Supreme Court Holds that Dodd-Frank Only Protects Those Who Report to SEC

The Supreme Court, in Digital Realty Trust v. Somers , No. 16-1276 (Feb. 21, 2018), held that the Dodd-Frank whistleblower retaliation provision only protects those who had made reports to the SEC, and did not protect those who made only internal reports before being terminated. The Court rejected the SEC’s arguments for a broader view of Dodd-Frank’s protections and held that SEC Rule 21-F was inconsistent with the statute.

Unlike the Sarbanes-Oxley Act of 2002, which protects those who make only internal reports, the Dodd-Frank Act of 2010 was written in such a way as to apply only to those who also provide information to the SEC.

This means that an employee who initially makes internal reports to his supervisors or other managers and then is quickly terminated, will not be able to bring a Dodd-Frank retaliation claim if he had not yet reported to the SEC. The decision may motivate employers to retaliate quickly against employees who make internal reports, before they have a chance to go to the SEC. The Supreme Court does recognize that “the plain-text reading of the statute undoubtedly shields fewer individuals from retaliation than the alternative proffered by Somers and the Solicitor General,” but notes that employees are protected “as soon as they also provide relevant information to the Commission.” However, as most employees who make these reports are not lawyers with specialized training in the retaliation statutes, they likely will not know that they need to make a report to the SEC in order to be protected under Dodd-Frank.

Today’s decision only applies to the anti-retaliation provision of Dodd Frank, and does not affect the separate, “award program” provision of Dodd-Frank, because that already required reporting to the SEC in order to obtain an award. In contrast, the anti-retaliation provisions of both Sarbanes-Oxley, and of the Consumer Financial Protection Bureau’s statute, do not require reporting to the SEC in order to be protected.

There are two concurring opinions (who take different views on the role of legislative history in interpreting the statute), and no dissent. The Supreme Court thus rejected the approach taken by the Second and Ninth Circuits, and instead followed that of the Fifth Circuit.