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Media Alerts - Asadi v. G.E. Energy (USA), L.L.C. - Fifth Circuit
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July 18, 2013
  Asadi v. G.E. Energy (USA), L.L.C. - Fifth Circuit
Headline: Fifth Circuit Rules that the Dodd-Frank Whistleblower-Protection Provision Does Not Apply to Employees who Report Suspected Wrongdoing Only Internally.

Area of Law: Securities; Whistleblower-Protection.

Issue Presented: Whether an individual may seek relief under 15 U.S.C. § 78u-6(h), the Dodd-Frank whistleblower-protection provision, when the individual's report of suspected wrongdoing is not made to the Securities and Exchange Commission.

Brief Summary: Asadi filed a complaint alleging that G.E. Energy (USA), L.L.C. (GE Energy) violated the whistleblower-protection provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, 15 U.S.C. § 78u-6(h), by terminating him after he made an internal report of a possible securities law violation. The U.S. District Court for the Southern District of Texas granted GE Energy's motion to dismiss for failure to state a claim. The U.S. Court of Appeals for the Fifth Circuit affirmed, holding that Asadi was not a "whistleblower" under Dodd-Frank because the plain language of the Dodd-Frank whistleblower-protection provision creates a private cause of action only for individuals who provide information to the SEC.

Extended Summary: According to the allegations of his complaint, Asadi, the Iraq Country Executive for GE Energy, was informed by Iraqi officials of their concern that GE Energy hired a woman closely associated with a senior Iraqi official to curry favor with that official in negotiating a lucrative joint venture agreement. Asadi reported the issue to his supervisor and to the GE Energy ombudsperson for the region, because he was concerned this violated the Foreign Corrupt Practices Act (FCPA). Shortly following, Asadi received a negative performance review. GE Energy allegedly pressured Asadi to step down from his role as Iraq Country Executive and accept a reduced role in the region. Asadi did not comply and GE Energy fired him.

Asadi filed a complaint alleging that GE Energy violated Dodd-Frank's whistleblower-protection provision by terminating him following his internal reports of the possible FCPA violation. GE Energy moved to dismiss Asadi's complaint because (1) Asadi does not qualify as a "whistleblower" under the whistleblower-protection provision, and (2) the whistleblower-protection provision does not apply extraterritorially. The district court dismissed Asadi's whistleblower-retaliation claim with prejudice, concluding that the whistleblower-protection provision "does not extend to or protect Asadi's extraterritorial whistleblowing activity." Asadi appealed to the U.S. Court of Appeals for the Fifth Circuit.

The argument on appeal focused on whether Asadi qualified as a protected whistleblower. Asadi contended that the whistleblower-protection provision should be construed to protect individuals who take actions described within the section, even if they do not provide information to the SEC. Asadi argued that he should be protected because of a conflict between the narrow statutory definition of "whistleblower," which refers to "any individual who provides . . . information . . . to the Commission," and the third category of protected activity, § 78u-6(h)(1)(A)(iii), which does not necessarily require disclosure of information to the SEC. Asadi also maintained that the Fifth Circuit should defer to the SEC's regulation construing the Dodd-Frank whistleblower-protection provision, which adopts his suggested construction and expands the meaning of a "whistleblower" beyond the statutory definition.

Affirming the District Court's dismissal, the Fifth Circuit held that under Dodd-Frank's plain language and structure there is no conflict and that Congress's intent was clear and unambiguous, that there is only one category of whistleblowers: individuals who provide information relating to a securities law violation to the SEC. The three categories listed in § 78u-6(h)(1)(A) represent the protected activity in a whistleblower-protection claim, but they do not define which individuals qualify as whistleblowers. The Fifth Circuit noted that if they were to accept Asadi's construction of the whistleblower-protection provision, the Sarbanes-Oxley Act's anti-retaliation provision would, for practical purposes, be rendered moot.

For the full opinion, please see:

Panel: Circuit Judges Elrod and Higginson and District Judge Jackson

Argument Date: 06/05/2013

Date of Issued Opinion: 07/17/2013

Docket Number: No. 12-20522

Decided: Affirmed

Case Alert Author: Kirsty Davis

Counsel: Ronald Edward Dupree, Jr., Dupree Law Firm, for Plaintiff-Appellant; Linda L. Addison, Fulbright & Jaworski L.L.P., for Defendant-Appellee.

Author of Opinion: Judge Elrod

Case Alert Circuit Supervisor: Aaron-Andrew P. Bruhl

    Posted By: Aaron Bruhl @ 07/18/2013 12:54 PM     5th Circuit  

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