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Court Narrows Whistleblower Remedies

By William Vogeler, Esq. on February 23, 2018 5:59 AM

Contrary to popular opinion, liberal and conservative justices see cases the same way sometimes.

In Digital Realty Trust v. Somers, the U.S. Supreme Court unanimously threw out a whistleblower case against a company that allegedly violated securities laws. It wasn't about workers' rights v. big business; it was about the plain meaning of the law.

Justice Ruth Bader Ginsburg, the acknowledged left-end of the panel, said whistleblowers must inform the Securities and Exchange Commission before suing under the Dodd-Frank Act.

Dodd-Frank Act

Paul Somers, a former employee at the California company, reported to management that his supervisor was hiding cost overruns. When the company fired Somers, he sued and alleged retaliation.

The U.S. Ninth Circuit Court of Appeals ruled in his favor, but the Supreme Court said the Act authorizes whistleblower suits only by people who report alleged misconduct to the SEC. Writing for the court, Ginsburg said Somers didn't do that.

"Somers did not provide information 'to the Commission before his termination ... so he did not qualify as a 'whistleblower,'" Ginsburg said.

Pro-business groups, including the U.S. Chamber of Commerce, had filed amicus briefs in favor of the employer. The Trump administration, on the other hand, had weighed in on the side of whistleblowers.

Sarbanes-Oxley Act

The decision does not leave whistleblowers without a remedy if they don't report to the SEC. Ginsburg explained that Congress has "a more far-reaching objective" with the Sarbanes-Oxley Act.

"It sought to disturb the corporate code of silence that discouraged employees from reporting fraudulent behavior not only to the proper authorities, such as the FBI and the SEC, but even internally," she wrote.

Justice Clarence Thomas, joined by Justices Samuel Alito and Neil Gorsuch, concurred in a separate opinion. They agreed with the decision, but said the majority should have limited its review to the statute and not the legislative record.

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