Internal Whistleblowers Protected by Dodd-Frank Says Second Circuit

11th September 2015

On Thursday, September 10, 2015, a divided Second Circuit reversed and remanded a lower court’s dismissal of a whistleblower retaliation case by a former employee. The Court found that the sections of the Dodd-Frank Act that govern when a whistleblower has to report to the Securities and Exchange Commission (“SEC”) to be covered by anti-retaliation protections were ambiguous.

The Second Circuit’s ruling, a divided 2-1 majority, revitalized a lawsuit that was filed by Daniel Berman, a former finance director at Neo@Oglivy LLC. Berman was fired for internally reporting suspected accounting fraud, but was fired before he contacted the SEC about the allegations. The lower court dismissed Berman’s claim in December 2014 stating that Berman was not covered by the statute because he waited until six months after his firing to contact the SEC.

The Court majority was unclear about when the Dodd-Frank anti-retaliation protections started for whistleblowers who report issues internally but wait to go to the SEC. The majority stated that it would defer (citing the Chevron deference) to the SEC’s interpretive rule that internal whistleblowers are protected by Dodd-Frank. 

This decision creates a circuit split and is in contrast to the 2013 Fifth Circuit decision in Asadi v. G.E. Energy (USA), LLC, where the Court did not agree with a similar claim on the grounds that Dodd-Frank defines only those individuals who provide information directly to the SEC as whistleblowers and an individual needs to be an SEC whistleblower first before they are entitled to Dodd-Frank anti-retaliation protections.

The Berman decision and subsequent circuit split could ascend to the U.S. Supreme Court for the final say on who is entitled to Dodd-Frank whistleblower provisions and protections.