Amicus Curiae Brief — Digital Realty Trust, Inc. v. Somers, 138 S. Ct. 43 (2017) (No. 16-1276)

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RECORD oan

AND OCT 17 2017

No. 16-1276 OFFICE OF THE CLERK

In the Supreme Court of the United States

DIGITAL REALTY TRUST, INC.,

Petitioner,

Uv,

PAUL SOMERS,

Respondent.

ON WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF

APPEALS FOR THE NINTH CIRCUIT

BRIEF FOR THE NATIONAL

WHISTLE®'’ OWER CENTER, ET AL, AS

AMICI CURIAE IN SUPPORT OF

RESPONDENT

Stephen M. Kohn

Counsel of Record

Michael D. Kohn

David K. Colapinto

Kohn, Kohn and Colapinto, LLP

3233 P Street, N.W.

Washington, D.C. 20007

(202) 342-6980

sk@kkc.com

TABLE OF CONTENTS

pg sy | ce | |

INTEREST OF AMICI CURIAE............ BS a ecsaesan

SUMMARY OF THE ARGUMENT.

I. THE SEC ESTABLISHED THAT THE

“MANNER” IN WHICH A

“WHISTLEBLOWER” CAN PROVIDE

INFORMATION TO THE COMMISSION

INCLUDES INTERNAL REPORTG. .............. 6

A. The Regulated Community Urged the SEC to

Incorporate Internal Disclosures into the

Core Definition of the “Manner” Employees

Could Qualify as a “Whistleblower.”.............. 8

B. The SEC Exercised Its Discretion Under 15

U.S.C. § 78u-6(a)(6) to Incorporate Internal

Disclosures into the Core Definition of the

“Manner” Employees Could Qualify as a

oo cincsveneteneey: 15

Il. DIGITAL’S ARGUMENT THAT THE SEC

GAVE “NO HINT THAT IT WAS

CONSIDERING EXPANDING THE

DEFINITION OF ‘WHISTLEBLOWER” IS

FALSE AND MISLEADING. ...............0::00008. 19

Ill. BASIC RULES OF STATUTORY

CONSTRUCTION REQUIRE THAT THIS

COURT INTERPRET SUBDIVISION (IID AS

PROTECTING INTERNAL DISCLOSURES

AND DISCLOSURES TO FEDERAL LAW

RRR aD tae ep ee 23

A. The Securities and Exchange Act Must be

Interpreted as a Whole. ..................cccecceee-eees 24

B. Harmonious and Consistent Reading of the

DFA’s Provisions Requires the Protection of

Internal Whistleblowers. ..................-........4+. 26

C. The Specificity of Subdivision (iii) and the

Timing of Its Addition to the DFA

Mandates that Internal Whistleblowers be

IV. DIGITAL’S ARGUMENT WOULD

UNDERMINE THE CENTRAL LAW

ENFORCEMENT COMPONENTS OF THE

REGULATORY SCHEME FAR BEYOND

INTERNAL REPORTING ...................::::seeeeees 31

V. FOR NEARLY 50 YEARS, CONGRESS AND

ADMINISTRATIVE AGENCIES HAVE HELD

THAT INTERNAL EMPLOYEE

DISCLOSURES ARE PROTECTED UNDER

ANTI-RETALIATION LAWS SIMILAR TO

RE etcciatinntensinndisdenicmmnreninnteistaniaumeinidags 33

VI. DIGITAL’S POSTION WILL UNDERMINE

THE SUCESSFUL SEC WHISTLEBLOWER

I ssciserntnccecaastaunicurnnsembiseaseunineiehis 40

II ikicindeninidicntiinsipmsndeeinnanitaiinaiaeateaaanicuei 42

ill

TABLE OF AUTHORITIES

CASES

Bechtel Construction Co. v. Sec’y of Labor,

BO Fe GS CRG Cie. 1G) nccivecinccccccccssccsecsscessses 38

Beck v. Prupis,

ee RE ici sac boauanbionindiinetaanetiocbiianedia 1

Berman v. Neo@Ogilvy LLC,

ee ce ee Ee Oy Bi ecccccnnsesedunstevcioceceecasesian 23

Bloate v. United States,

SI A a 29, 30

Davis v. Mich. Dep’t of Treas.,

nn 24

Doe v. Chao,

LIT mE React Wee eect Bre A ast mele 1

Duncan v. Walker,

er ae 29, 30

Edmond v. United States,

Ea ae Rene een nee eR 29

EEOC v. Waffle House, Inc.,

Sr lt 1

English v. General Elec.,

Ee oO RR ee 1

F.T.C. v. Mandel Bros., Inc.,

ls I so acicarcthcestoessnsinsialsesnteinbiseideabaeaion 26, 27

Food & Drug Admin. v. Brown & Williamson

Tobacco Corp.,

I SP oT a We a Oa 24, 26

Haddle v. Garrison,

ice ceases 1

Helvering v. Credit All. Corp.,

Be I ahiccrtedeiensnsisncsincsccinentoeiennaietes 26, 28

Heydenfeldt v. Daney Gold,

A er ci ois est n cdineenateetsanmninaceiden 24

Kansas Gas & Elec. Co. v. Brock,

780 F.2d 1505 (10th Cir. 1985)....................... 35, 38

Kawasaki Kisen Kaisha Lid. v. Regal-Beloit Corp.,

3 Rens aR CT cae Ramee HS 28

Kellogg Brown & Root Services, Inc. v. U.S. ex rel.

Carter,

i a eeileelea 2

Lane v. Franks,

ge 8 IERIE eerie ek SERS SEE 1

Lawson v. FMR LLC,

ee ee In ciarcnncttnatenedcabiapeiicsbaindnadiian ]

Lynch v. Overholser,

i I ons nicetisiesistteaecisoesttsinileininiesainiael 26

Mackowiak v. Univ. Nuclear Sys., Inc.,

ote be lt . — eemee 38

New Lamp Chimney Co. v. Ansonia Brass & Copper

Co.,

Bn EE II inno sinciesccdeioun sienieadnabnenmiemenelinncligienth 24

Passaic Valley Sewerage Comm'rs v. U.S. Dep't of

Labor,

§ AE. Ce ere eneoEe 38

Phillips v. Interior Bd. of Mine Operations Appeals,

Ee me 6 Oe Ce COR. BORG OD secinricctccstcestcices passim

Russello v. United States,

i ik 30, 31

State Farm Fire & Cas. Co. v. U.S. ex rel. Rigsby,

og GE RE Se Rebel oct Seo eee 2

TRW Inc. v. Andrew,

8 TRESS Rey sree Means Oia MPO FR 29, 30

Universal Health Svcs. v. U.S. ex rel. Escobar,

te RE SAE Se ec sree 2

Vermont Agency of Natural Resources v. U.S. ex rel.

Stevens.

8 ge 1

Willy v. Admin. Review Bad.,

4338 FBG EBS GEG Cle. BODOG) ..0.cccccvecesscsccessccccccccess 38

STATUTES

I a ae 13, 25

I RI, he tl La ee 13, 25

ee acricania necinhipceesiietctsdienieass ea abiniidbnianie 13, 25

a Te Paice iccccevincisininshchusabotoiiaiepnebananician 32

I i i a oe passim

LT SR GES ERE ES, See ae REN 33, 39

Be BEA © Fe critncccncseececcscictscacesene 23, 33

15 U.S.C. § 78u-6(h)(1)(A)G1)..........-...e.e cceseeeeeeees 23, 33

15 U.S.C. § 78u-6(h)(1)(A) (iil)........... cece eee eee passim

15 U.S.C. § 78u-6(h)(2)(D)(i)(D)-(IV) ..... eee eee eeee eee 32

5+ ie URE ares eee tenes BONS ee 14

See Een a 31

FAM, BF eB Fe) ll 34

91 P.L. 173, 83 Stat. 742 § 110(b)(2)..........-...cceseeeee 34

REGULATIONS

ee i 13

Be ee I civtricecdesnocencnsissesksnsnicletcreswninn 13

yg kh | BO ge Rieee renee Mtea einer eemne lic 13

beer SS * | Se nA e ee eee 13

17 C.F.R. § 240.21 F-4(b)(iv)(4)(v)(C) ........ eee 16

OF Cheese er ED ere nstsccdeccttccensescsessesens 16

Be is Oe ee i sescttiibeitecinthascincdviecneevesnies 16

Oe ae es ee aii recstisacsctibencictcrntadadtains 16

FEDERAL AGENCY DECISIONS

Day v. Dep’t of Homeland Sec.,

2013 MSPB 49 (June 26, 2013)......................060 39

Flor v. U.S. Dept. of Energy,

No. 93-TSC-1 (Dec. 9, 1994)........................- vase 39

Nathaniel v. Westinghouse,

BO: ee PMs CP Bg. BOP vececevceosicesccsscsescocenesene 39

Poulos v. Ambassador Fuel Oil Co., Inc..,

No. 86-CAA-1 (Apr. 27, 1987) ...........ccecceessesseceseees 39

Wells v. Kansas Gas & Elec. Co.,

No. 83-ERA-12 (June 14, 1984) ...............00..ceeeee 39

Willy v. Coastal Corp.,

No. 85-CAA-1 (June 1, 1994) ..........cccccserceresssoseones 40

OTHER AUTHORITIES

2016 ANNUAL REPORT TO CONGRESS ON THE DODD-

FRANK WHISTLEBLOWER PROGRAM, U.S. SEC. &

EXCH. COMM’N (Nov. 15, 2016),

https://www.sec.gov/files/owb-annual-report-

I abenusueuniunissebaciencs 40

Andrew Cereseny, SEC Division of Enforcement

Director, The SEC’s Whistleblower Program: The

Successful Early Years, SIXTEENTH ANNUAL

TAXPAYERS AGAINST FRAUD CONFERENCE (Sept. 14,

2016), httpe ./www.sec.gov/news/speech/ceresney-

sec-whistleblower-program.html ......................... 40

CODE OF BUSINESS CONDUCT AND ETHICS, DIGITAL

REALTY TRUST, INC. 6 (Feb. 17, 2016),

http://s21.q4cdn.com/814695872/files/doc_downloa

ds/highlights/2016/Code-of-Business-Conduct-and-

Ethics-(Revised-Feb.-17-2016).pdf ................. 14, 37

Comments and Legal Guidance Concerning Proposed

Rule 240.21F-8 for Implementing Whistleblower

Provisions of the Dodd-Frank Act, NAT’L

WHISTLEBLOWER CTR. (Jan. 25, 2011) .........0..00..2. 21

Comments and Legal Guidance Concerning Proposed

Rule 240.21F-8 for Implementing Whistleblower

Provisions of the Dodd-Frank Act, NAT'L

WHISTLEBLOWER CTR. (Mar. 7, 2011) ..........0.0000... 21

Comments on Proposed Rules for Implementing the

Whistleblower Provisions of Section 21F of the

Securities Exchange Act of 1934, File No. S7-33-10,

U.S. SEc. & EXCH. COMM’N (last modified Apr. 27,

2015), https://www.sec.gov/comments/s7-33-

ID ccschiicdcnutiaieradncpranedernsaneuiess totus 8, 10

vill

Comments, ALCOA, ET AL. (Dec. 17, 2010),

https://www.sec.gov/com ments/s7-33-10/s73310-

PE an.biid bavccnnrnctsccnsmbaanbbadalidatmnenastsvedéeuiagsuinesidimpats 1]

Comments, ASSOC. OF CORP. COUNSEL (Dec. 15,

2010), https://www.sec.gov/comments/s7-33-

BRR SR EE ORE SR ET ES 9, 10

Comments, BUS. ROUNDTABLE INST. (Dec. 17, 2010),

https://www.sec.gov/comments/s7-33-10/s73310-

SE ices iaisbsseisdutosripilagbabdnviaidapismmcigineppamiantebaiiads 11

Comments, CHAMBER OF COMMERCE (Dec. 17, 2010),

https://www.sec.gov/comments/s7-33-10//s73310-

NRT dd od ON Sane CAPA Ge as 11, 12

Comments, COVINGTON & BURLING LLP (Feb. 18,

2011), https://www.sec.gov/comments/s7-33-

ites tictieian dcisiicecnticcnsisncaennsivconnuniqaiss 9

Comments, D.C. BAR SECTION ON CORP., FIN., AND

Sec. LAW (Dec. 17, 2010),

https://www.sec.gov/comments/s7-33-10/s73310-

ee ee 11, 21

Comments, DELOITTE & TOUCHE LLP (Dec. 17, 2010),

https://www.sec.gov/comments/s7-33-10/s73310-

EE cervnkisnatistnticdahestsocssncingetanestanduricinamiioianneipene 11

Comments, GEN. ELEC. Co., ET AL. (Dec. 17, 2010),

https://www.sec.gov/comments/s7-33-10/s73310-

BP IEE cecdectracetesacncsisadiepeeisscommabesabeabninanbienairensenhenh 11

Comments, INST. OF INTERNAL AUDITORS (Dec. 17,

2010), https://www.sec.gov/comments/s7-33-

ois ienierictinsnessetnecticstnccureiniesemeniotens 10

Digital Realty Trust, Inc., Annual Report (Form 10-

II, Wis MIE Gps stcuisadnedesdcvasaneacanessesessograenseitense 25

Digital Realty Trust, Inc., Quarterly Report (Form

NE OD isco deapenisouscetsennisinteavatvininenees 4,40

Donna Boehme, From Enron to Madoff: Why Many

Corporate Compliance and Ethics Programs Are

Positioned for Failure, RAND CENTER FOR

CORPORATE ETHICS AND GOVERNANCE 30 (March 5,

2009),

https://www.rand.org/pubs/conf_proceedings/CF25

capa aeiiebiicaninneed 10, 28

IMPACT OF QUI TAM LAWS ON INTERNAL COMPLIANCE:

A REPORT TO THE SECURITIES EXCHANGE

COMMISSION, NAT’L WHISTLEBLOWER CTR. (Dec. 17,

Kathleen L. Casey, SEC Commissioner, Proposed

Rules for Implementing the Whistleblower

Provisions of Section 21F of the Securities

Exchange Act of 1934 (Nov. 3, 2010),

https://www.sec.gov/news/speech/2010/spch110310

IN DRIES oo . scccodecascesuccecneubescevamesess 20

Mary Jo White, SEC Chair, The SEC as the

Whistleblower’s Advocate (April 30, 2015),

https://www.sec.gov/news/speech/chair-white-

remarks-at-garrett-institute.html........................ 41

Mary L. Shapiro, SEC Chairman, Opening

Statement at SEC Open Meeting: Item 2—

Whistleblower Program (May 25, 2011),

https://www.sec.gov/news/speech/201 1/spch052511

IE ES ENE SN SR EE SEE 454%, oe

Memorandum from the Division of Enforcement

regarding a January 25, 2011, meeting with

representative of the National Whistleblowers

Center, U.S. SEC. & EXCH. COMM’N (Jan. 31, 2011)

Memorandum from the Division of Enforcement

regarding a March 28, 2011, meeting with

representatives of the National Whistleblowers

Center, O'Donoghue and O'Donoghue LLP, and the

National Coordinating Committee of Multi-

Employer Plans, U.S. SEc. & EXCH. COMM’N (Mar.

TE sds dasha cca anioinasddiheteicbenstatsasoundstisabielbebadbdmamadanas 22

Memorandum from the Office of Commissioner

Aguilar regarding a February 10, 2011, meeting

with representatives of the National

Whistleblowers Center, U.S. Sec. & EXCH. COMM’N

cnt Conte neds 22

Memorandum from the Office of Commissioner Casey

regarding a March 1], 2011, meeting with

representatives of the National Whistleblower

Center, U.S. Sec. & Excl. COMM’N (Mar. 11, 2011)

COO REO OOH OEE HO OT OO eee eee

Memorandum from the Office of Commissioner

Paredes regarding a February 11, 2011, meeting

with representatives of the National

Whistleblowers Center, U.S. SEc. & EXCH. COMM’N

A RE 0 EAR ERE OTERO OSETIA MCE Deeper 22

Memorandum from the Office of Commissioner

Walter regarding a March 16, 2011, meeting with

representatives of the National Whistleblowers

Center, U.S. SEC. & EXCH. COMM’N (Mar. 16, 2011)

CREE ORR ERR EOE ER ee rm eee eww ee hee ee

Memorandum from the Office of the Chairman

regarding meeting with National Whistleblowers

Center, U.S. Sec. & EXCH. COMM’N (Aug. 23, 2010),

https://www.sec.gov/comments/df-title-

ix/whistleblower/whistleblower.shtml.................... 2

Peter Kerwin, Jniernal Auditors Face Intense

Political Pressures to Influence Findings, UNIV. OF

WISCONSIN (March 16, 2015),

https://bus. wisc.edu/knowledge-

expertise/newsroom/press-

releases/2015/03/16/internal-auditors-face-intense-

political-pressures-to-influence-findings................ 7

Proposed Rules for Implementing the Whistleblower

Provisions of Section 21F of the Securities

Exchange Act of 1934, 75 Fed. Reg. 70,488 (Nov.

Pr Pe ialicilninibicsanaceteclscrapendeesains tet ihinitluutebinie desicansane 19, 20

Proposed SEC Rule 240.21F-8 and CFTC Rule RIN

number 3038-AD04, for Implementing

Whistleblower Provisions of the Dodd-Frank Act,

NAT'L WHISTLEBLOWER CTR. (Mar. 17, 2011)....... 21

Provision-by-Provision Analysis of Proposed Rule

240.21F-8 for Implementing Whistleblower

Provisions of the Dodd-Frank Act, NAT’L

WHISTLEBLOWER CTR. (Mar. 17, 2011)................ 21

REPORT OF ECI’S BLUE RIBBON PANEL, ETHICS &

COMPLIANCE CERTIFICATION INSTITUTE 27-28

OE ns cca tagtin Bo a ae ee Be 12

ek SES 27

Siete: 500 SO 38

i en: Wa, OS-081:................. EPG ERI BAS SCA eT 35

SEC Rule Making Proceeding — Whistleblower

Regulations, NAT’L WHISTLEBLOWER CTR. (Feb. 10,

x1)

Securities Whistleblower Incentives and Protection,

76 Fed. Reg. 34,300 (June 13, 2011)............. passim

STEVEN J. PEARLMAN, NEW WHISTLEBLOWER

POLICIES AND INCENTIVES: A PARADIGM SHIFT FROM

“OVERSIGHT” TO “INSIGHT” (2011),

https://www.rand.org/pubs/conf_proceedings/CF29

en cusiebuneaaociiines 13, 14, 25

THE POLITICS OF INTERNAL AUDITING, INSTITUTE OF

INTERNAL AUDITORS RESEARCH FOUNDATION (2015)

eee eee eee ee eee ee Pee eee eee eee ee eee ee ee eee

USAID Announces Grand Prize Winners of the

Wildlife Crime Tech Challenge, USAID (Sept. 1,

2016), https://www.usaid.gov/news-

information/press-releases/sep-1-2016-usaid-

announces-grand-prize-winners-wildlife-crime-

INE A RPG tee ete LENA ARE 1

]

INTEREST OF AMICI CURIAE

The National Whistleblower Center (“NWC’”) is a

nonprofit, tax-exempt organization dedicated to the

protection of employees who lawfully report illegal

conduct.! See www.whistleblowers.org. Since 1984,

the Center’s directors have represented

whistleblowers, taught law school courses on

whistleblowing, and authored numerous books and

articles on this subject. In 2016, the NWC was named

a Grand Prize winner of USAID's Wildlife Crime Tech

Challenge for its innovative solution to use

whistleblowers to combat wildlife crime.2

The NWC has participated before this Court

as amicus curiae in English v. General Elec., 496 U.S.

72 (1990); Haddle v. Garrison, 525 U.S. 121

(1999); Vermont Agency of Natural Resources v. U.S.

ex rel. Stevens, 529 U.S. 765 (2000); Beck uv.

Prupis, 529 U.S. 494 (2000); EEOC v. Waffle House,

Inc., 534 U.S. 279 (2002); Doe v. Chao, 540 U.S. 614

(2004); Lawson v. FMR LLC, 134 S. Ct 1158

(2014); Lane v. Franks, 134 S. Ct. 2369 (2014); Kellogg

Brown & Root Services, Inc. v. U.S. ex rel. Carter, 135

1 Pursuant to Rule 37.6, amici affirm that no counsel for a

party authored this brief in whole or in part and that no person

other than amici, their members, or their counsel made any

monetary contributions intended to fund the preparation or

submission of this brief. The parties have filed letters granting

blanket consent to the filing of amicus briefs with the clerk.

? This international competition, was sponsored by the U.S.

Agency for International Development, in partnership with the

Smithsonian Institution and National Geographic.

https://www.usaid.gov/news-information/press-releases/sep- 1-

2016-usaid-announces-grand-prize-winners-wildlife-crime-tech-

challenge.

S. Ct. 1970 (2015); Universal Health Sucs. v. U.S. ex

rel. Escobar, 136 S. Ct. 1989 (2016); and State Farm

Fire & Cas. Co. v. U.S. ex rel. Rigsby, 137 S. Ct. 436

(2016).

During the drafting of the Dodd-Frank Act

(“DFA”), the NWC proposed adding Subdivision (iii)

to the Act’s anti-retaliation section. The NWC was the

first organization to meet with the U.S. Securities and

Exchange Commission concerning implementation of

the whistleblower rules. During the SEC’s

rulemaking proceedings, the NWC filed numerous

written comments and met individually with each

Commissioner to explain the importance of protecting

internal whistleblowers. See infra note 10. In the final

rulemaking, the Commission cited to the NWC’s

comments forty-five times. See Securities

Whistleblower Incentives and Protection, 76 Fed.

Reg. 34,300 (June 13, 2011).

Amici Donna Boehme was the first global

compliance and ethics officer for two multinationals.

As Group Compliance and Ethics Officer for BP plc

(London), she established the company’s first global

compliance and ethics function in 2003, including the

company’s global code of conduct, covering 100,000+

employees in over 100 countries, a dedicated global

compliance and ethics team and a groundbreaking

network of 135+ senior-level business ethics leaders.

At BOC Group (now part of Linde Group), she

3 See Memorandum from the Office of the Chairman regarding

meeting with National Whistleblowers Center, U.S. SEC. & EXCH.

COMM'N (Aug. 23, 2010), https://www.sec.gov/communts/df-title-

ix/whistleblower/whistleblower.shtml.

established the company’s first global compliance and

ethics function and its first global code and program.

As Principal of Compliance Strategists LLC, Ms.

Boehme advises a wide spectrum of private and public

entities on compliance matters. She serves on the

respective boards of RAND Center of Corporate

Ethics and Governance, Rutgers Center for

Government Compliance & Ethics. She is an

Emeritus Member and past Board member of the

Ethics and Compliance Officer Association, a past

Board member of the Association of Corporate

Counsel — Europe, and past Advisory Board member

of The Society of Corporate Compliance & Ethics. She

was a charter member of the Conference Board

Council on Corporate Compliance & Ethics, the

Compliance and Ethics Leadership Council of the

Corporate Executive Board and a past member of the

Ethics Resource Center (Fellows Program). See

Donna C. Boehme, COMPLIANCE STRATEGISTS,

http://compliancestrategists.com/pro/our-

team/donna-c-boehme. Ms. Boehme_ submitted

comments and met with SEC Commissioners during

the rulemaking proceeding.

SUMMARY OF THE ARGUMENT

The question in this case is whether the Dodd-

Frank Act (“DFA”) whistleblower provisions protect

internal reporting. For the reasons argued herein,

this Court should affirm the holding of the U.S. Court

of Appeals for the Ninth Circuit.

First, Congress explicitly authorized the U.S.

Securities and Exchange Commission (“SEC” or

“Commission”) to conduct a rulemaking and

determine the “manner” in which a “whistleblower”

can provide information to the Commission. During

the rulemaking’ proceedings, the regulated

community strongly urged the Commission to

incorporate internal disclosures into the core

definition of a “whistleblower” covered under the

DFA. In the final rules, the Commission exercised its

discretion to incorporate internal disclosures into the

definition of “whistleblower.” To now hold that the

DFA does not protect internal reporting would upend

the plain language of the DFA and the process by

which the Commission established the “manner” for

making reports.

Second, Digital's argument that the rulemaking

proceeding did not address the anti-retaliation

provisions of the DFA is false and misleading. The

Commission expressly requested — and received —

comments pertaining to “the interpretation or

implementation of the anti-retaliation provisions of

Section 21(h).”

Third, basic rules of statutory construction

require that 15 U.S.C. § 78u-6(h)(1)(A)(@ii)

(“Subdivision (iii)”) protect internal reporting.

Protecting internal reports harmonizes the DFA with

the securities laws as a whole. Subdivision (iii)’s

definition of protected disclosures was inserted into

the statutory provisions well after the more general

definition of “whistleblower” in the DFA at 15 U.S.C.

§ 78u-6(a)(6), and is thus controlling.

Fourth, Subdivision (iii) of 15 U.S.C. § 78u-

6(h)(1)(A) not only protects internal disclosures, but

also disclosures to the DOJ and Congress. If this

Court strikes down protections for internal

disclosures, it will also strike down protections for

employees who report to Congress and the DOJ. To

contend that Congress would write itself and the DOJ

out of the definition of protected disclosures

exemplifies the fallacy of Digital’s argument.

Finally, the legislative history and

administrative and judicial precedents under

whistleblower laws analogous to the DFA

demonstrate that Congress intended disclosures to

compliance departments and managers to be fully

protected. Interpreting the DFA as not covering

internal disclosures “would nullify not only the

protection against discharge but also the

fundamental purpose of the Act,” reducing the Act to

“a hollow promise of protection.” Phillips v. Interior

Bd. of Mine Operations Appeals, 500 F.2d 772 (D.C.

Cir. 1971).

The judgment below should thus be affirmed.

ARGUMENT

I. THE SEC ESTABLISHED THAT THE

“MANNER” IN WHICH A

“WHISTLEBLOWER” CAN PROVIDE

INFORMATION TO THE COMMISSION

INCLUDES INTERNAL REPORTS.

Congress explicitly granted the U.S. Securities

and Exchange Commission (“SEC” or “Commission”)

the authority to define the “manner” in which an

individual could provide the SEC with information

and qualify as a “whistleblower” under the DFA.‘

Thus, the entire predicate of Digital Realty Trust,

Inc.’s (“Digital”) petition, that the SEC “invent[ed] a

different definition” of whistleblower, is

unsupportable. The SEC was in fact required by

Congress to define the “manner” in which information

was provided to it.

For good reason,® the SEC decided that one such

manner would be for a whistleblower to report

4 The DFA states that the “term ‘whistleblower’ means any

idvidudal who provides . . . information relating to a violation . .

_ to the Commission, in a manner establishshed, by rule or

regulation, by the Commission.” 15 U.S.C. § 78u-6(a)(6)

(emphasis added).

’ The real risks facing internal whistleblowers were

documented in a 2015 comprehensive survey. THE POLITICS OF

INTERNAL AUDITING, INSTITUTE OF INTERNAL AUDITORS

RESEARCH FOUNDATION (2015). The Institute of Internal

Auditors is a 180,000-member organization representing

auditors. The study found that 49% of Chief Auditing Executives

were told “not to perform audit work in high-risk areas,” while

another 55% were “directed to omit important findings” from

their audit reports. Jd. Many auditors reported retaliation for

potential securities law violations internally to their

company, who in turn would be under numerous

regulatory duties to investigate and self-report to the

Commission any actual violations.* As stated by the

Chair of the SEC at the time, “[plerhaps most

significantly, the final rules would give credit to a

whistleblower whose company passes the information

along to the Commission, even if the whistleblower

does not.” Mary L. Shapiro, SEC Chairman, Opening

Statement at SEC Open Meeting: Item 2—

Whistleblower Program (May ~ 25, 2011),

https://www.sec.gov/news/speech/2011/spch052511m!1

s-item2.htm.

refusing to alter their reports. The co-author of the report, Larry

Rittenberg, Professor Emeritus at the Wisconsin School of

Business, described the findings by stating “[i]t was shocking to

see the extent to which practicing internal auditors have been

subjected to political pressure ... This wasn’t simply a few

horror stories from shaken internal auditors in bad job

situations. We found pervasive efforts to undermine

transparency and effective corporate governance.” Peter Kerwin,

Internal Auditors Face Intense Political Pressures to Influence

Findings, UNIV. OF WISCONSIN (March 16, 2015),

https://bus. wisc.edu/knowledge-expertise/newsroom/press-

releases/2015/03/16/internal-auditors-face-intense-political-

pressures-to-influence-findings.

6 Digital is required to file, under oath, quarterly and annual

reports to the SEC which must attest to the accuracy and

competence of the company’s internal controls and be certified

by its Chief Executive Officer and Chief Financial Officer. See,

e.g., Digital Realty Trust, Inc., Quarterly Report (Form 10-Q)

(Aug. 9, 2017). Digital must certify that, based their “interna!

control” procedures, they have identified “[a]ll significant

deficiencies and material weaknesses” with these controls, and

can attest to the fact that they have “disclosed” “[a]ny fraud,

whether or not material, that involves management.” /d. at Ex.

31.1.

Despite Digital’s contention otherwise,

whistleblowers who report internally are currently

covered by the plain language of the whistleblower

definition of the DFA. 15 U.S.C. § 78u-6(a)(6). The

Commission’s decision to include internal reporting

as one of the “manners” in which an individual could

qualify as a “whistleblower” is controlling on this

Court.

A. The Regulated Community Urged the

SEC to Incorporate Internal Disclosures

into the Core Definition of the “Manner”

Employees Could Qualify as a

“Whistleblower.”

During the SEC’s rulemaking proceeding, one of

the most debated issues concerned the Commission’s

authority under Section 78u-6(a)(6) to define the

“manner” for which an individual must provide

information to the Commission to qualify as a

“whistleblower.” See Comments on Proposed Rules for

Implementing the Whistleblower Provisions of Section

21F of the Securities Exchange Act of 1934,

(“Comments”) File No. S7-33-10, U.S. Sec. & EXcu.

COMM’N (last modified Apr. 27, 2015),

https://www.sec.gov/comments/s7-33-

10/s73310.shtml.

During these proceedings, not one corporation or

corporate trade association urged the Commission to

narrowly define “whistleblower” as covering only

persons who report violations to the Commission.

Rather, the regulated community, en masse, strongly

urged the SEC to define the “manner” an employee

could qualify as a “whistleblower” to include persons

who reported violations internally. Numerous

corporations even argued that internal reporting

should be a mandatory requirement that employees

would have to meet in order to become a qualified

“whistleblower.”

For example, the law firm of Covington &

Burling, on behalf of a wide-range of companies,

including Apache Corp., Cardinal Health, Goodyear

Tire, Hewlett-Packard, Merck, Microsoft, Procter &

Gamble, and United Technologies, recognized the

“extraordinarily broad rulemaking authority”

granted the Commission to esté ssh the “manner” in

which an individual could becoie a “whistleblower”

and urged the SEC to interpret this section to support

“effective internal reporting procedures.” Comments,

COVINGTON & BURLING LLP 2-3 (Feb. 18, 2011),

https://www.sec.gov/comments/s7-33-10/s73310-

283.pdf.

The Association of Corporate Counsel (“ACC”), a

26,000-member organization representing “attorneys

employed in the legal departments of corporations

and private-sector organizations worldwide,” stated it

“strongly support[s] protections for individuals who

identify and report misconduct” internally.

Comments, ASSOC. OF CORP. COUNSEL 1 n.1, 3 (Dec.

15, 2010), https://www.sec.gov/comments/s7-33-

10/s73310-126.pdf. While recognizing “the valid

concern that some employees will fear retaliation for

blowing the whistle,” the ACC stated its belief that

“It]he solution to that problem is not, however, a

scheme to undermine important and effective

internal compliance and reporting systems; rather,

employees who fear retaliation may rely on the

anti-retaliation provision contemporaneously

enacted by Congress.” Jd. at 5 (emphasis added).

Indeed, the ACC urged the SEC to adopt a definition

of “whistleblower” as an employee who reports

“internally first.” Jd. at 5n.10.7

Dozens of other comments submitted by the

regulated community strongly encouraged the SEC to

incorporate internal whistleblowing into the

definition of a “whistleblower.” See Comments, U.S.

SEC. & EXCH. COMM’N

https://www.sec.gov/comments/s7-33-

10/s73310.shtml. §

? Consistent with the concerns raised by the ACC, the

Commission was provided a “White Paper” presented at the

RAND Center for Corporate Ethics and Governance Conference

Proceedings on March i, 2009, documenting the problems with

creating effective corporate compliance programs post-SOX and

explicitly calling upon “Congress and regulators” to “do more to

support effective” compliance programs. Donna Boehme, From

Enron to Madoff: Why Many Curporaic Compliance and Ethics

Programs Are Positioned for Failure, RAND C (NTER FOR

CORPORATE ETHICS AND GOVERNANCE 30 (March 5, 2009),

https://www .rand.org/pubs/conf_proceedings/C F258.readonline.

html. Among the major deficiencies identified within the

existing compliance programa was a lack of independence for

Chief Ethics and Compliance Officers and the need for

“vigorous enivrcement of non-retaliation policies.” Id. at 31.

The central issue raised in this White Paper and presented to

key policy makers just prior to the enactment of the DFA was

“how can companies put integrity back in business?” Id.

8 See, c.g., Comments, INST. OF INTERNAL AUDITORS 1, 3 (Dec.

17, 2010) (urging the Commission to “take every cfflort to

encourage, support, and strengthen effective processes within

Amici Chamber of Commerce was among the

most aggressive commentators recognizing the

“ample discretion” the Commission has to define the

“manner” for which whistleblowers can “submit their

allegations” to include internal reporting. Comments,

CHAMBER OF COMMERCE 3, 3 n.6 (Dec. 17, 2010),

https://www.sec.gov/comments/s7-33-10//s73310-

194.pdf. It recognized that internal reporting could

companies” to investigate fraud and to “protect and champion

internal whistleblowers.”); Comments, BUS. ROUNDTABLE INST.

3, 8 (Dec. 17, 2010) (asking the Commission to ensure that the

manners established by the Commission for employees to report

violations “encourage employees and _ other potential

whistleblowers to first utilize the well-developed internal

compliance elements of leading companies” and establish rules

that would permit reporting procedures that “both afford

whistleblower protection and allow for appropriate .. . internal

investigation activities.”); Comments, DELOITTE & TOUCHE LLP

8 (Dec. 17, 2010) (recognizing that the “SEC has broad authority

to promulgate a final] rule that requires timely internal reporting

. The SEC may, for example, !imit the definition of

‘whistleblower’ to one who first uses internal whistleblower

procedures,” and has the authority to predicate the amount of a

reward on “prompt internal reporting”); Comments, ALCOA, ET

AL. 11, 15 (Dec. 17, 2010) (companies including Alcoa, Citigroup,

Intel, Johnson & Johnson, Pfizer and Prudential, acknowledging

the “longstanding Commission guidance” promoting internal

reporting and asking the Commission to require whistleblowers

to use internal procedures and “promote internal reporting in its

final rules”); Comments, D.C. BAR SECTION ON CORP., FIN., AND

Sec. LAW 4 (Dec. 17, 2010), (proposing that the Commission

expand the anti-retaliation protections to apply to internal

programs”); Comments, GEN. ELEC. Co., ET AL. 1 (Dec. 17, 2010)

(filing by General Electric, Google, Honeywell, JPMorgan Chase,

Microsoft, and Northrop Grumman asking the Commission to

require whistleblower’s eligible for a reward to “report any

potential violation internally.”).

preserve “scarce government enforcement dollars.”

Id. The Chamber also informed the Commission that

their proposal “would not affect the scope of the

statutory retaliation protections afforded

whistleblowers under the [SEC} rule,” citing directly

to § 78u-6(h)(1).” Id. at 14.

Outside of the rulemaking proceedings, the

Chamber also sponsored a so-called “Blue Ribbon”

Pane] that accurately recognized that the “greatest”

“risk” to internal compliance was a work environment

“where employees are unwilling or unable to make

management aware of their knowledge of or

suspicions that wrongdoing is taking place.” REPORT

OF ECI’s BLUE RIBBON PANEL, ETHICS & COMPLIANCE

CERTIFICATION INSTITUTE 27-28 (2016). In its brief

before this Court the Chamber could not explain how

excluding internal reports under the DFA would

promote the recommendations of its own “Blue

Ribbon” panel.

The fact that the overwhelming majority of the

regulated community requested incorporating

internal disclosures into the core definition of a

“whistleblower” is not surprising. Much of Congress’

statutory framework and the SEC’s regulatory

scheme are predicated on internal controls and

internal reporting. Incentivizing internal reporting

creates the factual record that the Commission relies

upon to ensure compliance with the law.® Securities

¥ Digital's own Quartely Report makes note of this: “The

company maintains disclosure controls and procedures that are

designed to ensure that information required to be disclosed in

its reports filed under the Securities Exchange Act of 1934, as

Whistleblower Incentives and Protection, 76 Fed.

Reg. 34,300, 34,322-23 (June 13, 2011); 17 C.F.R. §§

240.13a-15(e), (f); 17 C.F.R. §§ 240.15d-15(e), (A).

Mr. Steven J. Pearlman, who at the time was a

partner in the firm of Seyfarth Shaw LLP and is now

counsel of Record for amicus curiae Chamber of

Commerce of the United States of America, delivered

a “White Paper” before the Rand Center for Corporate

Ethics and Governance which discussed these

dynamics. Specifically, he explained how the

provisions in the pre-DFA securities laws “require[d]

employers to establish robust internal compliance

mechanisms, such as anonymous _ reporting

procedures [15 U.S.C. § 78j-1], independent audit

committees |id.], effective internal financial controls

{15 U.S.C. § 7262], and comprehensive codes of ethics

and conduct [15 U.S.C. § 7264].” STEVEN J. PEARLMAN,

NEW WHISTLEBLOWER POLICIES AND INCENTIVES: A

PARADIGM SHIFT FROM “OVERSIGHT” TO “INSIGHT”

(2011), reprinted in Michael D. Greenberg, For Whom

the Whistle Blows: Advancing Corporate Compliance

and Integrity Efforts in the Era of Dedd-Frank, RAND

CORPORATION CONFERENCE PROCEEDINGS 33, 36

(2011),

https://www.rand.org/pubs/conf_proceedings/CF290.r

eadonline. html.

amended, is recorded, processed, summarized and reported

within the time periods specified in the U.S. Securities and

Exchange Commissions rules and forms, and that such

information is accumulated and communicated to its

management, including its chief executive officer and chief

financial officer, as appropriate, to allow timely decisions

regarding required disclosure.” See, e.g., Digital Realty Trust,

Inc., Quarterly Report (Form 10-Q) at 77 (Aug. 9, 2017).

Mr. Pearlman’s expert White Paper explained

that the “policy behind” this statutory “framework

was to incentivize employees to report fraud

internally so that companies could draw on their

internal compliance machinery to promptly

investigate the fraud in a manner calculated to

protect investors...” Jd.

In accordance with federal regulatory law,

Digital implemented a _ work-rule requiring all

employees to report any potential frauds internally to

their supervisor or the legal department. CODE OF

BUSINESS CONDUCT AND ETHICS, DIGITAL REALTY

TRUST, INC. 6 (Feb. 17, 2016),

http://s21.q4cdn.com/814695872/files/doc_downloads/

highlights/2016/Code-of-Business-Conduct-and-

Ethics-(Revised-Feb.-17-2016).pdf.

Based in large part on the emphatic response

from industry to promote internal reporting, the

Commission exercised its discretion to incorporate

internal disclosures into the _ definition of

“whistleblower” in its final rules.'°

“The NWC supported effective and independent compliance

programs (and the SEC's final rule), but opposed the proposals

that would make internal reporting mandatory. The basis for

this opposition included the obstruction of justice provision that

was passed by Conyress as part of the Sarbanes-Oxley Act.

codified at 18 U.S.C. § 1513(c). That provision makes it illega) to

deny any person anything of value because that person made a

truthful disclosure to a federal law enforcement agency

concerning a potential crime. This provision of law establishes

an overriding public policy that prevents any guvernment

agency, corporation, or individual from ubstructing the right of a

B. The SEC Exercised Its Discretion Under

15 U.S.C. § 78u-6(a)(6) to Incorporate

Internal Disclosures into the Core

Definition of the “Manner” Employees

Could Qualify as a “Whistleblower.”

Congress required the SEC to determine the

“manner” in which an individual could qualify as a

“whistleblower” under 15 U.S.C. § 78u-6(a)(6). After

the most comprehensive rulemaking proceeding ever

conducted by an _ executive agency on any

whistleblower law, the SEC incorporated internal

whistleblowers into the core definition of a

“whistleblower” under the DFA. In response to

numerous comments received, the Commission

carefully weighed the benefits of internal reporting,

and established rules that encouraged such conduct,

while explicitly prohibiting retaliation against those

who made such reports. The reasons given by the

Commission for protecting and encouraging internal

reporting were to:

« “Allow companies to take appropriate

actions to remedy improper conduct at

an early stage”;

e “Allow companies to self-report”;

whistleblower to disclose criminal violations to federal law

enforcement. In the final rules, the Commission struck the

appropriate balance, setting forth rules that encouraged or

incentivized internal reporting, yet recoginzing the right of

whistleblowers to report directly to the government, if they so

choose. Securities Whistleblower Incentives and Protections, 76

Fed. Reg. at 34,324-27.

e “Avoid undermining internal

compliance programs’;

e “Allow the Commission to preserve its

scarce resources by relying upon

corporate compliance programs’;

e “Promote a _ working relationship

between the Commission and

companies’; and

e “Increase the quality of tips.”

76 Fed. Reg. at 34,324.

The specifics of the final rules make clear that

internal reporting is incorporated into the core

definition of “whistleblower.” For example, entire

classes of employees cannot become “whistleblowers”

until they permit internal compliance programs a

minimum of 120 days to investigate problems and

self-report any verified concerns to the SEC. 17 C.F.R.

§ 240.21F-4(b)(iv)(4)(v)(C). If no anti-retaliation

protection existed within those 120 days, internal

reporting would present an enormous risk, therefore

obfuscating and defeating the purpose of the

provision. Additionally, under the rules, all

employees are strongly encouraged to _ utilize

compliance programs, and are provided a monetary

incentive for participating in these programs. 17

C.F.R. §§ 240.21F-6(a)(2)Gi), 240.21 F-6(a)(4).

Conversely, employees who undermine — such

programs are sanctioned, and can have any award

substantially reduced. Jd. § 240.21F-6(b)(3).

The SEC, through its Congressionally-delegated

authority, created a “manner” unique among

whistleblower laws, such as the False Claims Act. It

is the only whistleblower law for which an employee

could be credited as a whistleblower by internally

submitting information to their company who would

then self-report to the SEC. See Mary L. Shapiro, SEC

Chairman, Opening Statement at SEC Open Meeting:

Item 2— Whistleblower Program (May 25, 2011),

https://www.sec.gov/news/speech/201 1/spch052511m!

s-item2.htm.

The Commission’s anti-retaliation provisions

covering internal reporting are simply ancillary to

these substantive provisions, and the numerous

provisions of securities law thet require internal

controls and corporate self-reporting. It would have

been inconsistent with the legislative purposes

behind the DFA, and an abuse of discretion, for the

SEC to create rules mandating internal reporting for

numerous employees, and providing a monetary

inventive for internal reporting for all employees,

without ensuring that persons who report internally

are not subjected to retaliation.

Digital refers to the “express definition” of the

term “whistleblower” and then claiins that the SEC

could not “invent a different definition.” Pet’r’s Br. at

12. Digital did not participate in the rulemaking

proceeding which determined the definition of

“whistleblower.” However, the _ definition of

“whistleblower” was not set in stone by Congress. 15

U.S.C. § 78u-6(a)(6). Congress required the

Commission to “establish” the “manner” in which an

individual becomes a “whistleblower,” i.e. the manner

in which an individual would “provide” information to

the Commission. Jd. Digital, by failing to participate

in the rulemaking, apparently also did not review the

hundreds of comments submitted by the regulated

community, demanding, in the strongest terms, that

internal reporting be incorporated by the Commission

into the core definition of how individuals would

“provide” “information” to the Commission and

become a “whistleblower.”

Digital cannot explain how the SEC can, on the

one hand, require extensive internal controls, and on

the other hand, how the SEC lacks the authority to

ensure that these controls are not undermined by

retaliation. Likewise, Digital cannot explain why

their CEO and CFO must certify, on a quarterly basis,

that their internal controls are working, and that they

have internally identified all frauds, yet still maintain

that the SEC is somehow without authority to ensure

that the employees who provide critical information

as part of the internal control requirements cannot be

subjected to harassment, intimidation, and

retaliation simply for reporting these potential

frauds. If adopted by this Court, Digital’s argument

would upend the process by which the SEC

establishes the manner for making reports, and

upend the regulatory structure that requires strong

internal controls to protect investors and the

American public from fraud.

Il. DIGITAL’S ARGUMENT THAT THE SEC

GAVE “NO HINT THAT IT WAS

CONSIDERING EXPANDING THE

DEFINITION OF ‘WHISTLEBLOWER™” IS

FALSE AND MISLEADING.

Digital argues that the SEC failed to provide

“fair notice” when its final rules created an

“unheralded” and “drastic” change to the definition of

“whistleblower.” Pet’r’s Br. at 42. Digital claims the

Commission gave “no hint” that it was “considering

expanding the definition of ‘whistleblower,” and

requested no comments on the issue. Jd. Not only is

this argument not supported on the record, it is also

false and misleading.

The relationship between internal and external

whistleblowing was the most contentious issue

addressed in the SEC rulemaking. See Proposed

Rules for Implementing the Whistleblower Provisions

of Section 21F of the Securities Exchange Act of 1934,

75 Fed. Reg. 70,488 (Nov. 17, 2010); 76 Fed. Reg.

34,300; Mary L. Shapiro, SEC Chairman, Opening

Statement at SEC Open Meeting: Item 2—

Whistleblower Program (May 25, 2011),

https://www.sec.gov/news/speech/201 1/spch052511ml

s-item2.htm (“[N]o issue received more focus during

this process than the role of internal compliance

programs.”). Obviously, if the SEC was planning to

encourage or require employees to make internal

disclosures prior to being considered a

“whistleblower” under the reward-related definition

of that term, they would also have to ensure that

whistleblowers who made interna! reports were

protected from retaliation.

Shortly before the Commission published its

proposed whistleblower rules, it held an open meeting

during which SEC Commissioner Kathleen L. Casey

explained that the Commission was seeking

comments on “what ... the scope of the anti-

retaliation provisions [should be].” Kathleen L.

Casey, SEC Commissioner, Proposed Rules for

Implementing the Whistleblower Provisions of

Section 21F of the Securities Exchange Act of 1934

(Nov. 3, 2010),

https://www.sec.gov/news/speech/20 10/spch110310klI

c-whistleblowers.htm (emphasis added).

Fourteen days after the public meeting, the

SEC published its rulemaking proposal, and formally

asked for comments on the anti-retaliation provisions

of the DFA:

(T)}he Commission is seeking comment on

whether it should promulgate rules

regarding the interpretation or

implementation of the anti-retaliation

provisions of Section 21(h) of the

Exchange Act. If so, what specific rules

should the Commission consider

promulgating? . . . Should the application

of the anti-retaliation provisions be

limited or broadened in any other ways?

75 Fed. Reg. at 70,511.

As discussed above, supra Section I, the

comments received regarding the anti-retaliation

provisions strongly supported protection for internal

whistleblowers. For example, the D..C. Bar Section on

Corporate, Financial and Securities law urged the

Commission to explicitly protect internal

whistleblowers from retaliation.'11 The National

Whistleblower Center (““NWC”) submitted numerous

separate comments supporting the protection of

internal whistleblowers.'2 In addition to written

comments, the NWC met individually with every

'! Comments, D.C. BAR SECTION ON CORP., FIN., AND SEC.

LAW 4 (Dec. 17, 2010) (suggesting the Commission expand “the

anti-retaliation protections to whistleblowers who report to

persons with legal, compliance, audit, supervisory or

governance responsibilities” for the company as “Section

21F(h)(1)(A)(iii) allows the Commission to so expand the anti-

retaliation protections to apply to internal programs”).

12 National Whistleblower Center comments on the proposed

rules are available, by date, at:

https://www.sec.gov/comments/s7-33-10/s73310.shtm] and

https://www.sec.gov/comments/df-title-

ix/whistleblower/whistleblower.shtml. See IMPACT OF QUI TAM

LAWS ON INTERNAL COMPLIANCE: A REPORT TO THE SECURITIES

EXCHANGE COMMISSION, NWC (Dec. 17, 2010); Comments and

Legal Guidance Concerning Proposed Rule 240.21F-8 for

Implementing Whistleblower Provisions of the Dodd-Frank Act,

NWC (@an. 25, 2011); SEC Rule Making Proceeding -

Whistleblower Regulations, NWC (Feb. 10, 2011); Comments and

Legal Guidance Concerning Proposed Rule 240.21F-8 for

Implementing Whistleblower Provisions of the Dodd-Frank Act,

NWC (Mar. 7, 2011); Provision-by-Provision Analysis of

Proposed Rule 240.21F-8 for Implementing Whistleblower

Provisions of the Dodd-Frank Act, NWC (Mar. 17, 2011);

Proposed SEC Rule 240.21F-8 and CFTC Rule RIN number

3038-AD04, for Implementing Whistleblower Provisions of the

Dodd-Frank Act, NWC (Mar. 17, 2011).

Commissioner and urged them to explicitly protect

internal whistleblowers as part of their final rules.'®

No comments were submitted suggesting that the

SEC did not have the authority to protect internal

whistleblowers from retaliation, or suggesting that

Subdivision (iii) did not protect internal disclosures as

held by the Second and Ninth Circuits.

The Commission specifically requested, and

received, comments regarding the scope of anti-

retaliation provisions in the DFA. Digital’s contention

18 Memos detailing these National Whistleblower Center

meetings are available, by date, at:

https://www.sec.gov/com ments/s7-33-10/s73310.shtm] and

https://www.sec.gov/com ments/df-title-

ix/whistleblower/whistleblower.shtml. See Memorandum from

the Division of Enforcement regarding a January 25, 20/1,

meeting with representative of the National Whisticblowers

Center. U.S. S&c. & Excu. CoMw'N (Jan. 31, 2011); Memorandum

from the Office of Commissioner Aguilar regarding a February

10, 2011, mecting with representatives of the National

Whistleblowers Center, U.S. Skc. & EXCH. COMM'N (Feb, 10,

2011); Memorandum from the Office of Commissioner Paredes

regarding a February 1], 2011, meeting with representatives of

the National Whistleblowers Center, U.S. S@c, & Excl. COMM'N

(Feb. 11. 2011): Memorandum from the Office of Commissioner

Casey regarding a March 11, 2011, meeting with representatives

uf the National Whistleblower Center, U.S. Sec. & Excu. ComM'N

(Mar. 11, 2011); Memorandum from the Office of Cummissiuner

Walter regarding a March 16, 2011, meeting with representatives

of the National Whistlebiowers Center, U.S. Skc. & Excu.

COMM'N (Mar. 16, 2011); Memorandum from the Division of

Enforcement regarding a March 28, 2011, meeting with

represeniatives of the National Whistlebluwers Center,

O’Donaghue and O'Donoghue LLP. and the National

Coordinating Committee of Multi-Emplover Plans, U.S. Sec. &

EXCH. COMM'N (Mar. 31, 2011).

that it was provided “no hint” of those intentions is

frivolous.

Ill. BASIC RULES OF STATUTORY

CONSTRUCTION REQUIRE THAT THIS

COURT INTERPRET SUBDIVISION (III)

AS PROTECTING INTERNAL

DISCLOSURES AND DISCLOSURES TO

FEDERAL LAW ENFORCEMENT.

Subdivision (iii) unquestionably mandates

internal whistleblowers be protected under the DFA.

Toward the end of the legislative process, after the

House and Senate passed their own versions of the

DFA’s whistleblower provisions, Congress added a

new substantive definition of what constituted a

protected disclosure at Subdivision (iii) of 15 U.S.C. §

78u-6(h)(1)(A). Berman v. Neo@Ogilvy LLC, 801 F.3d

145, 152-53 (2d Cir. 2015) (setting forth the legislative

history of Subdivision (iii)). Prior to the addition of

Subdivision (iii), activity protected under the DFA

covered disclosures only “to the Commission” or for

“testifying in, or assisting in” Commission

proceedings. 15 U.S.C. §§ 78u-6(h)(1)(A)Q), (ii).

Under the blackletter law of statutory

construction, Subdivision (iii) must be interpreted as

incorporating SOX anti-retaliation provisions into the

DFA’s core definition of a protected disclosure and

permit employees fired for making an internal

disclosure of securities fraud to file a DFA retaliation

case.

A. The Securities and Exchange Act Must

be Interpreted as a Whole.

That a statute must be interpreted “as a whole”

is well-established. Heydenfeldt v. Daney Gold, 93

U.S. 634, 639 (1876); Food & Drug Admin. v. Brown

& Williamson Tobacco Corp., 529 U.S. 120, 132-33

(2000). This settled rule of statutory construction was

set out in New Lamp Chimney v. Ansonia Brass &

Copper Co. when this Court stated that a particular

provision in a statute “does not stand alone,’ and thus

“must be read and applied in connection with” the

entire regulatory scheme “so that each and every

section of the act may .. . have their due and conjoint

effect without repugnancy or inconsistency.” 91 U.S.

656, 662 (1875); see also Davis v. Mich. Dep't of Treas.,

489 U.S. 803, 809 (1989).

The DFA’s whistleblower protection provisions

“do not stand alone” and must be read as “part of” the

“general system of statutory regulation” governing

publicly traded corporations. See New Lamp Chimney

Co., 91 U.S. at 662. The anti-retaliation provisions

therefore “must be read and applied in connection

with every other” securities law section relating to

whistleblower protection — including Subdivision

(iii)’s invocation of SOX protections. /d.

The Securities Exchange Act mandates

internal corporate controls, and predicates most of the

SEC’s enforcement actions on the assumption that

the numerous internal disclosures stemming from

these requirements are truthful. See STEVEN J.

PEARLMAN, NEW WHISTLEBLOWER POLICIES AND

INCENTIVES: A PARADIGM SHIFT FROM “OVERSIGHT” TO

“INSIGHT” (2011), reprinted in Michael D. Greenberg,

For Whom the Whistle Blows: Advancing Corporate

Compliance and Integrity Efforts in the Era of Dodd-

Frank, RAND CORPORATION CONFERENCE

PROCEEDINGS 33, 36 (2011),

https://www.rand.org/pubs/conf_proceedings/CF290.r

eadonline.html. This includes “anonymous reporting

procedures [15 U.S.C. § 78j-1], independent audit

committees [id.], effective internal financial controls

[15 U.S.C. § 7262], and comprehensive codes of ethics

and conduct [15 U.S.C. § 7264].” Jd.

In accordance with these laws, Digital is

required to make numerous reports to the SEC

attesting to the accuracy of its internal reporting and

the integrity of its internal controls. Digital has in fact

regularly filed such sworn declarations on an annual

and quarterly basis. See, e.g., Digital Realty Trust,

Inc., Annual Report (Form 10-K) at 77 (Mar. 1, 2017).

Securities laws are predicated both on the right

of employees to report fraud to the SEC, and an

obligation that publicly traded companies have

extensive and _ truthful internal reporting

requirements that encourage employees to report

frauds internally. Based on these internal reporting

requirements the top corporate executives are

required to personally sign declarations, every

quarter, to the SEC, identifying any frauds identified

through these internal controls.

Because the DFA retaliation provisions must be

read in the context of the Securities Exchange Act as

a whole, it would be contrary to the letter of the

statute, and inconsistent with its reason and spirit, to

enact an anti-retaliation law that ignored those parts

of federal securities laws that encouraged or required

internal reporting. Subdivision (iii) was enacted to

ensure that the mandatory internal control rules were

harmonized with the DFA’s whistleblower provisions.

See Lynch v. Overholser, 369 U.S. 705, 711 (1962)

(finding against a statutory interpretation which was

“out of harmony with the awareness that Congress

has otherwise shown for safeguarding” certain

activities).

B. Harmonious and Consistent Reading of

the DFA’s Provisions Requires the

Protection of Internal Whistleblowers.

Once a statute is viewed as whole, it is often

possible to interpret two provisions as in conflict. This

Court has previously resolved such issues by

attempting to find a harmonious reading which would

allow the statue, and the provisions contained within,

to be read “consistent[ly] rather than conflicting[ly]”

as “a symmetrical and coherent regulatory scheme.”

Brown & Williamson, 529 U.S. at 1300-01; Helvering

v. Credit All. Corp., 316 U.S. 107, 112 (1942).

In F.T.C. v. Mandel Bros., Inc., this Court

examined ambiguity between a single statute’s

definitional provision and another provision in the

same statute. F.7.C. v. Mandel Bros., Inc., 359 U.S.

385 (1959). It found that a statute’s scope is not

necessarily limited to the definitional provision’s text

if the statute contains a different provision which

expands the definitional text in a manner that more

closely aligns with the purpose of the statute as a

whole. Id. at 388-90.

The dispute between the definition of

“whistleblower” in 15 U.S.C. § 78u-6(a)(6) and its

definition in Subdivision (iii) is similarly resolved.

Even assuming the whistleblower definition

contained in the DFA is unambiguous, reading the

DFA and U.S. securities laws as a_ whole

demonstrates that excluding internal whistleblowers

from protection contradicts Congress’ intent to

expand anti-retaliation laws for whistleblowers. The

DFA was created to expand the SEC’s enforcement

powers and increase whistleblower protections, and

did so in part by building upon SOX’s existing

protections.'¢ The interaction between the

whistleblower definition and Subdivision (iii) is

synonymous with the interaction of provisions in

Mandel, and only by harmoniously reading these

provisions together to include internal whistleblowers

in the DFA’s protections can Congress’ intended

expansion be effectuated. Jd. at 390-91.+5

14 See S. Rep. No. 111-176 at 38 (2010) (“The SEC would have

more help in identifying securities law violations through a new,

robust whistleblower program designed to motivate people who

know of securities law violations to tell the SEC. It also

expands existing whistleblower law.” (emphasis added)).

‘5S Digital argues that somehow balkanizing the SOX and

DFA anti-retaliation provisions serves the public interest.

However, the entire purpo ¢ of the DFA was to strengthen

existing law, not carve out exceptions inconsistent with the

overall regulatory scheme. During the Congressional hearings,

it was well established that existing anti-retaliaiton laws were

not sufficient and as demonstrated in the Boehme White Paper

Additionally, this Court has reasoned that when

two allegedly incompatible provisions could be given

full effect without creating an absurd, conflicting, or

impractical result, such an interpretation should

apply. Helvering, 316 U.S. at 112. In Helvering, the

Court rejected a proposed statutory reading which

would have allowed one provision to completely

overshadow the plain language of another. /d.;

Kawasaki Kisen Kaisha Ltd. v. Regal-Beloit Corp.,

561 U.S. 89, 108 (2010) (holding that when the text

permits, statutory provisions should be construed as

consistent, because subverting one provision to

another undermines both the provision’s purpose and

the underlying legislative purpose).

Analogously, Petitioner’s proposed reading of the

DFA’s whistleblower definition would overpower

Subdivision (iii) in contravention of the Helvering

rationale and the DFA’s objective of expanding

whistleblower protections. Just as in Helvering, this

Court should reject the interpretation which would

allow one provision to override the plain language and

meaning of another when each can be given effect

without repugnancy. Helvering, 316 U.S. at 112;

Kawasaki, 561 U.S. at 108.

to RAND, compliance programs needed further bolstering than

had been afforded under SOX. See Boehme, RAND CENTER FOR

CORPORATE ETHICS AND GOVERNANCE (March 5, 2009),

https://www.rand.org/pubs/conf_proceedings/C F258.readonline.

html.

C. The Specificity of Subdivision (iii) and

the Timing of Its Addition to the DFA

Mandates that Internal Whistleblowers

be Protected.

If the Court finds the two relevant provisions to

be in conflict, it should look to longstanding principles

of statutory interpretation and find the DFA provides

protection for internal whistleblowers because

Subdivision (iii) is both the more specific provision

and was the last manifestation of legislative intent.

This Court has affirmed that matters

specifically provided for in one provision of a statute

shall not be subverted to another provision of the

same statute which contains related, but more

generally-applicable language. Bloate v. United

States, 559 U.S. 196, 207-208 (2010); see Edmond uv.

United States, 520 U.S. 651, 657-58 (1997) (“where a

specific provision conflicts with a general one, the

specific governs”). This principle is especially true

where a certain reading of the general provision

would violate the “cardinal principle of statutory

construction” and render’ another provision

“superfluous, void, or insignificant.” TRW Inc. v.

Andrew, 534 U.S. 19, 31 (2001) (internal quotations

omitted); Duncan v. Walker, 553 U.S. 167, 174 (2001).

In Bloate, this Court recognized that although

one provision of the Speedy Trial Act of 1974 was

broad enough to encompass time granted to prepare

pretrial motions before a criminal trial, it should not

preclude application of another provision which more

specifically addressed the defendant’s leave for pre-

trial preparations. Bloate, 559 U.S. at 207-09. This

Court recognized that reading the general provision

as modifying the specific provision would render the

specific provision “virtually superfluous,” despite its

unambiguous language. /d. at 208-09.

Like the interaction between the statutory

provisions in Bloate, the DFA’s_ whistleblower

definition’s general language should not be

interpreted as a scope-limiting provision that would

“modify the contents” of the specific text in

Subdivision (iii). Bloate, 559 U.S. at 209. Contrary to

a general, non-exhaustive definition, Subdivision (iii)

was specifically crafted as a mechanism for extending

the DFA’s anti-retaliation protections to internal

whistleblowers from the statutory foundation of SOX.

The proposed interpretation provided by Petitioners

would render Subdivision (iii) superfluous in violation

of the cardinal principle of statutory construction

repeatedly espoused '+yv this Court. TRW Inc.. 534 U.S.

at 31; Duncan, 553 U.S. at 174. Therefore, the Court

should acknowledge that a “specific provision... .

controls [provisions] of more general application,” and

give full effect to Subdivision (iii). Bloate, 559 U.S. at

207.

Finally, as Subdivision (iii) was added in the

final drafting process of the DFA — after the

whistleblower definition provision — it trumps any

inconsistency with previously inserted provisions.

Russello v. United States, 464 U.S. 16, 23-24 (1983).

As in Russello, where this Court determined that

removing a limiting provision contained in an earlier

draft of a bill should lead to the presumption that

‘such limitation was not intended by Congress, the

late addition of the protection for internal

whistleblowing found in Subdivision (iii)

unmistakably shows Congress’ intent that such

whistleblowers are protected, and that the definition

of “whistleblower” is not constrained by an earlier

inserted provision. Jd.

IV. DIGITAL’S ARGUMENT WOULD

UNDERMINE THE CENTRAL LAW

ENFORCEMENT COMPONENTS OF THE

REGULATORY SCHEME FAR BEYOND

INTERNAL REPORTING.

Subdivision (iii) of 15 U.S.C. § 78u-6(h)(1)(A)

protects not just the internal reporting, but also

covers disclosures to the Department of Justice

(“DOJ”) and Congress. It is inconceivable that

Congress would draft a major Wall Street reform law

and exclude reports to law enforcement and Congress

from its protections.

The Sarbanes-Oxley Act (“SOX”) — relied on in

Subdivision (iii) - includes provisions that protect

whistleblowers at publicly traded companies from

retaliation where that whistleblower reported to “(A)

a Federal regulatory or law enforcement agency; (B)

any Member of Congress or any committee of

Congress; or (C) a person with supervisory authority

over the employee.” 18 U.S.C. § 1514A(a)(1). Digital

has focused on the third category of disclosures

protected under Subdivision (iii), but for are obvious

reasons, failed to explain to this Court that upholding

Digital’s interpretation of the law would also result in

stripping protections for disclosures to Congress and

the DOJ.

To suggest that Congress would preclude the

DOJ and Congress from the definition of protected

disclosures in the DFA is preposterous. Congress held

extensive hearings pertaining to the events that led

to enactment of the DFA. It is only logical that

Congress would want a law that protects its own

witnesses from retaliation. The same is true of the

DOJ, which has jurisdiction to investigate and

prosecute securities fraud.

Further, the DFA defines “related action” to

include “any judicial or administrative action brought

by” entities such as the Attorney General. 15 U.S.C.

§§ 78u-6(a)(5), (h)(2)(D)G)(D-(1V). Based on this

definition of a “related action” — as someone who

brings information to another agency or government

body — the DFA cannot be read as requiring

whistleblowers to bring information to only the SEC

in order to be protected from retaliation. Accordingly,

the SEC’s adoption of a whistleblower definition tied

to Subdivision (iii) is utterly logical.

Vv. FOR NEARLY 50 YEARS, CONGRESS,

COURTS AND ADMINISTRATIVE

AGENCIES HAVE HELD THAT INTERNAL

EMPLOYEE DISCLOSURES ARE

PROTECTED UNDER ANTI-

RETALIATION LAWS SIMILAR TO THE

DFA.

Although the specific legislative history behind

Subdivision (iii) is scant, background for which

Congress has legislated on similar whistleblower laws

for the past 50 years is robust and clear. Since 1969,

Congress has enacted numerous anti-

retaliation/whistleblower protection laws, usually as

part of a larger reform law. These laws sometimes

explicitly protect employees who report internally to

their managers, while other laws are similar in

nature to 15 U.S.C. § 78u-6(h), and only directly

mention reports to government officials or regulators

with responsibility over the reform law in question.

However, in numerous cases in which

Congressional intent to protect internal disclosures

was called into question, Congress clarified its intent

to ensure internal disclosures were protected.

Likewise, the administrative agencies with mandates

to enforce these laws have uniformly interpreted

them as protecting internal disclosures. These

precedents help clarify Congress’ actions in crafting

the DFA.

The issue currently before this Court first arose

in the context of mine safety. In 1969, Congress

enacted the Federal Mine Health and Safety Act

(“MHSA”), which, like the DFA, created a broad

federal regulatory scheme policing an industry. One

part of that law protected whistleblowers, using

language similar to DFA Sections 78u-6(h)(i) and

(ii)..6 The first court to review a case under MHSA

was asked to determine whether an internal report to

a supervisor was, as a matter of law, protected

activity — even if no report was made to the Mine

Health and Safety Commission. Writing for a 2-1

majority of the U.S. Court of Appeals for the D.C.

Circuit, Judge Malcom Wilkey firmly established that

internal reports — like those articulated in Section

78u-6(h)(1)(A)(iii) — were simply the “first step” in a

report to the government, and were thus as equally

protected as a direct report to the government.

Phillips v. Interior Bd. of Mine Operations Appeals,

500 F.2d 772, 781 (D.C. Cir. 1974).

Judge Wilkey’s reasoning, which was explicitly

ratified by Congress in 1977, is equally applicable to

the DFA. First, Judge Wilkey understood that miners

were in “the best position to observe the compliance

or noncompliance with safety laws” and that “sporadic

16 In relevant part, the 1969 MHSA stated: “No person shall

discharge or in any other way discriminate against or cause to

be discharged or discriminated against any miner or any

authorized representative of miners by reason of the fact that

such miner or representative (A) has notified the Secretary or

his authorized representative of any alleged violation or danger,

(B) bas filed, instituted, or caused to be filed or instituted any

proceeding under this Act, or (C) has testified or is about to

testify in any proceeding resulting from the administration or

enforcement of the provisions of this Act.” 91 P.L. 173, 83 Stat.

742 §§ 110(b)(1), (2).

federal inspections can never be frequent or thorough

enough to insure compliance.” Jd. at 778.

Second, Judge Wilkey understood that “miners

who insist on health and safety rules being followed,

even at the cost of slowing down production, are not

likely to be popular with mine foreman or mine top

management.” Jd. Thus, “only if miners are given a

realistically effective channel of communication re

health and safety, and protection from reprisal after

making complaints, can [MHSA] be effectively

enforced.” Id.

Finally, the employee’s “notification to the

foreman of possible dangers is an_ essential

preliminary stage in both the notification to the

Secretary (A) and the institution of proceedings (B),

and consequently brings the protection of [MHSA]

into play.” Id. at 779.

Because of the controversy surrounding the

protection of internal disclosures highlighted in

Phillips (which had a strong dissent), Congress

explicitly ratified the holding in Phillips and other

cases that protected internal disclosures. See S. Rep.

No. 95-181 (1977) , 3436 (“The committee intends to

insure the continuing vitality of various judicial

interpretations of section 110 of [MHSA] which are

consistent with the broad protections in the bill’s

provisions; See, e.g., Phillips v. IBMA, 500 F.2d

772.”).

Thereafter, other courts relied upon this

Congressional ratification of MHSA’s whistleblower

provision to endorse similar interpretations of other

laws to protect interna) disclosures, including the

Energy Reorganization Act. See Kansas Gas & Elec.

Co. v. Brock, 780 F.2d 1505, 1512 (10th Cir. 1985)

(“Phillips . . . unequivocally stand[s] for the

proposition that internal activities are to be protected

under the original version of [MHSA]. Thus, it is clear

that Congress was advocating the protection of

internal action.”).

The court in Phillips also considered the

company’s internal operating procedures for further

support that internal disclosures needed broad

protection, looking to the “procedure implementing

the statute” that was “actually in effect” at the mine

in which the employee worked. Phillips, 500 F.2d at

779. Those procedures mandated that miners report

safety concerns to their supervisors as a first step in

the investigatory process. As noted by Judge Wilkey,

“the existence of this procedure in itself was a

practical recognition that the bare words of [MHSA],

unless implemented by some procedure at the mine to

bridge the gap between ‘the Secretary or his

representative’ ... and the coal miner himself ...,

would be completely ineffective in achieving mine

safety.” Id. at 779, 781.

Similar procedures existed within Digital

Realty. These procedures, codified in Digital’s Code of

Business Conduct and Ethics, were distributed to

every employee, and published online in the web page

dedicated for investor information:

“All employees have a duty to report

any known or suspected violation of this

Code and any violation of laws, rules,

regulations or policies that apply to the

Company.

xx k

If you know of or suspect a violation

of this Code, immediately report the

conduct to your supervisor. Your

supervisor will contact the General

Counsel, who will work with you and

your supervisor to investigate your

concern. .. You may also report [to the

company by mail]... You may also...

report by telephone via the Company’s

confidential hotline.

Your supervisor, the General

Counsel and the Company will protect

your confidentiality to the extent

possible, consistent with law and the

Company’s need to investigate your

concern. The Company strictly prohibits

retaliation against an employee who, in

good faith, seeks help or reports known

or suspected violations.”

CODE OF BUSINESS CONDUCT AND ETHICS, DIGITAL

REALTY TRUST, INC. 6 (Feb. 17, 2016),

http://s21.q4cdn.com/814695872/files/doc_downloads/

highlights/2016/Code-of-Business-Conduct-and-

Ethics-(Revised-Feb.-17-2016).pdf.

After Congress ratified Judge Wilkey’s decision

in Phillips, every court and administrative agency

aware of this ratification applied the Phillips holding

to a wide range of whistleblower laws that, like the

1969 MHSA, failed to explicitly include internal

disclosures as a first step in making a report to the

government. See, e.g., Kansas Gas, 780 F.2d at 1512-

13 (citing to ratification to hold that internal

reporting is protected under the Energy

Reorganization Act); Bechtel Constr. Co. v. Sec’y of

Labor, 50 F.3d 926, 932 (11th Cir. 1995) (citing to

Phillips and Congressional ratification of that

holding); Passaic Valley Sewerage Comm'rs v. U.S.

Dep't of Labor, 992 F.2d 474, 479 (3d Cir. 1993)

(internal reporting protected, citing to Phillips);

Mackowiak v. Univ. Nuclear Sys., Inc., 735 F.2d 1159,

1162-63 (9th Cir. 1984) (citing to Phillips); Willy v.

Admin. Review Bd., 423 F.3d 483, 489 n.11 (5th Cir.

2005) (internal whistleblowing protected under Clean

Air Act based on Congressional ratification theory).

More recently, under the Whistleblower

Protection Enhancement Act of 2012 (“WEPA”),

Congress explicitly “clarified” the meaning of

whistleblower disclosures under the Whistleblower

Protection Act of 1989. In the Senate Report

discussing the WEPA, Congress explained that it was

rejecting the “narrow definition” of a _ protected

disclosure, and was “clarify[ing]” its original intent to

protect internal disclosures. The section of the report

which clarified Congress’ original intent to protect

internal disclosures was entitled “Clarification of

what constitutes a protected disclosure.” S. Rep. No.

112-155 at 4 (2012) (emphasis in original). Thereafter,

the Merit System Protection Board, the agency with

responsibility for interpreting the WEPA, found that

the explicit incorporation of internal disclosures into

the definition of a protected disclosure was a

clarifying amendment. Day v. Dep’t of Homeland Sec.,

2013 MSPB 49 (June 26, 2013).

The U.S. Secretary of Labor, who has

jurisdiction to administer numerous whistleblower

laws that do not explicitly cover internal reports, has

carefully reviewed the issue of internal versus

external reporting for nearly 40 years. Under every

administration, beginning with President Ronald

Regan, the Secretary has consistently held that

internal reports are fully protected under statutes

comparable to Section 78u-6(h). See, e.g., Wells v.

Kansas Gas & Elec. Co., No. 83-ERA-12 (June 14,

1984) (D&O of Sec’y Donovan) (internal protected

under Energy Reorganization Act); Poulos v.

Ambassador Fuel Oil Co., Inc., No. 86-CAA-1 (Apr. 27,

1987) (D&O of Sec’y Brock) (internal protected under

Clean Air Act); Flor v. U.S. Dept. of Energy, No. 93-

TSC-1 (Dec. 9, 1994) (D&O of Sec’y Reich) (internal

protected under Toxic Substances Control Act);

Nathaniel v. Westinghouse, No. 91-SWD-2 (Feb. 1,

1995) (D&O of Sec’y Reich) (internal protected under

the Solid Waste Disposal Act and the Comprehensive

Environmental Response, Compensation, and

Liability Act). In Willy v. Coastal Corp., Secretary of

Labor Brock justified his holding that internal reports

were protected under the Clean Air Act whistleblower

provision by explaining that Congress “expressly”

“clarify[ied] its “approval” of Phillips. Willy v. Coastal

Corp., No. 85-CAA-1 (June 1, 1994) (D&O of SOL).

As explained in Phillips, the failure to protect

the first steps in reporting a violation — i.e. internal

complaints — “would nullify not only the protection

against discharge, but also the fundamental purpose

of the Act,” reducing it to “a hollow promise of

protection.” Phillips, 500 F.2d at 781.

VI. DIGITAL’S POSTION WILL UNDERMINE

THE SUCESSFUL SEC WHISTLEBLOWER

PROGRAM.

The DFA whistleblower program has had a

“transformative impact” on the Commission’s

enforcement program,!? “both in terms of the

detection of illegal conduct and moving

investigations forward quicker and through the use of

fewer resources.” The SEC’s Whistleblower Program:

The Successful Early Years, SIXTEENTH ANNUAL

TAXPAYERS AGAINST FRAUD CONFERENCE (Sept. 14,

2016), https://www.sec.gov/news/speech/ceresney-sec-

17 2016 ANNUAL REPORT TO CONGRESS ON THE DODD-FRANK

WHISTLEBLOWER PROGRAM, U.S. SEC. & EXCH. COMM’N at 1 (Nov.

15, 2016), https://www.sec.gov/files/owb-annual-report-2016.pdf

(“The transformative effect of the SEC’s whistleblower program

has had on the agency’s enforcement program is further

demonstrated by the hundreds of millions of dollars that have

been returned to investors. . . [I]t has also bolstered the agency’s

enforcement efforts and aided harmed investors.”).

whistleblower-program.html (comments of SEC

Division of Enforcement Director Andrew Ceresney).

As observed by Commission Chair Mary Jo

White, because of the success of the SEC

whistleblower program, “[g]one are the days when

corporate wrongdoing can be pushed into the dark

corners of an organization.” Mary Jo White, SEC

Chair, The SEC as the Whistleblower’s Advocate,

SEC. LAW INST., NORTHWESTERN UNIV. SCH. OF LAW

(Apr. 30, 2015),

https://www.sec.gov/news/speech/chair-white-

remarks-at-garrett-institute.html. Employees can

now “view internal reporting as an effective means to

address potential wrongdoing without fear of reprisal

or retaliation.” Jd. The SEC’s __ effective

implementation of the DFA was a “game changer.” Jd.

This Court should not undo the careful balance

struck by the SEC, which harmonized the internal

control requirements set forth in federal securities

law, with the whistleblower award and retaliation

provisions in the DFA. The law is working; investors

are protected; companies are investing in their

compliance programs. Whistleblowers need to be

encouraged, whether they report violations directly to

the SEC, or work through the internal control

procedures established under U.S. securities law.

CONCLUSION

For the foregoing reasons, the judgment of the

U.S. Court of Appeals for the Ninth Circuit should be

affirmed.

Respectfully submitted,

Stephen M. Kohn

Counsel of Record

Michael D. Kohn

David K. Colapinto

Kohn, Kohn and Colapinto, LLP

3233 P Street, N.W.

Washington, D.C. 20007

(202) 342-6980

sk@kkc.com

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.