WASHINGTON–The U.S. Supreme Court agreed yesterday to consider whether insiders at companies who blow the whistle on their employers are shielded from retaliation if they only report alleged misconduct internally rather than to the Securities and Exchange Commission.
The case that is reaching the high court is an appeal by Digital Realty Trust, Inc. of a lower court ruling in favor of Paul Somers, a former employee of the San Francisco-based company, who had complained internally about alleged misconduct by his supervisor, but who never reported the matter to the SEC. At issue is the SEC's whistleblower protection rules put in place by the 2010 Dodd-Frank Wall Street reform law.
The court will hear the case during the next term that starts in October.
The SEC rules prohibit corporate employers from retaliating in any way against whistleblowers who try to report allegations of securities law violations.
The rules further give the SEC the power to offer monetary awards to whistleblowers whose tips lead to successful enforcement actions.
Digital Realty Trust has argued that the anti-retaliation protections do not apply to people who fail to report their allegations to the SEC, as the law defines a whistleblower as a person who reports possible securities violations to the SEC.
Should the Supreme Court support the company, it would likely force corporate whistleblowers to report wrongdoing to the SEC in order to be protected from retaliation.
Digital Realty Trust had fired Somers after he complained that his supervisor had eliminated some internal controls and hid major cost overruns on a project in Hong Kong.