Circuit Court Sets High Bar for Whistleblower Plaintiffs

A 5th Circuit panel ruled unanimously that a G.E. Energy executive did not qualify as a Dodd-Frank whistleblower because he did not provide any information to the Securities and Exchange Commission (“SEC”).

The relevant statute (15 U.S.C. § 78u-6) defines “whistleblower” as “any individual who provides . . . information relating to a violation of the securities laws to the [SEC] . . .” The statute also provides that no employer may retaliate against a “whistleblower” who (1) provides information to the SEC under the statute, (2) assists the SEC in a related investigation, or (3) makes certain protected or required disclosures.

In Khaled Asadi v. G.E. Energy (USA), LLC, Mr. Asadi had reported a potential Foreign Corrupt Practices Act issue to his supervisor at GE Energy. GE Energy fired him a year later. Mr. Asadi argued that while he did not meet the statutory definition of “whistleblower” because he had reported nothing to the SEC, he fit under the third category of protected activity: making certain protected or required disclosures.  

The 5th Circuit acknowledged that Mr. Asadi had “some case law” as well as the SEC regulation in his corner. But the court held that a plain reading of the statute dictates that only one category of whistleblower exists: individuals who provide information relating to a securities law violation to the SEC. The court explained that the third category of protected activity did not add to the definition of “whistleblower,” but rather clarified that an individual who reports misconduct to the SEC but is fired for an internal report is protected. In other words, had Mr. Asadi reported his suspicions to the SEC but been fired because of and by supervisors who only knew about his internal report, he would qualify as a “whistleblower.” The court also pointed out that Mr. Asadi’s construction of the Dodd-Frank whistleblower provisions would render the Sarbanes-Oxley anti-retaliation provisions moot.

Several federal district courts have read the definition more broadly than the 5th Circuit. Asadi therefore tees up potential U.S. Supreme Court review.