Supreme Court to Decide If an Internal Complaint is Enough to Protect Whistleblowers

The Dodd‑Frank Wall Street Reform and Consumer Protection Act includes robust safeguards for individuals who report potential violations of U.S. securities laws. Section 922 of Dodd-Frank established whistleblower protection rules that shield workers from retaliation when they provide qualifying information related to misconduct, fraud, or unlawful financial practices.

Following the statute’s passage, the U.S. Securities and Exchange Commission (SEC) issued formal rules in 2011 interpreting protections for individuals who report wrongdoing. The 2011 rules clarified that employees who make internal disclosures to their company’s compliance or legal teams may also remain protected, even if the information is not delivered directly to the SEC at the time of reporting.

However, federal Circuit Courts have issued mixed rulings on whether internal disclosures are legally covered under Dodd-Frank’s whistleblower retaliation protections. This legal uncertainty created a national circuit split that now heads toward resolution.

Background of the Legal Dispute

Courts that agree with the SEC interpretation argue that denying internal-reporting protections would discourage employees from using established corporate compliance channels, weakening enforcement in securities law matters. Supportive courts conclude that internal reports often serve as the first step toward exposing larger statutory violations and should therefore qualify for anti-retaliation safeguards.

In contrast, opposing courts argue that the statute’s wording explicitly references disclosures made “to the SEC”, and that internal corporate complaints are not protected unless directly submitted to the agency. This judicial disagreement created lasting uncertainty for companies, employees, legal counsel, and compliance teams handling workplace securities concerns.

Circuits Supporting Internal Reporting Protections:

• Second Circuit Court of Appeals
• Ninth Circuit Court of Appeals

Both Circuits ruled that whistleblowers do not lose protection when reporting internally, recognizing the SEC’s interpretation as reasonable, aligned with regulatory enforcement intent, and supportive of workplace reporting policy integrity.

Circuit Opposing Internal Reporting Protections:

• Fifth Circuit Court of Appeals

The Fifth Circuit ruled against the SEC interpretation, stating that internal reporting is not protected under Dodd-Frank without direct submission to the SEC, reinforcing a literal statutory reading.

The Case Heading to the Supreme Court

This legal question will be resolved in the Supreme Court case Digital Realty Trust v. Somers. The case centers on whether individuals who first report securities violations internally are protected from employer retaliation under the SEC’s 2011 rules or only when information is delivered directly to the SEC.

The outcome may determine future whistleblower reporting behavior, corporate compliance response obligations, retaliation liability exposure, employee bargaining power consideration, and enforcement power of regulatory interpretation when agency rules expand statutory text.

Workplace Impact for Whistleblowers

A Supreme Court ruling limiting internal reporting protections could:

• Discourage internal compliance disclosures
• Shift employees toward external agency-first reporting
• Raise corporate retaliation and liability risks
• Create new training, documentation, and policy enforcement burdens

A ruling upholding internal-reporting protections could:

• Preserve existing compliance pathways
• Strengthen retaliation safeguards
• Validate regulatory interpretation power
• Encourage ethical workforce self-reporting culture

If you’re a whistleblower, or thinking about reporting violations, contact our office and we can walk you through the process.