Group of professionals discuss finance

Breaking news and expert analysis on legal and compliance issues

[Back To Home][Back To Archives]

From Banking and Finance Law Daily, January 10, 2018

Car salesman has no Dodd-Frank Act whistleblower protection

By Richard A. Roth, J.D.

The Dodd-Frank Act provision that excludes automobile dealers from the Consumer Financial Protection Bureau’s authority also excludes dealer employees from the Act’s whistleblower protections, the U.S. Court of Appeals for the Fifth Circuit has decided. As a result, a salesman who claimed he was fired for complaining about a dealership’s Equal Credit Opportunity Act violations had no retaliatory discharge claim under the Act (Calderone v. Sonic Houston JLR, L.P., Jan. 9, 2018, Smith, J.).

According to the salesman, Sonic Houston JLR, his employer, refused to sell cars to or finance purchases for members of racial minorities. He reported what he saw as ECOA violations to several levels of management at the dealership, and eventually he was fired for doing so. He sued Sonic for violating the Dodd-Frank Act whistleblower protection section (12 U.S.C. §5567(a)).

Dodd-Frank Act protection. Under the Dodd-Frank Act, employers are prohibited from taking adverse employment actions against an employee in retaliation for the employee having provided information about a violation of any law that is under the jurisdiction of the CFPB. The protection applies not only when information is provided to the Bureau, but also when information is given to any other government agency and when it is reported within the company.

Perhaps unusually, the Dodd-Frank Act puts the implementing whistleblower protection regulation and administrative procedures under the authority of the Department of Labor, not the CFPB.

Auto dealer exemption. Automobile dealers are exempt from the Bureau’s "rulemaking, supervisory, enforcement or any other authority" as long as the dealer does not extend credit directly to consumers (12 U.S.C. §5519). Because Sonic did not make loans, the U.S. district court judge relied on this exemption to dismiss the salesman’s suit.

Concluding that the exemption applied not only to auto dealers but also to the application to dealers of all laws under the Bureau’s jurisdiction, the appellate court affirmed the dismissal.

Construing the exemption. The first step in deciding whether the salesman was a protected whistleblower was determining what laws were under CFPB authority, the court said. That was because protection was extended to employees who report violations of "any provision of this title or any other provision of law that is subject to the jurisdiction of the Bureau" (12 U.S.C. §5567(a)). The ECOA generally is subject to CFPB jurisdiction, the court acknowledged.

The salesman argued that while Sonic was exempt from the Bureau’s supervisory and enforcement authority, it was not exempt from consumer financial protection laws that are under the Bureau’s jurisdiction. The whistleblower protection provisions are under the authority of the Labor Department, not the CFPB, he pointed out.

The court accepted this argument, to some extent. The fact that Sonic was exempt from the Bureau’s authority did not mean it was exempt from the whistleblower protection provisions, because those provisions could be enforced by the Labor Department.

However, when applied to auto dealers, the ECOA was not under the Bureau’s jurisdiction, the court then said.

The laws that are subject to the Bureau’s jurisdiction are listed in 12 U.S.C. §5481(12), and the ECOA is one of the listed laws, the court pointed out. However, 12 U.S.C. §5481(12) prefaces the list by specifying "Except as otherwise specifically provided in section 5519..." Since 12 U.S.C. §5519 creates the auto dealer exemption, the ECOA is not subject to the Bureau’s jurisdiction when it is applied to auto dealers, the court reasoned. And, if the ECOA is not subject to the Bureau’s jurisdiction, firing an employee in retaliation for reporting a violation of the ECOA is not banned.

Reasonable belief. Whether the salesman reasonably believed that Sonic was discriminating illegally was irrelevant, the court added. An employee’s reasonable belief that an employer was violating a law might entitle him to protection even if there was no violation, the court said. However, the issue in the appeal was not whether Sonic had violated the ECOA. The issue was whether, given the auto dealer exemption, the Dodd-Frank Act applied to Sonic.

The salesman’s reasonable belief that there had been illegal discrimination could not expand the CFPB’s statutory jurisdiction, according to the court.

The case is No. 17-20029.

Attorneys: Thomas Franklin Coleman (Law Offices of Tom F. Coleman) for Steven A. Calderone. Michael David Mitchell (Ogletree, Deakins, Nash, Smoak & Stewart, PC) for Sonic Houston JLR, L.P.

Companies: Sonic Houston JLR, L.P.

MainStory: TopStory BankingFinance CFPB DirectorsOfficersEmployers DoddFrankAct EqualCreditOpportunity FedTracker LouisianaNews MississippiNews TexasNews TrumpAdministrationNews

Back to Top

Banking and Finance Law Daily

Introducing Wolters Kluwer Banking and Finance Law Daily — a daily reporting service created by attorneys, for attorneys — providing same-day coverage of breaking news, court decisions, legislation, and regulatory activity.

A complete daily report of the news that affects your world

  • View full summaries of federal and state court decisions.
  • Access full text of legislative and regulatory developments.
  • Customize your daily email by topic and/or jurisdiction.
  • Search archives for stories of interest.

Not just news — the right news

  • Get expert analysis written by subject matter specialists—created by attorneys for attorneys.
  • Track law firms and organizations in the headlines with our new “Who’s in the News” feature.
  • Promote your firm with our new reprint policy.

24/7 access for a 24/7 world

  • Forward information with special copyright permissions, encouraging collaboration between counsel and colleagues.
  • Save time with mobile apps for your BlackBerry, iPhone, iPad, Android, or Kindle.
  • Access all links from any mobile device without being prompted for user name and password.