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Internal Whistleblowing Protected Against Retaliation Under Dodd-Frank, Says Second Circuit

While the Dodd-Frank Act provides various protections to whistleblowers, federal courts have inconsistently interpreted who precisely qualifies as a whistleblower.  In a much-anticipated opinion, the Second Circuit Court of Appeals held, in Berman v. Neo@Ogilvy LLC, that whistleblowers who report wrongdoing internally – but not to the Securities and Exchange Commission – are protected from retaliation under the law.


By way of background, the Dodd-Frank Act defines “whistleblower” to mean an individual who reports information relating to a violation of the securities laws to the SEC.  It also includes an anti-retaliation provision that prohibits publicly-traded companies from discharging, demoting, suspending, threatening, or harassing a whistleblower because the whistleblower, among other things, made a disclosure that is required or protected by the Sarbanes-Oxley Act, the Dodd-Frank Act or any other law subject to the SEC’s jurisdiction.  Separately, the Sarbanes-Oxley Act mandates that certain individuals report certain types of potential wrongdoing internally, but it does not require reporting to the SEC.

So on one end, Dodd-Frank’s whistleblower definition is limited to reports to the SEC, while its anti-retaliation provision, by protecting Sarbanes-Oxley required disclosures, appears to protect those who make internal reports.  The question therefore, before the Second Circuit, was whether Dodd-Frank's definition of whistleblower applied to its anti-retaliation provision – or, in other words, whether an employee who complains internally – but not to the SEC – of suspected financial fraud is protected from retaliation under Dodd-Frank.

The Decision

They held that he was protected.  In doing so, the Second Circuit, recognized the statutory ambiguity at play, and because of that ambiguity, the Court was required to pay deference to the SEC’s rule, which interpreted Dodd-Frank's anti-retaliation provision to cover internal reports.

The Court also made it a point to distinguish the Supreme Court’s recent Burwell v. King decision, which addressed a statutory ambiguity in the Affordable Care Act.  There, the Court said, the Supreme Court itself had to resolve the ambiguity because the IRS, as the interpreting agency, lacked the expertise to address the ambiguity in the ACA.  But here, the SEC clearly had the expertise to interpret the Dodd-Frank’s provisions, and therefore the Court deferred to its reasonable interpretative rule.


This decision is significant because it may lead to more whistleblower claims. Dodd-Frank's anti-retaliation provision is much more whistleblower-friendly than the Sarbanes-Oxley Act, including by providing for double damages, a longer statute of limitations and the absence of any requirement to file a complaint with OSHA before proceeding with a lawsuit.  However, this decision is binding only in New York, Connecticut, and Vermont.  It also directly conflicts with the Fifth Circuit’s opinion in Asadi v. G.E. Energy, L.L.C.  Indeed, the Second Circuit acknowledged the “landscape of existing disagreement among a large number of district courts,” and thus, if a circuit split continues to persist, this issue may very well make its way to the Supreme Court.  Until then, employers operating at least in this Circuit, should not necessarily rely on a narrow reading of Dodd-Frank’s anti-retaliation provision.

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Brent Douglas