Divided Second Circuit Revives Whistleblower's Workplace Retaliation Claim

The U.S. Court of Appeals for the Second Circuit reversed a lower court's dismissal of a workplace retaliation claim brought by a whistleblower due to "sufficient ambiguity" concerning whether the definition of "whistleblower" in subsection 21F(a)(6)("Securities Whistleblower Incentives and Protection"), which was added to the Securities Exchange Act by Section 922 ("Whistleblower Protection") of the Dodd-Frank Act, applies to subdivision (iii) of subsection 21F(h)(1)(A) ("Protection of Whistleblowers - Prohibition against Retaliation"). "In operational terms," the Second Circuit elaborated, "the issue is whether an employee who suffers retaliation because he reports wrongdoing internally, but not to the SEC, can obtain the retaliation remedies provided by Dodd-Frank."

In a decision by Judge Jon O. Newman that was joined by Judge Guido Calabresi, the Court noted that this case "confronts both the definition of 'whistleblower' in subsection 21F(a)(6), which extends whistleblower protection only to employees who report violations to the Commission, and the language of subdivision (iii), which purports to protect employees from retaliation for making reports required or protected by Sarbanes-Oxley, reports that are made internally, without notification to the Commission." The court also stressed that the decision creates a split with the Fifth Circuit (see 2013 whistleblower case, Asadi v. GE Energy USA LLC), but "does so against a landscape of existing disagreement among a large number of district courts."

In his dissent, Judge Dennis Jacobs argued that the decision involved the "majority and the [SEC] . . . deleting three words ('to the Commission') from the definition of 'whistleblower' in the Dodd-Frank Act" and that this "alteration" placed the Second Circuit "on the wrong side" of the circuit split.