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Unfavorable Ruling for Dodd-Frank Whistleblowers: Moving Back Toward Asadi

Posted  December 11, 2014

By Marlene Koury

There is a split among the federal courts as to whether an employee is covered under the anti-retaliation provisions of Dodd-Frank when the employee only reports the conduct internally rather than to the SEC.

Last summer, the Fifth Circuit in Asadi v. GE Energy ruled the whistleblower retaliation protections of the Dodd-Frank Act apply only to those who actually provide information to the government. If a whistleblower merely reports within the company, to a supervisor or through an internal compliance program, the court ruled there is no coverage under the Act. But then just last month a California court found, in Connolly v. Wolfgang Remkes, that a whistleblower is not required to report to the SEC in order to qualify for protection.

Just as the law was moving in the right direction, a New York judge has relied on Asadi in throwing out a whistleblower retaliation lawsuit because the employee did not report his concerns to the SEC before the retaliation. The employee raised concerns internally over a number of transactions that he reasonably believed to be violations of “policy, law, and GAAP…WPP policies…Sarbanes-Oxley, DoddFrank and U.S. Securities Laws.” He claims that the company fired him after he made his concerns known.

In the decision, Berman v Neo@Ogilvy LLC, the judge recognized a “narrow exception” letting people sue under Dodd-Frank without first going to the SEC, and even noted that SEC regulations adopted in 2011 could support that view. But in the end, he sided with Asadi, reasoning that it “relied on the text of the statute and applies traditional canons of statutory construction to understand the statute’s meaning.” In doing so, he found the Asadi approach more “appropriate than the judicial creation of a ‘narrow exception’ to an unambiguous text.” The court held that Dodd-Frank creates a private cause of action “only for individuals who provide information relating to a violation of the securities laws to the Commission.”