July 12, 2020

Volume X, Number 194

July 10, 2020

Subscribe to Latest Legal News and Analysis

July 09, 2020

Subscribe to Latest Legal News and Analysis

Retaliation Plaintiff Not a Covered Whistleblower under Plain Reading of Dodd-Frank Act, Court Rules

A former employee who failed to show he reported alleged securities law violations to the Securities and Exchange Commission (SEC), as required under the Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA), cannot claim his former employer unlawfully retaliated against him, federal Judge William J. Martini has ruled. Price v. UBS Financial Services, Inc., No. 2:17-01882 (D. N.J. Apr. 19, 2018).

The plaintiff was not a whistleblower protected by the DFA, the court concluded, despite his having testified before the Financial Industry Regulatory Authority (FINRA), which is overseen by the SEC. The U.S. Supreme Court in Digital Realty Trust, Inc. v. Somers held that a protected DFA “whistleblower” includes only individuals who had provided information to the SEC. Accordingly, the District Court dismissed the DFA whistleblower retaliation claim, with prejudice.

Price marks the latest rejection of a creative plaintiff’s attempt to pigeonhole claims not involving the SEC into the DFA.

Background

Craig Price, a former wealth adviser for UBS, alleged UBS undermined his work efforts in order to terminate him in retaliation for testimony he gave to FINRA concerning the unlawful activities of a colleague. Price filed a complaint against his former employer alleging violations of the DFA and a state whistleblower act.

Judge Martini denied the employer’s motion to dismiss with respect to the state whistleblower act, but stayed the motion to dismiss the plaintiff’s DFA claim pending resolution of Digital Realty by the Supreme Court.

On February 21, 2018, the Supreme Court in Digital Realty held a plaintiff must have provided information to the SEC in order to meet the plain reading of the statutory definition of a “whistleblower” under the DFA.

Price then opposed the defendant’s motion to dismiss, arguing he qualified as a whistleblower under the DFA because the SEC oversees FINRA, including FINRA’s rulemaking process and disciplinary proceedings. Therefore, Price argued, it was inappropriate to dismiss his DFA whistleblower claim because FINRA acts with the authority of the SEC.

Tell the SEC

Judge Martini concluded the Supreme Court’s holding in Digital Realty was “unequivocal”: a DFA whistleblower had to provide information regarding securities law violations to the SEC. This is supported by the objective of the DFA whistleblower program to “motivate people who know of securities law violations to tell the SEC.”

The court noted, “Plaintiff had ample time between when he first learned of the violations and his termination to report the misconduct to the SEC, but he chose not to.” Therefore, Judge Martini found Price did not qualify as a DFA whistleblower and, accordingly, dismissed his DFA claim.

The Supreme Court’s decision in Digital Realty resolved a long-standing split among federal courts as to whether individuals who had only reported matters internally, and not to the SEC, qualified for whistleblower protection. The narrow reading of the “whistleblower” definition adopted by the Court reflected the minority view on the issue. Price is one of the latest examples of a district court following the Supreme Court’s lead and declining to expand the whistleblower definition beyond the plain language of the DFA.

Jackson Lewis P.C. © 2020National Law Review, Volume VIII, Number 152

TRENDING LEGAL ANALYSIS


About this Author

Richard J. Cino, Jackson Lewis, Corporate Governance Attorney, Contract Breach Lawyer
Office Managing Principal

Richard J. Cino is the Office Managing Principal of the Morristown and Monmouth County, New Jersey, offices of Jackson Lewis P.C. He is also Co-Leader of the Corporate Governance and Internal Investigations Practice Group.

Mr. Cino has a broad area of practice and responsibility with the firm. He acts as lead counsel on all aspects of employment litigation, including defending claims of whistleblowers under various state and federal laws including the Sarbanes-Oxley Act, sexual harassment, all types of discrimination,...

973-451-6324
Joseph C. Toris, Confidentiality, non-competition agreement, restrictive covenants, Jackson LEwis Law Firm
Of Counsel

Joseph C. Toris is Of Counsel in the Morristown, New Jersey, office of Jackson Lewis P.C. He is experienced with complex issues surrounding employee disloyalty, enforceability of confidentiality and non-competition agreements, and other restrictive covenants. Mr. Toris regularly participates in emergent matters seeking to impose or defend against the imposition of restraints in the state courts of New Jersey.

He is also experienced with Sarbanes-Oxley issues including the defense of whistleblower claims under the Act. Mr. Toris also assists clients in the development of codes of ethics and business conduct and corporate compliance programs, management and employee training and internal investigations.

973-451-6347