December 12, 2017 - Posts

Supreme Court Asks: What Counts As Whistleblowing and When Should the Law Protect It?

Late last month, the Supreme Court heard oral argument in Digital Realty Trust, Inc. v. Somers, Case No. 16-1276, on exactly what it means to be a whistleblower under federal law, in this case the Dodd-Frank Act.

 

Like many federal statutes, the Dodd-Frank Act—a securities law passed to strengthen 2002’s Sarbanes-Oxley Act—contains language meant to encourage employees to report on illegal conduct by their employers and to prohibit employers from retaliating against those employees who blow the whistle on them.

 

But what types of activities are actually protected under that statute?  To date, courts addressing this question have reached different conclusions.  Some have held that an employee is not protected unless he or she actually reports on potential violations to U.S. Securities and Exchange Commission.  Other courts—most notably the Ninth Circuit Court of Appeals—have adopted a broader view, holding that Dodd-Frank also protects internal whistleblowers from retaliation—i.e. those who report on potential fraud or other illegal activity to their own corporate managers in an attempt to stop it.

 

Based on the questions that the Justices asked during oral argument, the Supreme Court appears to be leaning towards the narrower view.  If true, that means that employees may have no legal recourse if they report internally on violations of U.S. securities law and their employers then retaliate against and fire them, which may encourage more employees to avoid internal reporting altogether and go straight to the Securities and Exchange Commission.

 

Fortunately, this case appears to be focused on specific language within the Dodd-Frank Act that creates an unusually narrow definition of a whistleblower.  Other federal statutes, including the federal False Claims Act—which is the primary statute used to pursue fraud against Medicare and Medicaid—have much broader language and have been interpreted as protecting both internal whistleblowers and those who report fraud to outside government agencies.  However, the Supreme Court’s broader analysis of when whistleblowing is worth protecting should still be of great interest to whistleblowers and potential whistleblowers across the country.  Stay tuned.

 

To learn more about our Whistleblower & Qui Tam practice click here.  Our firm is located in Nashville, Tennessee but we represent whistleblowers all around the country.


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