On May 8, 2019, the House Committee on Financial Services passed H.R. 2515, the Whistleblower Protection Reform Act of 2019, which would amend Section 922 of Dodd-Frank to extend the statute’s anti-retaliation protections to employees who report alleged misconduct internally.
Digital Realty Trust v. Somers
H.R. 2515 was proposed in…
On March 4, 2019, the U.S. Commodity Futures Trading Commission (CFTC) issued a whistleblower award totaling more than $2 million to be paid to an individual whistleblower, as part of its Dodd-Frank whistleblower program. This award is particularly interesting because the whistleblower “provide[d] critical information through independent analysis of market…
On November 15, 2018, the U.S. Securities and Exchange Commission (“SEC”) published its statutorily mandated fiscal year report to Congress covering the agency’s whistleblower program.
The report, which covers the period from October 1, 2017 through September 30, 2018, was prepared by the SEC’s Office of the Whistleblower (“OWB”) to…
On June 27, 2018, the U.S. District Court for the Central District of California granted Snap Inc.’s motion to compel arbitration of a Dodd-Frank whistleblower retaliation claim. Pompliano v. Snap Inc., No. 17-cv-3664 (2018 WL 3198454).
Background. Plaintiff signed an employment agreement (the “Agreement”) with Snap Inc. (the “Company”)…
On June 28, 2018, the U.S. Securities and Exchange Commission (“SEC” or “Commission”) voted in an open meeting on several final rules and rule proposals that will have a material impact on the Commission’s whistleblower program. Most notably, the SEC approved a rule proposal that would modify its Rule 21F, which defines who is a whistleblower and establishes anti-retaliation protection, to comport with the U.S. Supreme Court’s holding in Digital Realty Tr., Inc. v. Somers, 138 S. Ct. 767 (2018).
As detailed on our blog, in February, the U.S. Supreme Court unanimously held that the anti-retaliation provision of the Dodd-Frank Act only applies to individuals who have provided information regarding a violation of the securities laws to the SEC. In so holding, the Court ruled that the SEC’s Rule 21F-2, which enabled an individual to gain anti-retaliation protection from complaints not made directly to the SEC (such as internal company complaints), was in clear contravention of Congress’s instruction that a “whistleblower” is a person who provides “information relating to a violation of the securities laws to the Commission.”
The SEC’s proposed rule will comport with the Court’s holding by requiring, inter alia, that an individual seeking anti-retaliation protection report, in writing, information about possible securities laws violations to the SEC itself. The proposed rule would apply uniformly: to the SEC’s whistleblower award program, the heightened confidentiality program, as well as for employment anti-retaliation protection.
On April 19, 2018, the United States District Court for the District of New Jersey held that providing testimony to FINRA (which is overseen by the SEC) does not constitute protected activity for purposes of establishing a Dodd-Frank whistleblower claim. Price v. UBS Financial Services, Inc., No. 2:17-01882.
Background. Plaintiff,…
On March 20, 2018, the DC Circuit upheld the SEC’s denial of a Claimant’s application for a Dodd-Frank whistleblower bounty award because the SEC did not rely on the information provided by the Claimant in pursuing an enforcement action against Management Solutions. In upholding the SEC determination, for first time, the court identified the standard of review for an appeal of the SEC’s denial of an award in a whistleblower action, holding that the appropriate standard under 5 U.S.C.A. § 706(2)(E) is whether the SEC’s determination was based on “substantial evidence.” Doe v. SEC, 2018 U.S. App. Lexis 7449 No. 16-1414 (D.C. Cir. Mar. 20, 2018).
On February 21, 2018, the U.S. Supreme Court unanimously ruled that an individual is not covered by the anti-retaliation provision of the Dodd-Frank Act unless they have provided information regarding a violation of law to the U.S. Securities and Exchange Commission. Digital Realty Trust, Inc. v. Somers, No. 10-1276…
On February 5, 2018, U.S. District Court for the Southern District of New York granted Defendant Khan Funds Management America, Inc.’s Rule 12(b)(6) motion to dismiss a whistleblower retaliation claim under Dodd-Frank on the grounds that Plaintiff failed to state a claim upon which relief could be granted. Polite v.
Last week, the Seventh Circuit Court of Appeals held that a terminated CEO’s complaints about his board of directors’ managerial decisions did not qualify as protected whistleblowing under the Sarbanes-Oxley Act of 2002 (“SOX”) nor under the Dodd-Frank Act of 2010 (“DFA”). Verfuerth v. Orion Energy Sys., Inc., No. 16-3502, 2018 WL 359814 (7th Cir. Jan. 11, 2018).
Background. Plaintiff was the founder and former CEO of a company that specializes in energy-efficient lighting. In November 2012, following a series of disputes between Plaintiff and the company’s board of directors, Plaintiff was terminated for incurable cause. A year and a half after his termination, Plaintiff brought a lawsuit that alleged that he was retaliated against, in violation of SOX and DFA, for his complaints to various board members about the company’s business practices. Practices about which Plaintiff alleged to have complained included attorney over-billing, intellectual property disputes, conflicts of interest, and violations of internal company protocol. The Company moved for summary judgment, arguing in part that Plaintiff’s complaints did not qualify as whistleblowing entitled to protection from adverse employment actions.
Rulings. Chief Judge Griesbach granted the Company’s Motion for Summary Judgment on Plaintiff’s SOX and DFA claims. Chief Judge Griesbach held (1) that SOX protects complaints about securities fraud, not “run-of-the-mill corporate problems,” which is what he believed Plaintiff raised here, and (2) that Plaintiff’s complaints to various board members about what he thought they should be doing did not amount to whistleblowing, because “[s]imply telling a person he might be committing fraud is not whistleblowing” and “airing concerns is not whistleblowing.” Verfuerth v. Orion Energy Sys., Inc., No. 14-CV-352, 2016 WL 4507317 (E.D. Wis. Aug. 25, 2016).
The Seventh Circuit Court of Appeals agreed, holding that “[a]n executive who advises board members to disclose a fact that the board already knows about has not ‘provide[d] information’ about fraud. At most, he has provided an opinion.” Verfuerth No. 16-3502, 2018 WL 359814 at *4. The Court emphasized that nothing in SOX, or any other federal statute, prevents a company from firing its executives over differences of opinion.
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