Academic journal article Washington and Lee Law Review

Comment on Whistling Loud and Clear: Applying Chevron to Subsection 21F of Dodd–Frank

Academic journal article Washington and Lee Law Review

Comment on Whistling Loud and Clear: Applying Chevron to Subsection 21F of Dodd–Frank

Article excerpt

I.Introduction

On February 21, 2018, the Supreme Court decided Digital Realty Trust, Inc. v. Somers,1 resolving the circuit split at the heart of Shaun M. Bennett's student Note, Whistling Loud and Clear: Applying Chevron to Subsection 21F of Dodd-Frank. In a unanimous decision, the Court concluded that the Dodd-Frank Wall Street Reform and Consumer Protection Act's2 (Dodd-Frank) definition of "whistleblower" applied to the anti-retaliation provision in question in the case.3 Because Mr. Somers did not report his employer's securities law violations to the U.S. Securities and Exchange Commission (SEC) before the company fired him, the Court decided, he lost his bid for retaliation protection under the Dodd-Frank Act.4 Somers is the second of two recent cases in which the Court has reviewed federal whistleblower retaliation protections. The first, Lawson v. FMR LLC,5 was decided in 2014 and interpreted whistleblower retaliation protections in the Sarbanes-Oxley Act of 20026 (Sarbanes-Oxley). Somers concerned a second set of whistleblower retaliation protections enacted as part of Dodd-Frank.7

Together, Lawson and Somers reveal some important truths. First, as evidenced by the Court's willingness to resolve two similar cases in four years, whistleblowing is a tremendously important subject. It has implications for systemic risk as well as for risk-monitoring and governance of firms. As I explain in Part VI, future cases may address the unique vulnerabilities of lawyers in whistleblowing situations, and tensions between lawyers' professional responsibilities and employer/employee incentives under federal whistleblowing law.

Second, Congress's drafting of whistleblower protection provisions has been entirely inadequate to achieve the sort of clear incentives that facilitate whistleblowing as an activity. There has been a significant amount of confusion about who is covered by which protection, and under what circumstances. Somers clarifies one ambiguity, but there remain serious unanswered questions about how whistleblower incentives and protections work on the ground. Third, there is fundamental and sustained disagreement on the Court about how Sarbanes-Oxley and Dodd-Frank should be interpreted. The justices disagree about whether it is appropriate to take into account Congress's "intent" to protect investors, restore trust in capital markets, and "root out corporate fraud,"8 and about the specific value of Senate Reports as legislative history.

II.Whistleblowing and the Economy

As companies increasingly operate across borders, and technological and financial innovations create new, unregulated risks, whistleblowers offer unique protections to companies and shareholders. Scholars are only now recognizing the role that whistleblowers can play in preventing or reducing corporate wrongdoing, improving efficient capital allocation, and forcing private information into the public domain.9 In recognition of whistleblowers' microprudential and macroprudential potential, Congress has passed two major pieces of legislation over the last fifteen years to encourage and protect whistleblowers. SarbanesOxley,10 enacted in 2002 after the Enron catastrophe, and DoddFrank,11 passed after the 2008 financial crisis, both create whistleblower incentives and protections.

There are differing views about the "structure" of our federal whistleblower protection regime, as evidenced by Somers. In his Note, Mr. Bennett offers a "structural" comparison of the Sarbanes-Oxley scheme and the Dodd-Frank scheme, and finds the two schemes independent and significantly different. This is not how the SEC viewed them; it interpreted the later Dodd-Frank Act to have built upon and borrowed from the Sarbanes-Oxley whistleblower provisions, and thus viewed the regulatory schemes holistically. In Somers, the Supreme Court chose neither side, and focused on differences between the whistleblower protection schemes.12

In its briefs to the Supreme Court, the SEC argued that the Dodd-Frank Act whistleblower provisions should be understood as presenting a dual structure, with one set of provisions addressing the potentially million-dollar awards the SEC gives to whistleblowers, and the other set of provisions protecting whistleblowers from retaliation. …

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