Ninth Circuit: Internal Whistleblowers Protected Under Dodd-Frank Act

In Somers v. Digital Realty Trust, the plaintiff reported a colleague’s suspected misconduct to senior management, alleging that his colleague hid costs that had exceeded several million dollars on a project. Somers was separated from employment, and he sued Digital Realty Trust for a number of reasons, including a whistleblower retaliation claim. Digital asserted that since Somers had reported the misconduct to internal management and not the SEC, he was not protected by the Dodd-Frank Act.

However, the Ninth Circuit stated that the anti-retaliation provision contained in the Dodd-Frank Act covers employees who report either to the SEC or to internal management. The court highlighted that the ultimate purpose of the Dodd-Frank Act is to protect employees from unlawful retaliation when they report violations. The Ninth Circuit also cited the SEC’s Exchange Act Rule 21F-2, which stated that internal whistleblower disclosures are protected.

As of this decision, two circuit courts (Second and Ninth) have favored the broader interpretation of whistleblowing, while one circuit court (Fifth) takes the opposing stance. It remains to be seen whether this matter will petitioned to the Supreme Court for further review.

Action Items

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Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser.

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