In a first-impression decision, the U.S. District Court for the District of Nebraska recently ruled that an employee who disclosed information about potential securities law violations to FINRA may qualify as a “whistleblower” under Dodd-Frank, even though the employee did not provide any information to the SEC.  Bussing v. COR Clearing, LLC, No. 12-cv-00238, 2014 U.S. Dist. LEXIS 69461 (D. Neb. May 21, 2014).

Background

Plaintiff Julie Bussing was employed as an executive vice president for Legent Clearing, LLC (the Company).  Plaintiff asserted in her complaint that FINRA instituted proceedings against the Company.  Plaintiff further asserted that, while compiling documents and other information for FINRA’s review, she provided a report to her superiors concluding that the Company engaged in purportedly unlawful activity.  Plaintiff alleged that her supervisors told her to stall and stop responding to FINRA’s document requests and that her employment was terminated when she allegedly refused and continued to aid FINRA in its investigation.

Plaintiff filed suit alleging she was fired in violation of the Dodd-Frank whistleblower protection provision.  The Magistrate Judge ruled that Plaintiff did not qualify as a whistleblower under the Dodd-Frank Act because she only disclosed information to FINRA, not the SEC.  Plaintiff objected to the Magistrate’s findings in the district court proceedings.

District Court’s Ruling

The District Court reversed the Magistrate Judge’s ruling.  It acknowledged that the term “whistleblower” is defined in the Dodd-Frank anti-retaliation provision as an individual who “provides information … relating to a violation of the securities law to the Commission.” (emphasis added).  However, it reasoned that Plaintiff’s case was unusual and required the court to disregard the statutory definition of “whistleblower” to effectuate the purpose of the whistleblower provision.  In addition to determining that the Dodd-Frank whistleblower provision protects disclosures to a broad range of persons and entities other than the SEC, the court noted that FINRA rules constitute rules or regulations “subject to the jurisdiction of the SEC.”  Thus, the court ultimately determined that Plaintiff qualified as a Dodd-Frank whistleblower because her disclosures to FINRA were required by a rule or regulation subject to the SEC’s jurisdiction.

Implications

This decision is the most recent in a wave of cases around the country addressing the definition of “whistleblower” under Dodd-Frank.  As we recently discussed, the Southern District of New York and Middle District of Florida recently reached different conclusions about whether individuals are required to complain to the SEC to be protected under the statute.  This battle is expected to continue, and we will keep our loyal readers on top of this issue—especially when the federal circuit courts of appeal tackle it once again.  Stay tuned …

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Photo of Steven J. Pearlman Steven J. Pearlman

Steven J. Pearlman is a partner in the Labor & Employment Law Department and Co-Head of the Whistleblowing & Retaliation Group and the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Steven’s practice covers the full spectrum of employment law, with a particular…

Steven J. Pearlman is a partner in the Labor & Employment Law Department and Co-Head of the Whistleblowing & Retaliation Group and the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Steven’s practice covers the full spectrum of employment law, with a particular focus on defending companies against claims of employment discrimination, retaliation and harassment; whistleblower retaliation; restrictive covenant violations; theft of trade secrets; and wage-and-hour violations. He has successfully tried cases in multiple jurisdictions, and defended one of the largest Illinois-only class actions in the history of the U.S. District Court for the Northern District of Illinois. He also secured one of only a few ex parte seizures orders that have been issued under the Defend Trade Secrets Act, and obtained a world-wide injunction in federal litigation against a high-level executive who jumped ship to a competitor.

Reporting to boards of directors, their audit committees, CEOs and in-house counsel, Steven conducts sensitive investigations and has testified in federal court. His investigations have involved complaints of sexual harassment involving C-suite officers; systemic violations of employment laws and company policies; and fraud, compliance failures and unethical conduct.

Steven was recognized as Lawyer of the Year for Chicago Labor & Employment Litigation in the 2023 edition of The Best Lawyers in America. He is a Fellow of the College of Labor and Employment Lawyers.  Chambers describes Steven as an “outstanding lawyer” who is “very sharp and very responsive,” a “strong advocate,” and an “expert in his field.” Steven was 1 of 12 individuals selected by Compliance Week as a “Top Mind.” Earlier in his career, he was 1 of 5 U.S. lawyers selected by Law360 as a “Rising Star Under 40” in the area of employment law and 1 of “40 Illinois Attorneys Under Forty to Watch” selected by Law Bulletin Publishing Company. Steven is a Burton Award Winner (U.S. Library of Congress) for “Distinguished Legal Writing.”

Steven has served on Law360’s Employment Editorial Advisory Board and is a Contributor to Forbes.com. He has appeared on Bloomberg News (television and radio) and Yahoo! Finance, and is regularly quoted in leading publications such as The Wall Street Journal.

The U.S. Chamber of Commerce has engaged Steven to serve as lead counsel on amicus briefs to the U.S. Supreme Court and federal circuit courts of appeal. He was appointed to serve as a Special Assistant Attorney General for the State of Illinois in employment litigation matters. He has presented with the Solicitor of the DOL, the Acting Chair of the EEOC, an EEOC Commissioner, Legal Counsel to the EEOC and heads of the SEC, CFTC and OSHA whistleblower programs. He is also a member of the Sedona Conference, focusing on trade secret matters.

Photo of Allison Martin Allison Martin

Allison Martin is a senior counsel in the Labor & Employment Law Department. Allison represents employers in a wide range of employment litigation matters, including employment discrimination and harassment lawsuits arising under Title VII and similar state and local statutes, retaliation claims, and…

Allison Martin is a senior counsel in the Labor & Employment Law Department. Allison represents employers in a wide range of employment litigation matters, including employment discrimination and harassment lawsuits arising under Title VII and similar state and local statutes, retaliation claims, and wage-and-hour claims. She represents employers in federal and state courts, arbitration tribunals, and before the EEOC and the New York City Commission on Human Rights. Allison has extensive experience litigating both single plaintiff and class action lawsuits.

Allison also counsels clients on a broad range of employment law matters, including investigations, employment policies and procedures, and employee terminations and discipline. She also has experience conducting high-profile internal investigations on behalf of employers.

Allison previously served as a federal law clerk in the U.S. District Court for the Southern District of New York.

At Seton Hall University School of Law, Allison was an Articles Editor for the Seton Hall Law Review. Allison also  interned for Chief Judge Garrett E. Brown (Ret.) of the U.S. District Court for the District of New Jersey while in law school.