Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca2-14-04626/USCOURTS-ca2-14-04626-0/pdf.json

Nature of Suit Code: 790
Nature of Suit: Other Labor Litigation
Cause of Action: 

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14-4626

Berman v. Neo@Ogilvy LLC

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

August Term 2014

Argued: June 17, 2015 Decided: September 10, 2015

Docket No. 14-4626

- - - - - - - - - - - - - - - - - - - - - - 

DANIEL BERMAN,

Plaintiff-Appellant,

v.

NEO@OGILVY LLC, WPP GROUP USA, INC.,

Defendants-Appellees. - - - - - - - - - - - - - - - - - - - - - - 

Before: NEWMAN, JACOBS, and CALABRESI, Circuit Judges. 

Appeal from the December 8, 2014, judgment of the

United States District Court for the Southern District of

New York (Gregory H. Woods, District Judge), dismissing, for

failure to state a claim on which relief can be granted, an

employee’s suit claiming that his discharge violated the

whistleblower protection provisions of the Dodd-Frank Wall

Street Reform and Consumer Protection Act. The District

Court ruled that these provisions protect only employees

discharged for reporting violations to the Securities and

Exchange Commission and not those reporting violations only

1

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internally. See Berman v. Neo@Ogilvy LLC, No. 1:14-cv-523-

GHW-SN, 2014 WL 6860583 (S.D.N.Y. Dec. 5, 2014).

Reversed and remanded. Judge Jacobs dissents with a

separate opinion. 

Alissa Pyrich, Jardim, Meisner &

Susser, P.C., Florham Park, NJ

(Bennet Susser, Richard S.

Meisner, Jardim, Meisner &

Susser, P.C., Florham Park, NJ,

on the brief), for Appellant.

Howard J. Rubin, Davis & Gilbert

LLP, New York, NY (Jennifer

Tafet Klausner, David J.

Fisher, Davis & Gilbert LLP,

New York, NY, on the brief),

for Appellees.

(William K. Shirey, Asst. Gen.

Counsel, Washington, DC (Anne

K. Small, Gen. Counsel, Michael

A. Conley, Deputy Gen. Counsel,

Stephen G. Yoder, Senior

Counsel, Washington, DC), for

amicus curiae Securities and

Exchange Commission, in support

of Appellant.)

(Kate Comerford Todd, U.S.

Chamber Litigation Center,

Inc., Washington, DC, Eugene

Scalia, Gibson, Dunn & Crutcher

LLP, Washington, DC (Rachel E.

Mondel, Gabrielle Levine on the

brief) for amicus curiae The

Chamber of Commerce of the

United States of America, in

support of the Appellees.)

2

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JON O. NEWMAN, Circuit Judge.

This appeal presents the recurring issue of statutory

interpretation that arises when express terms in one

provision of a statute are arguably in tension with language

in another provision of the same statute. The Supreme Court

recently encountered a similar issue when it interpreted a

provision in the Patient Protection and Affordable Care Act

in Burwell v. King, 135 S. Ct. 2480 (2015). In the pending

case, the tension occurs within the whistleblower protection

provisions of the Dodd-Frank Wall Street Reform and Consumer

Protection Act (“Dodd-Frank”). Pub. L. No. 111-203, Title

IX, § 922(a), 124 Stat. 1376, 1841 (2010), which added

section 21F to the Exchange Act of 1934, codified at 15

U.S.C. § 78u-6. The relevant administrative agency, the

Securities and Exchange Commission (“SEC” or “Commission”),

has issued a regulation endeavoring to harmonize the

provisions that are in tension.

Plaintiff-Appellant Daniel Berman appeals from the

December 8, 2014, judgment of the District Court for the

Southern District of New York (Gregory H. Woods, District

Judge), dismissing on motion for summary judgment his suit

against Defendants-Appellees Neo@Ogilvie LLC and WPP Group

USA, Inc. See Berman v. Neo@Ogilvy LLC, No. 1:14-cv-523-GHW3

Case 14-4626, Document 139-1, 09/10/2015, 1594795, Page3 of 29
SN, 2014 WL 6860583 (S.D.N.Y. Dec. 5, 2014). We conclude

that the pertinent provisions of Dodd-Frank create a

sufficient ambiguity to warrant our deference to the SEC’s

interpretive rule, which supports Berman’s view of the

statute. We therefore reverse and remand for further

proceedings.

Background

The statutory and regulatory provisions. Section 21F,

added to the Exchange Act by Dodd-Frank, is captioned

“Securities Whistleblower Incentives and Protection.” 15

U.S.C. § 78u-6. Subsection 21F(b) provides the incentives

by directing the SEC to pay awards to individuals whose

reports to the Commission about violations of the securities

laws result in successful Commission enforcement actions.

See 15 U.S.C. § 78u-6(b). Subsection 21F(h) provides the

protection by prohibiting employers from retaliation against

employees for reporting violations. Id. § 78u-6(h).

This appeal concerns the relationship between the

definition of “whistleblower” in section 21F and one

subdivision of the provision prohibiting retaliation, which

was added by a conference committee just before final

passage. Subsection 21F(a), the definitions subsection of

section 21F, contains subsection 21F(a)(6), which defines

4

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“whistleblower” to mean “any individual who provides . . .

information relating to a violation of the securities laws

to the Commission . . . .” Id. 78u-6(a)(6) (emphasis added). 

Subsection 21F(h), the retaliation protection provision,

contains subsection 21F(h)(1)(A), which provides:

(A) In General

No employer may discharge, demote, suspend,

threaten, harass, directly or indirectly, or in

any other manner discriminate against, a

whistleblower in the terms and conditions of

employment because of any lawful act done by the

whistleblower—

(i) in providing information to the Commission

in accordance with this section;

(ii) in initiating, testifying in, or

assisting in any investigation or judicial or

administrative action of the Commission based

upon or related to such information; or

(iii) in making disclosures that are required

or protected under the Sarbanes-Oxley Act of

2002 (15 U.S.C. 7201 et seq.), this chapter

[i.e., the Exchange Act], including section

78j-1(m) of this title [i.e., Section 10A(m)

of the Exchange Act], section 1513(e) of Title

18, and any other law, rule, or regulation

subject to the jurisdiction of the Commission.

Id. 78u-6(h)(1)(A).

The Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”),

Public L. No. 107-204, 116 Stat. 475 (2002), which is crossreferenced by subdivision (iii) of subsection 21F(h)(1)(A)

of Dodd-Frank, includes several provisions concerning the

5

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internal reporting of securities law violations or improper

practices.

For example, section 307 of Sarbanes-Oxley requires the

SEC to issue rules requiring an attorney to report

securities law violations to the chief legal counsel or

chief executive officer of the company. See 15 U.S.C.

§ 7245(1). Section 301 of Sarbanes-Oxley added to the

Exchange Act section 10A(m)(4), requires the SEC by rule to

direct national securities exchanges and national securities

associations to require audit committees of listed companies

to establish internal company procedures allowing employees

to submit complaints regarding auditing matters. This

section is not codified. Section 806(a) of Sarbanes-Oxley

prohibits a publicly traded company from retaliating against

an employee who provides information concerning securities

law violations to, among other, a federal regulatory or law

enforcement agency, a member of Congress, or “a person with

supervisory authority over the employee.” 18 U.S.C.

§ 1514A(a)(1). 

This appeal concerns the arguable tension between the

definitional subsection, subsection 21F(a)(6), which defines 

“whistleblower” to mean an individual who reports violations

to the Commission, and subdivision (iii) of subsection

6

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21F(h)(1)(A), which, unlike subdivisions (i) and (ii), does

not within its own terms limit its protection to those who

report wrongdoing to the SEC. On the contrary, subdivision

(iii) expands the protections of Dodd-Frank to include the

whistleblower protection provisions of Sarbanes-Oxley, and

those provisions, which contemplate an employee reporting

violations internally, do not require reporting violations

to the Commission. 

In statutory terms, the issue presented is whether the

“whistleblower” definition in subsection 21F(a)(6) of DoddFrank applies to subdivision (iii) of subsection

21F(h)(1)(A). In operational terms, the issue is whether an

employee who suffers retaliation because he reports

wrongdoing internally, but not to the SEC, can obtain the

retaliation remedies provided by Dodd-Frank.

The SEC believes he can. In 2011, using its authority

to issue rules implementing section 21F, see 15 U.S.C.

§ 78u-6(j), the SEC promulgated Exchange Act Rule 21F-2, 17

C.F.R. § 240.21F-2, which provides:

(a) Definition of a whistleblower.

(1) You are a whistleblower if, alone or jointly

with others, you provide the Commission with

information pursuant to the procedures set forth

in § 240.21F–9(a) of this chapter, and the

7

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information relates to a possible violation of the

Federal securities laws (including any rules or

regulations thereunder) that has occurred, is

ongoing, or is about to occur. A whistleblower

must be an individual. A company or another entity

is not eligible to be a whistleblower. 

(2) To be eligible for an award, you must submit

original information to the Commission in

accordance with the procedures and conditions

described in §§ 240.21F–4, 240.21F–8, and

240.21F–9 of this chapter. 

(b) Prohibition against retaliation.

(1) For purposes of the anti-retaliation protections

afforded by Section 21F(h)(1) of the Exchange Act (15

U.S.C. 78u–6(h)(1)), you are a whistleblower if:

(i) You possess a reasonable belief that the

information you are providing relates to a possible

securities law violation (or, where applicable, to a

possible violation of the provisions set forth in 18

U.S.C. 1514A(a)) that has occurred, is ongoing, or is

about to occur, and; 

(ii) You provide that information in a manner described

in Section 21F(h)(1)(A) of the Exchange Act (15 U.S.C.

78u–6(h)(1)(A)). 

(iii) The anti-retaliation protections apply whether or

not you satisfy the requirements, procedures and

conditions to qualify for an award.1

1 Just recently, on August 4, 2015, the SEC issued a

release “to clarify that, for purposes of the employment

retaliation protections provided by Section 21F of the

Securities Exchange Act of 1934 (“Exchange Act”), an

individuals’s status as a whistleblower does not depend on

adherence to the reporting procedures specified in Exchange

8

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Echoing section 21F(a)(6) of Dodd-Frank, subsection

21F-2(a)(1) of Exchange Act Rule 21F-2 defines a

whistleblower as a person who “provide[s] the Commission”

with specific information. 17 C.F.R. § 240.21F-2(a)(1). 

However, subsection 21F-2(b) of the Rule, headed “Protection

against retaliation,” provides, in subdivision 21F-2(b)(ii)

that, for purposes of the retaliation protections of DoddFrank, a person is a whistleblower if the person

“provide[s]” specified information “in a manner described

in” the retaliation protection provisions of Dodd-Frank,

which includes the cross-reference in subdivision (iii) to

the reporting provisions of Sarbanes-Oxley. Id. § 240.21F2(b)(ii). Those provisions, as explained above, protect an

employee who reports internally without reporting to the

Commission.

As the SEC explained in its release accompanying

issuance of Exchange Rule 21F–2, “the statutory antiretaliation protections [of Dodd-Frank] apply to three

Act Rule 21F-9(a) [specifying procedures to be followed to

qualify for a whistleblower award], but is determined solely

by the terms of Exchange Act Rule 21F2(b)(1).”

Interpretation of the SEC’s Whistleblower Rules Under

Section 21F of the Securities Exchange Act of 1934, SEC

Release No. 34-75592, 2015 WL 4624264 (F.R.) (Aug. 4, 2015).

9

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different categories of whistleblowers, and the third

category [described in subdivision (iii) of subsection

21F(h)(1)(A)] includes individuals who report to persons or

governmental authorities other than the Commission.”

Securities Whistleblower Incentives and Protections, Release

No. 34-64545, 76 Fed. Reg. 34300-01, at *34304, 2011 WL

2293084 (F.R.) (June 13, 2011) (emphasis added).

So the more precise issue in the pending appeal is

whether the arguable tension between the definitional

section of subsection 21F(a)(6) and subdivision (iii) of

subsection 21(F)(h)(1)(A) creates sufficient ambiguity as to

the coverage of subdivision (iii) to oblige us to give

Chevron deference to the SEC’s rule. See Chevron U.S.A.,

Inc. v. Natural Resources Defense Council, Inc., 467 U.S.

837 (1984).

The pending lawsuit. Plaintiff-Appellant Daniel Berman

was the finance director of Defendant-Appellee Neo@Ogilvy

LLC (“Neo”) from October 2010 to April 2013. He was

responsible for Neo’s financial reporting and its compliance

with Generally Accepted Accounting Principles (“GAAP”), as

well as internal accounting procedures of Neo and its

parent, Defendant-Appellee WPP Group USA, Inc. (“WPP”). Neo

10

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is a media agency that provides a range of digital and

direct media services.

In January 2014, Berman sued Neo and WPP, alleging that

he was discharged in violation of the whistleblower

protection provisions of section 21F of Dodd-Frank and in

breach of his employment contract. According to the

allegation of the complaint, while employed at Neo, he

discovered various practices that he alleged amounted to

accounting fraud. He also alleged that these practices

violated GAAP, Sarbanes-Oxley, and Dodd-Frank, and that he

had reported these violations internally. A senior officer

at Neo became angry with him, and he was terminated as a

result of his whistleblower activities in April 2013. In

August 2013 he reported his allegations to the WPP Audit

Committee.

While employed at Neo and for about six months after he

was fired, Berman did not report any allegedly unlawful

activities to the SEC. In October 2013, after the

limitations period on one of his Sarbanes-Oxley claims had

ended, he provided information to the Commission.

Defendants’ motion to dismiss the complaint was

referred to Magistrate Judge Sarah Netburn. She filed a

11

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Report & Recommendation (“R&R”) recommending that Berman was

entitled to be considered a whistleblower under Dodd-Frank

because of the retaliation protection of subdivision (iii)

of subsection 21F(h)(A)(1), unrestricted by the definition

of “whistleblower” in subsection 21F(a)(6). However, the

R&R also recommended that the retaliation claims be

dismissed for legal insufficiency, without prejudice to

amendment, and that the contracts claims be dismissed with

prejudice.

The District Court, disagreeing with the Magistrate

Judge, relied on the definition of “whistleblower” in

subsection 21F(a)(6) and ruled that subsection 21F(h)(1)(A),

including subdivision (iii), provided whistleblower

protection only to those discharged for reporting alleged

violations to the Commission. The District Court dismissed

the Dodd-Frank claims because Berman had been terminated

long before he reported alleged violations to the SEC. The

District Court also rejected the contract claims and

dismissed the entire complaint. See Berman, 2014 WL 6860583,

at *6. Berman’s appeal challenges only the dismissal of his

Dodd-Frank claim.

12

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Discussion

The statutory interpretation issue posed by this case

is not as stark, and hence not as easily resolved, as that

encountered in somewhat similar cases.2 In Scialabba v.

Cuellar de Osorio, 134 S. Ct. 2191 (2014), for example, the

express language of one clause of a subsection of a statute

was contradicted by express language in another clause of

2 We start by posing the issue as one of statutory

construction because Berman sued for violation of DoddFrank. If we find the statute ambiguous, we will consider

whether the SEC’s regulation is a reasonable interpretation

of the statute warranting Chevron deference. The SEC begins

its argument by asserting that “‘[t]he interpretation of a

statute by a regulatory agency charged with its

administration is entitled to deference if it is a

permissible construction of the statute.’” Brief for SEC at

17 (citing Haekal v. Refco, Inc., 198 F.3d 37, 41 (2d Cir.

1999)). Then the SEC points out that consideration of

whether an agency interpretation is permissible requires two

steps: first, considering whether there is an “unambiguously

expressed intent of Congress,” Chevron, 467 U.S. at 843, on

“the precise issue in question,” id. at 842, and, second, if

the statute is silent or ambiguous, considering whether the

agency’s interpretation is “based on a permissible

construction of the statute, id. at 843.

Although our approach and the SEC’s both require

initial interpretation of the statute, the reasons for that

inquiry differ. We start with the statute because that is 

the basis for Berman’s claim. His complaint does not

mention the SEC’s rule. The SEC starts with the statute to

determine whether its regulation is entitled to Chevron

deference. Chevron, in which the two-step analysis was

outlined, was a suit challenging the validity of an agency

regulation.

13

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the same subsection. See id. at 2207 (“[T]he two halves of

[8 U.S.C.] § 1153(h)(3) face in different directions.”). In

Church of the Holy Trinity v. United States, 143 U.S. 457

(1892), application of the express terms of a statute to the

facts of a case yielded a result so unlikely to have been

intended by Congress that the Supreme Court did not apply

those terms.3 See id. at 472 (declining to apply to a

church’s contract with a British pastor a prohibition on

contracting to import an alien to perform labor of any

kind).

Closer to our case is the issue the Supreme Court

recently confronted in Burwell v. King. There, four words

of one provision expressly provided that income tax

subsidies were available to those who purchased health

insurance on exchanges “established by a state,” and the

argument made to the Court was that the operation of the

entire statute would be undermined if tax subsidies were not

also available to those who purchased health insurance on

3 See also Yates v. United States, 135 S. Ct. 1074, 1079

(2015) (declining to apply literal meaning of “tangible

object” as used in Sarbanes-Oxley” to a fish); Bond v.

United States, 134 S. Ct. 2077, 2091 (2014) (declining to

apply express terms of definition of “chemical weapon” to

toxic chemicals spread by a jilted wife on property of her

husband’s lover).

14

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exchanges established by the federal government. A closely

divided Court accepted that argument and interpreted the

Affordable Care Act as a whole to provide income tax

subsidies to those who purchased health insurance on federal

exchanges.

The interpretation issue facing the Supreme Court in

King was far more problematic than the issue we face here. 

In King the issue was whether the statutory phrase

“established by the State” should be understood to mean

“established by the State or by the Federal Government.” In

our case, the statutory provision relied on by the Appellees

and our dissenting colleague contains the phrase “provide

. . . to the Commission,” but the issue is not whether that

phrase means something other than what it literally says.4

Instead, the issue is whether the statutory provision

applies to another provision of the statute, or, more

precisely, whether the answer to that question is

sufficiently unclear to warrant Chevron deference to the

Commission’s regulation.

4 We do not doubt that “provide . . . to the Commission”

means “provide . . . to the Commission.”

15

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In our case there is no absolute conflict between the

Commission notification requirement in the definition of

“whistleblower” and the absence of such a requirement in

both subdivision (iii) of subsection 21F(h)(1)(A) of DoddFrank and the Sarbanes-Oxley provisions incorporated by

subdivision (iii). An employee who suffers retaliation

after reporting wrongdoing simultaneously to his employer

and to the SEC is eligible for Dodd-Frank remedies and those

provided by Sarbanes-Oxley. Subdivision (iii) assures him

the latter remedies, and his simultaneous report to the SEC

assures him that he will not have excluded himself from

Dodd-Frank remedies. Indeed, it was the possibility of 

simultaneous complaints to both the employer and the

Commission that persuaded the Fifth Circuit to insist that

the Commission notification requirement be observed by all

employees who seek Dodd-Frank remedies for whistleblower

retaliation. See Asadi v. G.E. Energy (USA), L.L.C., 720

F.3d 620, 627-28 (5th Cir. 2013).5

5 By using the Fifth Circuit’s example of “simultaneous”

reporting to an employer and to the Commission, we recognize

that a literal application of the definition of

“whistleblower” to subdivision (iii) would also benefit

those who reported to the Commission very soon after

reporting to an employer, soon enough to do so before the

employer retaliated by discharging the employee for the

internal reporting (assuming the employer terminated because

of both acts of reporting).

16

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Although the simultaneous employer/Commission reporting

example avoids an absolute contradiction between the

Commission reporting requirement of the “whistleblower”

definition and subdivision (iii)'s incorporation of

Sarbanes-Oxley remedies, a significant tension within

subsection 21F nevertheless remains. Applying the

Commission reporting requirement to employees seeking

Sarbanes-Oxley remedies pursuant to subdivision (iii) would

leave that subdivision with an extremely limited scope for

several reasons.

First, although there may be some potential

whistleblowers who will report wrongdoing simultaneously to

their employer and the Commission, they are likely to be few

in number. Some will surely feel that reporting only to

their employer offers the prospect of having the wrongdoing

ended, with little chance of retaliation, whereas reporting

to a government agency creates a substantial risk of

retaliation.

Second, and more significant, there are categories of

whistleblowers who cannot report wrongdoing to the

Commission until after they have reported the wrongdoing to

their employer. Chief among these are auditors and

attorneys.

17

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Auditors are subject to subsection 78j-1 of the

Exchange Act, 15 U.S.C. § 78j-1, which is one of the

provisions of Sarbanes-Oxley, expressly cross-referenced by

subdivision (iii). Subsection 78j-1(b)(1)(B) requires an

auditor of a public company, under certain circumstances, to

“inform the appropriate level of the management” of illegal

acts, unless they are inconsequential. See 15 U.S.C. § 78j1(b)(1)(B). Subsection 78j-1(b)(2) requires an auditor to

report to the board of directors if the company does not

take reasonable remedial action after the auditor’s report

to management. See id. § 78j-1(b)(2). Significantly to our

case, subsection 78j-1(b)(3)(B) permits an auditor to report

illegal acts to the Commission only if the board or

management fails to take appropriate remedial action. See

id. § 78j-1(b)(3)(B). Thus, if subdivision (iii) requires

reporting to the Commission, its express cross-reference to

the provisions of Sarbanes-Oxley would afford an auditor

almost no Dodd-Frank protection for retaliation because the

auditor must await a company response to internal reporting

before reporting to the Commission, and any retaliation

would almost always precede Commission reporting.

Attorneys are subject to both section 307 of SarbanesOxley, 15 U.S.C. § 7245, and the SEC’s Standards of

18

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Professional Conduct6 (“Attorney Standards”), 17 C.F.R.

§ 205.1-7, and subdivision (iii) cross-references “any other

law, rule, or regulation subject to the jurisdiction of the

Commission.” Subsection 7245(1) requires attorneys to

report material violations of the securities laws to the

chief legal counsel or chief executive officer (“CEO”) of a

public company, and subsection 7245(2) requires attorneys to

report such violations to the audit or other appropriate

committee of the board of directors if the counsel or CEO

“does not appropriately respond to the attorney’s internal

reporting. 15 U.S.C. §§ 7245(1), (2). Again significantly

to our case, the SEC’s Rule 3 of its Attorney Standards

contemplates an attorney reporting to the Commission only

after internal reporting, see 17 C.F.R. § 205.3(d)(2),

explicitly recognizing that by reporting internally first an

attorney “does not reveal client confidences or secrets or

privileged or otherwise protected information related to the

attorney’s representation of the issuer,” id. § 205.3(b)(1). 

Like auditors, attorneys would gain little, if any, DoddFrank protection if subdivision (iii), despite crossreferencing Sarbanes-Oxley provisions protecting lawyers,

6 The full title is “Standards of Professional Conduct

for Attorneys Appearing and Practicing Before the Commission

in the Representation of an Issuer.” 17 C.F.R. § 205.1.

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protected only against retaliation for reporting to the

Commission.

Thus, apart from the rare example of simultaneous (or

nearly simultaneous)7 reporting of wrongdoing to an employer

and to the Commission, there would be virtually no situation

where an SEC reporting requirement would leave subdivision

(iii) with any scope. 

In light of these realities as to the sharply limiting

effect of a Commission reporting requirement on all

whistleblowers seeking the Sarbanes-Oxley remedies promised

by Dodd-Frank for those who report wrongdoing internally,

the question becomes whether Congress intended to add

subdivision (iii) to subsection 21F(h)(1)(A) only to achieve

such a limited result. To answer that question we would

normally look to the legislative history of subdivision

(iii) to learn what Congress, or the relevant committee, had

sought to accomplish by adding subdivision (iii). See, e.g.,

Vincent v. The Money Store, 736 F.3d 88, 101 n.10 (2d Cir.

2013).

Unfortunately that inquiry yields nothing. What became

subdivision (iii) of subsection 20F(h)(1)(A) was not in

7 See footnote 5, supra.

20

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either version of Dodd-Frank that was passed by the House

and the Senate prior to a conference.8 After these versions

went to conference, the House Conferees prepared a

“conference base text” to serve as the basis for resolution

of differences by the Conference Committee.

Subdivision (iii) first saw the light of day in that

conference base text when it was added to follow

subdivisions (i) and (ii) of subsection 20F(h)(1)(A), both

of which had been in the Senate version. Unfortunately,

there is no mention of the addition of subdivision (iii),

8 As originally submitted by the Administration on July

22, 2009, the “Financial Services Oversight Council Act of

2009" proposed adding section 21F to the Exchange Act. The

Administration’s proposal included subsection 21F(g)(1)(A),

which entitled an employee to be made whole if discharged

“for providing information ” as provided elsewhere in the

bill. As passed by the House of Representative on Dec. 11,

2009, the “Wall Street Reform and Consumer Protection Act of

2009" also proposed adding section 21F to the Exchange Act. 

The House version of section 21F included subsection

21F(g)(1)(A), which prohibited retaliation against an

employee for “providing information to the Commission” as

provided elsewhere in the bill, and subsection 21F(g)(4),

which defined “whistleblower” as one or more individuals

“who submit information to the Commission” as provided in

section 21F. See H.R. 4173, 111th Cong., 1st Sess. (2009). 

As passed by the Senate on May 20, 2010, the “Restoring

American Financial Stability Act of 2010" also proposed

adding section 21F to the Exchange Act. The Senate version

of section 21F included subsection 21F(a)(7), which copied

the definition of “whistleblower” from H.R. 4173, and

included in subsection 21F(h)(1)(A) the language that would

become subdivisions (i) and (ii) of subsection 21F(h)(1)(A)

of Dodd-Frank. See H.R. 4173, 111th Cong., 2d Sess. (2010). 

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much less its meaning or intended purpose, in any

legislative materials – not in the conference report nor the

final passage debates on Dodd-Frank in either the House or

the Senate. The “Joint Explanatory Statement of the

Committee of Conference” explains only that “[t]he subtitle

[Subtitle B of Title IX] further enhances incentives and

protections for whistleblowers providing information leading

to successful SEC enforcement actions.” H. Rep. No. 111-517,

at 870 (2009-10) (Conf. Rep.). Subdivision (iii) is, like

Judge Friendly’s felicitous characterization of the Alien

Tort Act, “a kind of legal Lohengrin; . . . no one seems to

know whence it came.” ITT v. Vencap, Ltd., 519 F.2d 1001,

1015 (2d Cir. 1975), abrogated on other grounds by Morrison

v. National Australia Bank, 561 U.S. 247 (2010) .

Other courts confronting the issue of whether the

arguable tension between subsection 21F(a)(6) and

subdivision (iii) of subsection 21F(h)(1)(A) warrants

Chevron deference to Exchange Rule 21F-2 have reached

conflicting results. The Fifth Circuit in Asadi, 720 F.3d

at 620, and the District Court decision that Asadi affirmed,

Asadi v. G.E. Energy (USA), LLC, Civ. Action No. 4:12-345,

2012 WL 2522599 (S.D. Tex. Jun. 28, 2012), both ruled the

subsection 21F(a)(6) definition of “whistleblower”

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controlling. Three other district courts have followed

Asadi. See Verfuerth v. Orion Energy Systems, Inc., 65 F.

Supp. 640, 643-46 (E.D. Wis. 2014); Banko v. Apple Inc., 20

F. Supp. 3d 749, 756-57 (N.D. Cal. 2013); Wagner v. Bank of

America Corp., No. 12-cv-00381-RBJ, 2013 WL 3786643, at *4-

*6 (D. Colo. July 19, 2013).

On the other hand, a far larger number of district

courts have deemed the statute ambiguous and deferred to the

SEC’s Rule. See Somers v. Digital Realty Trust, Inc., No. C14-5180 EMC, 2015 WL 2354807, at *4-*12 (N.D. Cal. May 15,

2015); Yang v. Navigators Group, Inc., 18 F. Supp. 3d 519,

533-34 (S.D.N.Y. 2014); Khazin v. TD Ameritrade Holding

Corp. No. 13-4149 (SDWQ)(MCA), 2014 WL 940703, at *3-*6

(D.N.J. Mar. 11, 2014); Azim v. Tortoise Capital Advisors,

LLC, No. 13-2267-KHV, 2014 WL 707235, at *2-3 (D. Kan. Feb.

24, 2014); Ahmad v. Morgan Stanley & Co., 2 F. Supp. 3d 491,

495-97 n.5 (S.D.N.Y 2014); Rosenblum v. Thomson Reuters

(Mkts.) LLC, 984 F. Supp. 2d 141, 146-49 (S.D.N.Y. 2013);

Murray v. UBS Securities, LLC, No. 12-5914, 2013 WL 2190084,

at *4 (S.D.N.Y. May 21, 2013); Ellington v. Giacoumakis, 977

F. Supp. 2d 42, 44-46 (D. Mass. 2013); Genberg v. Porter,

935 F. Supp. 2d 1094, 1106-07 (D. Colo. 2013); Nollner v.

Southern Baptist Convention, Inc., 852 F. Supp. 2d 986, 995

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(M.D. Tenn. 2012); Kramer v. Trans-Lux Corp., No. 3:11CV1424

SRU, 2012 WL 4444820, at *4 (D. Conn. Sept. 25, 2012); Egan

v. Tradingscreen, Inc., No. 10 Civ. 8202, 2011 WL 1672066,

at *4-7 (S.D.N.Y. May 4, 2011). Thus, although our decision

creates a circuit split, it does so against a landscape of 

existing disagreement among a large number of district

courts.

Like all these courts, we confront both the definition

of “whistleblower” in subsection 21F(a)(6), which extends

whistleblower protection only to employees who report

violations to the Commission, and the language of

subdivision (iii), which purports to protect employees9 from

retaliation for making reports required or protected by

Sarbanes-Oxley, reports that are made internally, without

notification to the Commission. We recognize that the terms

of a definitional subsection are usually to be taken

literally, see Antonin Scalia and Bryan A. Garner, “Reading

9 The dissent chides us for stating that subdivision

(iii) protects “employees” from retaliation for reporting

violations, pointing out correctly that this subdivision

does not use the word “employees.” Dissenting op. [5-6]. 

However, subsection 21F(h)(1)(A), of which subdivision (iii)

is a component, prohibits an “employer” from taking adverse

action or discriminating against a whistleblower “in the

terms or conditions of employment.” Who but “employees”

could be discriminated against by an “employer” in the terms

and conditions of “employment?”

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Law,” 227 (2012) (“Ordinarily, judges apply text-specific

definitions with rigor.”), and, pertinent to this case,

usually applied to all subdivisions literally covered by the

definition, but we have also recognized that “mechanical use

of a statutory definition” is not always warranted. See In

re Air Cargo Shipping Services Antitrust Litigation, 697

F.3d 154, 163 (2d Cir. 2012). Scalia and Garner too have

stated, “Definitions are, after all, just one indication of

meaning – a very strong indication, to be sure, but

nonetheless one that can be contradicted by other

indications.” Scalia and Garner 228. The issue here,

however, is not whether to read the words of the

definitional section literally, but the different issue of

whether the definition should apply to a late-added

subdivision of a subsection that uses the defined term. 

In deciding whether sufficient ambiguity exists in

Dodd-Frank to warrant deference to the SEC’s Rule, we note,

but are not persuaded by, the arguments that any reading

would render some language of Dodd-Frank superfluous. 

Berman contends that if subdivision (iii) is subject to the

Commission reporting requirement by virtue of subsection

21F(a)(6), then most of subdivision (iii) would be

superfluous because the Sarbanes-Oxley protections

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purportedly incorporated would have no effect. The SEC

argues that if the definition of “whistleblower” applies to

all three subdivisions of subsection 21F(h)(1)(A), then the

Commission reporting requirement, expressly stated in

subdivisions (i) and (ii), would be superfluous. Neo

contends that if subdivision (iii) does not require an

employee to report violations to the Commission, then the

SEC reporting requirement in subsection 21F(a)(6) would be

superfluous. 

All these arguments ignore the realities of the

legislative process. When conferees are hastily trying to

reconcile House and Senate bills, each of which number

hundreds of pages, and someone succeeds in inserting a new

provision like subdivision (iii) into subsection

21F(h)(1)(A), it is not at all surprising that no one

noticed that the new subdivision and the definition of

“whistleblower” do not fit together neatly.10 The definition

speaks of reporting to the Commission, but subdivision (iii)

incorporates Sarbanes-Oxley provisions, which contemplate

internal reporting, without reporting to the Commission. 

Subdivisions (i) and (ii), which were included in the Senate

10 “True ambiguity is almost always the result of

carelessness or inattention.” Scalia and Garner 33.

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version of Dodd-Frank before the conferees met, fit

precisely with the “whistleblower” definition. Subdivision

(i) explicitly requires reporting “to the Commission,” and

subdivision (ii) concerns assisting action “of the

Commission,” whereas the terms of subdivision (iii) do

neither.11

When the conferees, at the last minute, inserted

subdivision (iii) within subsection 21F(h)(1)(A), did they

expect subdivision (iii) to be limited by the statutory

definition of “whistleblower” in subsection 21F(a)(6), or

did they expect employees to be protected by subdivision

(iii) whenever they report violations internally, without

reporting to the Commission?12 The texts leave the matter

unclear, and no legislative history even hints at an answer.

11 Subdivision (iii) mentions the Commission only to

provide that the protection of (iii) extends to SarbanesOxley disclosures required by any “law, rule, or regulation

subject to the jurisdiction of the Commission.” 15 U.S.C.

§ 78u-6(h)(1)(A)(iii).

12 Or, to put the matter another way, did the conferees

deliberately decide to insert subdivision (iii) in

subsection 21F(h)(1)(A), knowing it would arguably be

subject to the subsection 21F(a)(6) definition of

“whistleblower,” rather than add the text of subdivision

(iii) elsewhere so that it would not even arguably be

subject to that definition?

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Ultimately, we think it doubtful that the conferees who

accepted the last-minute insertion of subdivision (iii)

would have expected it to have the extremely limited scope

it would have if it were restricted by the Commission

reporting requirement in the “whistleblower” definition in

subsection 21F(a)(6). If we had to choose between reading

the statute literally or broadly to carry out its apparent

purpose, we might well favor the latter course. However, we

need not definitively construe the statute, because, at a

minimum, the tension between the definition in subsection

21F(a)(6) and the limited protection provided by subdivision

(iii) of subsection 21F(h)(1)(A) if it is subject to that

definition renders section 21F as a whole sufficiently

ambiguous to oblige us to give Chevron deference to the

reasonable interpretation of the agency charged with

administering the statute. Unlike the situation confronting

the Supreme Court in King, where the agency administering

the disputed provision, the Internal Revenue Service, was

deemed to lack relevant expertise, King, 135 S. Ct. at 2489,

obliging the Court itself to resolve the ambiguity, see id.,

the SEC is clearly the agency to resolve the ambiguity we

face. Therefore, also unlike King, we need not resolve the

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ambiguity ourselves, but will defer to the reasonable

interpretive rule adopted by the appropriate agency.

Under SEC Rule 21F-2(b)(1), Berman is entitled to

pursue Dodd-Frank remedies for alleged retaliation after his

report of wrongdoing to his employer, despite not having

reported to the Commission before his termination. We

therefore reverse and remand for further proceedings. On

remand, the District Court will have an opportunity to

consider the R&R’s recommendation to dismiss, without

prejudice to amendment, for lack of a sufficient allegation

of a termination entitled to Dodd-Frank protection, and any

other arguments made by the Defendants in support of their

motion to dismiss. 

Reversed and remanded.

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