Fifth Court States Whistleblower Protection if Whistleblower
Report to SEC or Internally to Company
The Fifth Circuit ruled on June 17, 2013, that anti-retaliation
provisions in Dodd-Frank only protect whistleblowers who disclose
alleged fraud to the U.S. Securities and Exchange Commission and
not just internally to the company. The case is Asadi v. GE
Energy USA LLC, case number 12-20522, in the U.S. Circuit
Court of Appeals for the Fifth Circuit.
Khaled Asadi, a former GE Energy USA LLC executive was allegedly
fired after reporting a possible securities law violation.
The Fifth Circuit appeals court ruled that he could not sue GE
under Dodd-Frank's anti-retaliation provision since he did not
qualify as a whistleblower under Dodd-Frank because he only
reported the fraud internally and did not report it to the SEC.
Whistleblower Defined Under Dodd-Frank
Dodd-Frank defines a whistleblower as any individual who
discloses potential wrongdoing "to the Commission." 15 USC §
78u-6(a)(6) A separate provision allows whistleblowers (who
seemingly by definition must have reported to the SEC) to sue
employers for retaliation in three enumerated situations, one of
which requires that the whistleblower has made disclosures required
or protected by the Sarbanes-Oxley Act ("SOX"). 15 USC §
78u-6(h)(1) SOX, however, does not specifically require
disclosure to the SEC. Therein lies the root of the issue - a
conflict between the definition of whistleblower and the specific
language of the anti-retaliation section.
SEC States Whistleblowers Are Protected No Matter Where
Reporting Takes Place
The SEC itself has stated that a whistleblower need not have
reported wrongdoing to the SEC to avail himself of Dodd-Frank's
anti-retaliation protections. The SEC's May 25, 2011,
Adopting Release for its DFA whistleblower regulations states that
this provision provides protection, in certain circumstances, for
those who have only reported wrongdoing internally: "[T]he
retaliation protections for internal reporting afforded by Section
21F(h)(1)(A) do not broadly apply to employees of entities other
than public companies. . . . In a few limited situations -
reporting by employees of subsidiaries and NRSRO's [nationally
recognized statistical rating organizations] covered by SOX Section
806, and by employees whose reports were required or protected
under SOX or the Exchange Act, see DFA Section 21F(h)(1)(A)(iii) -
internal reporting is expressly protected." Thus, outside of
a public company, internal reporting will give rise to
anti-retaliation protection only if that reporting was "required or
protected" by a law, rule or regulation within the SEC's
Split in Circuit Courts for Dodd-Frank Could be Seen by
U.S. Supreme Court Soon
At least five federal district courts have ruled that the two
Dodd-Frank provisions at issue are either ambiguous or conflicting,
and each has adopted the more expansive view of Dodd-Frank
whistleblower protections that allows for anti-retaliation
protections for those who only report internally. The
Assadi decision is the first by an appeals court on
the issue. This means that a split among circuit courts may
occur, which could lead to U.S. Supreme Court review.
Why Report Under Sarbanes-Oxley verse Dodd-Frank?
Plaintiffs who claim retaliation for activity that is protected
under Sarbanes-Oxley but who do not report to the SEC would, in
many instances, desire to sue under Dodd-Frank in order to take
advantage of its plaintiff-friendly anti-retaliation provisions,
which include greater potential damages (Dodd-Frank allows an award
of two times back pay, while SOX only allows for a single back pay
award), a longer Statute of Limitations (up to 10 years) and the
ability to sue in federal court (as opposed to SOX which requires
an administrative filing with the U.S. Department of Labor).
In the end, The Fifth Circuit's decision may benefit the SEC in
by encouraging whistleblowers to report their concerns directly to
Both SOX and Section 922 each allow for reinstatement and
attorneys' costs and fees, Section 922 allows an award of two times
back pay, while SOX only allows for a single back pay award.
Read more here
about SEC Whistleblower Payouts and Rewards.
One benefit of the whistleblower protections under Section
922 is that such claims can be brought directly in the U.S.
district courts. Other federal laws, like SOX, require an employee
to file an administrative complaint with the U.S. Department of
Labor, Occupational Safety and Health Administration, before
bringing suit in federal court.
Contact Us To Learn More
If you have discovered evidence of government fraud,
contact an experienced False Claims Act attorney before blowing the
whistle. You may be entitled to a substantial reward and the legal
protections afforded to whistleblowers under state and federal
laws. The attorneys of Berger & Montague are nationally
recognized experts in Whistleblower/Qui Tam actions with over a
decade of experience pursuing these complex fraud cases. For more
information or to schedule your confidential consultation, use the
form on this page or call us at 1-800-424-6690.
For further reading:
Provision of the False Claims Act
SEC Whistleblower Law and the Securities Whistleblower
Whistleblower Clients Can Expect From Our Lawyers
SEC Prepare for Whistleblower Payouts and Monetary Awards under
Dodd Frank Act
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