Could This Maryland SOX Whistleblower Case Be a Sign of Things to Come?

May 25, 2017
Matthew LaGarde

In Olekanma v. Wolfe, No. CV-DKC-15-0984, 2017 WL 784121 (D. Md. Mar. 1, 2017), Maryland’s federal district court granted a motion to dismiss claims brought under the Sarbanes-Oxley Act of 2002 (SOX) and the Dodd-Frank Act of 2010 by Samuel Olekanma, a corrections officer at the Jessup Correctional Institution (“JCI”). Mr. Olekanma, proceeding pro se, alleged that JCI had failed to adequately respond to his allegations of sexual harassment by a JCI contractor. Although the legal theory underlying these claims is unclear, Mr. Olekanma argued that these alleged failures by JCI constituted violations of the anti-retaliation provisions of SOX and Dodd-Frank.

A reader could be forgiven at this point for wondering: Why are we writing about this?  After all, there is nothing remarkable or noteworthy about a pro se plaintiff mispleading his claims. What is noteworthy, however, is the basis for the court’s dismissal.

The Dodd-Frank Split

As we have written about numerous times before, there is a circuit split on the question whether the Dodd-Frank Act’s protections against retaliation extend to whistleblowers who only report their concerns internally, i.e., within their company. Dodd-Frank’s anti-retaliation provision states that the act protects “whistleblowers” from retaliation and elsewhere defines a “whistleblower” as an individual who provides information to the Securities and Exchange Commission (SEC). However, the anti-retaliation provision also states that it protects individuals who make disclosures that are “required or protected” by SOX, and SOX, in turn, protects whistleblowers who report their concerns internally.

Thus, there is a tension within the statutory language about whether its protections extend to internal whistleblowers. A circuit split has developed on this issue, with the Fifth Circuit Court of Appeals ruling that internal whistleblowers are not protected, and the Second and Ninth Circuit Courts of Appeals ruling that internal whistleblowers are protected.

The Case of Mr. Olekanma

What does that have to do with Mr. Olekanma? At the moment, the Fourth Circuit Court of Appeals, the circuit which includes Maryland, has not ruled on the question of whether Dodd-Frank protects internal whistleblowers. As a result, it is up to the district courts in the Fourth Circuit to decide the question in the first instance.

In this case, the Maryland District Court could easily have side-stepped the question entirely. The court could have held that Mr. Olekanma’s complaints about his employer’s response to his sexual harassment complaints did not constitute protected conduct under either SOX or Dodd-Frank, and dismissed his claims on that basis.  Instead, the court dismissed his claims on two other grounds.  SOX’s protections only apply to publicly traded employers, and Mr. Olekanma was employed by a state agency. Thus, the court held that the Maryland Department of Public Safety and Correctional Services is not an employer covered by SOX, and dismissed Mr. Olekanma’s SOX claim on that ground. Rather than dismissing his Dodd-Frank claim on that basis, or on the ground that he did not engage in conduct protected under the statute, the court specifically cited the absence of any allegation that Mr. Olekanma had reported his claims to the SEC to justify dismissing his Dodd-Frank claim. To support this position, the court cited Asadi v. G.E. Energy (USA), LLC, 720 F.3d 620 (5th Cir. 2013), the Fifth Circuit case holding that Dodd-Frank does not protect internal whistleblowers.

Future Implications

This decision is not binding on any future decision by the Maryland district court nor any other court. Reading the tea leaves, however, the Olekanma decision does suggest that the court is persuaded by the Fifth Circuit’s reasoning in Asadi. At least for the time being, that is bad news for whistleblowers. The stakes on this question may not seem incredibly high: While Dodd-Frank provides whistleblowers with more generous remedies, whistleblowers impacted by this requirement of reporting to the SEC should still have their SOX claim to fall back on. However, SOX has a 180-day statute of limitations, as compared to the three-year statute of limitations provided by Dodd-Frank. Six months has a way of flying by, particularly when the adverse action at issue was not a termination, e.g., if the retaliation took the form of a demotion. When this happens, the question of whether internal whistleblowing is protected under Dodd-Frank often ends up deciding whether an employee has any recourse at all.

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