Does the Dodd-Frank Act’s whistleblower anti-retaliation provision apply to employees who have not reported a violation of the securities laws to the Securities Exchange Commission, when the Act defines a “whistleblower” as an individual who “provide[s] information relating to a violation of the securities laws to the Commission?”
NELF, joined by Associated Industries of Massachusetts, filed an amicus brief in the certiorari and merits stages of this case, on behalf of the employer, Digital Realty Trust. The case is now scheduled for oral argument on November 28. At issue is the meaning of a subsection of Dodd-Frank’s “Securities whistleblower incentives and protection” section, 15 U.S.C. § 78u-6, which protects “a whistleblower [from retaliation in the workplace] . . . because of any lawful act done by the whistleblower . . . in making disclosures that are required or protected under the Sarbanes-Oxley Act [SOX] . . . .” 15 U.S.C. § 78u-6(h)(1)(A)(iii). That same section of Dodd-Frank defines a “whistleblower” as “any individual who provides . . . information relating to a violation of the securities laws to the [SEC] . . . .” 15 U.S.C. § 78u-6(a)(6). SOX, however, affords protection to the employee who only reports a potential securities law violation to his employer. And the Ninth Circuit in this case interpreted the disputed subsection of Dodd-Frank to mean that Dodd-Frank also protects the employee who only reports to his employer.
This case matters to NELF and its supporters because an employee who sues for whistleblower retaliation under Dodd-Frank is entitled to very generous remedies--a six-to-ten year limitations period, double back pay damages, and a direct right of action in federal court, without having to exhaust any administrative remedies. 15 U.S.C. § 78u-6(h)(1)(B)-(C). Dodd-Frank also awards the whistleblower a substantial monetary bounty if her reporting to the SEC results in a successful administrative or judicial enforcement action by that agency. § 78u-6(b). [1]
The lower court erred because it abandoned Dodd-Frank’s clear provision that a “whistleblower” is an employee who reports to the SEC. This definition must apply whenever the word “whistleblower” appears in the disputed subsection of Dodd-Frank. And applying this definition to the disputed language yields only one meaning. The employee who reports information to the SEC is protected when he also reports that information to his employer and then suffers retaliation because of his internal reporting.
This subsection of Dodd-Frank therefore protects an employee who has reported to both the SEC and her employer, when the employer does not know that the employee has reported to the SEC. And this subsection is necessary because, without it, such an employee would not be protected under Dodd-Frank. She would only be protected under SOX for her internal reporting. By affording Dodd-Frank protection under these circumstances, then, the disputed subsection encourages an employee to report to both the SEC and her employer.
The Ninth Circuit apparently rejected the statute’s plain meaning. In that court’s view, the disputed language identified a set of circumstances that was “narrow[] to the point of absurdity . . . .” Appendix to Petitioner’s Petition for Certiorari 8a. But it is not for the courts to pass judgment on congressional line drawing of this sort. Nor is it a court’s role to conform an unambiguous statute such as this one to the court’s own notion of what Congress may have had in mind.
But this is precisely what the Ninth Circuit did here, when it “interpreted” the disputed language to protect employees who are not Dodd-Frank whistleblowers because they have not reported to the SEC. The Ninth Circuit impermissibly substituted the word “employee” for the defined term “whistleblower.” And Dodd-Frank’s specific definition of a whistleblower excludes all other possible meanings of that term. Moreover, Congress chose the word “employee” in SOX’s whistleblower provision but did not do so when it later enacted Dodd-Frank. It must be presumed that this choice was deliberate.
In any event, it is hardly absurd for Congress to assume that an employee may choose to report to both the SEC and her employer, and that the employer may not know that such an employee has reported to the SEC. Consistent with SOX’s purposes, an employee may wish to report a potential violation to her employer, for speedy internal resolution of the matter. But, consistent with Dodd-Frank’s purposes, that same employee may also wish to alert the SEC to the matter, to secure her right to pursue Dodd-Frank’s special financial incentives (a potentially large bounty) and legal protection (including the right to recover double back pay). And the employer may not know that such an employee has reported to the SEC because Dodd-Frank and the SEC regulations both preserve the confidentiality of a whistleblower’s identity.
If allowed to stand, the Ninth Circuit’s decision would certainly eviscerate Dodd-Frank’s definition of a whistleblower. But in so doing, the lower court’s approach would also contravene Congress’ purpose of linking Dodd-Frank’s special financial incentives with its enhanced remedial protection. In the lower court’s view, an employee can sue for retaliation under Dodd-Frank even though he is not eligible for a bounty under that statute, because he has not reported to the SEC. But Dodd-Frank’s incentives and remedies are not severable from each other. Instead, they go hand in hand. And they are only available to the employee who has earned them both, by reporting information to the SEC.
[1] In particular, Dodd-Frank’s whistleblower provision creates the SEC Investor Protection Fund, § 78u-6(g), and requires the SEC to pay employees between 10% and 30% of the penalties collected by the SEC in a “covered judicial or administrative action,” which is defined as “any judicial or administrative action brought by the Commission under the securities laws that results in monetary sanctions exceeding $1,000,000.” 15 U.S.C. § 78u-6(b).
NELF, joined by Associated Industries of Massachusetts, filed an amicus brief in the certiorari and merits stages of this case, on behalf of the employer, Digital Realty Trust. The case is now scheduled for oral argument on November 28. At issue is the meaning of a subsection of Dodd-Frank’s “Securities whistleblower incentives and protection” section, 15 U.S.C. § 78u-6, which protects “a whistleblower [from retaliation in the workplace] . . . because of any lawful act done by the whistleblower . . . in making disclosures that are required or protected under the Sarbanes-Oxley Act [SOX] . . . .” 15 U.S.C. § 78u-6(h)(1)(A)(iii). That same section of Dodd-Frank defines a “whistleblower” as “any individual who provides . . . information relating to a violation of the securities laws to the [SEC] . . . .” 15 U.S.C. § 78u-6(a)(6). SOX, however, affords protection to the employee who only reports a potential securities law violation to his employer. And the Ninth Circuit in this case interpreted the disputed subsection of Dodd-Frank to mean that Dodd-Frank also protects the employee who only reports to his employer.
This case matters to NELF and its supporters because an employee who sues for whistleblower retaliation under Dodd-Frank is entitled to very generous remedies--a six-to-ten year limitations period, double back pay damages, and a direct right of action in federal court, without having to exhaust any administrative remedies. 15 U.S.C. § 78u-6(h)(1)(B)-(C). Dodd-Frank also awards the whistleblower a substantial monetary bounty if her reporting to the SEC results in a successful administrative or judicial enforcement action by that agency. § 78u-6(b). [1]
The lower court erred because it abandoned Dodd-Frank’s clear provision that a “whistleblower” is an employee who reports to the SEC. This definition must apply whenever the word “whistleblower” appears in the disputed subsection of Dodd-Frank. And applying this definition to the disputed language yields only one meaning. The employee who reports information to the SEC is protected when he also reports that information to his employer and then suffers retaliation because of his internal reporting.
This subsection of Dodd-Frank therefore protects an employee who has reported to both the SEC and her employer, when the employer does not know that the employee has reported to the SEC. And this subsection is necessary because, without it, such an employee would not be protected under Dodd-Frank. She would only be protected under SOX for her internal reporting. By affording Dodd-Frank protection under these circumstances, then, the disputed subsection encourages an employee to report to both the SEC and her employer.
The Ninth Circuit apparently rejected the statute’s plain meaning. In that court’s view, the disputed language identified a set of circumstances that was “narrow[] to the point of absurdity . . . .” Appendix to Petitioner’s Petition for Certiorari 8a. But it is not for the courts to pass judgment on congressional line drawing of this sort. Nor is it a court’s role to conform an unambiguous statute such as this one to the court’s own notion of what Congress may have had in mind.
But this is precisely what the Ninth Circuit did here, when it “interpreted” the disputed language to protect employees who are not Dodd-Frank whistleblowers because they have not reported to the SEC. The Ninth Circuit impermissibly substituted the word “employee” for the defined term “whistleblower.” And Dodd-Frank’s specific definition of a whistleblower excludes all other possible meanings of that term. Moreover, Congress chose the word “employee” in SOX’s whistleblower provision but did not do so when it later enacted Dodd-Frank. It must be presumed that this choice was deliberate.
In any event, it is hardly absurd for Congress to assume that an employee may choose to report to both the SEC and her employer, and that the employer may not know that such an employee has reported to the SEC. Consistent with SOX’s purposes, an employee may wish to report a potential violation to her employer, for speedy internal resolution of the matter. But, consistent with Dodd-Frank’s purposes, that same employee may also wish to alert the SEC to the matter, to secure her right to pursue Dodd-Frank’s special financial incentives (a potentially large bounty) and legal protection (including the right to recover double back pay). And the employer may not know that such an employee has reported to the SEC because Dodd-Frank and the SEC regulations both preserve the confidentiality of a whistleblower’s identity.
If allowed to stand, the Ninth Circuit’s decision would certainly eviscerate Dodd-Frank’s definition of a whistleblower. But in so doing, the lower court’s approach would also contravene Congress’ purpose of linking Dodd-Frank’s special financial incentives with its enhanced remedial protection. In the lower court’s view, an employee can sue for retaliation under Dodd-Frank even though he is not eligible for a bounty under that statute, because he has not reported to the SEC. But Dodd-Frank’s incentives and remedies are not severable from each other. Instead, they go hand in hand. And they are only available to the employee who has earned them both, by reporting information to the SEC.
[1] In particular, Dodd-Frank’s whistleblower provision creates the SEC Investor Protection Fund, § 78u-6(g), and requires the SEC to pay employees between 10% and 30% of the penalties collected by the SEC in a “covered judicial or administrative action,” which is defined as “any judicial or administrative action brought by the Commission under the securities laws that results in monetary sanctions exceeding $1,000,000.” 15 U.S.C. § 78u-6(b).
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