Supreme Court deals blow to Wall Street whistle-blowers with unanimous ruling

Richard Wolf | USA TODAY

WASHINGTON — The Supreme Court dealt a blow to some Wall Street whistle-blowers Wednesday.

The justices ruled unanimously that employees are not protected from retaliation if they blow the whistle on alleged corporate misdeeds without going to the Securities and Exchange Commission.

That limits the whistle-blower protections in the 2010 federal law cracking down on Wall Street fraud and abuse because of the specific way the so-called Dodd-Frank law was written by Congress.

It was a major victory for conservatives who argue that judges should interpret laws literally and agencies should not be granted discretion to implement them differently. It was a loss for consumer groups that lobbied for both the 2010 law that followed the Wall Street financial crisis and a 2002 law enacted after the Enron securities-reporting scandal.

Both of those laws included provisions to protect employees who blow the whistle on alleged wrongdoing. But the Dodd-Frank law defined whistle-blowers narrowly by specifying that they must notify the Securities and Exchange Commission, not just company officials.

Two lower federal courts previously upheld the SEC's interpretation that the law covers internal whistle-blowing. But the justices declared that interpretation inaccurate.

Justice Ruth Bader Ginsburg wrote the opinion for the court, which was unanimous in its judgment in favor of Digital Realty Trust and against would-be whistle-blower Paul Somers. Three of the court's conservative justices did not sign on to her reasoning, however.

The case dates to 2014, when the company fired Somers, its vice president of portfolio management, following his internal complaints about a supervisor's actions. Somers filed suit and won at both the federal district and appeals courts, which ruled that Congress' intention was to protect such actions.

Dodd-Frank's whistle-blower provision is designed to aid the commission's enforcement efforts by "motivating people who know of securities law violations to tell the SEC," Ginsburg said. "To that end, Congress narrowly defined who is eligible for the statute's benefits."

The court's decision appeared assured during oral arguments in November, when even liberal justices appeared stumped by the language of the law.

"It's odd. It's peculiar. It's probably not what Congress meant," Justice Elena Kagan said. "But what makes it the kind of thing where we can just say we're going to ignore it?"

More: Supreme Court faces blockbuster term -- and Trump

More: The Supreme Court's top cases in 2017 term