Supreme Court Whistleblower Ruling Roils Plaintiffs’ Bar
By Lynn Shapiro, Staff Writer
Last week’s unanimous Supreme Court decision, limiting the “whistleblower” anti-retaliation protection clause of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) to include only those employees who report company fraud to the SEC, is “bad policy in need of a legislative fix”, qui tam attorneys Adam Pollock and Steve Cohen, of Pollock, Cohen, LLP, in Manhattan say.
The case in dispute, Digital Realty Trust v. Somers, started when Paul Somers, then an executive at a real estate investment trust fund in San Francisco, told his superiors about what he said were securities law violations, but did not report these violations to the SEC, according to Adam Liptak, of The New York Times.
Somers was fired after he filed a complaint with his company’s top brass about hidden cost overruns, and sued the company under Dodd-Frank.
“The Ninth Circuit Court in San Francisco ruled on behalf of Somers, saying that interpreting the law literally ‘would make little practical sense and undercut Congressional intent”, Liptak notes.
Qui tam attorney, Pollock, says that “as a consequence of this decision, every well-informed employee will run straight to the SEC instead of reporting internally, as they have been. That is not good for employers and it’s not good public policy,” Pollock argues.
“The 9-0 decision about the plain text of the law calls out for an easy legislative fix. There should be bi-partisan support for promoting internal reporting of corporate fraud,” Pollock concludes.
Adhering to the letter of the law, Ruth Bader Ginsberg, writing for the court, said “To sue under Dodd-Frank’s anti-retaliation provision, a person must first provide…information relating to a violation of the securities laws to the Commission,” according to Dodd-Frank.
Bellwether Counsel Argues for Broader Protection
Daniel Geyser of the Dallas firm Stirs & Maher, counsel to bellwether whistleblower, Saul Somers, told the High Court justices, according to the National Law Journal, that “the entire point that Congress had made in this [Dodd-Frank] statute and consistent again with every piece of modern, major whistleblowing legislation is to protect internal whistle blowing.
“This is the ordinary progression of getting information to the government. You first give the corporation a chance for self-governance. If they refuse to do it, then you go to the government,” Geyser said, according to the National Law Journal.
Digital Reality Trust argued that Somers was not a whistleblower under Dodd-Frank, as he failed to report the company’s SEC violations to the Commission.
The High Court’s ruling is a victory for Kannon Shanmugam, a partner at Williams & Connelly, representing Digital Reality.
Plaintiffs’ attorneys note that a separate provision in the Sarbanes-Oxley Act of 2002, protects whistleblowers who need not report to the SEC. It requires employees to file a complaint with the Labor Department within 180 days after an employee is fired.
Gorsuch Creates Originalist Trifecta
Liptak notes that “two sets of justices” filed concurring opinions, disagreeing over whether the majority should have taken account of a Senate report.
“I do not think it wise for judges to close their eyes to reliable legislative history,” wrote Justice Sotomayor, joined by Justice Stephen Breyer, speaking of her right to consult a Congressional document before deciding the case.
The new originalist trifecta: Justice Clarence Thomas, Samuel Alito, and Neil Gorsuch, argued that the law should be read as written, and not as intended by progressive jurists, who might rely on a Congressional document before handing down their ruling.
Trump for Plaintiff
Seemingly out of character, Trump Administration lawyers filed a brief on behalf of the plaintiff. They claimed the court should not “depart from the usual understanding of the term ‘whistleblower.’
“Doing so, “would undermine Congress’ effort to promote more rigorous and effective internal compliance programs,” Trump’s attorneys argued.