Supreme Court Limits Whistleblower Suits Under Dodd-Frank

Kelley Drye Client Advisory

On February 21, 2018, the Supreme Court released its Opinion in Digital Realty Trust, Inc. v. Somers, 583 U.S. ___ (“Digital Realty”). Digital Realty clarifies the limited instances where a purported whistleblower can claim protection from wrongful retaliation pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”).
The plaintiff in Digital Realty, Paul Somers, claimed he was a whistleblower protected by Dodd-Frank’s anti-retaliation provision. Somers alleged he was terminated from his job after reporting purportedly wrongful conduct to the company’s senior management. He filed a lawsuit seeking whistleblower protections under Dodd-Frank.
While Somers had reported alleged misconduct within the company from which he was fired, he had not reported that conduct to the Securities and Exchange Commission (“SEC”).  In a unanimous opinion, the Supreme Court held that a whistleblower” under Dodd-Frank was defined as someone who had reported the alleged wrongdoing to the SEC. The fact that Somers had made a report prior to his termination only to his employer but not to the SEC, precluded him from protection as a whistleblower” under Dodd-Frank’s anti-retaliation provision.
The Supreme Court’s ruling in Digital Realty underscores the limits of Dodd-Frank’s whistleblower protections. While an individual who reports alleged wrongdoing within a company may think he or she is a whistleblower, companies will often have defenses against the purported whistleblower’s status. As Digital Realty makes clear, a company may be protected from whistleblower activity if the purported whistleblower does not follow particularized requirements.
Kelley Drye recently prevailed in a litigation brought by a purported whistleblower against the Federal National Mortgage Association (“Fannie Mae”). In that case, as in Digital Realty, the plaintiff claimed she was a whistleblower, protected by applicable whistleblower protection laws. In reality, as Kelley Drye argued and the federal trial and appellate courts concluded, she was no such thing. Just last week, the federal district court in the District of Columbia awarded Fannie Mae over $43,000 in costs for having to defend the lawsuit. Herron v. Fannie Mae, --- F.Supp.3d ----, 2018 WL 1036358 (Feb. 22, 2018).
The federal, state, local laws and common law regarding whistleblower protections can be complicated, and the definition of who qualifies as a whistleblower” under a particular statute is often limited. Please let us know if you have any questions regarding the defense of whistleblower (or purported) whistleblower actions. We are here to help.