On Tuesday, November 28, 2017, the U.S. Supreme Court heard oral arguments in the case of Digital Realty Trust, Inc. v. Paul Somers. While the Supreme Court’s ruling on this case is not expected until next June, the outcome, as well as the arguments made this week, have serious ramifications for the accepted legal definition of “whistleblowing” and the protections that definition provides.
Paul Somers was the Vice President at Digital Realty Trust, Inc., from 2010 to 2014, during which time he filed reports to senior management about possible securities law violations by the company. When Digital Realty fired Somers, he filed suit in the U.S. district court for California, alleging that Digital Realty fired him for his reports of securities law violations in violation of the anti-retaliation protections created by the Dodd-Frank Wall Street Reform and Consumer Protection Act. Dodd-Frank was passed in 2010 in the wake of the 2008 financial crisis and expanded the whistleblower incentives and protections under the 2002 Sarbanese-Oxley Act. (Here is a side-by-side comparison of these two whistleblowing acts, including both the definitions they use and the protections they provide.) Although the district court held Somers to be a “whistleblower” under the statute, and the Ninth Circuit affirmed the district court’s decision on behalf of Somers, Digital Realty appealed to the Supreme Court on the grounds that Somers was not a “whistleblower” as defined by Dodd-Frank because Somers did not report his concerns to the Securities and Exchange Commission (SEC) before he was terminated.
Circuit courts are currently split over the definition of “whistleblower” under Dodd-Frank and whether an employee must go to the SEC with reports of wrongdoing to be classified as such. While the Ninth Circuit found that Somers was entitled to protection under Dodd-Frank, thereby ruling in favor of a wider definition of “whistleblower” – under which employees who report concerns internally, but not to the SEC, are protected – the Fifth Circuit took the opposite stance in a similar 2013 case, Asadi c. G.E. Energy. There, the Fifth Circuit ruled on behalf of G.E. Energy on the grounds that whistleblowers must take their complaints to the SEC in order to be protected.
In Digital Realty, the Supreme Court will decide whether the term “whistleblower” should include only those who complain of violations to the SEC, or if it should also include those, such as Paul Somers, who report internally. Unfortunately, a ruling that narrows the definition will have important negative consequences, as more employees tend to report concerns about potential violations internally than report to the SEC: In a 2017 report to Congress, the SEC said 83% of whistleblowing award recipients raised concerns internally to their supervisors before reporting wrongdoing to the commission. Moreover, in a recent amicus brief, the SEC said that it backs Somers in this case, as well as the wider definition of whistleblower. This is a stance more employers should take, as internal complaints offer an opportunity to fix a problem and avoid the cost of an SEC investigation; and broader definitions of whistleblowing provide more extensive protections for workers concerned about possible violations of the law.
If you feel you have been retaliated against for raising concerns of wrongdoing at your place of work, please contact The Harman Firm.