On February 21, 2018, the U.S. Supreme Court ruled in favor of petitioner Digital Realty Trust (“Digital Realty”) in Digital Realty Trust Inc. v. Somers, narrowing the definition of “whistleblower” under the 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act (“Dodd–Frank”). The decision clarifies that Dodd–Frank’s anti-retaliation provisions do not apply to employees who only report violations internally within their company. In order to be covered by Dodd–Frank’s employee whistleblower protections, employees reporting securities law misconduct must go to the Securities and Exchange Commission (SEC).
Dodd–Frank was passed in 2010 in response to the 2007–2008 financial crisis with the aim of increasing responsibility and transparency in the financial industry, ending bailouts and “too-big-to-fail” banks, and creating restrictions on abusive financial services practices that hurt consumers. The law made many significant changes to financial regulations in government agencies, banks, and other financial services entities, including creating whistleblower protections for those who report unlawful activities in the financial industry. As the SEC explains, Dodd–Frank “expressly prohibits retaliation by employers against whistleblowers and provides them with a private cause of action in the event that they are discharged or discriminated against by their employers in violation of the Act.”
In Digital Reality Trust, Paul Somers alleged that his former employer—Digital Realty, a real estate investment trust—terminated his employment after he internally reported suspected violations of securities law to Digital Realty’s management. Somers then brought suit against his former employer alleging whistleblower retaliation claims under Dodd–Frank, which Digital Realty moved to dismiss on the grounds that Somers was not covered by Dodd–Frank because he had brought his concerns only to internal management, not the SEC. The district court and U.S. Circuit Court of Appeals for the Ninth Circuit denied Digital Realty’s motion, allowing Somers’s whistleblower claim to proceed. Digital Realty then appealed to the U.S. Supreme Court, which reversed the Ninth Circuit’s decision and dismissed Somers’s Dodd–Frank whistleblower claim.