U.S. District Court for the District of Massachusetts Refuses to Adopt Narrow Definition of SEC Whistleblower Under Dodd-Frank


On October 16, 2013, a federal court in Massachusetts issued a ruling widely applauded by whistleblower attorneys and advocates.  See Ellington v. Giacoumakis, No. 13-11791-RGS, 2013 WL 5631046 (D. Mass. Oct. 16, 2013).  The primary issue in the decision is the applicability of Dodd-Frank’s anti-retaliation provisions to whistleblowers that experience retaliatory action, prior to bringing their concerns to the Securities and Exchange Commission (“SEC”).  As explained below, this issue is of grave concern to the whistleblower community and has been litigated to differing results throughout the country.

In denying the defendants’ motion for judgment on the pleadings, the court in Ellington addressed the specific issue of whether the plaintiff qualified for the whistleblower protections of Dodd-Frank, in light of the fact that he brought his concerns to the SEC only after his termination.  In Ellington the defendants terminated the plaintiff’s employment after he reported his concerns regarding defendants’ securities violations internally to the company’s compliance officer.  After his firing, the plaintiff subsequently reported to the SEC.  The defendants moved for dismissal arguing that the plaintiff did not qualify as a “whistleblower” as defined by Dodd-Frank and, hence, was not entitled to its protections.

The defendants premised their arguments on Asadi v. G.E. Energy (USA) LLC, a July decision by the Fifth Circuit Court of Appeals which is highly problematic for SEC whistleblowers.  720 F.3d 620 (5th Cir. 2013).  In rendering its decision, on analogous facts, the Fifth Circuit held that congressional intent was clear, in enacting Dodd-Frank, that SEC whistleblowers were limited by statutory definition to individuals who brought their information to the SEC.  The theory is premised on the definitions section of the statute which states, “[t]he term ‘whistleblower’ means any individual who provides… information relating to a violation of the securities laws to the Commission.”  15 U.S.C. § 78u-6(a)(6).  The Asadi ruling was certainly ground-breaking, albeit in an alarming manner.

Prior to the Asadi decision, several federal courts, ruling on the same issue, found that competing statutory language and congressional intent required the term “whistleblower” be construed more liberally for purposes of Dodd-Frank.  See Egan v. Tradingscreen, Inc., No. 10-8202, 2011 WL 1672066, at *4 (S.D.N.Y. May 4, 2011); Kramer v. Trans-Lux Corp., No. 11-1424, 2012 WL 4444820, *4 (D. Conn. Sept. 25, 2012); Genberg v. Porter, No. 11-02434, 2013 WL 1222056, *10 (D. Colo. Mar. 25, 2013); Murray v. UBS Securities, LLC, No. 12-5914, 2013 WL 2190084, at *6-7 (S.D.N.Y. May 21, 2013); see also Nollner v. S. Baptist Convention, Inc., 852 F. Supp. 2d 986 (M.D. Tenn. 2012).  These courts determined, contrary to the Asadi ruling, that reporting to the SEC is not a prerequisite for protection under Dodd-Frank’s anti-retaliation provisions.  However, two days after the Fifth Circuit rendered its decision in Asadi, a federal court in Colorado followed suit and adopted its reasoning, demonstrating an alarming development in the law.  Wagner v. Bank of America Corp., No. 12-00381, 2013 WL 3786643 (D. Colo. July 19, 2013).

Ellington is a critical case, as it is the first district court, post-Asadi, to rule on this issue in a manner favorable to whistleblowers.  Moreover, it signals the willingness of federal courts, outside the Fifth Circuit, to refuse to adopt the dangerous precedent set by Asadi.  To some, it seems this issue is destined for Supreme Court adjudication.  But until that time, at least outside of the Fifth Circuit, it seems securities whistleblowers can avail themselves upon the anti-retaliation provisions of Dodd-Frank, regardless of whether their concerns reach the SEC prior to experiencing retaliatory action.

Young Law Group is a nationwide leader in whistleblower representation and has successfully represented numerous clients in some of the nation’s largest qui tam cases for over a decade.  For a free confidential consultation with one of our SEC whistleblower lawyers, please call Eric L. Young, Esquire at (800) 590-4116 or complete the online form here.