N.D. Illinois Dismisses Dodd-Frank Whistleblower Claim For Lack Of Complaint To The SEC

by Proskauer - Whistleblowing & Retaliation
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On June 7, 2017, the U.S. District Court for the Northern District of Illinois dismissed a whistleblower retaliation claim under the Dodd-Frank Act because the plaintiff failed to report his complaint of alleged securities violations to the SEC. Martensen v. Chicago Stock Exchange, Case No. 17-cv-1494 (N.D. Ill.) (Shadur, J.)

Plaintiff worked as a supervisor at the Chicago Stock Exchange’s Market Regulation Trading Examinations Unit. He alleged that his employment was terminated in violation of Dodd-Frank’s whistleblower protection provision after he complained to his superiors regarding alleged securities violations.

The District Court dismissed the complaint sua sponte on the grounds that Plaintiff was not a protected “whistleblower” under Dodd-Frank since he had only submitted an internal complaint. The Court noted that Dodd-Frank defines a “whistleblower” as any individual who provides, or 2 or more individuals acting jointly who provide, information relating to a violation of the securities to the Commission[.]” (emphasis added). The Court therefore concluded that Dodd-Frank’s definition of “whistleblower” unambiguously requires a complaint to the SEC and the SEC’s administrative regulations to the contrary were thus not entitled to deference.

Implications

Courts around the country are divided as to whether Dodd-Frank’s anti-retaliation protections extend to individuals who make internal complaints but do not complain to the SEC. The Second Circuit in Berman v. Neo@Ogilvy LLC, 801 F.3d 145 (2d Cir. 2015) and the Ninth Circuit in Somers v. Digital Realty Trust, Inc., 850 F.3d 1045 (9th Cir. 2016) have held that a Dodd-Frank “whistleblower” need not report an alleged violation to the SEC, whereas the Fifth Circuit’s decision in Asadi v. G.E. Energy (USA), LLC, 720 F.3d 620 (5th Cir. 2013) reaches the opposite conclusion. With this decision, at least 13 district courts have followed Asadi and at least 18 district courts have followed Berman and Somers. Somers has recently been appealed to the U.S. Supreme Court.

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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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