U.S. top court refuses to widen whistleblower protections

The U.S. Supreme Court on Wednesday refused to broaden
protections for corporate insiders who call out misconduct,
throwing out a lawsuit brought against a real estate trust by a
former employee who had reported alleged wrongdoing internally but
not to the Securities and Exchange Commission.

The justices ruled 9-0 in favor of Digital Realty Trust Inc,
deciding that the 2010 Wall Street reform law known as the
Dodd-Frank Act protects whistleblowers from retaliation only if
they have brought their claims of securities law violations
directly to the SEC.

“The plain-text reading of the statute undoubtedly shields fewer
individuals from retaliation than the alternative,” said Justice
Ruth Bader Ginsburg, writing for the court.

The ruling could inhibit employees from trying to resolve
complaints of wrongdoing in-house without involving the SEC, and
also could impede retaliation suits by workers who accuse
businesses of firing them for reporting such conduct.

The case required the justices to decide who should be
considered a whistleblower deserving of protection from corporate
retaliation under federal law. The Dodd-Frank law explicitly
defines whistleblowers as any individual or group of employees who
provide “information relating to a violation of the securities
laws” to the SEC.

Digital Realty, a publicly traded San Francisco-based company
that owns and develops data centers, had appealed a lower court
ruling in favor of a fired executive, Paul Somers, after he
informed senior management about alleged violations by his
supervisor but never reported the matter to the SEC.

Ginsburg wrote that the text of the Dodd-Frank law clearly
excludes people who do not provide information to the SEC.

“Somers did not provide information ‘to the Commission’ before
his termination … so he did not qualify as a ‘whistleblower,’”
Ginsburg added.

Somers, a Digital Realty portfolio-management vice president
from 2010 to 2014, sued the company, saying he was dismissed
because he reported internally that his supervisor had hidden major
cost overruns, eliminated internal controls and granted
unsubstantiated payments to friends, according to court
filings.

The SEC adopted rules in 2011 to prohibit corporate employers
from retaliating against whistleblowers who try to report
allegations of securities law violations or fraud. The rules allow
the SEC to offer monetary awards to whistleblowers whose tips lead
to successful enforcement actions.

Backed by President Donald Trump’s administration, Somers argued
that whistleblower protections must extend to those who speak up
internally in order to encourage people to report misconduct
without fear of being fired.

The San Francisco-based 9th U.S. Circuit Court of Appeals last
year upheld a federal judge’s decision that the law covered a wide
array of disclosures by whistleblowers, not just those who report
to the SEC. Digital Realty appealed that ruling to the high
court.

reuters

The U.S. Supreme Court on Wednesday refused to broaden
protections for corporate insiders who call out misconduct,
throwing out a lawsuit brought against a real estate trust by a
former employee who had reported alleged wrongdoing internally but
not to the Securities and Exchange Commission.

The justices ruled 9-0 in favor of Digital Realty Trust Inc,
deciding that the 2010 Wall Street reform law known as the
Dodd-Frank Act protects whistleblowers from retaliation only if
they have brought their claims of securities law violations
directly to the SEC.

“The plain-text reading of the statute undoubtedly shields fewer
individuals from retaliation than the alternative,” said Justice
Ruth Bader Ginsburg, writing for the court.

The ruling could inhibit employees from trying to resolve
complaints of wrongdoing in-house without involving the SEC, and
also could impede retaliation suits by workers who accuse
businesses of firing them for reporting such conduct.

The case required the justices to decide who should be
considered a whistleblower deserving of protection from corporate
retaliation under federal law. The Dodd-Frank law explicitly
defines whistleblowers as any individual or group of employees who
provide “information relating to a violation of the securities
laws” to the SEC.

Digital Realty, a publicly traded San Francisco-based company
that owns and develops data centers, had appealed a lower court
ruling in favor of a fired executive, Paul Somers, after he
informed senior management about alleged violations by his
supervisor but never reported the matter to the SEC.

Ginsburg wrote that the text of the Dodd-Frank law clearly
excludes people who do not provide information to the SEC.

“Somers did not provide information ‘to the Commission’ before
his termination … so he did not qualify as a ‘whistleblower,’”
Ginsburg added.

Somers, a Digital Realty portfolio-management vice president
from 2010 to 2014, sued the company, saying he was dismissed
because he reported internally that his supervisor had hidden major
cost overruns, eliminated internal controls and granted
unsubstantiated payments to friends, according to court
filings.

The SEC adopted rules in 2011 to prohibit corporate employers
from retaliating against whistleblowers who try to report
allegations of securities law violations or fraud. The rules allow
the SEC to offer monetary awards to whistleblowers whose tips lead
to successful enforcement actions.

Backed by President Donald Trump’s administration, Somers argued
that whistleblower protections must extend to those who speak up
internally in order to encourage people to report misconduct
without fear of being fired.

The San Francisco-based 9th U.S. Circuit Court of Appeals last
year upheld a federal judge’s decision that the law covered a wide
array of disclosures by whistleblowers, not just those who report
to the SEC. Digital Realty appealed that ruling to the high
court.

reuters