On June 22, 2016, Judge Daniels of the Southern District of New York dismissed SOX and Dodd-Frank whistleblower claims, ruling that Plaintiff’s alleged internal complaints did not constitute protected activity, as they did not implicate securities laws, mail fraud, or wire fraud.  Diaz v. Transatlantic Reinsurance Co., No. 16-cv-1355.

Plaintiff allegedly complained that the Executive Vice President of her department was violating the Company’s conflict of interest policies by giving favorable treatment to family members working under Plaintiff’s management and by approving legal bills for the Company that were paid to her husband’s law firm for legal representation.  She claimed that she was subjected to unwarranted criticisms and transferred to a less desirable department after complaining.

The Company filed a Rule 12(b)(6) motion to dismiss, arguing that the conduct Plaintiff reported did not implicate federal securities law or mail or wire fraud.  The Court agreed and dismissed the SOX claim.  The court also dismissed the Dodd-Frank claim because it was premised upon alleged non-compliance with the Company’s internal conflict of interest policy which, is not covered by Dodd-Frank.  The Court also rejected Plaintiff’s assertions that the alleged conflict of interest could have affected shareholders because the supporting allegations in the complaint were conclusory and insufficient to support a SOX or Dodd-Frank whistleblower claim.

Employers can be expected to rely on this decision when confronted with claims based on alleged violations of internal policies or questionable business practices that do not implicate the laws referenced in SOX or Dodd-Frank.