Before breaking for summer recess, the U.S. Supreme Court announced that it will hear a case involving Dodd-Frank whistleblower protections. Digital Realty Trust, a real estate investment trust company, is appealing a lower court ruling in favor of an executive fired by the SF-based company after he complained internally about alleged misconduct by his supervisor. The employee never reported the matter to the SEC.

The scope of the SEC whistleblower rules, which were adopted in 2011 under Dodd-Frank, are "on trial" in this case. Those rules: (i) prohibit corporate employers from retaliating in any way against whistleblowers who try to report allegations of securities law; and, (ii) give the SEC the power to offer monetary awards to whistleblowers whose tips lead to successful enforcement actions.

IF THE SUPREME COURT RULES IN FAVOR OF THE COMPANY.  Digital Realty Trust argues the anti-retaliation protections do not apply to people who fail to report their allegations to the SEC because the law defines a whistleblower as a person who reports possible securities violations to the SEC. A decision in favor of Digital Realty Trust could deter people from reporting misconduct internally, according to Jordan Thomas, a partner at Labaton Sucharow who represents whistleblowers.

"I think both corporate whistleblowers and corporations should hope that the Supreme Court finds that internal reporting is sufficient to have the anti-retaliation protections because if not, sophisticated corporate whistleblowers will bypass internal reporting systems and report directly to the SEC."