Digital Realty Trust, Inc. v. Somers

• Decision Date: 21 February 2018
• Docket Number: No. 16–1276.,16–1276.
• Parties: DIGITAL REALTY TRUST, INC., Petitioner v. Paul SOMERS.
• Court: U.S. Supreme Court

138 S.Ct. 767

200 L.Ed.2d 15

DIGITAL REALTY TRUST, INC., Petitioner

v.Paul SOMERS.

No. 16–1276.

Supreme Court of the United States

Argued Nov. 28, 2017.

Decided Feb. 21, 2018.

Kannon K. Shanmugam, Washington, DC, for Petitioner.

Daniel L. Geyser, Los Angeles, CA, for Respondent.

Christopher G. Michel, pro hac vice, for the United States as amicus curiae, by special leave of the Court, supporting the respondent.

Brian T. Ashe, Kiran A. Seldon, Shireen Y. Wetmore, Seyfarth Shaw LLP, San Francisco, CA, Kyle A. Petersen, Seyfarth Shaw LLP, Chicago, IL, Kannon K. Shanmugam, Amy Mason Saharia, A. Joshua Podoll, Meng Jia Yang, Williams & Connolly LLP, Washington, DC, for Petitioner.

Stephen F. Henry, Berkeley, CA, Peter K. Stris, Brendan S. Maher, Daniel L. Geyser, Douglas D. Geyser, Stris & Maher LLP, Los Angeles, CA, for respondent.

Justice GINSBURG delivered the opinion of the Court.

Endeavoring to root out corporate fraud, Congress passed the Sarbanes–Oxley Act of 2002, 116 Stat. 745 (Sarbanes–Oxley), and the 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act, 124 Stat. 1376 (Dodd–Frank). Both Acts shield whistleblowers from retaliation, but they differ in important respects. Most notably, Sarbanes–Oxley applies to all "employees" who report misconduct to the Securities and Exchange Commission (SEC or Commission), any other federal agency, Congress, or an internal supervisor. 18 U.S.C. § 1514A(a)(1). Dodd–Frank delineates a more circumscribed class; it defines "whistleblower" to mean a person who provides "information relating to a violation of the securities laws to the Commission." 15 U.S.C. § 78u–6(a)(6). A whistleblower so defined is eligible for an award if original information he or she provides to the SEC leads to a successful enforcement action. § 78u–6(b) – (g). And, most relevant here, a whistleblower is protected from retaliation for, inter alia, "making disclosures that are required or protected under" Sarbanes–Oxley, the Securities Exchange Act of 1934, the criminal anti-retaliation proscription at 18 U.S.C. § 1513(e), or any other law subject to the SEC's jurisdiction. 15 U.S.C. § 78u–6(h)(1)(A)(iii).

The question presented: Does the anti-retaliation provision of Dodd–Frank extend to an individual who has not reported a violation of the securities laws to the SEC and therefore falls outside the Act's definition of "whistleblower"? Pet. for Cert. (I). We answer that question "No": To sue under Dodd–Frank's anti-retaliation provision, a person must first "provid [e] ... information relating to a violation of the securities laws to the Commission." § 78u–6(a)(6).

I

A

"To safeguard investors in public companies and restore trust in the financial markets following the collapse of Enron Corporation," Congress enacted Sarbanes–Oxley in 2002. Lawson v. FMR LLC, 571 U.S. 429, ––––, 134 S.Ct. 1158, 1161, 188 L.Ed.2d 158 (2014). Most pertinent here, Sarbanes–Oxley created new protections for employees at risk of retaliation for reporting corporate misconduct. See 18 U.S.C. § 1514A. Section 1514A prohibits certain companies from discharging or otherwise "discriminat[ing] against an employee in the terms and conditions of employment because" the employee "provid[es] information ... or otherwise assist[s] in an investigation regarding any conduct which the employee reasonably believes constitutes a violation" of certain criminal fraud statutes, any SEC rule or regulation, or "any provision of Federal law relating to fraud against shareholders." § 1514A(a)(1). An employee qualifies for protection when he or she provides information or assistance either to a federal regulatory or law enforcement agency, Congress, or any "person with supervisory authority over the employee." § 1514A(a)(1)(A)-(C).¹

To recover under § 1514A, an aggrieved employee must exhaust administrative remedies by "filing a complaint with the Secretary of Labor." § 1514A(b)(1)(A) ; see Lawson, 571 U.S., at –––– – ––––, 134 S.Ct., at 1163–1164. Congress prescribed a 180–day limitation period for filing such a complaint. § 1514A(b)(2)(D). If the agency "does not issue a final decision within 180 days of the filing of [a] complaint, and the [agency's] delay is not due to bad faith on the claimant's part, the claimant may proceed to federal district court for de novo review." Id., at ––––, 134 S.Ct., at 1163 (citing § 1514A(b) ). An employee who prevails in a proceeding under § 1514A is "entitled to all relief necessary to make the employee whole," including reinstatement, backpay with interest, and any "special damages sustained as a result of the discrimination," among such damages, litigation costs. § 1514A(c).

B

At issue in this case is the Dodd–Frank anti-retaliation provision enacted in 2010, eight years after the enactment of Sarbanes–Oxley. Passed in the wake of the 2008 financial crisis, Dodd–Frank aimed to "promote the financial stability of the United States by improving accountability and transparency in the financial system." 124 Stat. 1376.

Dodd–Frank responded to numerous perceived shortcomings in financial regulation. Among them was the SEC's need for additional "power, assistance and money at its disposal" to regulate securities markets. S. Rep. No. 111–176, pp. 36, 37 (2010). To assist the Commission "in identifying securities law violations," the Act established "a new, robust whistleblower program designed to motivate people who know of securities law violations to tell the SEC." Id., at 38. And recognizing that "whistleblowers often face the difficult choice between telling the truth and ... committing ‘career suicide,’ " Congress sought to protect whistleblowers from employment discrimination. Id., at 111, 112.

Dodd–Frank implemented these goals by adding a new provision to the Securities Exchange Act of 1934: 15 U.S.C. § 78u–6. Section 78u–6 begins by defining a "whistleblower" as "any individual who provides ... information relating to a violation of the securities laws to the Commission, in a manner established, by rule or regulation, by the Commission." § 78u–6(a)(6) (emphasis added). That definition, the statute directs, "shall apply" "[i]n this section"—i.e., throughout § 78u–6. § 78u–6(a).

Section 78u–6 affords covered whistleblowers both incentives and protection. First, the section creates an award program for "whistleblowers who voluntarily provid[e] original information to the Commission that le[ads] to the successful enforcement of [a] covered judicial or administrative action." § 78u–6(b)(1). A qualifying whistleblower is entitled to a cash award of 10 to 30 percent of the monetary sanctions collected in the enforcement action. See § 78u–6(b)(1)(A)–(B).

Second, § 78u–6(h) prohibits an employer from discharging, harassing, or otherwise discriminating against a "whistleblower" "because of any lawful act done by the whistleblower" in three situations: first, "in providing information to the Commission in accordance with [ § 78u–6 ]," § 78u–6(h)(1)(A)(i) ; second, "in initiating, testifying in, or assisting in any investigation or ... action of the Commission based upon" information provided to the SEC in accordance with § 78u–6, § 78u–6(h)(1)(A)(ii) ; and third, "in making disclosures that are required or protected under" either Sarbanes–Oxley, the Securities Exchange Act of 1934, the criminal anti-retaliation prohibition at 18 U.S.C. § 1513(e),² or "any other law, rule, or regulation subject to the jurisdiction of the Commission," § 78u–6(h)(1)(A)(iii). Clause (iii), by cross-referencing Sarbanes–Oxley and other laws, protects disclosures made to a variety of individuals and entities in addition to the SEC. For example, the clause shields an employee's reports of wrongdoing to an internal supervisor if the reports are independently safeguarded from retaliation under Sarbanes–Oxley. See supra, at 772 – 773.³

The recovery procedures under the anti-retaliation provisions of Dodd–Frank and Sarbanes–Oxley differ in critical respects. First, unlike Sarbanes–Oxley, which contains an administrative-exhaustion requirement and a 180–day administrative complaint-filing deadline, see 18 U.S.C. § 1514A(b)(1)(A), (2)(D), Dodd–Frank permits a whistleblower to sue a current or former employer directly in federal district court, with a default limitation period of six years, see § 78u–6(h)(1)(B)(i), (iii)(I)(aa). Second, Dodd–Frank instructs a court to award to a prevailing plaintiff double backpay with interest, see § 78u–6(h)(1)(C)(ii), while Sarbanes–Oxley limits recovery to actual backpay with interest, see 18 U.S.C. § 1514A(c)(2)(B). Like Sarbanes–Oxley, however, Dodd–Frank authorizes reinstatement and compensation for litigation costs, expert witness fees, and reasonable attorneys' fees. Compare § 78u–6(h)(1)(C)(i), (iii), with 18 U.S.C. § 1514A(c)(2)(A), (C).⁴

Congress authorized the SEC "to issue such rules and regulations as may be necessary or appropriate to implement the provisions of [ § 78u–6 ] consistent with the purposes of this section." § 78u–6(j). Pursuant to this authority, the SEC published a notice of proposed rulemaking to "Implemen[t] the Whistleblower Provisions" of Dodd–Frank. 75 Fed.Reg. 70488 (2010). Proposed Rule 21F–2(a) defined a "whistleblower," for purposes of both the award and anti-retaliation provisions of § 78u–6, as one or more individuals who "provide the Commission with information relating to a potential violation of the securities laws." Id., at 70519 (proposed 17 C.F.R. § 240.21F–2(a) ). The proposed rule, the agency noted, "tracks the statutory definition of a ‘whistleblower’ " by requiring information reporting to the SEC itself. 75 Fed.Reg. 70489.

In promulgating the final Rule, however, the agency changed course. Rule 21F–2, in finished form, contains two discrete "whistleblower" definitions. See 17 C.F.R. § 240.21F–2(a) – (b) (2017). For purposes of the award program, the Rule states that "[y]ou are a whistleblower if ... you provide the Commission with information ... relat[ing] to a...