Supreme Court Hears Oral Argument in Digital Realty Trust, Inc. v. SomersCourt Considering Whether Dodd-Frank Act’s Anti-Retaliation Provision Protects Internal Whistleblowers as Well as Those Who Report to the SEC December 5, 2017
Paul Somers was an employee of Digital Realty Trust whose employment was terminated by Digital Realty Trust in 2014 after he allegedly reported internally that his supervisor had eliminated certain internal controls mandated by the Sarbanes-Oxley Act. Somers filed suit, claiming that his termination constituted illegal retaliation against a whistleblower under the Dodd-Frank Act. The Department of Justice joined the argument in support of the employee.
At argument, Chief Justice Roberts and Justices Alito, Breyer, Gorsuch and Kagan made statements that made it appear they are sympathetic to Digital Realty Trust’s argument that because the Dodd-Frank Act’s definition of “whistleblower” is restricted to individuals who report alleged misconduct directly to the SEC (“any individual who provides . . . information relating to a violation of the securities laws to the Commission” (15 U.S.C. § 78u-6(a)(6))), the anti-retaliation provision must apply only to those whistleblowers so defined. Justice Gorsuch asked, “[H]ow much clearer could Congress have been than to say in this section the following definitions shall apply, and whistleblower is defined as including a report to the Commission[?]” Justice Kagan echoed these comments, stating that although “it’s peculiar” and “probably not what Congress meant,” “it says what it says.”
Chief Justice Roberts stated that a definition in a statute must be “absurd or anomalous” to the point where “it really makes a mess of the whole thing” for the Court to disregard the definition, and implied that Dodd-Frank’s anti-retaliation provision did not meet that standard. (The anti-retaliation provision enumerates the activities of a “whistleblower” that are protected from retaliation: “providing information to the Commission in accordance with [Dodd-Frank]”; or “making disclosures that are required or protected under the Sarbanes-Oxley Act of 2002, [other provisions of Dodd-Frank], and any other law, rule, or regulation subject to the jurisdiction of the Commission.” 15 U.S.C. § 78u-6(h)(1)(A).) Justice Breyer noted that “the ordinary whistleblower is protected under Sarbanes-Oxley” and said it was not clear to him why a ruling that Dodd-Frank only protects individuals who report directly to the SEC would be “a disaster.”
Justice Gorsuch also criticized the SEC for its 2011 rule that took the position that Dodd-Frank’s protections extend to internal whistleblowers. (17 C.F.R. § 240.21F-2.) He said repeatedly that the SEC “provid[ed] no notice to people” and “no reasonable opportunity to comment” on the rule, and that he was “stuck with the absence of any fair notice, a . . . decision, without any reasons.”
Based on the statements during oral argument of Justices Roberts, Alito, Breyer, Gorsuch and Kagan, the Court appears likely to hold that the Dodd-Frank anti-retaliation provision applies only to individuals who report alleged misconduct to the SEC. As Justice Breyer noted, even if the Court ruled that Dodd-Frank does not apply, the Sarbanes-Oxley anti-retaliation provisions indisputably apply to individuals who report alleged misconduct internally. Indeed, one of the arguments of those who agree with the employer’s position here is that interpreting Dodd-Frank to apply to internal complaints would make a dead letter of the Sarbanes-Oxley provisions.
The Court will issue a decision by June 2018. You may read the argument transcript here: https://www.supremecourt.gov/oral_arguments/argument_transcripts/2017/16-1276_i426.pdf.