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Supreme Court says securities whistleblowers must go through SEC

by | Feb 23, 2018 | News From The Supreme Court, Whistleblower Protection

Recently we wrote about the case of an executive who was fired after bringing his concerns of securities fraud to upper management.

He sued for whistleblower retaliation under a provision of Dodd-Frank specifically written to shield employees who report securities violations. But the U.S. Supreme Court has ruled – unanimously, if reluctantly – that Paul Somers was not protected because he failed to bring his complaint directly to the SEC.


Is this what Congress intended?

Dodd-Frank extends whistleblower protection to individuals who have knowledge of violations of securities laws. Paul Somers was a vice president of Digital Realty Trust who believed he had such knowledge. In 2014 he reported his suspicions to senior management. Soon after, the real estate investment trust sent him packing.

Dodd-Frank allows whistleblowers who suffer retaliation to recover double back pay and other damages. But the language of the law requires individuals to file their complaints with the Securities and Exchange Commission. The Supreme Court, in a unanimous decision, adhered to the letter of the law: Somers was not a whistleblower under the statute because he did not specifically make his complaint to the SEC. (For the record, his superiors sat on the information and did not alert authorities.)

Justice Ruth Bader Ginsberg, writing for the court, said that Dodd-Frank is designed for whistleblowers to work with the SEC. It encourages reporting, provides prompt access to federal court and protects those individuals from reprisal. The statute also allows individuals to collect a monetary reward when whistleblowing leads to a large securities fraud recovery.

Justice Elena Kagan and others expressed doubt that Congress meant to leave conscientious employees like Somers out in the cold. But she and other members of the court said that the straightforward language of the Dodd-Frank whistleblower provision did not allow for conjecture. It remains to be seen whether Congress will amend the law or let it stand.

Whistleblower protection is not an empty promise

It’s a devastating outcome for Mr. Somers but a cautionary tale for others. The federal government does provide whistleblower protection you but only if you bring your complaint in the right way through the correct channels. This travesty of justice underscores the value of seeking legal counsel before taking on the risks and burdens of whistleblowing.