Dodd-Frank Whistleblower Provision: Second Circuit, Disagreeing with Fifth Circuit, Defers to SEC’s Interpretation of Dodd-Frank Whistleblower Definition and Holds That Internal Whistleblowers Are Entitled to Pursue Dodd-Frank Retaliation Claims

Sullivan & Cromwell LLP - September 11, 2015

On September 10, 2015, the U.S. Court of Appeals for the Second Circuit held that the Dodd-Frank Act’s anti-retaliation provision can be used not just by individuals who report concerns to the SEC but also by individuals who complain to their employers internally.  Berman v. [email protected] LLC & WPP Group USA, Inc., No. 14-4626.  The majority reasoned that the Dodd-Frank Act’s use of the word “whistleblower” was sufficiently ambiguous that the Court should defer to the SEC’s interpretation of the statute; in 2011, the SEC promulgated Rule 21-F2, taking the position that Dodd-Frank protected internal whistleblowers.  Judge Jacobs dissented, noting that Dodd-Frank unambiguously defines “whistleblower” as a person who reports to the SEC and criticizing the majority for engaging in unnecessary rewriting of the statute.  He dismissed Rule 21-F2 as reflective of “the SEC’s territorial interests” and not an appropriate reading of the statute.  The decision is significant because Dodd-Frank’s whistleblower provisions are significantly more generous to potential plaintiffs than the Sarbanes Oxley Act (“SOX”) whistleblower law.  Indeed, to a significant extent, the decision will make a dead letter of SOX’s whistleblower provisions.  The decision openly acknowledges that it creates a circuit split with the Fifth Circuit and the question may well ultimately reach the U.S. Supreme Court.