WASHINGTON — The U.S. Supreme Court on Tuesday appeared hesitant to broaden protections for corporate insiders who blow the whistle on financial wrongdoing and fraud by their employers, with several justices suggesting the law does not cover those who report the violations only internally instead of to the government.
The justices heard an hour of arguments in a case that will determine the scope of a shield against employer retaliation provided under the 2010 Dodd-Frank Wall Street reform law to individuals who come forward with information on securities law violations or fraud.
The case involves Digital Realty Trust Inc’s appeal of a California federal appeals court’s ruling in favor of a fired executive, Paul Somers, after he complained internally about alleged misconduct by his supervisor but never reported the matter to the U.S. Securities and Exchange Commission.
The San Francisco-based real estate investment trust company, which owns and develops data centers, said the Dodd-Frank law explicitly defines a whistleblower as someone who provides information to the SEC and therefore does not apply to Somers.
The court’s decision, due by the end of June, could have a lasting impact on the willingness of whistleblowers to report violations internally, an important tool in the fight against corporate misconduct.