Last week, the Fifth Circuit issued the first decision
interpreting Dodd-Frank’s anti-retaliation provision. Importantly, the court stated that to be
protected under the Act’s provisions, an individual must be a whistleblower,
which is defined in the Act as requiring that the individual makes a report to
the SEC. This holding conflicts with
other prior district court decisions and the SEC’s interpretation, which held that
an individual was protected even when he or she only made an internal report to
company management.
The Fifth Circuit noted that the statute’s plain language in
the anti-retaliation provision only protects whistleblowers, and that reading
out the requirement that a whistleblower provide information to the SEC would
render the provision meaningless. The
Court found that the SEC’s interpretation was not entitled to Chevron deference because the statute
was plain and unambiguous, and thus no agency interpretation was required. It also noted that if it extended Dodd-Frank’s
whistleblower definition to extend to the filing of internal management
reports, it would likely render a similar provision in Sarbanes-Oxley moot, as Sarbanes-Oxley,
with more onerous filing requirements, would have no practical purpose if individuals
could simply proceed under Dodd-Frank.
Given that Congress extended protections under Sarbanes-Oxley at the same
time it passed Dodd-Frank, the Court found that its intent could not have been
to overlap protections in the way the SEC advocated.
Employers will likely be happy with the result,
as Dodd-Frank’s provision has been narrowed back to what many thought was its
original intent. Other circuit courts
have yet to take up the issue. In
general, those filing under Dodd-Frank need to make sure to have made a prior
SEC disclosure before bringing forward a case.