Digital Realty Trust, Inc. v. Somers

The National Whistleblower Center submitted an amicus curiae, also known as friend-of-the-court, brief to the U.S. Supreme Court, urging the Justices to reject the convoluted logic of big business allies and protect internal whistleblowers in Digital Realty Trust, Inc. v. Somers.

The amicus brief was widely read and influential. In fact, an analysis of the Supreme Court arguments by the well-respected SCOTUS Blog, which highlights Justice Stephen Breyer’s point about the National Whistleblower Center’s amicus brief, can be found here. Senator Charles Grassley, the then-Chairman of the Senate Judiciary Committee and the top-ranking official on the Senate Whistleblower Caucus, also filed a brief in support of the whistleblower. Sen. Grassley argued that “it would make no sense to read” the Dodd-Frank Act as only protecting employees’ internal disclosures if they “also reported to the SEC” stating the “obvious effect of petitioner’s interpretation will be to discourage internal reporting.”

The National Whistleblower Center also provided a report to the public, published during the formation of the SEC Whistleblower Program, which proves that “the overwhelming majority of employees voluntarily utilized internal reporting processes”, and therefore are effected by the result of the Digital Realty case. The report, titled “Impact of Qui Tam Laws on Internal Whistleblowers”, can be read here.

The Supreme Court’s Decision Leaves Whistleblowers Unprotected

On February 21, 2018, the U.S. Supreme Court ruled in support of Digital Realty, and against whistleblowers. Seemingly unaware of the practical consequences of its decision, the Supreme Court unanimously ruled to leave whistleblowers who report internally without critical protections under the Dodd-Frank Act.

Stephen M. Kohn, then-Executive Director and now Chairman of the Board of the National Whistleblower Center (NWC) and an attorney who has represented “internal” whistleblowers since 1984, described the Supreme Court decision in Digital Realty Trust v. Somers (No. 16-1276) as “devastating.”

“The overwhelming majority of whistleblower report violations directly to their managers and internal corporate compliance programs. Stripping internal whistleblowers of protection under the Dodd-Frank Act could negatively impact over 90% of corporate fraud retaliation cases,” Kohn said.

Kohn, in a piece for Law30, also explained that employees now take grave risks in using internal compliance programs. Titled “Digital Realty’s Victory is a Loss for Corporate Compliance,” the piece describes the stunning blow of the U.S. Supreme Court decision for whistleblowers. This long-form writing describes the background of the SEC whistleblower program, and how and why the rules were created. It notes the long process, as well as the lobbying work of big business toward the SEC in arguing for internal compliance programs. It also tells the story of Paul Somers, who was retaliated against after using the internal reporting procedures of his employer, Digital Realty. As Kohn describes,

Digital ignored every argument as to why internal compliance programs should be supported, and claimed that to be a “whistleblower” under the Dodd-Frank Act, employees were required to bypass compliance programs and first contact the SEC.

The Supreme Court agreed to hear Digital’s arguments. Incredibly, every corporation that had urged the SEC to protect or encourage internal whistleblowing remained silent. Every compliance-related trade association remained silent. The corporate lawyers who so eloquently advocated for internal whistleblowing during the SEC’s rule-making proceeding remained silent.

And Kohn uses his expertise to offer a word of warning to future whistleblowers: In light of the Supreme Court’s decision, whistleblowers should hire an attorney and take their complaints directly to the Securities and Exchange Commission (SEC).

Other whistleblower laws undermined by this decision include the Commodity Exchange Act, numerous banking whistleblower laws, the Clean Air Act,  Safe Drinking Act, Occupational Safety and Health Act, Credit Union Employee Protection Act, FDIC Act, International Monetary Transactions Act, Superfund, Water Pollution Control Act, Toxic Substances Control Act, and Surface Mining laws.

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