2nd Circ. Ruling on Overseas Tipsters Dodges Big Issues

August 14, 2014

Jordan A. Thomas says recent Second Circuit decision may deter future international whistleblowers, but remains optimistic about future court rulings

In its Thursday ruling that the Dodd-Frank Act's whistleblower protections do not cover tipsters outside the United States, the Second Circuit dodged a potentially tricky reading of the U.S. Supreme Court's Morrison decision and left completely untouched a growing dispute over whether internal reporting is covered by the law's anti-retaliation provisions.

Jordan A. Thomas, chairman of whistleblower practice at Labaton Sucharow LLP, said the Second Circuit's decision also dealt a blow to international whistleblowers, many of whom may now hesitate to come forward for fear of retaliation.
In the 2013 fiscal year, approximately 12 percent of SEC whistleblowers submitted their tips from abroad, according to the SEC's most recent whistleblower report to Congress. The agency did not specify what percentage of those tipsters were U.S. citizens.

While Thomas said that number might decline, he remained optimistic that another court might soon come to a different conclusion. Thursday's decision bucked the trend of federal courts generally ruling more favorably for whistleblowers, according to Thomas. "The fight's not over," he said.