 (N.D. Ill.) (Shadur, J.)

Plaintiff worked as a supervisor at the Chicago Stock Exchange’s Market Regulation Trading Examinations Unit. He alleged that his employment was terminated in violation of Dodd-Frank’s whistleblower protection provision after he complained to his superiors regarding alleged securities violations.

The District Court dismissed the complaint sua sponte on the grounds that Plaintiff was not a protected “whistleblower” under Dodd-Frank since he had only submitted an internal complaint. The Court noted that Dodd-Frank defines a “whistleblower” as any individual who provides, or 2 or more individuals acting jointly who provide, information relating to a violation of the securities to the Commission[.]” (emphasis added). The Court therefore concluded that Dodd-Frank’s definition of “whistleblower” unambiguously requires a complaint to the SEC and the SEC’s administrative regulations to the contrary were thus not entitled to deference.

Implications

 Courts around the country are divided as to whether Dodd-Frank’s anti-retaliation protections extend to individuals who make internal complaints but do not complain to the SEC. The Second Circuit in Berman v. [email protected] LLC, 801 F.3d 145 (2d Cir. 2015) and the Ninth Circuit in Somers v. Digital Realty Trust, Inc., 850 F.3d 1045 (9th Cir. 2016) have held that a Dodd-Frank “whistleblower” need not report an alleged violation to the SEC, whereas the Fifth Circuit’s decision in Asadi v. G.E. Energy (USA), LLC, 720 F.3d 620 (5th Cir. 2013) reaches the opposite conclusion. With this decision, at least 13 district courts have followed Asadi and at least 18 district courts have followed Berman and Somers. Somers has recently been appealed to the U.S. Supreme Court.

© 2017 Proskauer Rose LLP.

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About this Author

Steven J Pearlman, Labor Employment Law Firm, Proskauer Law firm
Partner

Steven Pearlman is a partner in the Labor & Employment Law Department and co-head of the firm's Whistleblowing & Retaliation Group, resident in the Chicago office. Steven’s practice focuses on defending complex employment litigation involving claims of discrimination and harassment, wage-and-hour laws and breaches of restrictive covenants (e.g., non-competition agreements). He has successfully tried cases to verdict before judges and juries in Illinois, Florida and California, and defended what is reported to be the largest Illinois-only class action in the history of the U.S....

312-962-3545
Edward C. Young, Proskauer Rose, Harassment Lawyer, Labor Rights Attorney
Associate

Edward C. Young is an associate in the Labor & Employment Law Department. He represents companies nationwide in a broad range of employment issues, including discrimination, retaliation and harassment claims under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act and the Family Medical Leave Act, as well as other federal and state employment statutes and various common law torts. In addition, Eddie represents employers in trade secret matters and challenges to the independent contractor status of workers.

Prior to attending law school, Eddie earned his master’s degree in Human Resources and Industrial Relations from Loyola University while working for more than three years in the corporate human resources department of a national professional services firm. Eddie also served as a Coles Fellow with the Illinois Human Rights Commission.

Eddie is a co-author of “Discrimination Law Basics,” which was presented at the Practicing Law Institute’s Understanding Employment Law Conference in 2014. 

312.962.3595