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Financial Services Law Insights and Observations

High Court passes on opportunity to resolve circuit split over statutory requirements for whistleblower protection under Dodd-Frank Act

Courts U.S. Supreme Court Dodd-Frank Whistleblower SOX


On March 21, the U.S. Supreme Court denied a Petition for Writ of Certiorari in Verble v. Morgan Stanley Smith Barney, LLC,  (No. 16-946), thereby declining to resolve a circuit split regarding whether the protections against retaliation provided in the Dodd-Frank Act extend to whistleblowers who do not report the misconduct to the SEC. At issue were the statutory requirements for qualifying as a “whistleblower” under the Dodd-Frank Act. While the Act defines “whistleblower” as an individual who reports wrongdoing “to the Commission,”[1] a separate provision provides protection against retaliation for whistleblowers reporting wrongdoing under Sarbanes-Oxley,[2] which includes both reporting to federal agencies or internal reporting within the company.[3]

The Verble case came to the Court on appeal from a Sixth Circuit decision affirming the dismissal of Mr. Verble’s claim that he was improperly terminated in retaliation for being a confidential informant (and whistleblower) to the FBI. A U.S. District Court for the Eastern District of Tennessee dismissed the former financial advisor’s Dodd-Frank retaliation claim after finding that Dodd-Frank’s anti-retaliation provision was available only for whistleblowers who reported their concerns directly to the SEC. See Verble v. Morgan Stanley Smith Barney, 148 F. Supp. 3d 644 (E.D. Tenn. 2015). On appeal, the Sixth Circuit affirmed the dismissal, but did not reach the issue regarding the scope of Dodd-Frank’s anti-retaliation provision. Rather than taking sides on the split between circuits, the Sixth Circuit panel opted instead to base its decision solely on the ground that Mr. Verble “fail[ed] to meet the threshold requirement of providing enough facts to state a plausible claim for relief.” 

On January 26, Mr. Verble filed the aforementioned unsuccessful Petition for Writ of Certiorari. The first question presented in the petition for certiorari was whether the Sixth Circuit erred by avoiding the issue; next, Mr. Verble asked the Court to settle a split between the Fifth and Second Circuits—the only two circuits to have opined on the issue. Weighing in first, the Fifth Circuit had strictly applied the Dodd-Frank Act’s definition of “whistleblower” to the later anti-retaliation provision, so as to require dismissal of the plaintiff’s action in that case because he did not make his disclosures to the SEC. See Asadi v. G.E. Energy (USA), L.L.C., 720 F.3d 620, 621 (5th Cir. 2013). In so doing, the court declined to rely upon an SEC regulation adopting a contrary interpretation. By contrast, the Second Circuit, viewing the statute itself as ambiguous, applied Chevron deference to (and accepted) the SEC’s interpretation, which extended protections to all whistleblowers. Berman v. Neo@Ogilvy LLC, 801 F.3d 145, 155 (2d Cir. 2015).

Notably, while the petition for certiorari was pending, the Ninth Circuit became the third appellate circuit to stake out a position on the existence of an external reporting requirement when, in an opinion filed on March 8, it held that the Dodd-Frank Act whistleblower provision “unambiguously and expressly protects from retaliation all those who report to the SEC and who report internally.” See Somers v. Digital Realty Trust, No. 15-17352, 2017 WL 908245 (9th Cir. 2017).


[1] 15 U.S.C. § 78u-6(a)(6)

[2] 15 U.S.C. § 78u-6(h)(1)(A)(iii)

[3] 17 C.F.R. § 240.21F-2 (2011)

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