Asadi: Renegade or Precursor of Who Is a Whistleblower Under the Dodd-Frank Act?

Whistleblowers have a long and honorable history. From Ralph Nader blowing the whistle on the hazards of GM’s Corvair in Unsafe at Any Speed1 in the 1960’s to Jeffrey Wigand in 1996 exposing the duplicity of the tobacco industry, whistleblowers have put conscience ahead of career and personal success to expose corporate fraud and wrongdoing. Not surprisingly, they have had to endure ridicule and ostracism as well as financial hardship. Legislation has sought to protect them from retribution, often with mixed success. The most recent legislative effort is the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) that allows whistleblowers to collect a bounty for the whistleblowing and also protects the whistleblower from retaliatory acts by his or her employer. One of the challenges currently dividing the courts is determining who should come within the protection of the legislation. The Fifth Circuit Court of Appeals, in Asadi v. GE Energy, interpreted the definition of “whistleblower” quite narrowly to encompass only those individuals who make information available directly to the Securities and Exchange Commission (SEC). This interpretation by the Fifth Circuit not only rejects the broader interpretation of SEC regulations, but is also inconsistent with the decisions of various district courts that have considered this question. Part I opens with a discussion of the requirements of “whistleblower” status under both the statutory language of Dodd-Frank and the accompanying SEC regulations. Part II reviews the Asadi decision and calls into question the soundness of the court’s decision to disregard SEC regulations. Part III explores the circumstances in which administrative regulations are entitled to deference and those situations in which they may be disregarded as an overreach of power. Part IV surveys several district court decisions that have interpreted the term “whistleblower” under Dodd-Frank. Part V argues that even public policy dictates that the courts should adopt a broad interpretation of “whistleblower” so as to provide maximum safeguards against fraud and abuse. The paper concludes that the Fifth Circuit in Asadi reached an incorrect result, and, therefore, that this renegade decision which advocates a narrow scope of whistleblower protection should be rejected in future judicial interpretations of who is a whistleblower.