Asadi v. G.E. Energy: Fifth Circuit Limits Whistleblower Protection to Individuals Who Report Directly to the SEC

In Asadi v. G.E. Energy (USA), L.L.C., 720 F.3d 620 (5th Cir. 2013), the United States Court of Appeals for the Fifth Circuit ruled that an employee must report securities violations directly to the SEC to be considered a “whistleblower” protected by Section 922 of Dodd-Frank from employer retaliation.  

Plaintiff Khaled Asadi, served as G.E. Energy’s Iraq Country Executive in Amman, Jordan. During his employment, Plaintiff claimed that Iraqi officials informed him that G.E. Energy had hired a woman closely associated with a senior Iraqi official to “curry favor with that official in negotiating a lucrative joint venture agreement.” Plaintiff was concerned that the action may have violated the Foreign Corrupt Practices Act and reported the information to his supervisor and the regional ombudsperson. Shortly following the report, Plaintiff received what was described as a “surprisingly negative” performance review, and within one year, was terminated from his position.

Plaintiff filed suit alleging that his termination was in violation of the Dodd-Frank whistleblower protection provision. G.E. Energy moved to dismiss the complaint arguing that Plaintiff did not qualify as a whistleblower. The district court granted G.E. Energy’s motion to dismiss.

On appeal, the Fifth Circuit held that Plaintiff was not a whistleblower because he did not report the information to the SEC. In arriving at this conclusion, the court looked to the plain language of Section 21F of the Exchange Act. 15 USC 78u-6. Section 21F(h)(1)(A) states that an employer many not discharge a whistleblower for reporting a securities violation. 15 USC 78u-6(h)(1)(A). Further, Section 21F(h)(1)(A) defines a whistleblower as an individual who reports information directly to the SEC. Section 21F(h)(1)(A)’s use of the term “whistleblower,” rather than “employee” or “individual,” therefore, reflected a congressional intent only to protect individuals who reported violations directly to the SEC.   

The Fifth Circuit affirmed the district court’s dismissal, ruling that the plain language of the Dodd-Frank Act and Section 78u-6(h)(1)(A) limits whistleblower protection to individuals who provide violation information directly to the SEC.

The primary materials for this case can be found on the DU Corporate Governance website.

Meredith Spears