October 22, 2012

In Kramer v. Trans-Lux Corp., No. 3:11-cv-01424-SRU, 2012 WL 4444820 (D. Conn. Sept. 25, 2012), Kramer sued his former employer for retaliatory discharge under the Sarbanes-Oxley and Dodd-Frank Acts, alleging that his repeated complaints to his supervisor, the CFO, and the board audit committee, followed by complaints to the SEC and PBGC about the actions of his fellow pension committee member and sole trustee of the pension plan lead to his termination of employment. And a federal district court agreed.

"But Mike" you say, "doesn't the Dodd-Frank Act provide protection against whistleblower retaliation for reporting or making disclosures required by the Securities Exchange Act or otherwise subject to SEC jurisdiction? The SEC does not regulate or have jurisdiction over qualified pension plans." You are correct on that point. However, SEC rule 240.21F-2(b)(1), cited by the Court, provides that:

For the purposes of the retaliation protections afforded by Section 21F(h)(1) of the Exchange Act, you are a whistleblower if;

(i) You possess a reasonable belief that the information you are providing relates to a possible securities law violation . . . That has occurred, is ongoing or is about to occur; and

(ii) You provide that information in a manner described in Section 21F(h)(1)(A) of the Exchange Act.

The Court concluded that Kramer had a "reasonable belief" that the pension plan matters implicate federal securities laws. “As Kramer has pointed out, in order to obtain the protections of section 1514A, the conduct at issue need not have actually constituted a violation of the SEC rules or regulations –by the language of the whistleblower provision, the whistleblower need only have reasonably believed that it was a violation.”

Additionally, the Court rejected the requirement set forth in the SEC rules (quoted above) that a whistleblower must provide information in the manner prescribed by the SEC, as imposing a requirement beyond the language of the statute. The SEC Rule requires filing a specific form. Kramer had simply written a letter to the SEC.

So, whistleblower protection may not be just for securities law violations anymore.