Dodd-Frank Anti-Retaliation Provision Limited To Complaints About Securities Laws

The U.S. District Court for the Eastern District of Wisconsin ruled that an Illinois-based bank employee could not state a claim under the whistleblower protection provision in Dodd-Frank because his complaints alleged violations of banking laws, not securities laws. Zillges v. Kenney Bank & Trust, No. 13-cv-01287 (E.D. Wis. June 4, 2014).

Plaintiff Zillges was the President and CEO of Kenney Bank & Trust (Bank) from 2011 until his employment was terminated in July 2013. Plaintiff alleged that, during his two-year long tenure with the Bank, he observed conduct that violated federal banking laws, and that he reported the conduct to the Bank’s Board of Directors, the Federal Deposit Insurance Corporation and the Federal Trade Commission. He also alleged that he took steps to prevent and correct the regulatory violations. Plaintiff further alleged that the Defendants (i.e., the Bank and several affiliated entities and individuals) sought retribution by terminating his employment.

After filing an initial complaint against Defendants in November 2013, Plaintiff sought leave to file an amendment that added claims under the Dodd-Frank whistleblower anti-retaliation provision. Defendants opposed the motion, arguing that such an amendment was futile because Dodd-Frank did not cover complaints about alleged violations of banking laws or regulations. The court agreed with Defendants, ruling that Plaintiff did not qualify as a Dodd-Frank whistleblower because he did not allege “a violation of the securities laws.” Thus, the court concluded that Plaintiff could not state a claim upon which relief may be granted under Dodd-Frank.

As we have discussed in recent posts (see our discussion of decisions from district courts in Nebraska, New York and Florida), the issue of what it takes to be a Dodd-Frank whistleblower (in particular, whether one must complain to the SEC to receive protection) is currently a subject of debate. But the Zillges decision underscores that, at a minimum, the complaint must implicate federal securities laws – and not merely banking or other financial laws or related regulations.


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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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