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Dodd Frank – Who Can Qualify As A Whistleblower (Part III)

May 22, 2013

Although Dodd-Frank Explicitly Defines A “Whistleblower” In A Way That Only Includes Those Who Provide Information To The SEC, An Exception Has Been Carved Out That Is Rooted In A “Catch-All” Part Of The Law

Another Part Of Dodd-Frank’s “Catch-All” Provision Could Actually Turn Every SOX Claim Into A Dodd-Frank Claim

The “catch-all” provision in Dodd-Frank section 78u–6(h)(1)(A)(iii) could potentially be interpreted to permit many, or all, alleged SOX whistleblowers to bring their SOX claims through Dodd-Frank. Such an interpretation would permit claimants to escape the administrative scheme under SOX, and instead file directly in federal court; take advantage of a longer statute of limitations; and obtain more generous damages than those permitted by SOX. In Kramer v. Trans-Lux Corp., No. 3:11cv1424(SRU), 2012 WL 4444820, at *5 (D. Conn. Sept. 25, 2012), the district court found that SOX claimants may indeed seek relief through Dodd-Frank, thereby avoiding the OSHA exhaustion requirement, being subject to a much longer statute of limitations, and receiving potentially better damages if they win. In rejecting the employer’s argument that this created a problem by essentially allowing an end-around SOX, the court stated:

Trans–Lux argues that the SEC’s rule is an impermissible construction of the statute because it would allow potential plaintiffs to pursue under the Dodd–Frank Act retaliation claims they would have otherwise pursued under Sarbanes–Oxley. This is problematic, Trans–Lux asserts, because the Dodd–Frank Act has a longer statute of limitations than Sarbanes–Oxley, and no exhaustion requirement. Yet the Dodd–Frank Act appears to have been intended to expand upon the protections of Sarbanes–Oxley, and thus the claimed problem is no problem at all.


If courts do continue to sanction this sort of “end around SOX” strategy, it could dramatically reduce OSHA charges of SOX retaliation, and increase federal court SOX litigation brought under Dodd-Frank. On the other hand, if the ARB continues its recent trend of issuing more favorable decisions to SOX complainants than courts usually do, then SOX claimants may prefer to pursue administrative relief, even if they could sue through the Dodd-Frank “catch-all” provision. Because of the importance of this issue, plaintiffs-side whistleblower lawyers donated heavily to President Obama’s 2012 reelection campaign. See Whistle-Blowers’ Lawyers Donate to Obama Campaign, New York Times (Oct. 2, 2012). Given that President Obama was reelected, it seems likely that the ARB will continue to trend pro-employee in its decision through at least 2016.

Hat tip: An outstanding article that covers the law and final regulations in comprehensive fashion is Dodd-Frank and the SEC Final Rule: From Protected Employee To Bounty Hunter, ST001 ALI-ABA 1487 (July 28-30, 2011), which was written by Littler Mendelson, P.C. lawyers John S. Adler, Edward T. Ellis, Barbara E. Hoey, Gregory C. Keating, Kevin M. Kraham, Amy E. Mendenhall, Kenneth R. O’Brian, and Carole F. Wilder. This post is partially derived from that article.

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