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The Ninth Circuit Expands the Reach of Retaliation Claims under Dodd-Frank

If your client is an employer in any of the states in the Ninth Circuit, including California, the client's chances of being sued for a retaliatory discharge under Dodd-Frank may have increased exponentially.  

Dodd-Frank, among many things, prohibits an employer from retaliating against an employee who reports unlawful conduct, i.e., a whistleblower.  What was unclear is whether the employee had to actually file a complaint with the SEC to be deemed a whistleblower, or whether a whistleblower included employees that only complained internally about corporate misconduct.  

Until recently, there was one-to-one circuit split between the Second and Fifth Circuit Courts of Appeals.  The Second Circuit held that an employee who makes only internal complaints is entitled to whistleblower protection, while the Fifth Circuit held that an employee had to actually complain to the SEC.  (Compare Berman v. [email protected] LLC, 801 F.3d 145 (2nd Cir. 2015) with Asadi v. G.E. Energy (USA), L.L.C., 720 F.3d 620 (5th Cir. 2013).)  

In Somers v. Digital Realty Trust Inc., 850 F.3d 1045 (9th Cir. 2017), the Ninth Circuit, in a 2-1 opinion, recently broke that tie.  In siding with the Second Circuit, the Ninth Circuit held Dodd-Frank "should be read to provide protections to those who report internally as well as those that report to the SEC."  

It remains to be seen how the other circuit courts will decide the issue or whether the United States Supreme Court will consider the issue given the circuit split.   But for now, at least in the Second and Ninth Circuits, employers must defend against federal retaliation claims if an employee alleges he or she was retaliated against because of an internal complaint.

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