On November 10, 2015, the employer in a high-profile whistleblower-retaliation case[1] advised the United States Court of Appeals for the Second Circuit that it “will not be pursuing a petition for writ of certiorari with the Supreme Court of the United States” with respect to the appellate court’s recent pro-whistleblower decision concerning the scope of the anti-retaliation provisions contained in Section 21F of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank” or the “Act”).[2] In so doing, the employer re-invigorated the debate over whether Dodd-Frank’s anti-retaliation protections cover individuals who report to their employers, as opposed to contacting the Securities and Exchange Commission (“SEC”).
Background
In Berman v. Neo@Ogilvy LLC, the former finance director of Neo@Ogilvy (“Neo”) sued Neo and its parent, alleging that he had been discharged in violation of the whistleblower protection provisions of Section 21F of Dodd-Frank, and in breach of his employment contract. According to the complaint, Berman internally reported various practices that constituted accounting fraud under the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), Dodd-Frank, and generally accepted accounting principles. Berman alleged that his employment was terminated after a senior officer at Neo “became angry with him” for reporting the suspected violations. Berman did not report any allegedly unlawful conduct to the SEC during his employment or for about six months after his termination.
Relying on the “whistleblower” definition contained in Section 21F(a)(6) of Dodd-Frank, the United States District Court for the Southern District of New York held that the Act provides whistleblower protection only to those who are discharged after reporting alleged violations to the SEC.[3] The District Court dismissed Berman’s Dodd-Frank claim (as well as his contract claims) because his employment was terminated before he reported the alleged violations to the SEC. Berman appealed the dismissal of his Dodd-Frank claim.
The Second Circuit Opinion
On appeal, the Second Circuit considered whether Dodd-Frank’s anti-retaliation provisions protect whistleblowers who report suspected wrongdoing to their employers, rather than the SEC. The appellate court noted that Section 21F(a)(6) narrowly defines “whistleblower” as an individual who reports “to the Commission,” whereas subdivision (iii) of Section 21F(h)(1)(A) more broadly extends protection to whistleblowers who report under statutes that provide for internal reporting of securities violations, such as Sarbanes-Oxley.
Predictably, the SEC filed an amicus brief in Berman, arguing that the statute does not unambiguously demonstrate congressional intent to limit whistleblower protection to those who report suspected wrongdoing to the SEC. The SEC asserted that, under the circumstances, the court should defer to its reasonable interpretation of the anti-retaliation provisions,[4] as articulated in Rule 21F-2(b)(1). That is, “[u]nder [the SEC’s] interpretation, an individual who reports internally and suffers employment retaliation will be no less protected than an individual who comes immediately to the Commission.”[5]
The Second Circuit found that, if restricted to the definition of “whistleblower” contained in Section 21F(a)(6), subdivision (iii) would protect only those employees who notify the SEC at the same time, or just before, they report internally under Sarbanes-Oxley. According to the court, the subset of whistleblowers that elects to report suspected wrongdoing to the SEC is “few in...
