Circuits Split on Dodd-Frank’s Whistleblower Protections

In Berman v. Neo@ogilvy LLC, the Second Circuit held that there was enough ambiguity between the Dodd-Frank Act’s definition of “whistleblower” and its anti-retaliation provisions to trigger Chevron deference to the SEC’s interpretation of the statute.  The Second Circuit thus accepted the SEC’s interpretation that Dodd-Frank does not require whistleblowers to report wrongdoing to the SEC to invoke the Act’s employee protection provisions.  This is the opposite conclusion reached by the Fifth Circuit in Asadi v. G.E. Energy (USA), L.L.C., setting the stage for the Supreme Court to resolve the conflict among the Circuits.

The Dodd-Frank Wall Street Reform and Consumer Protection Act, 15 U.S.C. § 78u–6, was passed in 2010 in response to the 2008 economic crash.  Section 922 of Dodd-Frank contains two courses of relief for whistleblowers: a whistleblower can provide information to the SEC and the SEC may provide that whistleblower with a monetary award; or a whistleblower may file a private cause of action against an employer who retaliates because of the whistleblower’s protected disclosures (this latter section is often referred to as the “anti-retaliation provision”).

The ambiguity in the Dodd-Frank Act is the apparent disconnect between its definition of “whistleblower” and the language in its anti-retaliation provision that incorporates the whistleblower definition to delineate those protected under the statute.  The term “whistleblower” includes only those who have provided information to the SEC.  But Dodd-Frank’s anti-retaliation provision does not explicitly state that protected disclosures must be made to the SEC.  In 2011, the SEC issued regulations broadly interpreting Dodd-Frank’s anti-retaliation provision to include disclosures to persons or governmental authorities other than the SEC.

Despite the SEC’s regulations in favor of a broad interpretation of the anti-retaliation provision, in July 2013, the Fifth Circuit in Asadi held that the plain language of the statute provides that a whistleblower is only someone who reports to the SEC.  And thus, according to the Fifth Circuit, a person who reports wrongdoing to a person or entity other than the SEC is not a whistleblower under Dodd-Frank and is not protected by its anti-retaliation provision.

More recently, in its September 2015 Berman decision, the Second Circuit held that Dodd-Frank is ambiguous and thus calls for deference to the SEC’s interpretation of the statute.  In other words, the Second Circuit allowed for a broader interpretation of Dodd-Frank’s anti-retaliation provision and did not limit protection only to those who reported to the SEC.  The Second Circuit supported its position that Dodd-Frank was ambiguous by pointing to the numerous district courts that have come out on different sides of the issue.

The Second Circuit decision in Berman is significant because it rules in favor of broader anti-retaliation protections under the Dodd-Frank Act.  The decision also invites the Supreme Court to resolve the Circuit split on the types of disclosures protected by Dodd-Frank.

Tagged: Dodd-Frank Act, Whistleblower Laws (Federal)