In Asadi v. G.E. Energy (USA), L.L.C, the US Court of Appeals for the Fifth Circuit issued an opinion affirming a district court decision to deny whistleblower protection under the Dodd-Frank act to a former General Electric (GE) employee, finding the employee was not a "whistleblower" under the Act because he did not report suspected misconduct to the Securities and Exchange Commission (SEC).

In 2010, while serving as GE Energy's (GE) Iraq Country Executive, Iraqi officials informed Asadi of a GE hiring that Asadi believed may violate the Foreign Corrupt Practices Act (FCPA). Asadi reported the issue to his supervisor and an ombudsman within GE. Shortly after his internal report, Asadi received a "surprisingly negative" performance review and was pressured to accept a reduced role with minimum responsibility, which Asadi refused. Less than a year later, Asadi was fired by GE. Asadi filed a complaint in district court, alleging that GE violated the Dodd-Frank whistleblower protection provision by terminating him after reporting the possible FCPA violation. The district court dismissed Asadi's claim with prejudice, concluding that the provision did not extend to Asadi's extraterritorial whistleblowing activity. Asadi timely filed an appeal.

The US Court of Appeals for the Fifth Circuit affirmed the district court's dismissal of Asadi's Dodd-Frank whistleblower protection claim on different grounds. In a decision largely rooted in legislative and statutory interpretation, the Fifth Circuit found that Asadi did not qualify as a "whistleblower" within the meaning of the Dodd-Frank Act.

The Fifth Circuit considered the interplay between the Act's definition of whistleblower and its protection provisions. Specifically, the Fifth Circuit rejected Asadi's claim because:

In rendering its decision, the Fifth Circuit considered and discarded several district court cases that found the interplay between Sections u-6(a) and u-6(h), and especially the third subparagraph of u-6(h), ambiguous and therefore providing protection to actors who did not report misconduct to the SEC. The Fifth Circuit also specifically rejected the SEC's definition of whistleblower in Rule 21F-2(b)(1), which defines "whistleblower" more broadly than the Dodd-Frank Act and does not require reporting to SEC (17 C.F.R. § 240.21F-2(b)(1)), as inconsistent with other SEC rules regarding the whistleblower program as well as Congressional intent behind the Dodd-Frank Act.

The Fifth Circuit did not address in its opinion the issue raised by the district court decision of whether the Dodd-Frank anti-retaliation provision applies extraterritorially.

The holding of the case is straightforward: to be eligible for whistleblower protections under the Dodd-Frank Act, an employee must report potential securities law violations to the SEC. Employees who only report internally and not to the SEC may still be protected from employer retaliation under the Sarbanes-Oxley Act. Employees and employers should take note of the differences highlighted by the court between the anti-retaliation provisions of Dodd-Frank and SOX. The SOX provisions are less employee-friendly than the Dodd-Frank provisions.