Fifth Circuit Rules Dodd-Frank’s Anti-Retaliation Provision Is Only Available For Whistleblowers Who Report To The SEC

As we have noted in previous alerts dated July 22, 2010, November 11, 2010 and November 30, 2011, the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) provides a number of incentives and protections to those who report wrongdoing – i.e., “whistleblowers.” One of the key protections is Dodd-Frank’s anti-retaliation provision, which provides a private right of action against employers who retaliate against the whistleblower for reporting. This provision protects whistleblowers from retaliatory discharge, demotion, suspension, threats, harassment, or any other manner of discrimination.

The Fifth Circuit ruled Wednesday, however, that the Dodd-Frank anti-retaliation provision only protects whistleblowers who disclose alleged wrongdoing to the Securities and Exchange Commission (“SEC”), and not those who report internally. In Asadi v. GE Energy USA LLC, 2013 U.S. App. LEXIS 14470 (5th Cir. 2013), an executive sued GE under Dodd-Frank after he was allegedly fired for internally reporting a possible securities law violation to his supervisor and the GE ombudsman for the region. The Court affirmed the district court’s dismissal of the executive’s claims, holding that the plain language of the provision creates a private cause of action only for individuals who provide information to the SEC.

Other district courts have considered this question and have concluded that the whistleblower-protection provision, as enacted, is either conflicting or ambiguous because a separate Dodd-Frank anti-retaliation category does not specifically require disclosure to the SEC. These courts have adopted a more expansive view of Dodd-Frank whistleblower protections and concluded that the provision extends to protect certain individuals who do not make disclosures to the SEC. See, e.g., Kramer v. Trans–Lux Corp., 2012 U.S. Dist. LEXIS 136939, at *4-5 (D. Conn. 2012); Nollner v. S. Baptist Convention, Inc., 852 F. Supp. 2d 986, 994 n.9 (M.D. Tenn. 2012); Egan v. TradingScreen, Inc., No. 10 Civ. 8202 (LBS), 2011 U.S. Dist. LEXIS 47713, at *4–5 (S.D.N.Y. 2011). The Fifth Circuit’s ruling on this issue – the first by an appellate court – has created a potential circuit split, and the issue may ultimately have to be decided by the Supreme Court.

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As we have noted in previous alerts dated July 22, 2010, November 11, 2010 and November 30, 2011, the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) provides a number of incentives and protections to those who report wrongdoing – i.e., “whistleblowers.” One of the key protections is Dodd-Frank’s anti-retaliation provision, which provides a private right of action against employers who retaliate against the whistleblower for reporting. This provision protects whistleblowers from retaliatory discharge, demotion, suspension, threats, harassment, or any other manner of discrimination.

The Fifth Circuit ruled Wednesday, however, that the Dodd-Frank anti-retaliation provision only protects whistleblowers who disclose alleged wrongdoing to the Securities and Exchange Commission (“SEC”), and not those who report internally. In Asadi v. GE Energy USA LLC, 2013 U.S. App. LEXIS 14470 (5th Cir. 2013), an executive sued GE under Dodd-Frank after he was allegedly fired for internally reporting a possible securities law violation to his supervisor and the GE ombudsman for the region. The Court affirmed the district court’s dismissal of the executive’s claims, holding that the plain language of the provision creates a private cause of action only for individuals who provide information to the SEC.

Other district courts have considered this question and have concluded that the whistleblower-protection provision, as enacted, is either conflicting or ambiguous because a separate Dodd-Frank anti-retaliation category does not specifically require disclosure to the SEC. These courts have adopted a more expansive view of Dodd-Frank whistleblower protections and concluded that the provision extends to protect certain individuals who do not make disclosures to the SEC. See, e.g., Kramer v. Trans–Lux Corp., 2012 U.S. Dist. LEXIS 136939, at *4-5 (D. Conn. 2012); Nollner v. S. Baptist Convention, Inc., 852 F. Supp. 2d 986, 994 n.9 (M.D. Tenn. 2012); Egan v. TradingScreen, Inc., No. 10 Civ. 8202 (LBS), 2011 U.S. Dist. LEXIS 47713, at *4–5 (S.D.N.Y. 2011). The Fifth Circuit’s ruling on this issue – the first by an appellate court – has created a potential circuit split, and the issue may ultimately have to be decided by the Supreme Court.

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