United States: The United States Supreme Court Narrows Whistleblower Protections Under Dodd-Frank

The Supreme Court of the United States has refused to broaden protections for employee-whistleblowers under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). In Digital Realty Trust Inc v. Somers, a decision with potentially far-reaching consequences, the Court held that the anti-retaliatory provisions of the Dodd-Frank Act apply only where a whistleblower reports directly to the United States Securities and Exchange Commission (SEC).

Background: The Dodd-Frank Act

Passed in the wake of the 2008 financial crisis, the Dodd-Frank Act amended the Securities Exchange Act, 1934 and introduced new protections and incentives to encourage greater reporting of potential securities violations. The Act defines a "whistleblower" to be "any individual who provides information relating to the violation of the securities laws to the Commission, in a manner established, by rule or regulation, by the Commission."

To encourage preemptive reporting of potential securities laws violations, the Dodd-Frank Act authorized the SEC to implement a "bounty for tips" program—whereby whistleblowers who voluntarily provide "original information" to the Commission that leads to a successful enforcement action are eligible to receive a cash award of 10 to 30 percent of the monetary sanctions collected by the SEC. Since the program's inception, the SEC has paid out over $1 billion in financial rewards.

The Dodd-Frank Act also introduced "anti-retaliatory" protections to the Securities Exchange Act, 1934—designed to protect "whistleblowers" from retribution by their employers for reporting potential securities violations. Under the Act, an employer is prohibited from dismissing, harassing or otherwise discriminating against a "whistleblower" on the basis that the whistleblower has (1) provided information to the SEC; (2) initiated, testified or assisted in a SEC investigation or enforcement action; or (3) otherwise provided information to a federal regulatory or law enforcement agency, Congress or an internal supervisor.

If an employer retaliates against a whistleblower, the whistleblower is entitled to sue the employer in Federal Court. If the whistleblower is ultimately successful, the Act directs that the whistleblower will be entitled to receive "double-pay back with interest" (i.e., an amount equal to double the whistleblowers 'actual' costs and damages).

The anti-retaliatory provisions in the Dodd-Frank Act supplemented the pre-existing protections from retribution in the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley Act), which applied more broadly to any "employee" that reports fraud or a potential securities violation to a government agency or supervisor. The Sarbanes-Oxley Act protections, however, are markedly less advantageous for employees than the Dodd-Frank Act. Among other things, the Sarbanes-Oxley Act requires the employee to "exhaust" administrative avenues of redress by filing a complaint with the Secretary of Labor before commencing a lawsuit against their employer directly. The employee's initial complaint must also be filed within a relatively short 180-day limitation period and there is no possibility of recovering "double-pay back" (as is the case under the Dodd-Frank Act).

Digital Realty Trust: Who Is a Whistleblower?

The legal issue in Digital Realty Trust Inc v. Somers was whether the definition of "whistleblower" in the Dodd-Frank Act limited application of the anti-retaliatory provisions only to those whistleblowers that report to the SEC.

Paul Somers was employed from 2010-2014 as the Vice-President of Digital Realty Trusts (Digital Realty), a real estate investment trust focused on acquiring data centers. Somers alleged that he was terminated by Digital Realty shortly after reporting his concerns about potential securities laws violations to senior management. Importantly, Somers never reported these concerns to the SEC, even after he had been terminated. Somers subsequently commenced a lawsuit against Digital Realty under the anti-retaliatory provisions of the Dodd-Frank Act, alleging that he had been terminated as retribution for raising the potential securities violations with senior management.

Digital Realty moved to dismiss Somers' claim, arguing that he did not meet the definition of a "whistleblower" under the Dodd-Frank Act because he had never reported his concerns to the SEC. In response, Somers argued that the Dodd-Frank Act definition of "whistleblower" could not be applied literally to the anti-retaliatory provisions, as it would "gut" the protective force of those provisions.

Somers further argued that the Court should defer to the rules passed by the SEC to implement the provisions of Dodd-Frank Act and establish a whistleblower program. The SEC Rules advanced two different definitions of "whistleblower." For the purposes of the reward-program, the SEC Rules defined a "whistleblower" as a person who provided information to the Commission. For the purposes of the anti-retaliatory provisions, the SEC Rules defined a whistleblower as a person who possesses a reasonable belief that they have information about potential securities violations and reports that information to any government agency or internally.

Somers prevailed at first instance at the United States District Court (Northern District of California) and on appeal to the 9th Circuit Court of Appeal. Both Courts were of the view that applying the Dodd-Frank Act definition of "whistleblower" mechanically to the anti-retaliatory provisions would narrow the Act's protections "to the point of absurdity" by failing to protect employees that report potential securities violations internally or to government agencies other than the SEC. Digital Realty appealed to the Supreme Court.

A unanimous Supreme Court agreed with Digital Realty's argument and overturned the 9th District Court of Appeal. Justice Ginsburg, writing for the Court, was of the view that "Dodd-Frank's text and purpose leave no doubt as to who the term whistleblower applies to." The definition section of Dodd-Frank was "unequivocal": a "whistleblower" is a person that reports to the SEC. Since the anti-retaliatory protections applied only to "whistleblowers" and because Somers had not reported to the SEC, he could not bring a lawsuit against Digital Trust for the alleged retribution. In Justice Ginsburg's view, this result was consistent with Congress' goal in enacting Dodd-Frank: namely, to "to motivate people to know of securities laws violations to tell the SEC."

In result, the Supreme Court allowed the appeal and dismissed Somers lawsuit against Digital Realty.

Implications: Will Employees Still Report Internally?

While the legal analysis and result in Digital Realty is perhaps unremarkable—with the Supreme Court concluding, in effect, that the Dodd-Frank Act means exactly what it says—the decision could have far-reaching implications for both the American and Canadian capital markets.

The ruling in Digital Realty may engender a "race to report" and increase the number of meritless tips received by the SEC because the only way ensure the protection of the Dodd-Frank Act anti-retaliatory provisions is to report directly to the SEC. A whistleblower that would otherwise be inclined to only report their concerns internally, and await the company's response, might conclude that they must simultaneously report to the SEC to protect themselves from future reprisal. Even where a whistleblower reports internally and the company conducts a thorough investigation that clears the impugned parties of any wrongdoing, the whistleblower is still incentivized to report to the SEC to protect against future reprisal. As a result, the Digital Realty decision may challenge the ability of public companies to resolve alleged securities violations through internal reporting mechanisms, short of the SEC becoming involved.

Importantly, however, the decision in Digital Realty does not affect the anti-retaliatory provisions of the Sarbanes-Oxley Act. While the Sarbanes-Oxley Act is less generous to employees than the Dodd-Frank Act, employers may still be taken to task if they retaliate against an employee that has blown the whistle on corporate fraud or securities laws violations.

Reporting issuers under Ontario securities laws should also be aware that the anti-reprisal protections provided to whistleblowers under section 121.5 Securities Act are broader than the Dodd-Frank Act provisions, and expressly extend to whistleblowers who report their concerns internally without reporting directly to the Ontario Securities Commission (OSC). Importantly, however, section 121.5 does not provide whistleblowers with a private cause of action against employers. Rather, it allows the OSC to commence proceedings to sanction the employer for retaliatory behavior.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Alan P. Gardner
Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions