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

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DENNIS JACOBS, Circuit Judge, dissenting:

The majority and the Securities and Exchange Commission (“SEC”) have

altered a federal statute by deleting three words (“to the Commission”) from the

definition of “whistleblower” in the Dodd‐Frank Act.  No doubt, my colleagues

in the majority, assisted by the SEC or not, could improve many federal statutes

by tightening them or loosening them, or recasting or rewriting them.  I could try

my hand at it.  But our obligation is to apply congressional statutes as written.  In

this instance, the alteration creates a circuit split, and places us firmly on the

wrong side of it.  See Asadi v. G.E. Energy (USA), LLC, 720 F.3d 620 (5th Cir.

2013).  I respectfully dissent.

I

Persons who report certain violations of the securities laws are protected

from retaliation under (at least) two federal statutes.  Sarbanes‐Oxley protects

employees who blow a whistle to management or to regulatory agencies; Dodd‐

Frank protects “whistleblowers,” defined as persons who report violations “to

the Commission.”  15 U.S.C. § 78u‐6(a)(6).  Dodd‐Frank has a longer statute of

limitations, doubles the collectible back‐pay, and requires no administrative

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exhaustion.  The plaintiff in this case reported the violation to his employer, and

did not report it “to the [Securities and Exchange] Commission,” id., and he is

therefore protected from retaliation under Sarbanes‐Oxley only.  But the SEC and

the majority perceive a hole in coverage, or an insufficiency of remedy, and are

patching.

The statutory provisions relevant to this case are few.  The Dodd‐Frank Act

defines the word “whistleblower” in one sentence, and provides that this

definition “shall apply” anywhere else “[i]n this section”:

(a) Definitions

In this section the following definitions shall apply:

[...]

(6) Whistleblower

The term “whistleblower” means any individual who provides, or 2

or more individuals acting jointly who provide, information relating

to a violation of the securities laws to the [Securities and Exchange]

Commission, in a manner established, by rule or regulation, by the

Commission.

15 U.S.C. § 78u‐6(a)(6).  “This definition, standing alone, expressly and

unambiguously requires that an individual provide information to the SEC to

qualify as a ‘whistleblower’ for purposes of § 78u‐6.”  Asadi, 720 F.3d at 623.  A

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definition is one of the “prominent manner[s]” for limiting the meaning of

statutory text.  King v. Burwell, 135 S. Ct. 2480, 2495 (2015); see also United States

v. DiCristina, 726 F.3d 92, 99 (2d Cir. 2013) (quoting Groman v. IRS, 302 U.S. 82,

86 (1937) (“When an exclusive definition is intended the words ‘means’ is

employed.”)).

Later, within the same statutory section, in a provision titled “Protection of

whistleblowers,” Dodd‐Frank creates a private cause of action for

“whistleblowers”:

(h) Protection of whistleblowers

(1) Prohibition against retaliation

(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

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(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, including section 78j‐1(m) of this title, section 1513(e)

of Title 18, and any other law, rule, or regulation subject to the

jurisdiction of the Commission.

15 U.S.C. § 78u‐6(h)(1)(A)(emphases added).

Reading the definition and the substantive provision together “clearly

answers two questions: (1) who is protected; and (2) what actions by protected

individuals constitute protected activity.”  Asadi, 720 F.3d at 625.  As the Fifth

Circuit put it, “the answer to the first question is ‘a whistleblower.’”  Id. (quoting

15 U.S.C. § 78u‐6(h)(1)(A) (“No employer may discharge . . . a whistleblower . . . .”

(emphasis added))).  And, just as easy, “the answer to the latter question is ‘any

lawful act done by the whistleblower’ that falls within one of the three categories

of action described in the statute.”  Id. (quoting 15 U.S.C. § 78u‐6(h)(1)(A)).

Berman alleges that he made “disclosures that are required or protected

under the Sarbanes‐Oxley Act of 2002,” 15 U.S.C. § 78u‐6(h)(1)(A)‐‐in particular,

he alleges that he reported a securities law violation to his employer.  But he does

not allege facts that make him a “whistleblower” as that term is defined in Dodd‐

Frank.  Nor could he‐‐he concedes that before his termination, he never reported

anything “to the [Securities and Exchange] Commission.”  15 U.S.C. § 78u‐6(a)(6).

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II

The majority hardly disputes that my reading (and the reading given in

Asadi) is the more natural reading of the statute.  But the majority extends

deference to an SEC regulation that alters the unambiguous definition of

“whistleblower” to include anyone who reports a securities law violation “in a

manner described in . . . 15 U.S.C. 78u‐6(h)(1)(A),” 17 C.F.R. § 240.21F‐2(b)(1),

including those who report a securities violation to their employer only.

According to the majority, there is “arguable tension,” Maj. Op. at 7, between the

definition and the substantive whistleblower‐protection provisions, and that is

deemed enough for the SEC’s interpretation to survive under Chevron.  I would

apply the unambiguous statutory text.

A.  The majority assumes its own conclusion, claiming that “subdivision

(iii) [of 15 U.S.C. § 78u‐6(h)(1)(A)] . . . purports to protect employees from

retaliation for making reports required or protected by Sarbanes‐Oxley”.  Maj.

Op. at 25 (emphasis added).  That is a bad misreading, tantamount to a

misquotation.  Dodd‐Frank’s whistleblower‐protection provisions do not

mention this (generic) employee.  Instead, the statute lists three ways that “a

whistleblower” may take protected activity (in one case, by making disclosures

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protected under Sarbanes‐Oxley, see 15 U.S.C. § 78u‐6(h)(1)(A)(iii)).  And

“whistleblower” is a defined term.  So subdivision (iii) only protects someone

who (1) makes a protected disclosure under Sarbanes‐Oxley, and (2) also satisfies

Dodd‐Frank’s definition of “whistleblower.”  If the statute used the word

“employee[],” Maj. Op. at 25, Berman might have a claim.  He does not because

the phrasing is a coinage of the majority.

The majority asks: “Who but ‘employees’ could be discriminated against

by an ‘employer’ in the terms and conditions of ‘employment?’”  Maj. Op. at 25

n.9.  My answer?  A whistleblower.  (Congress apparently agrees.  See 15 U.S.C.

§ 78u‐6(h)(1)(A) (“No employer may . . . discriminate against[] a whistleblower in

the terms and conditions of employment . . . .”).)

The (generic) “employee” is nevertheless protected: in the Sarbanes‐Oxley

whistleblower‐protection provision.  See 18 U.S.C. § 1514A(a) (a publicly‐traded

company may not “discriminate against an employee” because of lawful

whistleblowing activity) (emphasis added).  The majority ignores the distinction

Congress drew in the two statutes.

B.  The majority claims repeatedly that “the issue presented is whether the

‘whistleblower’ definition in subsection 21F(a)(6) of Dodd‐Frank applies to

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subdivision (iii) of subsection 21F(h)(1)(A).”  Maj. Op. at 7; see also id. at 15‐16.

To answer that question, the majority looks here, there and everywhere‐‐except

to the statutory text.  But the definitions section is unambiguous: “In this section

the following definitions shall apply.”  15 U.S.C. § 78u‐6(a) (emphasis added).

And all of the relevant statutory provisions in this case appear “[i]n this

section”‐‐that is, section 78u‐6 of title 15 of the U.S. Code.  Accordingly, when

Congress used the word “whistleblower” in 15 U.S.C. 78u‐6(h)(1)(A), it “mean[t]

any individual who provides . . . information relating to a violation of the

securities laws to the Commission.”  15 U.S.C. § 78u‐6(a)(6).

The thing about a definition is that it is, well, definitional.

C.  What appears to animate the majority’s finding of “arguable tension” is

that the natural reading of the statutory text would leave 15 U.S.C.

§ 78u‐6(h)(1)(A)(iii) with “extremely limited scope,” Maj. Op. at 17, affording

incremental protection only for individuals who suffer retaliation for reporting to

their employer after having already made a report to the SEC.  But the majority

simply assumes that this would be a “rare example,” Maj. Op. at 20, because the

two reports would have to be “simultaneous,” Maj. Op. at 16, or at least “nearly

simultaneous,” Maj. Op. at 20, and that, because simultaneity would be so rare,

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Congress could not have bothered its head over it.  The majority does not explain

why simultaneous reporting is required.  I cannot see why it would be.

Moreover, someone might well fire off complaints of illegal activity more or less

at once to one or more of everyone and anyone who might listen: corporate

officers or directors, the SEC, the newspaper, a prosecutor, members of Congress,

and so on.

In any event, the majority has no support for the proposition that when a

plain reading of a statutory provision gives it an “extremely limited” effect, the

statutory provision is impaired or ambiguous.  The U.S. Code is full of statutory

provisions with “extremely limited” effect; there is no canon that counsels

reinforcement of any sub‐sub‐sub‐subsection that lacks a paradigm‐shift.1

  The

majority is thrown back on what it calls euphemistically “the realities of the

legislative process.”  Maj. Op. at 27.  By that, it is suggested that Congress is too

     1 The majority properly disclaims reliance on the absurdity canon, see Maj.

Op. at 14, presumably recognizing that there is nothing absurd about a plain

reading of the whistleblower definition in Dodd‐Frank.  Compare Church of the

Holy Trinity v. United States, 143 U.S. 457, 460 (1892) (“If a literal construction of

the words of a statute be absurd, the act must be so construed as to avoid the

absurdity.”).

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busy or confused to draft wording that achieves goals consistent with the intent

of the SEC.2

D.  The majority observes that the statutory text as written gives “little, if

any” protection to lawyers who report violations to employers only, or do so

first‐‐and who may be required to do so.  Maj. Op. at 20.  As the majority

explains, lawyers and auditors are subject to a web of statutory, contractual, and

ethical obligations that impact the timing and manner in which they report

violations, whether to employers or to regulatory agencies or to prosecutors.

Sometimes these obligations require disclosure; sometimes they require

confidentiality.  Congress may well have considered that additional incentives

should not be offered to get lawyers and auditors to fulfill existing professional

duties, for the same reason reward posters often specify that the police are

ineligible.

     2 The regulation at issue reflects the SEC’s territorial interests, not its own

reading.  Until only yesterday or so, a separate SEC regulation specified the

procedures by which a Dodd‐Frank whistleblower “must” report a violation‐‐

either by mail or fax “to the SEC Office of the Whistleblower” in Washington,

D.C., or online through the SEC’s website.  See 17 C.F.R. § 240.21F‐9(a).  After oral

argument, the SEC issued an “interpretive rule” amending its regulations to

conform to the error it has (successfully) argued here.  See SEC Release No.

34‐75592, 80 Fed. Reg. 47,829 (Aug. 10, 2015).

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III

The majority relies almost wholly on King v. Burwell, 135 S. Ct. 2480

(2015).  That case does not do the work the majority needs done.

A.  King v. Burwell is not a wholesale revision of the Supreme Court’s

statutory interpretation jurisprudence, which for decades past has consistently

honored plain text over opportunistic inferences about legislative history and

purpose.  Had the Supreme Court intended an avulsive change, it would not

have done so sub silentio.  Just ten days before King v. Burwell came down, the

Court reinforced and applied the principle that a judge’s “job is to follow the text

even if doing so will supposedly undercut a basic objective of the statute.”  Baker

Botts LLP v. ASARCO LLC, 135 S. Ct. 2158, 2169 (2015) (internal quotation marks

omitted); see also id. (Sotomayor, J., concurring in part and concurring in the

judgment) (“Given the clarity of the statutory language, it would be improper to

allow policy considerations to undermine the American Rule in this case.”).

Nothing in King v. Burwell suggests that, in the fortnight that intervened after

ASARCO, the Court repented of that holding‐‐let alone the scores of cases

preceding ASARCO that say the same thing.  See, e.g., Pavelic & LeFlore v.

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Marvel Entm’t Grp., 493 U.S. 120, 126 (1989) (“Our task is to apply the text, not to

improve upon it.”).

B.  To the extent the Supreme Court departed from the plain statutory text

in King v. Burwell, it expressly relied on most unusual circumstances.  The Court

adapted wording to avoid what it considered the upending of a ramified, hugely

consequential enactment: “Congress passed the Affordable Care Act to improve

health insurance markets, not to destroy them.”  135 S. Ct. at 2496.  

Here, the sole consequence of applying the statute as written is that those

who report securities violations only to their employer will receive statutory

protection that in the SEC’s view is sub‐optimal.  They will be protected under

Sarbanes‐Oxley, but not Dodd‐Frank‐‐that is, they will enjoy the same protection

every securities whistleblower had before the passage of Dodd‐Frank in 2010,

and more protection than any securities whistleblower had before the passage of

Sarbanes‐Oxley in 2002.  No markets collapse, no castles fall.  A shorter statute of

limitations may be inconvenient for some plaintiffs, but it does not threaten the

entire statutory scheme.  The only palpable danger lurking here is that

bureaucrats and federal judges assume and exercise power to redraft a statute to

give it a more respectable reach.  

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King v. Burwell was not animated by a perceived need to afford greater

impact to a small phrase; to the contrary, the Court rejected the idea that

“Congress made the viability of the entire Affordable Care Act turn on the

ultimate ancillary provision: a sub‐sub‐sub section of the Tax Code.”  135 S. Ct. at

2495.  In rejecting that approach, the Court emphasized that categorical guidance

as to congressional intent should better be looked for in a more predictable

location‐‐like a definitions section:

Had Congress meant to limit tax credits to State Exchanges, it likely

would have done so in the definition of ‘applicable taxpayer,’ or in

some other prominent manner.  It would not have used such a

winding path of connect‐the‐dots provisions about the amount of the

credit.

Id.  

For the purpose of the provision at issue here, Congress expressed its

meaning in a “prominent manner”‐‐in the definitions section.  That is exactly

where the Court said one should look, and where the Court said that Congress

should have inserted its limiting language about Affordable Care Act subsidies if it

wanted the language interpreted strictly.  In our case the majority follows the sort

of “winding path of connect‐the‐dots provisions” that the Supreme Court

ridiculed.

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*  *  *

I vote to affirm.  “If the statutory language is plain, we must enforce it

according to its terms.”  King v. Burwell, 135 S. Ct. at 2489.  The Court did not

mean in King v. Burwell to revisit the era when judges could cast aside plain

statutory text just because they harbor “doubt[s]” about what was going on in the

heads of individual “conferees” during the legislative process.  See Maj. Op. at

28.

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