UNITED STATES

SECURITIES AND EXCHANGE COMMISSION 100 F Street, N.E.

Washington, D.C. 20549-9040

Office of the Stephen G. Yoder General Counsel 202-551-4532

May 21, 2015 LETTER PURSUANT TO FED. R. APP. P. 28(J) VIA CM/ECF Catherine O’Hagan Wolfe Clerk of Court U.S. Court of Appeals for the Second Circuit Thurgood Marshall United States Courthouse 40 Foley Square New York, NY 10007

Re: Berman v. Neo@Ogilvy LLC, No. 14-4626 Dear Ms. Wolfe: This letter is to advise the Court of the attached decision in Somers v. Digital Realty Trust, Inc., No. C-14-5180, 2015 WL 2354807 (N.D. Cal. May 15, 2015), which addresses the scope of Section 21F(h)(1) of the Securities Exchange Act of 1934 (“Exchange Act”). Consistent with the position of plaintiff-appellant Daniel Berman and amicus curiae U.S. Securities Exchange Commission, the Somers court concluded that Section 21F(h)(1) is ambiguous and that Commission’s rule interpreting the provision is entitled to Chevron deference.

The Somers decision is important for several reasons. First, the Somers court found statutory tension so as to invoke Chevron step-two because, among other things, many of the whistleblowing activities protected by Section 21F(h)(1)(A)(iii) would not be covered if an individual had to first report to the Commission. 2015 WL 2354807, at *6-*12. Consistent with the argument the Commission has advanced in its amicus brief, the Somers court focused expressly on the auditor reporting regime and the attorney reporting regime under the Sarbanes-Oxley Act of 2002, both of which generally require internal reporting before an individual may make a report to the Commission. 2015 WL 2354807, at *9-*10. Second, the Somers court rejected the argument that the defendant-

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Catherine O’Hagan Wolfe Clerk of Court May 21, 2015 Page 2 of 2 appellee advances here that the interpretation adopted by the Commission’s rule would render Section 806 of the Sarbanes-Oxley Act a dead letter. 2015 WL 2354807, at *11. The Somers court explained that there remain important reasons why an individual might prefer to utilize Section 806 of the Sarbanes-Oxley Act—specifically, the Department of Labor can investigate and prosecute a Section 806 claim, and Section 806 affords emotional damages (unlike Section 21F(h)(1) of the Exchange Act). 2015 WL 2354807, at *11. Finally, as the Commission argues in its amicus brief, the Somers court concluded that the narrow interpretation adopted by the U.S. Court of Appeals for the Fifth Circuit in Asadi v. G.E. Energy (U.S.A.), L.L.C., 720 F.3d 620 (5th Cir. 2013), would risk creating a two-tiered whistleblower reporting regime that might effectively discourage persons from reporting internally first. 2015 WL 2354807, at *12.

Respectfully submitted, s/ Stephen G. Yoder Stephen G. Yoder Senior Counsel

Enclosure

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2015 WL 2354807Only the Westlaw citation

is currently available.United States District Court,

N.D. California.

Paul Somers, Plaintiff,v.

Digital Realty Trust,Inc., et al., Defendants.

No. C-14-5180 EMC| Signed 05/15/2015

ORDER DENYING (1)DEFENDANT'S MOTION TODISMISS; (2) PLAINTIFF'SMOTION TO DISQUALIFY

DEFENSE COUNSEL

(Docket Nos. 20, 31)

EDWARD M. CHEN, District Judge

I. INTRODUCTION

*1 Plaintiff Paul Somers brought thislawsuit against his former employer,Digital Realty Trust, and Ellen Jacobs,a Senior Vice President at DigitalRealty Trust (collectively, Digital Realty,or Defendants). See Docket No. 1(Complaint); see also Docket No. 38(Ellen Jacobs Decl.) at ¶ 2. WhileSomers' complaint pleads five separatecauses of action, including claims fordiscrimination on the basis of his

sexual orientation and defamation, DigitalRealty's current motion to dismisschallenges only one cause of action:that Digital Realty violated the anti-retaliation provisions of the Dodd–Frank Wall Street Reform and ConsumerProtection Act of 2010 (Dodd–Frank,or DFA) where it allegedly terminatedSomers' employment in retaliation forhis making internal reports of securitieslaw violations. See Complaint at ¶¶44–51; Docket No. 20 (Motion toDismiss). Specifically, Digital Realtyargues that Somers' Dodd–Frank claimfails as a matter of law because Somersdoesn't qualify as a “whistleblower”

under the statute. 1 For the reasonsexplained below, Digital Realty appearsmistaken. The Securities and ExchangeCommission (SEC, or Commission) hasformally issued a rule that clarifies thescope and meaning of the whistleblowerprotections of Dodd–Frank, and extendsthe protection of those provisions toindividuals like Somers who reportsuspected violations not to the SEC,but to internal management. Because theCourt finds that the SEC's rule is entitledto Chevron deference, Digital Realty'smotion to dismiss is DENIED.

1 Digital Realty also argued that Somers could

not maintain a cause of action for whistleblower

retaliation under the Sarbanes–Oxley Act

directly because Somers did not exhaust his

administrative remedies. Somers states in his

opposition brief that he did not plead or intend to

bring a Sarbanes–Oxley whistleblower claim, see

Docket No. 21 at 1, and so Defendants' motion to

dismiss any such claim is currently unripe.

Also pending before the Court isSomers' motion to disqualify Defendants'

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counsel, Seyfarth Shaw, for a purportedconflict of interest. Because SeyfarthShaw's prior representation of Somers– for a total of 2.1 hours of billabletime – is not “substantially related”to its current successive representationof the Defendants, disqualification isnot appropriate. This motion is alsoDENIED.

II. BACKGROUND

A. Background Relevant to DigitalRealty's Motion to DismissSomers was hired by Digital Realtyin July 2010. Complaint at ¶ 10.According to Plaintiff, Digital Realty“operates as a real estate investmenttrust” that “owns, acquires, develops andmanages technology-related real estate.”Complaint at ¶ 13.

Somers worked as a Vice President ofPortfolio Management at Digital Realty,first in Europe and then in Singapore.Id. at ¶¶ 10, 15. In Singapore, Somersreported to Senior Vice President KrisKumar, who headed up the AsianPacific region for Digital Realty. Id.at ¶ 15. “Shortly before Plaintiff'swrongful termination by DefendantDigital, Plaintiff made complaints tosenior management regarding actions byKumar which eliminated internal controlsover certain corporate actions in violationof Sarbanes Oxley.” Id. at ¶ 22; seealso id. at ¶ 46 (“Plaintiff complainedto Defendant Digital's officers, directors,and/or managing agents that certain of

Kumar's activities violated requirementsfor internal controls established by [ ]the Sarbanes–Oxley Act of 2002.”).According to Somers, Kumar hadcommitted a number of acts of “seriousmisconduct,” including “hiding [ ] sevenmillion dollars in cost overruns on adevelopment in Hong Kong.”Id. at ¶ 27.

*2 Somers was fired by Digital Realtyon April 9, 2014. According to Somers,he was fired (at least in part) in retaliationfor internally reporting Kumar's allegedviolation(s) of Sarbanes–Oxley or otherapplicable laws. See Complaint at ¶ 50. Itis undisputed that Somers never reportedKumar's alleged violations to the SECor any other outside enforcement agency.See Docket No. 21 (Plaintiff's Oppositionto Motion to Dismiss) at 2.

B. Background Relevant to Somers'Motion to DisqualifyBefore going to work for Digital Realty,Plaintiff was represented by a partner at

Seyfarth Shaw, Eugene Jacobs. 2 DocketNo. 34 (Somers Decl.) at ¶ 2. Accordingto Mr. Jacobs, he gave a presentation onApril 20, 2010, to executive clients of“Kensington International, an executiverecruiting and placement firm.” DocketNo. 39 (Eugene Jacobs Decl.) at ¶3. At the April 20 presentation, Mr.Jacobs “prepared a standard discussionoutline called ‘Executive EmploymentAgreement Issues for Consideration’ thatcontains a general overview of issues anddiscussion points for things to considerwhen negotiating executive employment

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agreements.” Id. at ¶ 4. A copy of theoutline indicates that the topics discussedat the April 20 meeting included how tonegotiate a new executive's title with thehiring company, executive benefits, andtermination provisions. Id. at Ex. A.

2 Mr. Jacobs is not related to Defendant Ellen

Jacobs. Ellen Jacobs Decl. at ¶ 10.

Sometime after the presentation, Mr.Jacobs avers that he was contactedby Susan Duda, an executive coachat Kensington International, asking foran additional copy of the discussionhandout, “presumably so she could shareit with [her client] Mr. Somers.” EugeneJacobs Decl. at ¶ 7. Jacobs sent Dudathe discussion handout. Id. Two dayslater, Ms. Duda “sent Mr. Somers'resume to me and told me that he maycontact me about legal representation.Later that day, Mr. Somers engagedme to provide legal advice regardinghis potential employment agreement withNewcastle Limited, a Chicago-based realestate advisor and investor.” Id. at ¶ 8.According to Mr. Jacobs' time recordsfrom April 22, 2010, he spent .8 hours on a“[t]elephone conference [with] P. Somersregarding employment matter issues andstrategies.” Somers Decl., Ex. A (Billfrom Seyfarth Shaw to Somers).

On April 26, Mr. Jacobs contendsthat Somers “sent me documents thatNewcastle had sent him about the positionfor which he interviewed, including anoffer letter template, job description, andsummary of employee benefits availableto Newcastle employees.” Eugene Jacobs

Decl. at ¶ 10. Mr. Jacobs' time recordsindicate that he conducted a 1.3 hour-long telephone conference with Somersthat day to “review Newcastle offer letterand related documents; identify issues.”Somers Decl., Ex. A. These two telephoneconferences, lasting 2.1 hours in total, arethe only legal work Jacobs (and SeyfarthShaw) performed for Somers. See SomersDecl. at ¶ 5.

According to Jacobs, he next heardfrom Somers on April 30, when Somers“advised me that his negotiations withNewcastle had stalled.” Eugene JacobsDecl. at ¶ 11. Somers then “emailed[Jacobs] out of the blue” in June 2010to tell him “that he had already accepteda position with Digital Realty Trust.”Eugene Jacobs Decl. at ¶ 12. Accordingto Jacobs, he “had no input whatsoeverin any negotiations, if there were any,or other terms and conditions relatingto Mr. Somers' employment with DigitalRealty.” Jacobs further declares that:

*3 Mr. Somers neversought any legal adviceof any nature from mein connection with thejob at Digital Realty,nor did I provideany legal counselto him regardingDigital Realty inany regard whatsoever.In addition, Mr.Somers did notshare any confidentialinformation with meabout his job at

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Digital Realty. Myrepresentation of Mr.Somers was limitedto advising him onissues relating to thenegotiation of anemployment agreementwith Newcastle.

Id. at ¶ 14. Somers confirms that he“did not ask Mr. Jacobs to negotiate [his]agreement with Digital [Realty].” SomersDecl. at ¶ 2. However, Somers claimsthat he used “ideas” from Mr. Jacobs'presentation outline “in other subsequentmatters,” and that he “obtained my jobwith Digital Realty Trust, Inc. whilestill in communication with Mr. Jacobs.”Id. at ¶¶ 2–3. Mr. Somers also claimsthat he “discussed the Digital Realtyopportunity briefly with Mr. Jacobs andinformed Mr. Jacobs about some aspectsof my approach to obtaining the job withDigital.” Id. at ¶ 4. ///

III. DISCUSSION

A. Defendant's Motion to DismissSomers' Dodd–Frank WhistleblowerClaimDigital Realty moves to dismiss Somers'second cause of action, which allegesthat Somers was wrongfully terminatedfrom his employment in retaliation forreporting his supervisor's purported lawviolations to Digital Realty management.According to Digital Realty, Somers doesnot qualify as a “whistleblower” underthe Dodd–Frank Act because he did not

report any alleged law violations to theSEC. Digital Realty also argues in itsreply brief that Somers has not adequatelypleaded that his internal reports wereeither “required or protected” underthe Sarbanes–Oxley Act. See15 U.S.C.§ 78u–6(h)(1)(A)(iii). For the reasonsexplained below, Digital Realty's firstargument is unavailing and its secondargument was waived where DigitalRealty failed to raise it in its originalmotion.

1. Passage of Dodd–Frank andRelevant Statutory ProvisionsDodd–Frank established a newwhistleblower program in 2010 by addingSection 21F to the Securities ExchangeAct of 1934 (Exchange Act). See Section21F, codified at 15 U.S.C. § 78u–6. Section 21F “encourages individualsto provide information relating to aviolation of U.S. securities laws” throughtwo “related provisions that: (1) requirethe SEC to pay significant monetaryawards to individuals who provideinformation to the SEC which leadsto a successful enforcement action; and(2) create a private cause of actionfor certain individuals against employerswho retaliate against them for takingspecified protected actions.” Asadi v. GEEnergy (USA), L.L.C., 720 F.3d 620,623 (5th Cir.2013). Courts frequentlyrefer to the award provision as the“whistleblower-incentive program” andthe provision protecting whistleblowersfrom retaliation as the “whistleblower-protection program.” See id. at 623 n.3;see also Connolly v. Remkes, No. 5:14–

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cv–01344–LHK, 2014 WL 5473144, at*4 (N.D.Cal. Oct. 28, 2014). Onlythe provisions of the whistleblower-protection program are at issue here.

The DFA defines a “whistleblower”as “any individual who provides, or2 or more individuals acting jointlywho provide, information relating to aviolation of the securities laws to theCommission, in a manner established, byrule or regulation, by the Commission.”15 U.S.C. § 78u–6(a)(6) (emphasisadded). Dodd–Frank forbids employersfrom retaliating against whistleblowers,and sets forth specific prohibitions.Specifically the DFA provides that“[n]o employer may discharge, demote,suspend, threaten, harass, directly orindirectly, or in any other mannerdiscriminate against, a whistleblower inthe terms and conditions of employmentbecause of any lawful act done by thewhistleblower –

*4 (i) in providing information to theCommission in accordance with thissection;

(ii) in initiating, testifying in, orassisting in any investigation orjudicial or administrative action of theCommission based upon or related tosuch information; or

(iii) in making disclosures that arerequired or protected under theSarbanes–Oxley Act of 2002 (15U.S.C. 7201 et seq.), this chapter [i.e.,the Exchange Act], including section78j–1(m) of this title, section 1513(e)

of Title 18, and any other law, rule, orregulation subject to the jurisdiction ofthe Commission.”

15 U.S.C. § 78u–6(h)(1)(A)(i)–(iii). TheDFA provides that an employee maybring suit against any employer whoviolates the whistleblower protectionscodified in Section 21F. See15 U.S.C.§ 78u–6(h)(1)(B). Dodd–Frank furtherprovides that “[t]he Commission shallhave the authority to issue such rulesand regulations as may be necessary orappropriate to implement the provisionsof this section [i.e., the whistleblowerprogram] consistent with the purposes ofthis section.” 15 U.S.C. § 78u–6(j).

An aggrieved whistleblower under theDFA may also have a claim underthe Sarbanes–Oxley Act, which createda civil right of action to protectemployees from retaliation for reportinglaw violations. See18 U.S.C. § 1514A.However, the remedies and proceduresassociated with a Sarbanes–Oxley Actanti-retaliation claim are considerablydifferent from those provided underthe whistleblower-protection provision ofthe DFA. Three main differences bearhighlighting. First, the DFA providesfor recovery of two times back pay,whereas Sarbanes–Oxley provides forrecovery of back pay without amultiplier, along with other economicdamages such as emotional distressdamages. Compare15 U.S.C. § 78u–6(h)(1)(C)with18 U.S.C. § 1514A(c)(2); seealso Halliburton, Inc. v. Admin. ReviewBd., 771 F.3d 254, 266 (5th Cir.2014) (percuriam) (holding that Sarbanes–Oxley

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“affords noneconomic compensatorydamages, including emotional distressand reputational harm”). Second,Sarbanes–Oxley act claimants must firstfile an administrative complaint withthe Department of Labor, whereas DFAplaintiffs are not required to exhaust anyadministrative remedies. See18 U.S.C. §1514A(b)(1). And third, DFA claimaintshave between six and ten years to file suitfrom the time a violation occurs, whereasSarbanes–Oxley plaintiffs must file suitbetween 180 days after the violationoccurs and 180 days after the employeebecomes aware of the violation. See15U.S.C. § 78u–6(h)(1)(B)(iii); 18 U.S.C. §1514A(b)(2)(D).

2. The SEC Issues Rule 21F–2(b)(1) Interpreting the Whistleblower–Protection ProvisionsThe SEC issued final rules interpretingand implementing Section 21F of theDFA in June 2011. See SecuritiesWhistleblower Incentives and Protections(Adopting Release), 78 Fed.Reg. 34300,34301–34304 (June 13, 2011). Inparticular, the SEC issued Exchange ActRule 21F–2(b)(1), which states that for thepurpose of the whistleblower-protectionprogram, “you are a whistleblower if ...[y]ou provide information in a mannerdescribed in ...15 U.S.C. 78u–6(h)(1)(A).” See17 C.F.R. § 240.21F–2(b)(1).

*5 As noted above, the DFA –and specifically, section 78u–6(h)(1)(A) – “sets forth three types ofprotected whistleblower activity, the lastof which [i.e., subsection (iii) ] includes

‘making disclosures that are requiredor protected under the Sarbanes–OxleyAct.’ ”Connolly, 2014 WL 5473144, at*4 (quoting 15 U.S.C. § 78u–6(h)(1)(A)(iii)). “In turn, the Sarbanes–OxleyAct affords whistleblower protection toan employee who gives ‘information orassistance’ to ‘a person with supervisoryauthority over the employee’ ”id.(quoting18 U.S.C. § 1514A(a)(1)(C)), or toany other “such person working forthe employer who has the authorityto investigate, discover, or terminatemisconduct.” 18 U.S.C. § 1514A(a)(1)(C). That is, Sarbanes–Oxley protectsemployee disclosures made internally tocertain supervisory personnel irrespectiveof whether the employee separatelyreports the information to the SEC.Thus, by providing that an individualis a “whistleblower if” they “provideinformation in a manner described in”subsection (iii) of section 78u–6(h)(1)(A), Rule 21F–2(b)(1) stipulates that thewhistleblowing-protection program of theDFA does not require an employee toreport violations directly to the SEC.See Connolly, 2014 WL 5473144, at*4; Asadi, 720 F.3d at 629 (refusingto defer to SEC interpretation of theDFA, but explaining that Rule21F–2(b)(1) defines whistleblower “broadly byproviding that an individual qualifies asa whistleblower even though he neverreports any information to the SEC, solong as he has undertaken the protectedactivity listed in 15 U.S.C. § 78u–6(h)(1)(A)”); see also Adopting Release at 34304(explaining that under the SEC rule,“the statutory anti-retaliation protections

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apply to three different categories ofwhistleblowers, and the third categoryincludes individuals who report to personsor governmental authorities other than theCommission”).

3. SEC Rule 21F–2(b)(1) is Entitled toDeferenceThe determinative issue for resolvingDigital Realty's motion to dismiss iswhether SEC Rule 21F–2(b)(1) is entitledto Chevron deference. See Chevron,U.S.A. v. Natural Res. Def. Council, Inc.,467 U.S. 837 (1984) (holding that a courtshould defer to a responsible executiveagency's permissible construction of astatute where the statutory languageis ambiguous or otherwise does notspeak precisely to the question at issue).If it is entitled to deference, thenSomers has pleaded a legally sufficientretaliation claim under Dodd–Frank. Forinstance, Somers alleges that he wasfired in retaliation for “complain[ing]to Defendant Digital's officers, directors,and/or managing agents that certain ofKumar's activities violated requirementsfor internal controls established by theSarbanes–Oxley Act of 2002.” Complaintat ¶ 46. If, on the other hand, theCommission rule is not entitled todeference, then a fair reading of the DFArequires that Somers must have reported aviolation to the SEC in order to have causeof action under the DFA: Since Somersadmits that he did not make a report to theSEC before he was fired, he could not bea whistleblower under the DFA.

a. Applicability and LegalStandards of Chevron Framework

“[A]dministrative implementation of aparticular statutory provision qualifiesfor Chevron deference when it appearsthat Congress delegated authority to theagency generally to make rules carryingthe force of law, and that the agencyinterpretation claiming deference waspromulgated in the exercise of thatauthority.” United States v. Mead Corp.,533 U.S. 218, 226–27 (2001); see alsoNavarro v. Encino Motorcars, LLC, 780F.3d 1267, 1272 (9th Cir.2015) (holdingthat Chevron 's reasonableness standardapplies to a “regulation duly promulgatedafter a notice-and-comment period”).Rule 21F–2(b)(1) was promulgatedpursuant to an express provision of theDFA and after a notice-and commentperiod, and thus qualifies for Chevrondeference. See15 U.S.C. § 78u–6(j); seealso Adopting Release at 34300.

However, consideration of whether anagency interpretation is permissible underChevron requires an examination of twosteps. First, as a threshold matter, theCourt must consider “whether Congresshas directly spoken to the precise questionat issue.” Chevron, 467 U.S. at 842. “Ifso, then the inquiry is over, and wemust give effect to the ‘unambiguouslyexpress intent of Congress.’ ”Navarro,780 F.3d at 1271 (quoting Chevron,467 U.S. at 842). But if the statuteis silent or ambiguous with respectto the specific issue, the Court must

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proceed to the second step and determinewhether the agency's interpretation is“based on a permissible construction ofthe statute.” Chevron, 467 U.S. at 843. Ifthe agency's interpretation of the statute“is a reasonable one, this court may notsubstitute its own construction of thestatutory provision,” even if the Courtbelieves the provision would best be readdifferently. Navarro, 780 F.3d at 1273(citation omitted).

b. Chevron Step One:The Statute is Ambiguous

*6 Under the first step of Chevron,the Court must determine whether thewhistleblower-protection provisions ofthe DFA are ambiguous. “The plainnessor ambiguity of statutory languageis determined by reference to thelanguage itself, the specific context inwhich that language is used, and thebroader context of the statute as awhole.” Robinson v. Shell Oil Co.,519 U.S. 337, 341 (1997). Generalcannons of statutory interpretation areparticularly helpful in resolving closecases regarding statutory meaning. See,e.g.,United States v. Monsanto, 491 U.S.600, 611 (1989). Here, two interpretativecannons are particularly germane to thisCourt's inquiry, the surplusage cannon,which holds that a “court should giveeffect, if possible, to every word andevery provision Congress used” in thestatute, Asadi, 720 F.3d at 622, andthe harmonious-reading cannon, whichprovides that a court should “interpret

[a] statute as a symmetrical and coherentregulatory scheme, and fit, if possible, allparts into an harmonious whole.” FDAv. Brown & Williamson Tobacco Corp.,529 U.S. 120, 133 (2000); see generallyAntonin Scalia & Bryan A. Garner,Reading Law: The Interpretation of LegalTexts 174–183 (1st ed.2012) (discussingthe surplusage and harmonious-readingcannons).

As Judge Koh recently explained, the

“large majority” 3 of courts to considerDodd–Frank's whistleblower-protectionprovisions have found ambiguity “inthe interplay between §§ 78u–6(a)(6)and 78u–6(h)(1)(A)(iii)” and thus have“deferr[ed] to the SEC's interpretation

of Dodd–Frank.” 4 Connolly, 2014 WL5473144, at *5. To appreciate thetension between these provisions, it ishelpful to first examine the overallstructure of Section 21F. As quotedin full above, Section 21F(h)(1)(A)prohibits an employer from retaliatingagainst a whistleblower for: (i) “providinginformation to the Commission inaccordance with this section”; (ii)“initiating, testifying in, or assisting in”an investigation or enforcement actionof the Commission “based upon orrelated to such information”; or (iii)“in making disclosures that are requiredor protected under” Sarbanes–Oxley, theExchange Act (including section 78j–1 of the Exchange Act), 18 U.S.C. §1513(e), or “any other law, rule, orregulation subject to the jurisdiction ofthe Commission.” 15 U.S.C. § 78u–6(h)(1)(A)(i)–(iii). As the statutory language

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makes plain, subsections (i) and (ii)protect individuals from retaliation forwhistleblowing to the Commission aboutsecurities law violations. Subsection (iii),however, appears to afford much broaderprotection, prohibiting retaliatory actsagainst employees who make much morevaried types of disclosures, such asdisclosures of securities law violations toan immediate supervisor at their companyor to the board of directors. See18U.S.C. § 1514A(a)(1)(C) (protectingcertain disclosures regarding securitieslaws violations made to individuals with“supervisory authority” over the reportingemployee); 15 U.S.C. § 78j–1 (requiringcertain disclosures regarding illegal actsto be made to the board of directors).

3 The following is a non-exhaustive list of

other district courts that have concluded

that the DFA is ambiguous and determined

that the SEC interpretation of the DFA

whistleblower-protection provisions is entitled

to deference. Murray v. UBS Securities,

LLC, No. 12 Civ. 5914(JMF), 2013 WL

2190084 (S.D.N.Y. May 21, 2013); Yang v.

Navigators Group, Inc., 18 F.Supp.3d 519,

534 (S.D.N.Y.2014); Khazin v. TD Ameritrade

Holding Corp., No. 13–4149(SDW)(MCA),

2014 WL 940703, at *3–6 (D.N.J. Mar. 11,

2014); Ellington v. Giacoumakis, 977 F.Supp.2d

42, 44 (D.Mass.2013); Genberg v. Porter,

935 F.Supp.2d 1094, 1106–07 (D.Colo.2013);

Nollner v. Southern Baptist Convention, Inc.,

852 F.Supp.2d 986, 995 (M.D.Tenn.2012); see

also Egan v. TradingScreen, Inc., No. 10

Civ. 8202(LBS), 2011 WL 1672066, at *4–

6 (S.D.N.Y. May 4, 2011) (finding Section

21F of the DFA ambiguous and concluding,

without reference to the then-uncodified SEC

rule discussed here, that “whistleblower” under

the DFA encompasses those who make required

internal reports under Sarbanes–Oxley).

4 As will be discussed below, however, a small

minority of courts – including the only appellate

court to have ruled on the issue –have held that

the language of the DFA is unambiguous and

requires a whistleblower to make a report to

the SEC in order to qualify for anti-retaliation

protection. See, e.g.,Asadi, 720 F.3d at 629;

Banko v. Apple Inc., 20 F.Supp.3d 749, 756–57

(N.D.Cal.2013); Verfeurth v. Orion Energy Sys.,

Inc., —F.Supp.3d—, 2014 WL 5682514, at *3

(E.D.Wisc. Nov. 4, 2014). The Court respectfully

declines to follow these courts' reasoning.

*7 The tension arises when one considersthe definition of a “whistleblower” ascodified in Section 21F(a)(6). The DFAonly provides anti-retaliation protectionto “a whistleblower in the terms andconditions of employment,” and Section21F(a)(6) defines a “whistleblower”as “any individual who provides ...information relating to a violation of thesecurities laws to the Commission.” 15U.S.C. § 78u–6(a)(6) (emphasis added).As a number of courts have recognized,Section21F(h)(1)(A)(iii) appears to be“ ‘in direct conflict with the DFA'sdefinition of a whistleblower because[subsection (iii) ] provides protectionto persons who have not disclosedinformation to the SEC,’ ” whileSection21F(a)(6) requires the personreport to the Commission. Khazin, 2014WL 940703, at *6 (quoting Genberg,935 F.Supp.2d at 1106); see alsoConnolly, 2014 WL 5473144, at *6(finding statutory ambiguity given theconflict between the DFA provisions).Put differently, the majority of courtsto consider the issue have found thatsubsection (iii) “would be ineffective ifwhistleblowers must report directly to theSEC.”Connolly, 2014 WL 5473144, at *6.

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Digital Realty's arguments that there isno ambiguity or conflict in the DFA –which essentially parrot the argumentsmade by those courts that have concludedsimilarly – are not entirely persuasive.The first argument is that because the“whistleblower” definition in Section21F(a)(6) is plain and unambiguous, theplain language of that definition mustcontrol over any putatively conflictingstatutory text that appears later in Section21F. See Asadi, 720 F.3d at 623–24(holding that there can “only be onecategory of whistleblower” under theDFA given the “plain language andstructure” of the Act); see also Banko,20 F.Supp.3d at 756 (holding that “thestatute specifies that an employer may not[retaliate] against a whistleblower. It is notuntil after this clause that Congress addsprotection for reports that are protected bySarbanes–Oxley, indicating that the latteris subordinate to the former”) (emphasisin original).

In support of the argument that a cleardefinitional term must control, the Asadicourt cites to the Scalia & Garnertreatise, which states that “[w]hen ...a definitional section says that a word‘means' something, the clear import isthat this is its only meaning.” Scalia& Garner, supra, at 226 (emphasisin original). But just two pages later,the very same treatise recognizes thatwhile a statutory definition provides a“very strong indication” of a term'smeaning, it is “nonetheless one that canbe contradicted by other indications. Sowhere the artificial or limited meaning

would cause a provision to contradictanother provision, whereas the normalmeaning of the word would harmonizethe two, the normal meaning should beapplied.” Id. at 228. Indeed, just twoterms ago the Supreme Court concludedthat an express and clear definitionalterm in a statute may ultimately needto yield to countervailing interpretativefactors in order to harmonize themeaning of a statute. See Bond v.United States, 134 S.Ct. 2077, 2091(2014). In Bond, the Court consideredwhether a criminal prohibition codifiedin the Chemical Weapons ConventionImplementation Act of 1998 could applyto a defendant whose “amateur attempt ...to injure her husband's lover” withcommon chemicals resulted in the victimsuffering a “minor thumb burn readilytreated by rinsing with water.” Id. at2083. The defendant had been convictedunder statutory language that rendered itunlawful for any person to knowingly

“use ... any chemical weapon.” 5 Id.at 2086; see also18 U.S.C. § 229(a).Despite the statute's clear definition of“chemical weapon,” and despite thefact that the defendant had obviouslyused a “chemical weapon” with thenecessary men rea, the Court reversed thedefendant's conviction. Bond, 134 S.Ct. at2091. Specifically, the majority held that“chemical weapon” could not be givenits defined meaning because doing sowould violate other principles of statutoryinterpretation –namely the “backgroundassumption that Congress normallypreserves the constitutional balancebetween the National Government and the

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States.” Id. at 2091. (citation omitted);see also id. at 2097 (Scalia, J. dissenting)(recognizing that a court may ignorethe unambiguous words of a statutorydefinition in the rare case where doing sowill interpret the “words fairly, in light oftheir statutory context”).

5 “Chemical weapon” was defined in relevant part

as “[t]oxic chemicals and their precursors ...

” where “toxic chemical” was in turn defined

as “[a]ny chemical which through its chemical

action on life processes can cause death,

temporary incapacitation or permanent harm to

humans or animals.” Bond, 134 S.Ct. at 2085.

As the Court noted, the ordinary reading of

the relevant statutory language would “render

the statute striking in its breadth and turn

every kitchen cupboard and cleaning cabinet

in America into a potential chemical weapons

cache.” Id. at 2086 (internal quotation marks and

citation omitted).

*8 Indeed, just this Term the Courtagain found contextual ambiguity inwhat otherwise appeared to be seeminglyclear statutory language. See Yates v.United States, 135 S.Ct. 1074, 1079(2015). In Yates, the defendant hadbeen convicted of violating a provisionof Sarbanes–Oxley that prohibited thedestruction of a “tangible object” withthe intent to obstruct a law enforcementinvestigation. Id. at 1079. The Court notedthat “although dictionary definitions”of terms such as “tangible object”should “bear consideration, they are notdispositive....” Id. at 1082. The Courtultimately reversed Yates' conviction –obtained after he destroyed what wasindisputably a “tangible object” (fish)with the requisite intent – because themajority concluded that the term “tangibleobject” in the relevant provision of

Sarbanes–Oxley could not be given itsdictionary definition in light of the“specific context in which that languageis used,” including the historic originsand legislative purpose of the law. Id. at1082; see also United States v. Carroll,No. CR–13–566 EMC, 2015 WL 2251206(N.D.Cal. May 13, 2015) (discussingYates ).

As both Bond and Yates demonstrate,a court may decline to strictly apply adefinitional term in a statute, or otherwiseadopt the plain and ordinary meaning ofstatutory language, where other tools ofstatutory interpretation strongly suggestsuch a result. According, just becauseSection 21F expressly defines the term“whistleblower” to require a report tothe SEC does not mean that the plainlanguage of that definition must control inthe face of arguably conflicting statutorylanguage or other persuasive indicationsof legislative intent. See generally Bond,134 S.Ct. at 2091.

In determining whether the DFA'sdefinition of “whistleblower” itselfcompels the outcome in this case, theCourt must consider the “specific contextin which that language is used, andthe broader context of the statute asa whole.” Robinson, 519 U.S. at 341.Digital Realty argues that there is noconflict between the provisions of theDFA which would render the statuteambiguous, and thus there is no reasonto defer to the SEC's interpretation of thestatute. For the reasons explained below,the Court disagrees.

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i. The Whistleblower DefinitionWould Render Subsection (iii)

Superflous Because That DefinitionConflicts with Various Provisionsof Subsection (iii) Which Clearly

Contemplate Only Internal Reports,and not Reports to the SEC

As noted above, the broad language ofsubsection (iii) is arguably in tension withthe narrower definition of a whistleblowercontained in Section 21F(a)(6). As JudgeKoh observed in Connolly, subsection(iii) would be rendered meaningless bythe strict application of the definitionof “whistleblower” under the DFAbecause subsection (iii) appears tocontemplate a broad scope of protectionfor individuals who do not make reportsto the Commission. Connolly, 2014 WL5473144, at *6. A number of courts are inaccord. See footnote 3, supra.

Despite the fact that a number ofcourts have found that subsection (iii)of the DFA “would be ineffective ifwhistleblowers must report directly to theSEC,”Connolly, 2014 WL 5473144, at*6, the Fifth Circuit has held that therestrictive definition of “whistleblower”articulated in Section 21F(a)(6) doesnot render Section 21F(h)(1)(a)(iii)superfluous. Asadi, 720 F.3d at 626.In support of this argument, the FifthCircuit posited a hypothetical situationwhereby the whistleblower protections ofSection 21F(h)(1)(a)(iii) could have effectif an employee both internally reported

securities law violations to his employerand to the SEC:

Assume a mid-levelmanager discovers asecurities law violation.On the day hemakes this discovery,he immediately reportsthis securities lawviolation (1) tohis company's chiefexecutive officer(“CEO”) and (2) tothe SEC. Unfortunatelyfor the mid-levelmanager, the CEO,who is not yet awareof the disclosure tothe SEC, immediatelyfires the mid-levelmanager. The mid-level manager, clearlya “whistleblower” asdefined in Dodd–Frankbecause he providedinformation to the SECrelating to a securitieslaw violation, wouldbe unable to provethat he was retaliatedagainst because of thereport to the SEC.Accordingly, the firstand second categoryof protected activitywould not shieldthis whistleblower fromretaliation. The thirdcategory of protectedactivity, however,

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protects the mid-level manager. In thisscenario, the internaldisclosure to theCEO, a person withsupervisory authorityover the mid-levelmanager, is protectedunder 18 U.S.C. §1514A, the anti-retaliation provisionenacted as part of theSarbanes–Oxley Act of2002 (“the SOX anti-retaliation provision”).Accordingly, eventhough the CEO wasnot aware of the reportto the SEC at thetime he terminatedthe mid-level manager,the mid-level managercan state a claimunder the Dodd–Frank whistleblower-protection provisionbecause he was a“whistleblower” andsuffered retaliationbased on his disclosureto the CEO, which wasprotected under SOX.

*9 Id. at 627–28.

Digital Realty's reliance on Asadi ismisplaced. While the Court assumes,without deciding, that the abovehypothetical posited in Asadi actuallypresents one situation where sections21F(a)(6) and 21F(h)(1)(A)(iii) could be

applied in harmony such that the latter

section would not be superfluous, 6 theCourt finds there are other points oftension between these two provisions.

6 The Court notes that the SEC has taken the

position in various other litigations that the Fifth

Circuit hypothetical is flawed because “[w]hether

an individual's disclosures constitute a ‘protected

activity’ under the Fifth Circuit's narrow reading

of clause (iii) would turn on whether the

individual has made a separate disclosure to

the Commission. The Commission contends

that if the employer is genuinely unaware that

the employee has separately disclosed to the

Commission, any adverse employment action

that the employer takes would appear to lack

the requisite retaliatory intent – i.e., the intent to

punish the employee for engaging in a protected

activity.” See Br. of the Sec. & Exch. Comm'n

at 23, Safarian v. American DG Energy Inc.,

No. 14–2374 (3d Cir. Dec. 11, 2014) (SEC

Amicus Br.). However, under the Fifth Circuit's

hypothetical, the defendant would have the intent

to retaliate because of the employee's complaint

to management; the concurrent complaint to the

SEC is not the purported basis of the retaliatory

intent but serves the satisfy the gatekeeping

function of Section 21(a)(6)'s definition of

“whistleblower” entitled to DFA's remedies.

There are a number of provisions insubsection (iii) that conflict with theassumption that only those who reportto the SEC enjoin the whistleblowingprotection of the DFA. For instance,subsection (iii) expressly protects awhistleblower who makes required orprotected disclosures under section 78j–1of the Exchange Act. See15 U.S.C. § 78u–6(h)(1)(A)(iii). Section 78j–1(b), entitled“Required response to audit discoveries,”provides that an individual conductingan audit of a public company must,under certain circumstances, “inform theappropriate level of the management ofthe issuer ... [of] illegal acts that have

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been detected or have otherwise cometo the attention” of the auditor “unlessthe illegal act is clearly inconsequential.”15 U.S.C. § 78j–1(b)(1)(B). Section 78j–1 further requires that if the company(i.e.“issuer”) does not take reasonable“remedial action” after receiving such areport of illegal acts, an auditor must“directly report its conclusions to theboard of directors” of the corporation. 15U.S.C. § 78j–1(b)(2). Critically, section78j–1 only permits an auditor to reportsuch “illegal acts” to the SEC if the boardof directors or other internal managementfails to take appropriate remedial action.See15 U.S.C § 78j–1(b)(3)(B) (providingthat an auditor may either resign orreport putative law violations to the SECwhere management fails to appropriatelyrespond to an internal report of suchviolations). That is, section 78j–1 clearlyrequires internal reporting of illegal acts,and does not contemplate any reportof such acts to the SEC, except inlimited circumstances. Congress's expressmention of section 78j–1 in subsection(iii) of the Dodd–Frank whistleblowerprotection provision would seem toindicate that Congress wished to coverauditors who made required internalreports about illegal acts. Yet if this Courtis required to limit the DFA's protection tothose who report to the SEC, nearly all ofthe conduct “required” under section 78j–1 and its scheme of internal reports wouldbe undermined.

*10 As another example, subsection(iii) clearly covers internal reportsrequired of attorneys under Sarbanes

Oxley. See15 U.S.C. § 78u–6(h)(1)(A)(iii) (prohibiting retaliation for disclosuresthat are “required or protected under theSarbanes–Oxley Act”). 15 U.S.C. § 7245requires attorneys to “report evidence ofa material violation of securities law ...or similar violation[s] by the company ...to the chief legal counsel or the chiefexecutive officer of the company.” 15U.S.C. § 7245(1). Congress has furtherrequired attorneys to report such evidence“to the audit committee of the board ofdirectors ... or to another committee ofthe board of directors” if “the counselor officer does not appropriately respondto the evidence.” 15 U.S.C. § 7245(2).Similar to Section 78j–1, Sarbanes–Oxleyrequires attorneys to report certain lawviolations internally up the chain ofcommand. Indeed, a later-enacted SECrule provides that attorneys must firstreport violations internally before anyeventual report can be made to the SEC,because “[b]y communicating [evidenceof a material violation] to the issuer'sofficers or directors, an attorney doesnot reveal client confidences or secretsprivileged or otherwise protected ...related to the attorney's representationof an issuer.” 17 C.F.R. § 205.3(b)(1).The SEC rule specifically contemplatesthat attorneys will not externally reportlaw violations to the Commission unlessa number of preconditions are satisfied.See17 C.F.R. § 205.3(d)(2)(i)-(ii). Indeed,external reports may be prohibited by

attorney ethics rules. 7 Applying thenarrow definition of “whistleblower”from Section 21F(a)(6) to attorneyswho have made required internal reports

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under Sarbanes–Oxley would leavesuch lawyers largely (if not entirely)unprotected from retaliation under theDFA.

7 The Court notes that there has been some

controversy between the SEC and certain State

Bar Associations, which have argued that an

attorney may not report to the SEC without

client consent, and that attorneys may be subject

to discipline for complying with 17 C.F.R. §

205.3. See generally The New World of Risk for

Corporate Attorneys and Their Boards Post –

Sarbanes–Oxley: An Assessment of Impact and a

Prescription for Action, 2 Berkeley Bus. L.J. 185,

205–2010 (2005).

In light of these examples, Section 21F(a)(6)'s narrow definition of whistleblowercannot easily be reconciled with Section21F(h)(1)(A)(iii)'s seemingly expansivescope, which appears to cover conductunder statutes that expressly requireinternal whistleblowing activity to occurbefore an individual may even considermaking a voluntary report to the SEC.

ii. The Whistleblower DefinitionWould Render the Words“To The Commission” in

Subsections (i) and (ii) Superfluous

Digital Realty (and Asadi 's) nextargument – that reading the DFA to applyto employees who do not make a reportto the SEC would read the words “tothe Commission” out of the statutorydefinition of a whistleblower – is notdispositive. See Asadi, 720 F.3d at 625;Banko, 20 F.Supp.3d at 756. While it istrue that the SEC's Rule does effectivelyread the words “to the Commission”

out of the definition of whistlebloweras Section 21F(a)(6) would apply to(iii), Digital Realty's interpretation itselfwould create surplusage in subsections (i)and (ii). Section 21F(h)(1)(A) prohibitsretaliation against a “whistleblower,”which is defined in Section 21F(a)(6) as an “individual who provides ...information relating to a violation ofthe securities laws to the Commission.”15 U.S.C. § 78u–6(a)(6). But applyingthis limited definition of whistleblowerwould render superfluous the phrase “tothe Commission” in subsections (i) and(ii). For instance, subsection (i) prohibitsretaliating against a whistleblower “inproviding information to the Commissionin accordance with this section.”15 U.S.C. § 78u–6(h)(1)(A)(i). Thissubsection would be entirely unnecessaryif, as Digital Realty and the Asadicourt contend, only persons who provideinformation to the Commission canever be whistleblowers. As the SupremeCourt has noted, “the cannon againstsuperfluity assists only where a competinginterpretation gives effect to every clauseand word of a statute.” Microsoft Corp.v. i4i Ltd. P'Ship, 131 S.Ct. 2238, 2248(2011) (internal quotation marks andcitation omitted). Here, no interpretationappears to avoid excess language.

iii. The Wording of Sections (i) and (ii)as Compared to (iii) and the Legislative

History of the DFA FurtherSupports a Finding of Ambiguity

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Moreover, subsections (i) and (ii)expressly refer to providing informationor testimony to the Commission, while(iii) makes no similar reference to theCommission. The difference in language,wherein the key qualification articulatedin (i) and (ii) is omitted from (iii), suggestsa legislative intent that (iii) not be readto require SEC reporting. See Sebelius v.Auburn Regional Med. Cntr., 133 S.Ct.817, 825 (2013) (“We have recognized,as a general rule, that Congress's useof ‘certain language in one party of thestatute and different language in another’can indicate that ‘different meanings wereintended.’ ”) (quoting Sosa v. Alvarez–Machain, 542 U.S. 629, 711 n.9 (2004)).

*11 Indeed, this construction accordswith the legislative history. Subsection(iii) was added to the DFA at thevery last minute. Indeed, subsection (iii)never appears in any version of DFAuntil it formally passed, nor does itappear to have ever been discussed inthe legislative record. See, e.g., H.R.4173, 111th Congress (May 27, 2010;Public Print) (last version of Dodd–Frankbefore passage did not contain relevantsubsection). The conflict between thenewly-added (and very broad) subsection(iii) and the narrow whistleblowerdefinition that was consistently presentin every version of the bill from its firstintroduction in Congress, see H.R. 4173,111th Congress (Dec. 2, 2009), could wellhave been a legislative oversight. Andgiven the belated addition of subsection(iii), it is at least reasonable to assumethat Congress intended for the scope of

the DFA whistleblower-provisions to bebroader than in earlier versions of the bill,which versions unambiguously requiredan external report to the Commissionin order to be protected from employerretaliation. See, e.g., H.R. 4173, 111thCongress (May 27, 2010; Public Print)(report to Commission unambiguouslyrequired under penultimate draft ofDodd–Frank). Certainly, the legislativehistory contains no indication, apart fromthe definition of whistleblower itself,that Congress purposefully intended tolimit whistleblower protections under (iii)solely to those making reports to theCommission. See Bond, 134 S.Ct. at 2091(even express statutory definitions may beoverridden in appropriate circumstances).

iv. The Fifth Circuit's ConcernsRegarding Rendering the Sarbanes-

Oxley Act Anti–RetaliationProvisions “Moot” are Unfounded

The Asadi court also contendsthat an expansive reading of theDodd–Frank whistleblower protectionprovisions would render the Sarbanes–Oxley “anti-retaliation provision, forpractical purposes, moot.” Asadi, 720F.3d at 628. According to the FifthCircuit, an expansive construction “hasthis impact because an individual whomakes a disclosure that is protected bythe SOX anti-retaliation provision couldalso bring a Dodd–Frank whistleblowerprotection claim on the basis that thedisclosure was protected by SOX.”Id. Butsuch an individual would be unlikely

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to file suit under Sarbanes–Oxley Asaditells us, because Dodd–Frank “providesfor greater monetary damages,” has alonger limitations period, and does notrequire administrative exhaustion with theDepartment of Labor before filing suitin federal court. Id. at 629. This Courtdisagrees.

The Fifth Circuit overlooked tworeasons why individuals might chooseto file a claim under Sarbanes–Oxley's whistleblower provisions, eitherin addition to, or in place of, aDFA claim. First, certain individualsmay actually prefer the administrativeforum provided by SOX, especiallygiven that OSHA assumes responsibilityfor investigating and presenting aretaliation claim under Sarbanes–Oxley.See, e.g.,29 C.F.R. § 1980.104–1980.105(providing that OSHA, rather thanthe plaintiff, will investigate Sarbanes–Oxley whistleblower claims in the firstinstance and present its findings to anadministrative law judge). Second, whilethe DFA provides greater back pay thanis allowable under SOX, a plaintiff whoprevails under SOX can obtain othertypes of monetary damages not availableunder the DFA. For instance, a winningSOX plaintiff can recover damages fornoneconomic harms such as emotionaldistress and reputational harm. See18U.S.C. § 1514A(c)(2)(C); Halliburton,771 F.3d at 266 (holding that “the statueaffords noneconomic compensatorydamages, including emotional distressand reputational harm”). Put simply, thereis no reason to suspect that a broad reading

of the DFA will put an end to Sarbanes–Oxley whistleblower actions, even if sucha consideration were relevant at Chevronstep-one.

v. Policy Reasons Supporta Finding of Ambiguity

Because this Court believes that thelanguage of the DFA whistleblower-protection provision is at least somewhatin conflict, it is relevant to observethat the Fifth Circuit's resolution ofthat conflict – reading subsection (iii)narrowly to require a report to theCommission – seems at odds with publicpolicy underlying the DFA. As JudgeKoh has noted, the Fifth Circuit's readingof the law is entirely “contrary toDodd–Frank's purpose of encouragingreporting of securities violations” andotherwise improving accountability in thefinancial system. Connolly, 2014 WL5473144, at *5; see alsoPub.L. 11–203, H.R. 4173 (stating that a mainpurpose of Dodd–Frank is to “promotethe financial stability of the UnitedStates by improving accountability andtransparency in the financial system”).Moreover, reading subsection (iii) torequire a report to the SEC wouldrender the statute “utterly ineffective asa preventive measure because employerswould not know that a report was madeto the Commission.” Id. at *6. As theSEC has explained in an amicus brief,“because in [the Fifth Circuit's positedscenario] employers would not know thata report was made to the Commission,

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clause (iii) would have no appreciableeffect in deterring employers from takingadverse employment action for internalreports or the other disclosures listedin clause (iii).” SEC Amicus Br. at22. Put simply, requiring SEC reportingadds nothing to the policy of deterringemployer retaliation.

vi. Summary

*12 At bottom, it is difficult to finda clear and simple way to read thestatutory provisions of Section 21F inperfect harmony with one another. WhileAsadi 's interpretation of the statuteis not unreasonable, neither is thecounterveiling interpretation rendered bya number of district courts. The issuebefore this Court is not the preferableinterpretation, but whether the statuteis ambiguous. The Court finds thereis sufficient ambiguity to open thedoor to administrative interpretation andinvocation of Chevron deference to theSEC's interpretative regulation. Cf. Nat'lAss'n of Home Builders v. Defendersof Wildlife, 551 U.S. 644, 661–66(2007) (affording Chevron deference toagency interpretation because where twostatutory provisions present “seeminglycategorical – and, at first glance,irreconcilable – legislative commands”there is a “fundamental ambiguity that isnot resolved by the statutory text”). Therelevant “portions of Dodd–Frank are –at a minimum – susceptible to more thanone interpretation when read together.”Connolly, 2014 WL 5473144, at *6; see

also Rosenblum, 984 F.Supp.2d at 147–48 (“When considering the DFA as awhole, it is plain that a narrow readingof the statute requiring a report to theSEC conflicts with the anti- retaliationprovision, which does not have such arequirement. Thus, the governing statuteis ambiguous.”). For all of the reasonsexplained above, the Court concludes thatthe DFA provisions are ambiguous, andthus will proceed on to consider Chevronstep-two.

4. Chevron Step–Two: The SEC Rule isEntitled To DeferenceGiven that the whistleblower protectionprovisions of the DFA are ambiguous,the next question this Court must decideis whether SEC Rule 21F–2(b)(1) is a“permissible construction of the statute.”Connolly, 2014 WL 5473144, at *6(quoting McMaster v. United States, 731F.3d 881, 889 (9th Cir.2013)). As everycourt that has considered Chevron step-two has concluded, the answer to thatquestion is “yes.” See id. (“The SEC'sinterpretation is a reasonable position thatmost other courts have adopted”); see alsoKhazin, 2014 WL 940703, at *6 (holdingthat “the SEC's rule is a permissibleconstruction of the statute and warrantsjudicial deference”); Murray, 2013 WL2190084, at *5 (holding that “the SEC'sinterpretation is a reasonable one”).

First, the SEC's interpretation isreasonable because it effectivelyeliminates the tension between thenarrow definition of whistleblower inSection 21F(a)(6) and the seemingly

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very broad coverage of subsection (iii).Put simply, the SEC's interpretation isreasonable because it permits a large classof individuals to qualify as protectedwhistleblowers, a result which appearsconsistent with the broad languageCongress employed in subsection (iii).

Second, the SEC's interpretation isreasonable because it “comports withDodd–Frank's scheme to incentivizebroader reporting of illegal activities.”Connolly, 2014 WL 5473144, at *6; seealso Kramer v. Trans–Lux Corp., No.3:11–cv–1424 (SRU), 2012 WL 4444820,at *5 (D.Conn. Sep. 15, 2012) (explainingthat the DFA “appears to have beenintended to expand upon the protections ofSarbanes–Oxley”); Pub.L. 11–203, H.R.4173 (stating that a main purpose ofDodd–Frank is to “promote the financialstability of the United States by improvingaccountability and transparency in thefinancial system”).

Third, the Court finds the SEC'sinterpretation is reasonable becauseit encourages internal reporting ofpossible law violations. As the SECpersuasively explained in an amicusbrief, Rule 21F–2(b)(1) establishes paritybetween individuals who first reportto the SEC and those who firstreport internally, thereby avoiding a“two-tiered structure of anti-retaliationprotections that might discourage someindividuals from first reporting internallyin appropriate circumstances, and, thus,jeopardize the benefits that can result frominternal reporting.” SEC Amicus Br. at 28;

see alsoProposed Rules for Implementingthe Whistleblower Provisions of Section21F of the Securities Exchange Actof 1934, 75 Fed.Reg. 70488, 70488(Nov. 17, 2010) (expressing concern thatoverly incentivizing external reportingwould “reduce the effectiveness of acompany's existing compliance, legal,audit and similar internal processes forinvestigating and responding to potentialviolations of the Federal securities laws”);id. at 70516 (expressing concern thatthe Commission will “incur costs toprocess and validate” whistleblower “tipsof varying quality” if companies are notallowed “to investigate and respond topotential securities laws violations priorto reporting them to the Commission”);Orly Lobel, Lawyering Loyalties: SpeechRights and Duties Within Twenty–First–Century New Governance, 77 FordhamL.Rev. 1245, 1250 (2009) (arguingthat “internal protections are particularlycrucial in view of research findings that ...employees are more likely to chooseinternal reporting systems”).

*13 Finally, the Court finds theSEC's interpretation is reasonable becauseit enhances the Commission's abilityto bring enforcement actions againstemployers that engage in retaliatoryconduct. As the SEC has stated, anarrow reading of Dodd–Frank would“significantly weaken the deterrenceeffect on employers who might otherwiseconsider taking an adverse employmentaction.” SEC Amicus Br. at 29; see alsoConnolly, 2014 WL 5473144, at *6.

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Put simply, Rule 21F–2(b)(1) appearsto be a reasonable interpretation ofDodd–Frank's whistleblower-protectionprovisions, and thus is entitled todeference.

5. Digital Realty's Remaining Argumentis WaivedIn its reply brief, Digital Realty arguesfor the first time that Somers' retaliationclaim must fail because he did notadequately allege that his internal reportswere “protected” under Sarbanes–Oxleyand thus he cannot claim under subsection(iii). Specifically, Digital Realty arguesthat because Somers did not exhausthis administrative remedies to bring awhistleblower claim under Sarbanes–Oxley directly, his disclosures werenot “protected” under Sarbanes–Oxley,and thus the DFA does not applyirrespective of whether Somers couldhave qualified as a “whistleblower.”See15 U.S.C. § 78u–6(h)(1)(A)(iii) (DFAprohibits retaliation against an individualwho makes “disclosures that are requiredor protected under the Sarbanes–OxleyAct”).

Because Digital Realty did not makethis argument in its initial motion todismiss, the argument is waived. SeeDytch v. Yoon, No. C 10–02915 MEJ,2011 WL 839421, at *3 (N.D.Cal. Mar.7, 2011) (explaining that parties “cannotraise a new issue for the first timein their reply briefs”); see also UnitedStates v. Anderson, 472 F.3d 662, 668(9th Cir.2006) (recognizing the generalprinciple that arguments raised for the first

time in a reply brief are waived). DigitalRealty's motion to dismiss Somer's DFAclaim is denied.

B. Plaintiff's Motion to DisqualifyDefendants' CounselPlaintiff's motion to disqualifyDefendants' counsel, Seyfarth Shaw,must similarly be denied. “[W]e applystate law in determining matters ofdisqualification.” In re Cnty. of LosAngeles, 223 F.3d 990, 995 (9thCir.2000). Rule 3–310 of the CaliforniaRules of Professional Conduct providesthat a member of the bar “shall not,without the informed written consentof each client ... [a]ccept or continuerepresentation of more than one clientin a matter in which the interests of theclients potentially conflict.” Cal. Rulesof Prof. Conduct 3–310(C)(2). Wherethe potential conflict arises from thesuccessive representation of clients withpotentially adverse interests, as it doeshere, “the courts have recognized thatthe chief fiduciary value jeopardizedis that of client confidentiality.” Flattv.Super. Ct., 9 Cal.4th 275, 283 (1994)(emphasis omitted). “Thus, where aformer client seeks to have a previousattorney disqualified from serving ascounsel to a successive client in litigationadverse to the interests of the first client,the governing test requires that the clientdemonstrate a ‘substantial relationship ’between the subjects of the antecedent andcurrent representations.” Id. (emphasis inoriginal).

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Under the substantial relationship test,disqualification “turns on two variables:(1) the relationship between thelegal problem involved in the formerrepresentation and the legal probleminvolved in the current representation,and (2) the relationship between theattorney and the former client withrespect to the legal problem involvedin the former representation.” Jessen v.Hartford Cas. Ins. Co., 111 Cal.App.4th 698, 709 (2003). “[D]isqualificationwill depend upon the strength of thesimilarities between the legal probleminvolved in the former representationand the legal problem involved inthe current representation.” Id. Atbottom, “successive representations willbe ‘substantially related’ when theevidence before the trial court supportsa rational conclusion that informationmaterial to the evaluation, prosecution,settlement or accomplishment of theformer representation given its factualand legal issues is also material tothe evaluation, prosecution, settlementor accomplishment of the currentrepresentation given its factual and legalissues.” Id. at 713.

*14 Here, the substantial relationship testis plainly not met. Somers hired EugeneJacobs, a partner at Seyfarth Shaw, toprovide 2.1 hours of legal work relatedto his efforts to secure a position atNewcastle Limited, a Chicago-based realestate advisor and investor. See EugeneJacobs Decl. at ¶ 8. Somers admits thatJacobs did not advise him with regardsto his employment contract with Digital

Realty. Somers Decl. at ¶ 2. Somersvaguely claims that he “discussed theDigital Realty opportunity briefly withMr. Jacobs and informed Mr. Jacobsabout some aspects of my approachto obtaining the job with Digital,” but

even if this were true, 8 it would notdemonstrate that “information materialto ... accomplishment of the formerrepresentation ... is also material tothe ... accomplishment of the currentrepresentation.” Jessen, 111 Cal.App.4th at 713. At best, Jacobs providedSomers with advice regarding how tobest negotiate an executive agreement,advice that Somers later used whennegotiating with Digital Realty. Theinformation that would have passedfrom Somers to Jacobs in order to“evaluate” or “accomplish” this priorrepresentation has absolutely nothing todo with the “evaluation, prosecution,settlement or accomplishment of thecurrent representation,” where SeyfarthShaw is defending Digital Realty againstclaims of discrimination, whistleblowerretaliation and defamation. Plaintiff'sdisqualification motion is thereforedenied.

8 Jacobs denies Somers' vague allegations: “Mr.

Somers never sought any legal advice of any

nature from me in connection with the job at

Digital Realty, nor did I provide any legal counsel

to him regarding Digital Realty in any regard

whatsoever. In addition, Mr. Somers did not

share any confidential information with me about

his job at Digital Realty. My representation of

Mr. Somers was limited to advising him on issues

relating to the negotiation of an employment

agreement with Newcastle.” Eugene Jacobs Decl.

at ¶ 14.

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IV. CONCLUSION

Defendants' motion to dismiss is deniedbecause Somers has pleaded sufficientfacts to establish a plausible claim that heis a whistleblower under the Dodd–FrankAct. An external complaint to the SEC isnot required under Rule 21F2–(b)(1), andthat rule is entitled to Chevron deference.

Plaintiff's motion to disqualify SeyfarthShaw is denied because Seyfarth's shortrepresentation of Somers is whollyunrelated – let alone substantially so –to Seyfarth's current representation ofDigital Realty.

This order disposes of Docket Nos. 20 and31.

IT IS SO ORDERED.

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

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CERTIFICATE OF SERVICE

I hereby certify that I electronically filed the foregoing letter with the Clerk

of the Court for the United States Court of Appeals for the Second Circuit by using

the CM/ECF system on May 21, 2015. I certify that all participants in the case are

registered CM/ECF users and that service will be accomplished by the appellate

CM/ECF system.

s/ Stephen G. Yoder Stephen G. Yoder Senior Counsel Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549-9040

Dated: May 21, 2015

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