Supreme Court to Review Retaliation Protections for Whistleblowers

By | June 26, 2017

The U.S. Supreme Court agreed on Monday to take up a case that promises broad implications for when corporate insiders who blow the whistle on alleged misconduct can be shielded from retaliation by their employers.

The justices will hear Digital Realty Trust Inc.’s appeal of a lower court ruling in favor of Paul Somers, an executive who the San Francisco-based company fired after he complained internally about alleged misconduct by his supervisor but never reported the matter to the U.S. Securities and Exchange Commission.

The case hinges on the SEC’s whistleblower protection rules required by the 2010 Dodd-Frank Wall Street reform law. Those rules, which were adopted in 2011, prohibit corporate employers from retaliating in any way against whistleblowers who try to report allegations of securities law violations. They also give the SEC the power to offer monetary awards to whistleblowers whose tips lead to successful enforcement actions.

Digital Realty Trust argues that the anti-retaliation protections do not apply to people who fail to report their allegations to the SEC because the law defines a whistleblower as a person who reports possible securities violations to the SEC.

If the Supreme Court ultimately sides with the company, then it would force corporate whistleblowers to report wrongdoing to the SEC in order to be protected from retaliation.

Digital Realty Trust, a real estate investment trust company, got entangled in the dispute over whistleblower protection after it fired Somers, its former vice president of portfolio management.

Somers had complained internally that his supervisor had eliminated some internal controls and hid major cost overruns on a project in Hong Kong, but he never reported those concerns to the SEC.

After he was fired, he sued the company in November 2014, saying he was protected from retaliation as a whistleblower under the Dodd-Frank law.

The company tried unsuccessfully to quash his claim in the United States District Court for the Northern District of California.

The justices will review the case in the next term, which begins in October.

(Reporting by Sarah N. Lynch; Editing by Will Dunham)


Topics USA

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