On August 24, 2016, the Southern District of New York denied Defendants’ motion to dismiss a Dodd-Frank whistleblower retaliation claim brought by its former co-CEO and Executive Chairman of its Board of Directors, finding that the Plaintiff made a protected complaint alleging securities law violations to a person with supervisory authority. Kuhns v. Ledger, No. 15-cv-3246.
Court Denies Defendants’ Motion to Dismiss. Plaintiff proceeded to file a Dodd-Frank whistleblower retaliation claim in the Southern District of New York. Defendants moved to dismiss per Rule 12(b)(6), arguing that the statutory text in Section 806 of SOX, cross-referenced by Dodd-Frank, required plaintiff to make his disclosure to someone with supervisory authority over him who also “has the authority to investigate, discover, or terminate misconduct.” Rejecting this argument, the court reasoned that the plain text of the statute states that disclosure must be made to a senior employee “or” someone with such investigatory authority. The court also rejected Defendants’ contention that Plaintiff did not reasonably believe Defendants’ conduct rose to the level of securities fraud. But the court held that, even though Plaintiff did not specify a particular statutory subsection that the alleged fraud implicated, his statement about the possibility of a regulator inquiry arising from the way securities were being offered was sufficient to give Defendants notice that he was asserting a violation of securities laws.
Implications. This decision reveals the degree of latitude some courts may afford Plaintiffs who allege generalized violations of securities laws in the context of Dodd-Frank whistleblower actions.