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CALIFORNIA CORPORATE & SECURITIES LAW

Exactly What Part Of “To The Commission” Is Ambiguous?

The Dodd-Frank Act gave us many things, including Section 21F of the Securities Exchange Act of 1934.  Section 21F, prohibits employers from retaliating against a “whistleblower”.  15 U.S.C. § 78u-6(h)(1)(A).  We need not guess about the definition of “whistleblower” because Congress conveniently provided the following definition:

. . . any individual who provides, or 2 or more individuals acting jointly who provide, information relating to a violation of the securities laws to the [Securities and Exchange] Commission, in a manner established, by rule or regulation, by the Commission.

15 U.S.C. §78u-6(a)(6) (emphasis added).  Remarkably, the SEC ignored Congress’ definition and adopted a rule that extends whistleblower protection to persons who do not provide information to the SEC.  17 C.F.R. § 240.21F-2.  The Fifth Circuit Court of Appeals rejected the SEC’s “expansive interpretation of the term ‘whistleblower’ for purposes of the whistleblower-protection provision”. Asadi v. G.E. Energy United States, L.L.C., 720 F.3d 620, 630 (5th Cir. 2013).  A split in the circuit courts later arose when the Second Circuit deferred to the SEC’s interpretation in Berman v. Neo@Ogilvy LLC, 2015 U.S. App. LEXIS 16071 (2d Cir. Sept. 10, 2015).

As I discussed in this post from September 2015, an intra-circuit split developed here in the Ninth Circuit.  Yesterday, that split was resolved when the Ninth Circuit followed the Second Circuit’s approach.  Somers v. Digital Realty Trust, 2017 U.S. App. LEXIS 4079 (9th Cir. 2017).  Judge John B. Owens‘ dissent is succinct and to the point:

I agree with the Fifth Circuit in Asadi v. G.E. Energy (USA), L.L.C., 720 F.3d 620, 621 (5th Cir. 2013), and Judge Jacobs’ dissent in Berman v. Neo@Ogilvy LLC, 801 F.3d 145, 155-60 (2d Cir. 2015), and therefore respectfully dissent. Both the majority here and the Second Circuit in Berman rely in part on King v. Burwell, 135 S. Ct. 2480 (2015), to read the relevant statutes in favor of the government’s position. In my view, we should quarantine King and its potentially dangerous shapeshifting nature to the specific facts of that case to avoid jurisprudential disruption on a cellular level. Cf. John Carpenter’s The Thing (Universal Pictures 1982).

 

 

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