No Whistleblower Protection Without Informing SEC: 5th Cir.

By Brett Snider, Esq. on July 18, 2013 | Last updated on March 21, 2019

Whistleblowers are all the rage this season, unless you count the increasingly unpopular Edward Snowden, but unfortunately for overseas employees, this whistleblowing craze is only available if you inform the SEC.

In Asadi v. G.E. Energy (USA), L.L.C., the appellant Khaled Asadi learned this lesson the hard way, having the Fifth Circuit teach him a lengthy lesson about statutory interpretation and knock loose his dreams of being a rock star whistleblower.

So what happens if you don’t really blow the whistle to the SEC?

Dodd-Frank Whistleblower Protection

The ever-popular Dodd-Frank legislation did provide a decent escape hatch for employees who would be easily canned by their large companies for ratting them out to the Securities and Exchange Commission (SEC). Under 15 U.S.C. §78u-6(a)(6), Dodd-Frank defines "whistleblower" as someone who provides information "relating to a violation of the securities laws to the Commission," with the Commission referring to the SEC.

Asadi was a former employee of G.E. who was fired about a year after he alerted the company of a possible violation of the Foreign Corrupt Practices Act, but he never actually alerted the SEC.

Under 15 U.S.C. §78u-6(h), Asadi would have had a cause of action for G.E. firing him, if he was an actual whistleblower.

Whistleblowers Need to Actually Blow the Whistle

Given this, the Fifth Circuit focuses on Asadi's statutory interpretation argument that, despite the fact that he didn't tell the SEC anything, §78u-6(a)(6) ("whistleblower" definition section) should be construed loosely to include people in his situation.

Because Asadi opened up this canons of interpretation can of worms, the Asadi Court decided to take the appellant to school, offering the following nuggets of wisdom:

  • "Plain language." The definition portion of Dodd-Frank clearly and explicitly defines "whistleblower" as someone who actually informs the SEC of the potential violations to securities law, not ambiguous at all (read: game over).
  • "Compatible parts." Even if the Fifth Circuit could ignore the blaringly clear language in the definitional section of the whistleblower provision, the plain language reading of the statute is compatible in both the protection and definition sections.
  • "Surplusage." Congress doesn't say anything needlessly, so there is not a good reason here to simply assume that words, like "Commission" in a statute are filler or superfluous when they are given the presumption of purpose.

Under these canons of construction, the Fifth Circuit could have knocked Asadi over with a leaf, but he thought he had an ace in the hole, SEC regulations.

SEC v. Congressional Intent

Asadi had the right idea to rely on the SEC's broader definition of "whistleblower" as someone who undertakes the protected activities of a whistleblower but doesn't necessarily have to report to the SEC.

Unfortunately for Asadi, the Commission doesn't really have room to interpret the law in situations where Congressional intent is clear, and as the Asadi court mentioned with its lengthy discussion of statutory interpretation, the plain language is clear on whistleblowers.

Bottom Line

It may sound silly, but whistleblowers can't call themselves as such without actually blowing the whistle to the SEC. Otherwise they're just someone, like Asadi, who sat on incriminating information and was summarily fired.

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