May 08, 2017 Practice Points

Reach of Retaliation Claims Expanded under Dodd-Frank

Retaliation for an internal complaint could give rise to a federal whistleblower claim

by Michael S. LeBoff

If your client is an employer in any of the states in the Ninth Circuit, including California, the client's chances of being sued for a retaliatory discharge under Dodd-Frank may have increased exponentially. Dodd-Frank, among many things, prohibits an employer from retaliating against an employee who reports unlawful conduct, i.e., a whistleblower. 

What was unclear is whether the employee had to actually file a complaint with the SEC to be deemed a whistleblower, or whether a whistleblower included employees that only complained internally about corporate misconduct. Until recently, there was one-to-one circuit split between the Second and Fifth Circuit Courts of Appeals. The Second Circuit held that an employee who makes only internal complaints is entitled to whistleblower protection, while the Fifth Circuit held that an employee had to actually complain to the SEC. Compare Berman v. Neo@Ogilvy LLC, 801 F.3d 145 (2nd Cir. 2015) with Asadi v. G.E. Energy (USA), L.L.C., 720 F.3d 620 (5th Cir. 2013). In Somers v. Digital Realty Trust Inc., 850 F.3d 1045 (9th Cir. 2017), the Ninth Circuit, in a 2–1 opinion, recently broke that tie. In siding with the Second Circuit, the Ninth Circuit held Dodd-Frank "should be read to provide protections to those who report internally as well as those that report to the SEC." It remains to be seen how the other circuit courts will decide the issue or whether the United States Supreme Court will consider the issue given the circuit split. But for now, at least in the Second and Ninth Circuits, employers must defend against federal retaliation claims if an employee alleges he or she was retaliated against because of an internal complaint.

Keywords: commercial and business, litigation, Dodd-Frank, litigation, retaliation, whistleblower, Securities and Exchange Commission

Michael S. LeBoff is senior counsel at Klein & Wilson in  Newport Beach, California.


Copyright © 2017, American Bar Association. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. The views expressed in this article are those of the author(s) and do not necessarily reflect the positions or policies of the American Bar Association, the Section of Litigation, this committee, or the employer(s) of the author(s).