On July 6, 2017, the U.S. District Court for the Eastern District of Pennsylvania dismissed a whistleblower claim after determining that the plaintiff did not qualify as a whistleblower under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). Reyher v. Grant Thornton, LLP, No. 16-1757 (E.D. Pa. July 6, 2017).

Background

The plaintiff, Ann Marie Reyher, is a Certified Public Accountant that was hired as a Managing Director in Grant Thornton’s Philadelphia office. Reyher allegedly discovered accounting irregularities within the statements and filings of certain Grant Thornton clients and complained internally to Grant Thornton administrators that such irregularities “amounted to bank fraud, mail fraud, wire fraud, and/or fraud against shareholders.”  Notably, none of the clients implicated in Reyher’s allegations were publicly traded companies.  After seven weeks, Reyher was terminated by the organization.  Reyher alleged that the termination was retaliation for her internal complaints about the accounting irregularities and her refusal to participate in such activities, in violation of section 922 of Dodd-Frank.

Decision

The Eastern District of Pennsylvania dismissed Reyher’s Dodd-Frank whistleblower claim with prejudice, as Reyher did not qualify as a whistleblower. Section 922 of Dodd-Frank lists the different types of whistleblower disclosures that are protected, one being those protected under the Sarbanes-Oxley Act of 2002 (“SOX”). Reyher alleged that her complaints were protected under SOX, specifically 18 U.S.C. § 1514A, titled “Protection for Employees of Publicly Traded Companies Who Provide Evidence of Fraud.”

However, Reyher’s complaints only involved non-publicly traded entities (partnerships, S corporations, private corporations, individuals, etc.). She failed to allege that there was any connection between Grant Thornton’s work for their publicly traded company clients and her internal complaints.  While Reyher argued that § 1514A applied because Grant Thornton was a contractor to other publicly traded companies, the court explained that “a purported whistleblower employed by a private company cannot invoke the protections of § 1514A simply because her employer happens to contract with public companies on matters unrelated to the whistleblowing” and that “the connection between Grant Thornton and its public company clients is little more than a coincidence.”

The remaining state law claims were then dismissed without prejudice.

Implications

The decision aligns with a Gibney v. Evolution Marketing Research, LLC, another case in the Eastern District of Pennsylvania that refused to extend the scope of SOX to scenarios where the reported fraud is tangentially related to a publicly traded company.  25 F. Supp. 3d 741 (E.D. Pa. 2014).  Also notable is that the court refused address the question of whether an employee who only reports violations internally may qualify as a whisteblower under Dodd-Frank.  There is currently a circuit split on this issue and the Third Circuit has not yet addressed this question.