Dodd-Frank Whistleblower Anti-Retaliation Provisions: Clarifications around the Corner?

Posted by Kristin Graham Koehler and Elizabeth Kolbe

Almost four years after the passage of the Dodd-Frank Act, two recent developments suggest that clarifications regarding the whistleblower anti-retaliation provisions may be around the corner.

First, an upcoming case may shed light on whether a plaintiff must report alleged violations to the Securities and Exchange Commission (SEC) in order to be protected by the Dodd-Frank anti-retaliation provisions. On July 17, 2014, District Judge John M. Gerrard granted a motion to certify the question on interlocutory appeal to the Eight Circuit. Bussing v. Legent Clearing LLC et al., No: 8:12-cv-00238 (D. Neb).

The case arose after Julie Bussing, a former executive vice president for Legent Clearing LLC (now COR Clearing), alleged that she was fired after she responded to a FINRA document request by disclosing violations of the Bank Secrecy Act and anti-money laundering laws over the objection of her bosses.

In May 2014, Judge Gerrard held that the plaintiff was a “whistleblower” entitled to protection under the anti-retaliation provisions set forth in Dodd-Frank, finding that reporting the alleged violations to management within the company and to an independent regulator were sufficient to meet the whistleblower requirements, even though she had not reported the violations to the SEC. Specifically, the judge stated that Congress created the anti-retaliation section “with the aim of protecting a very broad range of disclosures, including many to persons or entities other than the SEC.” Disclosures required or protected under “any other law, rule, or regulation subject to the jurisdiction of the Commission” entitled a whistleblower to protection from retaliation. Although Bussing would be protected under the anti-retaliation provisions of Dodd-Frank, the judge held that she did not, however, meet the “whistleblower” requirements of the “bounty provision” of Dodd-Frank, which require reporting to the SEC.

While other lower courts are split on the issue, the only federal appeals court that has weighed-in, to date, is the Fifth Circuit, in Asadi v. GE Energy (USA) LLC, 720 F.3d 620 (5th Cir. 2013), holding that the retaliation protections under Dodd-Frank were only available to whistleblowers that report to the SEC. There is also a case currently pending at the Second Circuit on this issue. Liu Meng-Lin v. Siemens AG, No. 13-4385.

Second, the day following Judge Gerrard’s order, on July 18, a joint petition for rulemaking and issuance of a policy statement was submitted to the SEC by a former SEC official and the Government Accountability Project, an advocacy group supporting whistleblowers. The joint petition urges the SEC to increase and clarify the anti-retaliation protections for whistleblowers.

Specifically, the joint petition seeks clarification that whistleblowers are eligible for protection from retaliation when they make disclosures within their companies (and not to the SEC) and that private confidentiality agreements designed to prevent employees from reporting violations to the SEC or waiving their rights to receive monetary awards are illegal.

Stay tuned.