Young Law Group Secures Groundbreaking SEC Whistleblower Decision

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YLG attorneys successfully defeat Thomson Reuters' efforts to dismiss their client's lawsuit, alleging he was terminated for complaining about potential securities violations. S.D.N.Y. opts for a liberal definition of "whistleblower" under Dodd-Frank.

Young Law Group is pleased to announce that on October 25, 2013, Judge Shira A. Scheindlin, in the Southern District of New York, issued a ruling in a case involving client Mark Rosenblum refusing to adopt the Fifth Circuit’s opinion in Asadi v. G.E. Energy (USA) LLC, finding the ambiguity in Dodd-Frank’s anti-retaliation provisions warranted deference to the SEC’s interpretation. Mr. Rosenblum alleges that Thomson Reuters (Markets) LLC terminated him after he reported his concerns regarding the company’s securities violations to the FBI and the internal corporate compliance office. Only after his termination did Mr. Rosenblum file a Form TCR with the SEC. Thomson Reuters moved for dismissal, arguing that the court should adopt Asadi and find Mr. Rosenblum did not meet the statutory definition of a “whistleblower.” Thankfully for Mr. Rosenblum and the whistleblower advocacy community at large, Judge Scheindlin declined the invitation.

The July 2013 decision in the Fifth Circuit Court of Appeals, Asadi, could cause problems for SEC whistleblowers under Dodd-Frank, as it strictly construes who is entitled to the protections of the statute’s anti-retaliation provisions. 720 F.3d 620 (5th Cir. 2013). The primary issue in the decision is the applicability of those provisions to whistleblowers that experience retaliatory action, prior to bringing their concerns to the SEC. In Asadi the Fifth Circuit held that congressional intent was clear, in enacting Dodd-Frank, that SEC whistleblowers were limited, by statutory definition, to individuals who brought their information to the SEC. The theory is premised on the definitions section of the statute which states, “[t]he term ‘whistleblower’ means any individual who provides… information relating to a violation of the securities laws to the Commission.” 15 U.S.C. § 78u-6(a)(6). Thus as argued in Asadi, the SEC’s own interpretation of the provision is entitled to no deference.

The SEC issued comments to its rule, in part to address the competing inferences in the definitions section (15 U.S.C. § 78u-6(a)(6)) and the protected activity provision (15 U.S.C. § 78u-6(h)(1)(A)(iii)), the latter of which is not strictly limited to reports to the SEC, stating:

“[t]he second prong of the Rule 21F–2(b)(1) standard provides that, for purposes of the anti-retaliation protections, an individual must provide the information in a manner described in Section 21F(h)(1)(A). This change to the rule reflects the fact that the statutory anti-retaliation protections apply to three different categories of whistleblowers, and the third category includes individuals who report to persons or governmental authorities other than the Commission.” SEC Securities Whistleblower Incentives and Protections, 76 Fed.Reg. 34300–01, at *34304, 2011 WL 2293084 (2011) (“Comments to Final Rule”) (emphasis added)

Prior to the Asadi decision, several federal courts, ruling on the same issue, found that competing statutory language and congressional intent required the term “whistleblower” be construed more liberally for purposes of Dodd-Frank. See Egan v. Tradingscreen, Inc., No. 10-8202, 2011 WL 1672066, at *4 (S.D.N.Y. May 4, 2011); Kramer v. Trans-Lux Corp., No. 11-1424, 2012 WL 4444820, *4 (D. Conn. Sept. 25, 2012); Genberg v. Porter, No. 11-02434, 2013 WL 1222056, *10 (D. Colo. Mar. 25, 2013); Murray v. UBS Securities, LLC, No. 12-5914, 2013 WL 2190084, at *6-7 (S.D.N.Y. May 21, 2013); see also Nollner v. S. Baptist Convention, Inc., 852 F. Supp. 2d 986 (M.D. Tenn. 2012). These courts determined, contrary to the Asadi ruling, that reporting to the SEC is not a prerequisite for protection under Dodd-Frank’s anti-retaliation provisions. However, two days after the Fifth Circuit rendered its decision in Asadi, a federal court in Colorado followed suit and adopted its reasoning. Wagner v. Bank of America Corp., No. 12-00381, 2013 WL 3786643 (D. Colo. July 19, 2013).

However, there appears to be hope for would-be whistleblowers. In addition to Judge Scheindlin’s opinion last Friday, another recent decision indicates the willingness of federal courts, outside the Fifth Circuit, to refuse to adopt the reasoning of Asadi. On October 16, 2013, Judge Stearns in the District of Massachusetts issued a ruling in Ellington v. Giacoumakis, denying the defendants motion for the defendants’ motion for judgment on the pleadings No. 13-11791-RGS, 2013 WL 5631046 (D. Mass. Oct. 16, 2013). As detailed in Judge Stearns’ opinion, the defendants, in Ellington, terminated the plaintiff’s employment after he reported his concerns regarding defendants’ securities violations internally to the company’s compliance officer. After his firing, the plaintiff subsequently reported to the SEC. Judge Stearn found the SEC’s interpretation, quoted above, more persuasive than the court’s rationale in Asadi.

The case is Rosenblum v. Thomas Reuters (Markets), case No. 2:13-cv-02219, in the U.S. District Court for the Southern District of New York.

Young Law Group is a nationwide leader in whistleblower representation and has successfully represented numerous clients in some of the nation’s largest qui tam cases for over a decade. For a free confidential consultation, please call Eric L. Young, Esquire at (800) 590-4116.

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