Corporate Whistle-Blower Case Gets U.S. Supreme Court Scrutiny

The U.S. Supreme Court agreed to consider the reach of an anti-retaliation provision in the 2010 Dodd-Frank financial law in a case that could insulate publicly traded companies from some whistle-blower lawsuits.

The justices will hear an appeal from Digital Realty Trust Inc., which is fighting a lawsuit by a former company vice president who was fired after complaining about alleged violations of federal securities laws.

Digital Realty contends that Dodd-Frank authorized whistle-blower lawsuits only by people who had reported the alleged misconduct to the Securities and Exchange Commission. The fired employee, Paul Somers, lodged his complaint internally. Lower courts are divided on the issue.

The Dodd-Frank provision is one of two major federal protections for corporate whistle-blowers. A separate provision in the 2002 Sarbanes-Oxley Act lets workers press claims with the Labor Department, even if they didn’t report the alleged violation to the SEC.

Dodd-Frank offers advantages for whistle-blowers, authorizing larger awards and allowing more time to file cases.

The SEC received more than 4,200 reports of misconduct in 2016. Companies received about 1.3 reports per 100 employees in 2015, Digital Realty said in its appeal, citing a report by Navex Global, an ethics software company.

The case, which the court will hear in the nine-month term that starts in October, is Digital Realty v. Somers, 16-1276.

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