Labor & Employment Law Daily Wrap Up, WHISTLEBLOWERS—D. Mass.: Plaintiff who reported his employer to SEC may proceed with whistleblower claim, (Mar 19, 2025)

By Rebecca E. Hoffman, J.D.

The court denied IAFF Financial Corporation’s motion to dismiss the plaintiff’s Dodd-Frank Act claim despite the argument that the plaintiff’s correspondence with the SEC about IAFF did not spell out exactly which provision of the securities laws was violated.

The District of Massachusetts, on March 14, 2025, declined to dismiss a claim that IAFF Financial Corp. fired the plaintiff after he reported IAFF’s actions to the SEC, finding that the plaintiff could qualify as a whistleblower (Hughes v. Baystate Financial Services, LLC, No. 23-CV-10361 (D. Mass. March 14, 2025)).

The court also found that the plaintiff provided sufficient facts to preclude the dismissal of claims for defamation and tortious interference with advantageous employment relations against two other defendants, based on their statements to the plaintiff’s boss at IAFF that the plaintiff was taking bribes.

According to the court, the plaintiff, a former financial advisor at IAFF, sent an email to the SEC about a work-related conversation about which he had concerns. Thereafter, the plaintiff was fired from his job. The plaintiff sued IAFF, Baystate Financial Services, LLC, and its owner and managing partner. After various motions and orders, the plaintiff filed an amended complaint, claiming that IAFF violated the Dodd-Frank Act, among other contentions not relevant to the March 14 order, and charged Baystate Financial Services, LLC and its owner for defamation and tortious interference. The defendants moved to dismiss.

Whistleblower specs. IAFF argued that the plaintiff does not qualify as a whistleblower for purposes of the Dodd-Frank Act and accompanying regulations. The statute proscribes firing, demoting, or harassing a whistleblower for “providing information to” the SEC, the court explained. To qualify as a whistleblower, the plaintiff must have provided the Commission with information in writing relating to a possible violation of the securities laws. Courts that have examined what information must be provided to the SEC to qualify the provider as a whistleblower have determined that “‘a plaintiff must plausibly allege that he had an objectively reasonable belief that the defendant’s conduct violated one of the enumerated provisions of law’” (Lawrence v. IBM Corp., 12-CV-8433 (S.D.N.Y. Aug. 1, 2017)).

The email from the plaintiff to the SEC in this case stated that the plaintiff was “‘was required to report that [he has] serious ethical concerns’” related to a pending SEC application that purportedly failed to meet SEC requirements. “There is no question that this is a close call,” the court said. The email did not cite a provision that might have been violated, but the referenced application was “directly tied to various security [sic] law,” the court said in its prior order.

IAFF pointed to Digital Realty Tr., Inc. v. Somers, 583 U.S. 149 (2018), but the issue in that case was whether the information had been provided to the SEC, not the type of information provided. “Not only have courts disagreed about the necessary contents of the writing,” the court said, “but there has been no discussion of preceding oral conversations based on a pre-existing relationship and submitted application, which are then memorialized, albeit briefly, in a written report.” And other cases where the court was unable to review the alleged whistleblower’s correspondence with the SEC do not support the IAFF’s position here.

The court acknowledged that the email could have been more specific, but “accepting all allegations as true,” the facts surrounding it are sufficient to save the claim at this stage.

Common law claims. The plaintiff’s allegations are also sufficient to support a plausible claim for defamation, the court found. He claimed that the Baystate defendants told the plaintiff’s supervisor that the plaintiff was “‘incompetent’, ‘needed to be removed,’ and, most importantly, was ‘receiving bribes,’” the court said. These are actionable statements of fact, and because they tend to injure the plaintiff is his profession or business, they are actionable without proof of monetary loss. Also, although conditional privilege might protect the statements as intended “to protect or further a common business interest,” the plaintiff appropriately pleaded that the Baystate defendants made their statements with reckless disregard for the truth.

Furthermore, by alleging defamation, the plaintiff succeeded in pleading the requisite “improper means” to save his claim for tortious interference with advantageous employment relations. The alleged defamatory statements in turn allegedly led IAFF to “publicly deride” the plaintiff, “leading to a lack of interest by potential future employers,” the court found.

The case is No. 23-CV-10361.

Judge: Kelley, A.

Attorneys: David Pastor (Pastor Law Office) for John F. Hughes. Thomas N. O'Connor (O'Connor, Carnathan and Mack) for Baystate Financial Services, LLC. Sara E. Silva (Silva, Kettlewell & Pignatelli) for IAFF Financial Corp.

Companies: Baystate Financial Services, LLC; IAFF Financial Corp.

Cases: Whistleblowers Discharge Retaliation TortClaims MassachusettsNews