A former sales representative for a San Francisco datacenter acquisition company who claims to have been fired for reporting financial wrongdoing internally may still sue the company as a whistleblower even though he did not contact the federal government, the Ninth U.S. Circuit Court of Appeals ruled February 9.
The ruling provides further clarity on what whistleblower activity is protected by the Securities and Exchange Commission (SEC) under the Dodd-Frank law. The question of whether a whistleblower who is fired for reporting financial improprieties to his employer but not federal regulators is one that has divided federal courts in the past, prompting resolution by the U.S. Supreme Court.
According to the San Francisco Chronicle, plaintiff Paul Somers was a vice president of Digital Realty Trust from 2010 to 2014, working in Singapore as a marketer of digital real estate, i.e., datacenters and colocation centers.
Mr. Somers maintains Digital Realty fired him after he told company leaders about financial wrongdoing within the firm and complained of a lack of internal controls. Digital Realty sought to dismiss the lawsuit, arguing that federal whistleblower laws protect only those who report potential securities violations to the SEC.
U.S. District Judge Edward Chen in San Francisco interpreted the law in line with the SEC, ruling that federal whistleblower protections extend to those who report violations to their supervisors within the company, not just those who tip off the SEC.
Digital Realty appealed that judgment, but the Ninth Circuit court upheld the lower court’s decision in its Feb. 9 ruling.
In the majority opinion, Judge Mary Schroeder said “Leaving employees without protection for that required preliminary step (reporting problems internally) would result in early retaliation before the information would reach the regulators,” adding that the SEC’s broader interpretation of whistleblower protections afforded by Dodd-Frank “accurately reflects Congress’ intent to provide broad whistle-blower protections” under that act.
According to the San Francisco Chronicle, a lawyer for Mr. Somers said the appeals court ruling “expands the ability of whistle-blowers to internally report and then be protected.”
Source: San Francisco Chronicle