Digital Realty Trust v. Somers (Decision February 21, 2018)

Corporate Law

The Supreme Court refuses to look outside of the whistleblower definition in the Dodd-Frank Act. 

Paul Somers was hoping the Justices would borrow the whistleblower definition from the Sarbanes-Oxley Act in this case, but the Court would not. 

Somers worked as VP for Digital Realty Trust. He sensed potential securities law violations and reported them to upper management. After that, he was fired. Somers argued the law protects him from being fired for retaliation. Whistleblower anti-retaliation provisions do just that.

Digital Realty Trust v Somers Decision.png

Dodd-Frank and Sarbanes-Oxley

Both the Dodd-Frank Act and the Sarbanes-Oxley Act have whistleblower anti-retaliation provisions. As we reported earlier, they were enacted to help prevent future economic crises. The whistleblower provisions encourage employees to speak out. Dodd-Frank could apply to help Somers.

The two laws define whistleblower differently. Under the Dodd-Frank whistleblower provision - the one Somers needs -, employees who report potential violations only internally (i.e. to upper management) do not meet the definition. To be protected under the Dodd-Frank definition, an individual would have to report the potential violation to the Securities and Exchange Commission. The Sarbanes-Oxley definition is broader. It includes individuals who report both internally and to the SEC.

Because Somers did not report to the SEC, he needed the Court to recognize the Sarbanes-Oxley definition within the Dodd-Frank Act. 

Somers' arguments and the decision

The Supreme Court was not convinced with Somers' arguments. Somers referred to the text of the Dodd-Frank Act, as shown in our infographic, to support his view, but the textual argument he presented was not as compelling as the plain meaning of the Dodd-Frank whistleblower definition. Somers argued that the way the various provisions worked together, and were meant to encourage people to report, supported his side, but the Supreme Court reiterated that it did not find good reason to depart from the plain definition. The Supreme Court noted that Dodd-Frank intended to encourage reporting to the SEC, so its definition made sense. 

Rejecting Chevron Deference

Somers had the SEC on his side. The SEC had interpreted the relevant provision in Dodd-Frank to incorporate the broader whistleblower definition from Sarbanes-Oxley. Having the SEC rule on Somers' side could have been a big threat. Generally, when a court interprets an ambiguous statute, if the federal agency responsible for enforcing the statute has already made the call, the court will defer to that interpretation ("Chevron Deference"). In this case, however, the Supreme Court said the statute was not ambiguous. The Court would not defer to the agency's interpretation.

What is Chevron Deference?

See our infographic here!