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, where he is Head of the Restrictive Covenants, Trade Secrets & Unfair Competition Group and Co-Head of the Whistleblowing & Retaliation Group.

Employment, Restrictive Covenant & Trade Secret, and Whistleblower…

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

Employment, Restrictive Covenant & Trade Secret, and Whistleblower Practice. Steven’s national practice focuses on defending companies in federal and state courts and in arbitration fora against the full spectrum of employment-related claims, including claims of executives; restrictive covenant violations; employee raiding; theft of trade secrets; whistleblower retaliation under the Sarbanes-Oxley Act, the Dodd-Frank Act and similar state laws; and wage-and-hour violations, including class, collective and PAGA actions.

Steven has successfully handled trials in multiple jurisdictions; prevailed in seeking and defending against applications for temporary restraining orders and preliminary injunctions; defended one of the largest Illinois-only class actions in the history of the federal courts in Illinois (over 90k putative class members); and prevailed following his oral arguments before federal and state appellate courts. He brings his litigation experience (beginning in 1998) to bear in counseling clients to minimize risk and avoid or prepare for success in litigation.

Investigations. Reporting to boards of directors, their audit committees, CEOs and in-house counsel, Steven conducts sensitive investigations and has the unusual experience of testifying in federal court in connection with investigations. 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.

Thought Leadership and Accolades. Steven was named 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 has reported:

  • Steven is “one of the best in the country and has a lot of experience”;
  • Steven is as an “outstanding lawyer” who is “very sharp and very responsive,” a “strong advocate,” and an “expert in his field”;
  • He is thoughtful, attentive and demonstrates an acute understanding of matters top of mind for business-minded general counsel; and
  • “He is someone who can navigate the twists and turns of litigation without difficulty.”

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 U.S. Library of Congress Burton Award Winner for “Distinguished Legal Writing.”

Steven was appointed to Law360’s Employment Editorial Advisory Board and selected as a Contributor to Forbes.com. He has appeared on Bloomberg News (television and radio) and Yahoo! Finance, and is often 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.

In 2024, Steven received the Excellence in Pro Bono Service Award from the United States District Court for the Northern District of Illinois and the Chicago Chapter of the Federal Bar Association.

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