Author: Andrew Fernandez, Associate Member, University of Cincinnati Law Review
The 2008 financial crisis was a defining moment in American history as millions of people lost their jobs and wages stagnated. The 2008 financial crisis may well have been the catalyst for the election of President Obama in 2008. In response to the devastation of the financial crisis, Congress passed the Dodd Frank Act to reform the financial regulatory system.[1] One component of this comprehensive of legislation was protection to whistleblowers who reported violations of U.S. securities laws to the Securities and Exchange Commission (SEC).[2] “The term “whistleblower” means any individual who provides, or [two] or more individuals acting jointly who provide information relating to a violation of securities laws to the [Securities and Exchange] Commission . . . .”[3] The Fifth and Second Circuits have recently confronted whether an individual who is not a whistleblower under the statutory definition of the term is entitled to protection from the relevant section. The Fifth Circuit held a “whistleblower” who is not reporting a SEC violation is not entitled to this protection.[4] However, the Second Circuit ruled a whistleblower reporting non-SEC violations may seek protection under this statutory provision.[5] The Fifth Circuit’s approach is the correct one because it applied the plain meaning of the statute and avoids breaching the essential principles of the separation of powers.
The Plain Language of the Statute Approach
In the Fifth Circuit opinion, the plaintiff, an employee of GE reported potential violations of the Foreign Corrupt Practices Act to his supervisor and the GE Energy ombudsperson for the region.[6] Following these reports, the plaintiff claimed to receive a negative performance review and was asked to take a demotion.[7] The plaintiff refused and was later fired one year after his report of the alleged violations.[8] The plaintiff claimed protection under the whistle blower provision of the Dodd-Frank Act.[9] The Fifth Circuit held the plaintiff was not entitled to this protection as the plain language of the statute reflected Congress’s intention for the provision to only apply to whistleblowers to the SEC.[10] The court determined it must determine whether the statutory text was plain, give effect to every word in the provision, and interpret provisions of the act as compatible as opposed to contradictory.[11] Using this approach, the Fifth Circuit held the plain language of the statute clearly referred to only one category of whistleblowers, persons who provide information regarding violations of securities law to the SEC.[12] The court rejected the argument from the plaintiff that the court should defer to SEC’s recent regulation which adopted the plaintiff’s construction of the statute.[13] The court again stated Congress had defined the term whistleblower unambiguously and the intent of Congress was clear on the matter.[14] The court argued the SEC had essentially rewritten the term whistleblower into a much broader term then Congress intended.[15] Therefore, the court refused to consider the SEC interpretation of the regulation.[16]
The Ambiguous Statement Approach
The plaintiff, in the Second Circuit case, sued his employer after he reported various accounting practices to his company internally.[17] A senior officer was incensed at the whistleblowing activities and he was terminated as a result of these activities.[18] The court held it would defer the SEC ruling and the plaintiff was entitled to whistle-blower protection under the Dodd-Frank Act.[19] The court believed there was enough ambiguity in the statutory language to warrant deferring to the SEC ruling.[20] The ambiguity in the statute arises from the fact that there is a Commission notification requirement in the definition of whistleblower, but this notification requirement is not included in other provisions of the Dodd-Frank Act. [21] The court noted, there is no absolute conflict between the provisions as an employee can be protected by reporting violations simultaneously to employers and the SEC. [22] However, the court believed such an interpretation would give the act an extremely limited scope not intended by Congress.[23] Some professions such as Auditors or Lawyers must report wrongdoing to their employers before they can go to the SEC. [24] Some employees may also feel only reporting the violation to their employer minimizes their risk of job termination as a result of retaliation. [25] The court believed Congress did not intend for the protections to be limited in such a manner and therefore deferred to the SEC ruling. [26]
Why the Fifth Circuit Court’s Decision Was Correct
The Fifth Circuit’s opinion is the correct one because it applies the plain meaning of the statutory language and does not substitute its own judgment in interpreting the statute. The Fifth Circuit opinion is consistent with its principles of following the plain meaning of the statute, giving every word in the law a meaning, and interpreting statutory language as compatible within the legislation. This approach best ensures courts are following the intent of Congress as opposed to substituting their own judgment. The separation of powers is a key principle the Founding Fathers established to protect against tyranny. Even a well-intentioned court can trample the legislative branch by going outside the opinion.
Some may argue the Second Circuit had the proper policy intentions when it made its own decision. The court notes how limited the protections will be to certain employees and given the circumstances in which Dodd-Frank was drafted, it makes senses to construe the law as being favorable to employees to report violations. It could be argued courts should be allowed to make adjustments to the law to effectuate congressional intent. This type of judicial decision making ensures the intent of Congress is fulfilled as opposed to going against the wishes of Congress. Because of the partisan gridlock that has made Congress so fractured, judicial reconstruction is the only way to make meaningful adjustments to legislation.
This approach to judicial decision-making is fraught with perils however. In certain circumstances, courts will have to make their own determinations about ambiguous provisions in statutes. The concerns articulated by the Second Circuit would be appropriate in effectuating congressional intent in those circumstances. The term “Whistleblower” is not ambiguously defined however. Even the Second Circuit court acknowledges there is no direct conflict between the provisions in the statute. To expand the definition of the term is in fact rewriting the law that is outside the provision of the courts. No matter how gridlocked Congress is, it is the legislature’s responsibility to alter the laws of this country, not the judicial branch. Nor is it appropriate to defer to an administrative body’s interpretation when the statutory language is clear. Obviously administrative bodies have institutional expertise which they use to interpret and apply laws. This expertise cannot trump Congress’s clear intent when making laws. Otherwise, unelected men and women would have virtually unlimited power to control the lives of American citizens.
Conclusion
The Fifth Circuit’s approach is the correct one because it follows the plain language of the statute. The Fifth Circuit’s approach ensures the Court will follow Congressional intent as much as possible when interpreting statutes. The policy concerns which directed the Second Circuit’s decision are best done in the case of ambiguous statutory interpretation as opposed to the clear articulation of the term whistleblower in this statute. In this case, the policy concerns of the Second Circuit effectively rewrite the statute to a scenario to which it prefers. Thus unelected judges are in fact dictating vital US policy without the balancing influence of the American electorate. Therefore, future courts analyzing this statute would be wise to follow the Fifth Circuit’s opinion as opposed to the Second Circuit opinion.
[1] Asadi v. G.E. Energy (USA), L.L.C., 720 F.3d 620, 622-623 (5th Cir. App, 2013).
[2] Id. at 623.
[3] Berman v. Neo@Ogilvy LLC, 801 F.3d 145, 156 (2nd Cir. App., 2015).
[4] Asadi, 720 F.3d at 630.
[5] Berman, 801 F.3d at 155.
[6] Asadi, 720 F.3d at 621.
[7] Id.
[8] Id.
[9] Id. at 622.
[10] See id. at 629.
[11] Asadi, 720 F. 3d at 622.
[12] Id. at 625.
[13] See id. at 629-630.
[14] Id. at 630.
[15] Id.
[16] Asadi, 720 F. 3d at 630.
[17] Berman, 801 F.3d at 149.
[18] Id.
[19] See id. at 155.
[20] Id. at 148.
[21] Id. at 150.
[22] Berman, 801 F.3d at 150-151.
[23] Id. at 151.
[24] Id.
[25] Id.
[26] Id. at 155.
