Academic journal article Washington and Lee Law Review

Canons of Construction for Dysfunctional Statutes: A Comment on Bennett

Academic journal article Washington and Lee Law Review

Canons of Construction for Dysfunctional Statutes: A Comment on Bennett

Article excerpt

I.Introduction

Shaun Bennett's Whistling Loud and Clear: Applying Chevron to Subsection 21F of Dodd-Frank meticulously analyzes a securities law problem of considerable complexity. Bennett wrote it after the Supreme Court had granted certiorari in Digital Realty Trust, Inc. v. Somers,1 but before the Court's decision in the case. Just before the Note and this Comment went to press, the Court issued its opinion.2

The Note discusses the so-called "whistleblower" provision of Section 922 of the Dodd-Frank Wall Street Reform and Consumer Protection Act,3 codified as Section 21F of the Securities Exchange Act of 1934.4 Paragraph (a) of that provision defines a "whistleblower" as someone who provides information relating to a violation of the securities laws to the SEC. Paragraph (h) provides various protections to whistleblowers, including protection against termination of employment.

The interpretive problem before the Court arose because certain employees who reported alleged securities law violations to their employers, but not to the SEC, have sought whistleblower status and protection against termination under Section 21F. The Second, Fifth, and Ninth Circuits resolved those claims in three distinct ways. The Second Circuit deferred to an SEC rule extending protection against discharge to employees who report securities law violations to their employer, whether or not they also report to the SEC.5 The Ninth Circuit did not defer to the SEC's rule but still found that the statute's protections apply to the same broad class of employees.6 The Fifth Circuit, by contrast, took the more traditional position that the term, once defined, has the defined meaning throughout the relevant statutory provision.7 The Court granted certiorari in the Ninth Circuit case to resolve the conflict.

Bennett argues in favor of limiting the statute's protections to employees who report to the SEC, the position that prevailed at the Supreme Court. The Note also gives some suggestions to Congress should it find the result unpalatable as a matter of policy. The Note is analytically sharp but careful, takes a clear position, and argues persuasively for it.

Bennett can take considerable satisfaction from the Supreme Court's opinion in Somers, which reached the result for which he argued, and for broadly similar reasons. I will accordingly focus my commentary on what Somers left unresolved. The opinion took pains to declare that there was no conflict between the statutory language and statutory purpose.8 This allowed the Court to sidestep controversial issues raised in prior cases involving the construction of statutory definitions. One is a securities law case, Gustafson v. Alloyd Co, Inc.9 Another is King v. Burwell,10 which the Ninth Circuit concluded gave it authority to rewrite the defined term "whistleblower" to reflect a supposedly broader statutory purpose. I will suggest that Somers, although it does not explicitly engage with either case, requires a slight updating of priors regarding the reach and impact of both.

II.Gustafson and the Definition of "Prospectus"

Somers was not the first case to invite the Court to rewrite an explicit definition contained in a securities statute. The Court had already done so in Gustafson, producing what knowledgeable commentators have called "the worst securities law opinion ever written."11 I will compare the issues before the Court in Gustafson and Somers and speculate that the near-universal criticism that greeted the former decision influenced the way the Court approached the latter.

With various exceptions and exemptions, the Securities Act of 1933 requires an issuer making a public offering of securities to file a registration statement containing specified information.12 The statute also limits the ways in which issuers, underwriters, and dealers may solicit potential buyers of those securities. At the time of the Gustafson decision, the statute limited the written solicitations they could provide investors to the information contained within the registration statement at the time of the solicitation, again with certain exceptions and exemptions. …

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