Recently a second U.S. Court of Appeals looked at the question of whether a whistleblower who reports concerns internally to a company rather than going to the SEC directly, can claim protections under the Whistleblower Protections under the Dodd-Frank Act. In the case of Berman v. Neo@Ogilvy LLC, the Second Circuit Court of Appeals found that employees who reported suspected illegal conduct to their employers rather than to the SEC are entitled to the anti-retaliation protections afforded under Dodd-Frank.
The court properly recognized that almost all whistleblowers report internally and not to afford them anti-retaliatory protections would undermine the goal of both Dodd-Frank and the SEC’s interpretation of the statute to encourage the reporting of illegal conduct. Moreover, the court noted there were a group of potential whistleblowers, including attorneys and auditors, who cannot ethically report the SEC without prior internal reporting to their employers, who would not be protected.
The Berman decision conflicts with a prior decision from the Fifth Circuit Court of Appeals, in Asadi v. GE where that court held the opposite in refusing to give weight to SEC’s interpretation of the statute or its interplay with the anti-retaliation provisions of the Sarbanes-Oxley Act. The Fifth Circuit believed that under Dodd-Frank Act, Congress only desired to protect employees who reported to the SEC and not those who reported internally.
This split in decisions can cause significant difficulties for both whistleblowers and companies in trying to determine which court interpretation may apply to them. Moreover, it will certainly require the US Supreme Court to step in and make a final determination of the issue. Last month, the losing party in the Berman decision announced it would not be filing an appeal with the US Supreme Court. This action will put off for at least one more year, any clarity the Supreme Court could bring through a final decision on this significant issue.