Berman v. Neo@Ogilvy LLC
801 F.3d 145
| 2d Cir. | 2015Background
- Dodd-Frank § 21F creates whistleblower incentives (awards) and anti-retaliation protections; it defines “whistleblower” in § 21F(a)(6) as an individual who provides information "to the Commission." 15 U.S.C. § 78u-6.
- § 21F(h)(1)(A)(iii) (added late in conference) extends protection to disclosures “required or protected under the Sarbanes‑Oxley Act ... and any other law, rule, or regulation subject to the jurisdiction of the Commission,” which can encompass internal (non‑SEC) reporting.
- SEC Rule 21F-2 implements Dodd‑Frank: it repeats the § 21F(a)(6) definition for awards but interprets the anti‑retaliation protection to cover employees who report internally (i.e., without prior reporting to the SEC). 17 C.F.R. § 240.21F-2(b)(1).
- Daniel Berman alleged he reported accounting irregularities internally, was terminated, and only reported to the SEC after termination; he sued under Dodd‑Frank’s anti‑retaliation provision.
- The district court dismissed Berman’s Dodd‑Frank claim, holding the statutory definition required reporting to the SEC before termination; the Second Circuit majority reversed, deferring to the SEC under Chevron and allowing Berman to pursue Dodd‑Frank remedies.
- The court recognized conflicting district- and circuit‑level authority (including Asadi v. G.E. Energy), found sufficient ambiguity caused by the late addition of § 21F(h)(1)(A)(iii), and applied Chevron deference to the SEC’s reasonable interpretation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the § 21F(a)(6) definition (requires reporting “to the Commission”) limits § 21F(h)(1)(A)(iii) so that Dodd‑Frank retaliation protection requires prior reporting to the SEC | Berman: § 21F(h)(1)(A)(iii) covers internal Sarbanes‑Oxley disclosures; he need not have reported to the SEC before termination | Neo/WPP: The defined term “whistleblower” controls across the section; Dodd‑Frank protects only those who reported to the SEC | Court: Statute is ambiguous on this point; defer to SEC rule under Chevron, so internal reporters may be protected by Dodd‑Frank retaliation provision |
| Whether Chevron deference applies to the SEC’s interpretation of § 21F | Berman/SEC: Ambiguity in the statute permits deference to the SEC’s expertise implementing § 21F | Neo/WPP: The statutory definition is clear; no deference; courts should enforce plain text | Court: Ambiguity exists due to conflicting provisions and late conference‑committee language; SEC’s interpretation is reasonable and entitled to Chevron deference |
| Practical consequences for categories like auditors/attorneys who must report internally first | Berman/SEC: Interpreting § 21F(h)(1)(A)(iii) to cover internal reporting aligns with Sarbanes‑Oxley and protects those who cannot report to SEC first (auditors/attorneys) | Neo/WPP: Allowing internal reporting to trigger Dodd‑Frank awards/protections undermines the defined term and the award‑eligibility scheme | Court: Recognizes practical limits (auditors/attorneys) and treats that reality as evidence of ambiguity favoring SEC interpretation |
| Whether substitution/rewriting of statute is required or permissible | Berman/SEC: SEC interpretation harmonizes provisions without rewriting Congress’s work | Neo/WPP/dissent: Interpreting the statute to omit "to the Commission" rewrites unambiguous statutory text; courts must follow plain text | Court: Declines to rewrite statute itself; instead holds statute ambiguous and upholds SEC rule as a permissible construction |
Key Cases Cited
- Chevron U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S. 837 (1984) (two‑step framework for reviewing agency statutory interpretations)
- King v. Burwell, 135 S. Ct. 2480 (2015) (Supreme Court confronted tension between literal text and statutory scheme; discussed by majority as an in‑kind comparison)
- Asadi v. G.E. Energy (USA), L.L.C., 720 F.3d 620 (5th Cir. 2013) (held § 21F(a)(6) definition controls; required reporting to the SEC)
- Scialabba v. Cuellar de Osorio, 134 S. Ct. 2191 (2014) (example of irreconcilable internal statutory conflict; cited for contrast)
- Church of the Holy Trinity v. United States, 143 U.S. 457 (1892) (canon against literal application producing absurd results; cited by majority for doctrinal context)