Legal Alert: Court Rejects Retroactivity of Dodd–Frank's Whistleblower Remedies

Since the 2010 enactment of the Dodd–Frank Wall Street Reform and Consumer Protection Act, a recurring question in judicial opinions interpreting the Act’s whistleblower provisions has been whether these provisions should be given retroactive effect. Although federal courts have split on this question with respect to the Act’s restrictions on mandatory arbitration, a federal district court in Virginia has now held that the Act’s remedies for whistleblowers who share information with the Securities and Exchange Commission (SEC) do not apply retroactively.

The plaintiff in the case, Jones v. SouthPeak Interactive Corp., had been employed as the chief financial officer of one of the defendants. After allegedly concluding that the company falsely reported inflated profits, the plaintiff attempted to report her suspicions to the company’s internal audit committee and outside counsel. When her efforts allegedly failed to produce satisfactory results, she filed a complaint with the SEC’s Enforcement Division in 2009. The company terminated her employment several days later.

The plaintiff ultimately sued under the Sarbanes – Oxley Act of 2002 (SOX) and Dodd–Frank for unlawful retaliation. In response, the defendants moved to dismiss on the ground (among others) that the plaintiff’s Dodd–Frank claim was barred by the general presumption against retroactivity.

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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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