Dodd-Frank Act – Whistleblowers

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7^th Circuit Court of Appeals

Case Name: Jeffrey  Martensen v. Chicago Stock Exchange

Case No.: 17-2660

Officials: EASTERBROOK and BARRETT, Circuit Judges, and STADTMUELLER, District Judge.

Focus: Dodd-Frank Act – Whistleblowers

Jeffrey Martensen used to be a supervisor in the Chicago Stock Exchange’s unit responsible for examining compliance with trading regulations. He was fired in mid-2016 and contends in this suit that his discharge violates 15 U.S.C. §78u–6(h), a part of the Dodd- Frank Act that protects whistleblowers.

Martensen’s complaint does not allege that he reported to the Securities and Exchange Commission any fraud or other unlawful activity at the Exchange. The district judge summarily dismissed the suit, ruling that only a person who has reported “a violation of the securities laws to the Commission” (§78u–6(a)(6)) is covered by §78u–6(h). See 2017 U.S. Dist. LEXIS 87621 (N.D. Ill. June 7, 2017). The judge recognized that some courts have held that a report to the SEC is unnecessary but thought that view incompatible with §78u– 6(a)(6). Martensen proposed to file an amended complaint alleging that he had indeed reported fraud to the SEC, but the judge blocked that step, declaring that the absence of de- tail made an amendment pointless.

Both sides have filed post-argument memoranda discussing Verfuerth. The Stock Exchange contends that it requires affirmance. Martensen, by contrast, contends that it supports him because he has reported fraud to the SEC. He tells us that his amended complaint would allege that on January 13, 2014, he reported securities fraud by filling out a Form TCR on the Commission’s website.

Complaints need not plead law. See, e.g., Johnson v. Shel- by, 135 S. Ct. 346 (2014). But appellate filings must cover material legal issues. Martensen needed to identify a rule, subject to the SEC’s jurisdiction, that either “required” or “protected” his internal complaint about his superior’s directive. He has not done so. It may be that some rule does require or protect the sort of report that Martensen made, but appellate judges need not take unguided tours through stock ex- changes’ regulations in the hope that something will turn up. That’s a job for counsel—and Martensen, though representing himself, is a lawyer. Because Martensen has not shown that his grievance was within the scope of clause (iii), other questions can be left to Digital Realty Trust (and, if not answered there, to some future case).

Affirmed

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Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.