In one of the first cases of its kind, the US District Court for the District of Connecticut considered in Kramer v. Trans-Lux Corp. how to reconcile inconsistent language in the Dodd-Frank Act's whistleblower provisions. A key litigated issue in the case was whether a plaintiff is required to strictly satisfy the statutory definition of a whistleblower in order to bring a claim under the Act's anti-retaliation provisions, or whether the definition should be read more broadly to protect a wider range of conduct.

Richard Kramer served as the Vice President of Human Resources and Administration for Trans-Lux, where among other responsibilities he served on the company's pension plan committee, ensured compliance with federal and state laws and regulations, and served as a plan sponsor and fiduciary.

Starting in 2009, Kramer began to raise concerns with several of Trans Lux's managers about the company's actions, including:

The company dismissed Kramer's concerns. Subsequently, Kramer e-mailed his concerns to Trans-Lux's board of directors' audit committee, and sent a letter to the SEC about the company's failure to submit the 2009 pension plan amendment to the board of directors or the SEC. However, the SEC requires that information regarding possible securities violations be submitted online or by mailing or faxing a specific form, which Kramer did not use.

Hours after Kramer's e-mail to the board, he began to receive reprimands from company management. Over the following two months, one of Kramer's assistants was reassigned, an investigation was started against him by the company's in-house counsel and his duties were restricted. Finally, the company terminated Kramer.

Kramer filed suit against Trans-Lux, alleging retaliation in violation of the Dodd-Frank Act's whistleblower protections as well as an ERISA claim. In response, Trans-Lux filed a motion to dismiss both of Kramer's claims.

On September 25, 2012, the district court issued an opinion in Kramer v. Trans-Lux Corp., denying Trans-Lux's motion to dismiss Kramer's retaliation claim. In its decision, the court resolved seemingly conflicting definitions in the Dodd-Frank Act, adopting a broader reading of the Act's whistleblower definition urged by Kramer that encompasses a wider range of protected conduct.

The court began by noting that the Dodd-Frank's anti-retaliation provisions at Section 78u-6(h)(1)(A) of Title 15 of the US Code provide protection for whistleblowers who suffer retaliation in response to:

However, the definition of "whistleblower" in the incentives provision at Section 78u-6(a)(6) of Title 15 of the US Code includes only those individuals who provide information regarding a violation of securities laws to the SEC in a manner provided by the SEC. Trans-Lux argued that Kramer was not entitled to bring a retaliation claim since he did not provide information to the SEC in the required manner.

Kramer responded that Trans-Lux's interpretation would render part of the anti-retaliation provisions moot, and that those who make disclosures under the Sarbanes-Oxley or the Securities Exchange Act are entitled to protection even if they are not whistleblowers as defined by the Dodd-Frank Act.

The court first found that the statute did not unambiguously exclude non-whistleblowers from bringing retaliation claims, noting that Trans-Lux's interpretation:

Given the ambiguity in the statute, the court turned to a recent SEC rule interpreting the anti-retaliation provisions. That rule states that an individual qualifies as a whistleblower if he possesses a reasonable belief that the information he provides relates to a possible securities law violation.

Although Trans-Lux argued that this rule was not a permissible construction of the statute, the court disagreed, finding that it was consistent with the apparent intention of the Dodd-Frank Act to expand existing protections for whistleblowers under the Sarbanes-Oxley Act.

Under the standard established by the SEC rule, the court concluded that Kramer, in raising the issues regarding the pension plan committee, Toppi's conflict of interest and the plan amendments, may have reasonably believed that Trans-Lux was violating SEC rules or regulations. Based on these allegations, the court held that Kramer had put forth sufficient facts to support his whistleblower action, and denied Trans-Lux's motion to dismiss the retaliation claim.

In a footnote, the court also granted Trans-Lux's motion to dismiss Kramer's ERISA claim.

With its decision, the court concludes that failure to strictly meet the statutory definition of a whistleblower will not foreclose a plaintiff from pursuing claims under the Dodd-Frank Act's anti-retaliation provisions. Instead, the court adopted the broader reading of the definition set forth in the SEC rule in which a plaintiff need only have a reasonable belief of SEC violations to meet this initial requirement.