Court's Broad Interpretation of Dodd-Frank Whistleblower Provision Could Prompt More Employee Claims

2 October 2012
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Key takeaways 

  • On September 25, 2012, in Kramer v. Trans-Lux Corp., a federal judge in Connecticut broadly interpreted the whistleblower anti-retaliation provision of the Dodd-Frank Act to permit a whistleblower’s claim under that provision to survive a motion to dismiss.
  • The case appears to be the first time where a judge has allowed a whistleblower anti-retaliation claim under Dodd-Frank to proceed past the motion to dismiss stage and into discovery.
  • This case has important implications for companies seeking to comply with Dodd-Frank’s new anti-retaliation provisions, as it is likely the decision will embolden potential whistleblowers to pursue anti-retaliation claims.
  • Under Kramer, a whistleblower can avail himself or herself of the protections of the anti-retaliation provision even in a situation where he or she only reports concerns internally to management or the Board, provided he or she reasonably believes there has been a violation of the federal securities laws.
  • The Kramer decision’s broad construction further provides that, in those situations where an individual chooses to report externally to the SEC, there is no requirement that the individual do so in any particular way.