ED TennesseeThe Eastern District of Tennessee recently dismissed whistleblower claims, finding that the Plaintiff was not entitled to protection under Sarbanes-Oxley, Dodd-Frank, or the False Claims Act (“FCA”).  Verble v. Morgan Stanley Smith Barney LLC et al., 3:15-cv-00074 (E.D. Tenn. Dec. 8, 2015).  The court’s decision illustrates the sharp divide amongst courts regarding the scope of Dodd-Frank’s whistleblower protection provision.


Plaintiff was a financial advisor at Morgan Stanley’s Knoxville, Tennessee branch. After he was hired in 2006, he became suspicious that the Company and some of its clients were involved in illegal activities.  Plaintiff reported information to the FBI and later became a confidential informant.  After his termination in June 2013, Plaintiff for the first time contacted the SEC about alleged insider trading.  Thereafter, he filed suit, asserting claims under Sarbanes-Oxley, Dodd-Frank and the False Claims Act (“FCA”), alleging that that he was retaliated against for providing information to federal authorities regarding alleged unlawful activities.


The court dismissed all of the Plaintiff’s whistleblower claims.  First, it dismissed Plaintiff’s Sarbanes-Oxley claim because he failed to file a complaint with the U.S. Department of Labor within 180 days of his termination.  Second, the court dismissed Plaintiff’s FCA claim, finding that the complaint did not adequately allege facts to support the allegation that he had engaged in protected activity under the FCA.

Finally, the court dismissed Plaintiff’s Dodd-Frank retaliation claim because he did not provide the SEC with information prior to his termination.  Significantly, the court rejected Plaintiff’s argument that whistleblower protection under Dodd-Frank may be invoked by reporting information to any federal agency (in Plaintiff’s case, the FBI).   Further, the court declined to defer to recently promulgated regulations by the SEC stating that Dodd-Frank’s whistleblower provision covers internal complaints, finding  that Dodd-Frank’s definition of “whistleblower” is unambiguous and only covers employees who complain to the SEC.   In so holding, the court declined to follow the Second Circuit’s recent opinion in Berman v. Neo@Ogilvy, ruling that (i) construing Dodd-Frank with its “unambiguous, plain text” would not controvert the statutory scheme and (ii) the lack of legislative history is “telling” because the court should presume that, in defining the term “whistleblower”, Congress meant “what [the statute] says.”


Courts across the United States have issued contrary opinions about whether an employee must provide information to the SEC to qualify as a “whistleblower” under Dodd-Frank’s anti-retaliation provision.   As we have previously reported, the Second and Fifth Circuits have reached contrary conclusions on this issue, and district courts outside of those circuits are similarly divided.   Because Neo@Ogilvy has declined to appeal the Second Circuit’s opinion to the Supreme Court, it is possible that the Sixth Circuit may seize upon this opportunity to address the issue.


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Photo of Lloyd B. Chinn Lloyd B. Chinn

Lloyd B. Chinn is a partner in the Labor & Employment Law Department and co-head of the Whistleblowing & Retaliation Group. He litigates employment disputes of all types before federal and state courts, arbitration tribunals (e.g., FINRA, JAMS and AAA), and before administrative…

Lloyd B. Chinn is a partner in the Labor & Employment Law Department and co-head of the Whistleblowing & Retaliation Group. He litigates employment disputes of all types before federal and state courts, arbitration tribunals (e.g., FINRA, JAMS and AAA), and before administrative agencies in New York and across the country. Lloyd’s practice ranges from litigating compensation disputes to defending whistleblower, discrimination and sexual harassment claims. Although he represents employers in a wide range of industries, including law, insurance, health care, consulting, media, education and technology, he focuses a substantial portion of his practice on the financial services sector. He has tried to final verdict or arbitration award substantial disputes in this area.

Due to Lloyd’s litigation experience, clients regularly turn to him for advice regarding the full range of employment matters, including terminations, whistleblower policy and procedure, reductions in force, employment agreements, and employment policies. For example, in the wake of the financial crisis, he has counseled a number of firms through reductions in force and related bonus and deferred compensation disputes. Lloyd has also been retained to conduct internal investigations of allegations of workplace misconduct, including claims leveled against senior executives.

Lloyd has represented global businesses in matters involving Sarbanes-Oxley and Dodd-Frank whistleblower claims. He has taken an active role in the American Bar Association on these issues, currently serving as Co-Chair of the Whistleblower subcommittee of the ABA Employee Rights and Responsibilities Committee. Lloyd has spoken on whistleblowing topics before a numerous organizations, including the American Bar Association, ALI-ABA, Association of the Bar of the City of New York, and New York University School of Law. He has testified twice before Congressional subcommittees regarding whistleblower legislation and has also published blog postings, articles and client alerts on a variety of topics in this area, including the Dodd-Frank Act’s whistleblower provisions. Lloyd is a co-editor of Proskauer’s Whistleblower Defense Blog, and he has been widely quoted by on whistleblower topics by a number of publications, including the New York Times, the Wall Street Journal, the National Law Journal and Law 360.

Lloyd has also become active in the International Bar Association, presenting on a variety of subjects, including: the #MeToo movement, the COVID-19 pandemic and employment law, and cross-border harmonization of employment provisions in transactions. Lloyd also hosts a quarterly roundtable discussion among financial services industry in-house employment lawyers. He has also published articles and given speeches on a variety of other employment-law topics, including non-solicitation provisions, FINRA arbitration rules, cross-border discovery, e-discovery, and the use of experts.