NY District Court Rules Internal Tipsters Not “Whistleblowers” Under Dodd-Frank

by PIB Law on January 27, 2015

in Securities Litigation

NY District Court Rules Internal Tipsters Not “Whistleblowers” Under Dodd-Frank The federal courts continue to struggle with the definition of a Dodd Frank “whistleblower.” In Berman v. Neo@Ogilvy, No. 14-cv-523, a judge in the Southern District of New York ruled that the statute’s anti-retaliation provisions do not protect employees who report internally. The ruling conforms to the Fifth Circuit’s holding in Asadi v. G.E. Energy (USA), LLC, 720 F.3d 620 (5th Cir. 2013), but is at odds with a prior decision in the New York federal courts.

The Facts of the Case

The plaintiff, Daniel Berman, filed suit against his employer, alleging that the company terminated him after he reported internally several transactions that he believed to be in violation of the Dodd-Frank Act, the Sarbanes-Oxley Act, and other federal securities laws. The plaintiff did not report any of the alleged violations to the Securities and Exchange Commission (“SEC”) prior to his termination.

The primary issue before the court was whether whistleblowers must provide information directly to the SEC in order to benefit from the anti-retaliation provisions of the Dodd-Frank Act. As previously discussed on this blog, district courts across the country have failed to reach a consensus regarding whether to give deference to the SEC’s implementing rule, which provides protection from retaliation to workers who make protected disclosures regardless of whether they report the information to the SEC or another source. The Fifth Circuit is the only federal court of appeals to address the issue, concluding in Asadi that internal reporters are not protected.

The Court’s Decision

The court ultimately dismissed the suit, finding that the plaintiff did not qualify as a whistleblower. “Because the language of the statute unambiguously requires that a person provide information to the Commission in order to qualify as a whistleblower under the Act, the Court holds that plaintiff is not a whistleblower and that his suit must be dismissed,” Judge Gregory H. Woods ruled.

In reaching his decision, Judge Woods reasoned that the Fifth Circuit’s approach in Asadi represented a “harmonious interpretation of the statute that eliminates the purported contradiction in the Act that forms the basis of the other district court’s determination that the statute is ambiguous.” He further noted that “it appears to be the exception, not the rule, for Congress to grant an individual a private right of action to sue for damages arising from retaliation without requiring that individual to make contact with a federal agency first.”

PIB Law represents national banks, retailers, reinsurers, insurers, mortgage lenders and financial services companies from its offices in New Jersey, New York City, Philadelphia, Boston, San Antonio, and Chicago. For more information about our securities litigation services, contact PIB Law at 908-725-9700.

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