Further reflecting the divide amongst courts regarding the definition of “whistleblower” under the Dodd-Frank Act, the District Court of New Jersey recently held that an employee who internally reports an alleged securities law violation is subject to the statute’s anti-retaliation protections. Dressler v. Lime Energy, No. 3:14-cv-07060, 2015 U.S. Dist. LEXIS 106532 (D.N.J. Aug. 13, 2015).
Plaintiff, a former Lime Energy employee, sued after she was terminated for allegedly asserting her belief that the Company was allegedly improperly recording revenue. The Company moved to dismiss Plaintiff’s claim, arguing that she did not qualify as a Dodd-Frank “whistleblower” because she did not disclose her allegations to the SEC.
The court recognized that there is a split amongst courts regarding whether Dodd-Frank’s anti-retaliation provision protects employees who only report alleged securities violations internally and not to the SEC and stated that the question is a “close call.” The court ultimately concluded that the statute’s whistleblower provision is ambiguous and therefore deferred to the SEC’s interpretive rule that the whistleblower provision protects individuals who make internal disclosures of suspected securities laws violations.
Dressler is amongst the first courts to address the scope of Dodd-Frank’s anti-retaliation provision following the SEC’s interpretative rule clarifying that individuals are not required to report alleged misconduct to the SEC in order to be a “whistleblower” under the Dodd-Frank Act. It remains to be seen if other courts will defer to the SEC’s rule or follow other court decisions (including a decision by the Fifth Circuit Court of Appeals) holding that Dodd Frank’s anti-retaliation provision only protects employees who complain to the SEC.