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From Securities Regulation Daily, November 23, 2015

Reconsidering whistleblower case, court ditches Asadi for Berman

By Anne Sherry, J.D.

The Second Circuit’s determination that Dodd-Frank protects employees who report misconduct internally won over the federal district court in St. Louis. Previously, the court had adopted the Fifth Circuit’s reasoning in Asadi and dismissed the retaliation claims of an internal whistleblower. On reconsideration, it was compelled by the Second Circuit’s intervening conclusion that the SEC’s rule protecting internal reporting is entitled to deference (Lutzeier v. Citigroup Inc., November 19, 2015, White, R.).

Background. The plaintiff worked in the Internal Audit Group at Citigroup Management Corp. for about a year before he was terminated, allegedly in violation of the anti-retaliation provisions of SOX and Dodd-Frank as well as state law. At the time, the Fifth Circuit was the only federal appeals court to have ruled on whether Dodd-Frank protects employees who do not report misconduct to the SEC. The Eastern District of Missouri followed Asadi, holding that the employee was not a whistleblower and dismissing his Dodd-Frank claims. The employee unsuccessfully sought to have the decision certified for interlocutory appeal. Following that decision, though, the Second Circuit split with the Fifth to defer to the SEC’s interpretive rule, which protects internal whistleblowers. The Citigroup employee moved for reconsideration of the order dismissing his case in light of Berman v. Neo@Ogilvy.

Reconsideration. The court granted the motion for reconsideration and, after reviewing the briefs, agreed with the Second Circuit’s take. Based on the Berman decision and the SEC’s interpretive rule, the court held that an individual need not report to the SEC to qualify as a whistleblower. Although it was light on discussion, the court seemed to credit the Second Circuit’s explanation that conferees’ haste in reconciling lengthy House and Senate bills led to ambiguity in the final statute.

The case is No. 4:14CV183.

Attorneys: James F. Bennett (Dowd Bennett, LLP) for Fred E. Lutzeier. Amy L. Barton (Paul, Weiss, Rifkind, Wharton & Garrison LLP) and Eric A. Todd (Ogletree, Deakins, Nash, Smoak & Stewart, P.C.) for Citigroup, Inc., Citigroup Management Corp. and CitiMortgage, Inc.

Companies: Citigroup, Inc.; Citigroup Management Corp.; CitiMortgage, Inc.

MainStory: TopStory AccountingAuditing DoddFrankAct SarbanesOxleyAct WhistleblowerNews MissouriNews

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