Ninth Circuit: You Don’t Need to Report Securities Violations to the SEC to Be Protected by the Dodd-Frank Anti-Retaliation Provision

On March 8, 2017, a divided panel of the United States Court of Appeals for the Ninth Circuit held that the anti-retaliation provision of the Dodd-Frank Act protects individuals who make purely internal disclosures of alleged securities violations. The decision, Somers v. Digital Realty Trust, Inc., No. 15-17352 (9th Cir. March 8, 2017), aligns the Ninth Circuit with the Second Circuit, which reached the same result in Berman v. Neo@ogilvy, LLC, 801 F.3d 145 (2d Cir. 2015). These opinions stand in stark contrast to the position of the Fifth Circuit, which concluded in Asadi v. G.E. Energy (USA), L.L.C., 720 F.3d 620 (5th Cir. 2013), that in order to enjoy the protection of the anti-retaliation provision an individual must report the alleged securities violation to the SEC. While the Ninth Circuit’s decision is the latest entry in this evolving circuit split, it is unlikely to be the last—the Third Circuit is considering this very issue.

The Dodd-Frank Act defines a “whistleblower” as “any individual who provides, or 2 or more individuals acting jointly who provide, information relating to a violation of the securities laws to the Commission, in a matter established by rule or regulation, by the Commission.” 15 U.S.C. § 78u-6(a)(6).

As even the Ninth Circuit acknowledged, the definition above describes only those who report information to the SEC. But the Ninth Circuit did not regard this as determinative of the issue. Instead, the court analyzed both the purpose of the Dodd-Frank Act and the scope of the activities specifically covered by the anti-retaliation provision to reach its ultimate conclusion. In particular, the anti-retaliation provision protects those who engage in lawful activities “in making disclosures that are required or protected under the Sarbanes-Oxley Act of 2002 . . . and any other law, rule, or regulation subject to the jurisdiction of the Commission.” 15 U.S.C. § 78u-6(h)(1)(A)(iii). The Ninth Circuit, like the Second Circuit, noted that Sarbanes-Oxley requires both accountants and lawyers to report internally before they report to the SEC. Thus, using the “whistleblower” definition from Section 78u-6(a)(6) for purposes of the anti-retaliation provision would provide almost no protection to such lawyers and accountants—they would be forced to report internally first, and could legally be subject to retaliation in the period between their mandatory internal reporting and the time they made the report to the SEC. The Ninth Circuit concluded that such an approach “would make little practical sense and undercut congressional intent.”

The Ninth Circuit also agreed with the Second Circuit that the SEC regulation promulgated to implement anti-retaliation provision is entitled to deference. That regulation, Exchange Act Rule 21F-2, 17 C.F.R. § 240.21F-2, makes clear that the anti-retaliation provision protects anyone who engages in activities protected by 15 U.S.C. § 78u-6(h)(1)(A), including those who make internal disclosures under Sarbanes-Oxley.

Continuing its trend in Court of Appeals cases on this issue, the SEC appeared and argued as amicus in favor of expansive coverage of the anti-retaliation provision.

Acting SEC Chairman Limits Delegated Formal Order Authority

Acting SEC Chairman Michael Piwowar has apparently revised the staff’s ability to subpoena records and investigative testimony (“formal order authority”) by returning the authority to grant formal order authority to the agency’s Director of Enforcement. While the SEC has not formally recognized this policy shift, multiple sources, including Law360 and the Wall Street Journal, have reported that Acting Chair Piwowar has recently implemented this change, which revokes the delegated authority to regional directors and enforcement associate directors to approve the staff’s requests for formal order authority.

In 2009, under Chair Mary Schapiro and as part of certain initiatives to enhance enforcement’s capabilities in the aftermath of the financial crisis, the SEC delegated its authority to authorize formal order authority to the Director of Enforcement. The Director of Enforcement, in turn, delegated this authority to regional directors and enforcement associate directors. As a result, the staff could, within an hour (when necessary) obtain formal order authority, as compared to the days, weeks, or at times months, that it had historically taken to obtain formal order authority from the Commission. Not unexpectedly, the number of formal investigations opened by the staff dramatically increased.

Acting Chair Piwowar’s recent move eliminates the second layer of delegation by limiting the 2009 delegated authority to the Director of Enforcement. While the effect of this change on the number of SEC investigations remains uncertain, multiple sources report that Acting Chair Piwowar enacted the policy not to reduce that number, but to bring greater oversight and consistency to the investigation process. Further, while he is not authorized to take the step alone, as it would require a vote of the Commission which is currently comprised of only two members, Acting Chair Piwowar and Commissioner Kara Stein, the acting chair has asked the SEC’s general counsel to consider whether the agency should further restrict formal order authority by returning the power to grant it to the SEC Commissioners. Thus, at Acting Chair Piwowar’s direction, the SEC is considering a return to the pre-2009 formal order authority review and approval process.

The revocation of the regional and associate directors’ delegated ability to approve formal order authority is the latest action taken by Acting Chair Piwowar, who stepped in as acting chairman after former Chair Mary Jo White stepped down at the conclusion of the Obama administration. His actions have included requesting that all authorities granted to staff members be reviewed and that public disclosure rules required by Dodd-Frank be reconsidered.  Such actions indicate efforts to begin the reshaping of the agency as it awaits the confirmation of President Trump’s nomination for chairman, Jay Clayton.

District Court Invalidates Tolling Agreements in Criminal Securities Fraud Prosecution Case Due to Misunderstanding of Applicable Statute of Limitations

On January 30, 2017, the United States District Court for the District of New Jersey dismissed the government’s indictment against Guy Gentile for a pump-and-dump securities fraud scheme. After his arrest Gentile admitted to having engaged in the scheme and agreed to cooperate, which included signing two tolling agreements, each extending the statute of limitations for one year. In dismissing the indictments, the court held that the tolling agreements were invalid and the applicable statute of limitations for securities fraud was five years, not six years.

According to the opinion, Gentile engaged in a securities fraud scheme that indisputably ended in June 2008, at which time the statute of limitations for securities fraud was five years. In 2010, however, the Dodd-Frank Wall Street Reform and Consumer Protection Act extended the statute of limitations to six years for certain criminal securities fraud violations. Gentile was charged on June 25, 2012 and arrested on July 13, 2012, i.e. four years after the criminal conduct. Under interrogation, Gentile admitted to the fraud and agreed to cooperate with the government. Gentile entered into a tolling agreement with the government that tolled the limitations period from July 31, 2012 through July 31, 2013. Gentile subsequently signed a second tolling agreement, tolling the limitations period from July 31, 2013 through July 31, 2014. Gentile, however, refused to sign a third tolling agreement because he wanted all cooperation and criminal actions to be concluded by June 30, 2015. Critically, when entering the tolling agreements, both the government and Gentile assumed the statute of limitations was five years (the limitations period in effect at the time of the criminal conduct) and not six years (the limitations period in effect at the time of the arrest). Accordingly, at the time that the second tolling agreement expired, the government would have had to indict Gentile prior to July 31, 2015.

Unable to reach a plea deal, the government indicted Gentile in March 2016 and Gentile moved to dismiss. If the statute of limitations had been six years, the second tolling agreement would have presumably given the government until July 31, 2016 to indict. The court, however, disagreed. The court first found that, “limited to the specific facts of this case,” the tolling agreements were invalid because Gentile did not have a full understanding of the waiver. Slip Op. at 6. The court reasoned that “the waivers were executed unknowingly since Defendant clearly thought he was extending his exposure to criminal prosecution by two years when in fact, if the statute of limitations was six years, he was extending the period of exposure by three years.” Slip Op. at 7. That misunderstanding rendered the waivers invalid, with the effect that the statute of limitations was not tolled. Without a toll, the government’s deadline to indict was either June 30, 2013 (under the five-year limitations period) or June 30, 2014 (under the six-year limitations period). In either event, the March 2016 indictment was untimely.

After holding that the defendant’s ignorance of the potential six-year limitations period rendered the tolling agreements invalid, the court then held that the applicable statute of limitations is in fact five years, i.e., exactly what the Gentile had thought when he entered the tolling agreements. The court relied on the presumption against retroactivity absent express congressional intent. Since the applicable section of the Dodd-Frank act “contains no discussion nor mention of retroactivity, let alone clear intent that Congress intended th[e] section to apply to crimes committed prior to its enactment[,]” the six-year limitations period is not retroactive. Because the applicable statute of limitations was five years, even if the tolling agreements were valid, the indictment was untimely, as the tolling agreements would have only extended the statute of limitations until June 30, 2015.

Update: SCOTUS Will Consider Statute of Limitations on Disgorgement

We previously wrote about how the SEC urged the Supreme Court to grant certiorari in Kokesh v. SEC, and on Friday, January 13, the Court did just that. In an order without comment, the Court granted certiorari after both the petitioner and the SEC requested the Court’s review, albeit for different reasons. While the petitioner believes he should not be subject to disgorgement for ill-gotten gains that were obtained more than five years ago, the SEC wants the Court to bring clarity to the circuit split that has developed since the Eleventh Circuit’s decision in SEC v. Graham, which held that the five-year statute of limitations applies to disgorgement. As we previously noted, the SEC argued that Graham impedes its ability to achieve uniformity in the administration of securities laws.

We will continue to monitor developments in this case, which is sure to shape the timing of future SEC enforcement investigations and actions and the remedies it will seek.

President–Elect Trump Nominates Jay Clayton For SEC Chair

On January 4, 2017, President-Elect Donald Trump announced that he intends to nominate Walter “Jay” Clayton for Chairman of the Securities and Exchange Commission (SEC). In response, Mr. Clayton stated that, “If confirmed, we are going to work together with key stakeholders in the financial system to make sure we provide investors and our companies with the confidence to invest together in America. We will carefully monitor our financial sector, as we set policy that encourages American companies to do what they do best: create jobs.”

Of the three pillars of the SEC’s mission statement – 1) protect investors; 2) maintain fair, orderly, and efficient markets; and 3) facilitate capital formation – Mr. Clayton’s deep experience as a “dealmaker” most closely aligns with the facilitation of capital formation pillar.  Chair Mary Jo White’s primary prior experience as a federal prosecutor, in contrast, most closely aligned with the protection of investors. That said, while this announcement clearly indicates the incoming administration’s focus on that third pillar, with the latter part of this statement in his announcement, the President-Elect reminded the securities industry that the Chair and SEC will remain responsible for ensuring that the rules and regulations are followed, “Jay Clayton . . . will ensure our financial institutions can thrive and create jobs while playing by the rules at the same time.”

While Mr. Clayton has strong industry knowledge and experience, his lack of enforcement experience is comparable to Chair White’s lack of experience in the SEC’s regulatory and policy areas when she was appointed. Consequently, if his nomination is affirmed, Mr. Clayton’s choice for the next Director of the Division of Enforcement will reveal much about his enforcement objectives. In the meantime, one area that Mr. Clayton appears primed to de-emphasize is the SEC’s enforcement of the Foreign Corrupt Practices Act, based on this New York City Bar Association paper that he assisted in drafting. The President-Elect will also have more to say on the future direction of the SEC with his upcoming nominations to fill the two remaining open seats on the Commission.

10th Circuit Creates Split, Finds SEC’s Use of Administrative Law Judges Unconstitutional

The 10th Circuit recently found that the SEC’s use of Administrative Law Judges (“ALJs”) violates the Appointments Clause of the Constitution, creating a split amongst federal appellate courts and making it likely the Supreme Court will weigh in on the controversy that has been building over the last two years. More specifically, the court, in Bandimere v. SEC, held in a 2-1 decision that an SEC Administrative Law Judge is an inferior officer who must be constitutionally appointed.

Bandimere, a respondent in an SEC administrative proceeding, filed a petition for review after the SEC affirmed an initial decision entered by an ALJ that found Bandimere liable for violating a number of securities laws and imposed civil penalties against him. Bandimere raised a constitutional argument before the SEC, contending that the ALJ who presided over his hearing “was an inferior officer who had not been appointed under the Appointments Clause.” Op. at 3. The SEC rejected this argument, conceding that its ALJs are not constitutionally appointed, but ruling that they are not inferior officers subject to the requirements of the Appointments Clause.

Diverging from other federal courts, the 10th Circuit set aside the SEC’s opinion affirming the ALJ’s decision, holding that SEC ALJs are inferior officers who must be constitutionally appointed. In doing so, the court relied almost exclusively on Freytag v. Comm’r of Internal Revenue, 501 U.S. 868 (1991), in which “a unanimous Supreme Court concluded [that Tax Court] STJs [special trial judges] were inferior officers.” Op. at 13–14. The Bandimere court found that “Freytag held that [special trial judges appointed by the Tax Court] were inferior officers based on three characteristics”: (1) their position was “established by law”; (2) “the[ir] duties, salary, and means of appointment . . . are specified by statute”; and (3) they “exercise significant discretion” in “carrying out . . . important functions.” Op. at 18 (quoting Freytag, 501 U.S. at 881–82). The court concluded that like STJs, SEC ALJs possess all three characteristics. Specifically, the court found that the ALJ position was established by the APA and cited various statutes that “set forth SEC ALJs’ duties, salaries, and means of appointment.” Op. at 18. As to the third factor, the court focused on an SEC ALJ’s ability “to shape the administrative record by taking testimony, regulating document production and depositions, ruling on the admissibility of evidence, receiving evidence, ruling on dispositive and procedural motions, issuing subpoenas, and presiding over trial-like hearings.” Op. at 19. The court also highlighted an SEC ALJ’s authority to render initial decisions, determine liability, impose sanctions, enter default judgments, and modify or enforce temporary sanctions imposed by the SEC. Thus, because it determined that all three factors were satisfied, the court ruled that SEC ALJs “are inferior officers who must be appointed in conformity with the Appointments Clause.” Op. at 22. Because they are not constitutionally appointed, as the SEC conceded, the court held that SEC ALJs hold their office in violation of the Constitution.

In reaching this conclusion, the Bandimere court rejected the SEC’s position that its “ALJs are not inferior officers because they cannot render final decisions and the agency retains authority to review ALJs’ decisions de novo” and disagreed with the D.C. Circuit’s holding in Raymond J. Lucia Cos., Inc. v. SEC, 832 F.3d 277 (D.C. Cir. 2016), which used the same reasoning to conclude that SEC ALJs are employees rather than inferior officers. Op. at 23–24. The Bandimere court found that this argument misreads Freytag and “place[s] undue weight on final decision-making authority.” Op. at 24. The court held that while “[f]inal decision-making power is relevant in determining whether a public servant exercises significant authority . . . that does not mean every inferior officer must possess final decision-making power.” Op. at 28. Rather, the proper focus is the extent of discretion exercised and the importance of the duties carried out by an ALJ, both of which, the court found, weighed in favor of finding that SEC ALJs are inferior officers.

Similarly, the court also refuted the dissent’s attempt to distinguish SEC ALJs from Tax Court STJs by contending that unlike those of SEC ALJs, STJs’ initial decisions were binding even when the STJs did not technically enter a final decision. Contrary to the dissent, the majority found that the Tax Court did not merely rubber stamp STJs’ initial decisions, but rather ultimately “adopted opinions they had a hand in supervising and producing.” Op. at 34. Moreover, the majority found that approximately ninety percent of SEC ALJs’ initial decisions “become final without any review or revision from an SEC Commissioner.” Op. at 35.

The dissent also expressed concern that the majority’s decision “effectively rendered invalid thousands of administrative actions.” Dissent at 11. But the majority disagreed, and stated in response that “[n]othing in this opinion should be read to answer any but the precise question before the court:  whether SEC ALJs are employees or inferior officers. Questions about officer removal, officer status of other agencies’ ALJs, civil service protection, rulemaking, and retroactivity . . .  are not issues on appeal and have not been briefed by the parties.” Op. at 36.

Furthermore, Judge Briscoe’s concurrence suggests the dissent’s concern that the majority’s decision will have a wide-sweeping detrimental effect because it calls into question the constitutionality of past decisions rendered by ALJs is likely overstated. Citing Free Enter. Fund v. Public Co. Accounting Oversight Bd., 561 U.S. 477 (2010), the concurrence highlighted that “courts normally are required to afford the minimum relief necessary to bring administrative overreach in line with the Constitution.” Concurrence at 4. For example, in Free Enterprise Fund, the Supreme Court found the SEC’s Public Company Accounting Oversight Board (“PCAOB”) created by Sarbanes-Oxley violated Article II because the Act provided for dual for-cause limitations on the removal of board members. Specifically, PCAOB members could not be removed by the SEC except for good cause shown, and SEC Commissioners themselves cannot be removed except for inefficiency, neglect of duty, or malfeasance in office. The Supreme Court noted that “such multilevel protection from removal is contrary to Article II’s vesting of the executive power in the President” and that the President “cannot ‘take Care that the Laws be faithfully executed’ if he cannot oversee the faithfulness of the officers who execute them.” Free Enter. Fund, 561 U.S. at 484. The Supreme Court, however, did not find the PCAOB unconstitutional; it merely severed the for-cause removal provision of the PCAOB appointment clause, leaving the Board itself intact. Moreover, the Court rejected the petitioner’s argument that the constitutional infirmity made all of the Board’s prior activity unconstitutional.

In addition, this principle was recently applied in PHH Corp. v. Consumer Fin. Prot. Bureau, 839 F.3d 1 (D.C. Cir. 2016), in which the D.C. Circuit, rather than abrogating the entire Consumer Financial Protection Bureau (“CFPB”), “struck the single offending clause from the CFPB’s implementing legislation [the Dodd-Frank Act]” and simply altered the structure of the CFPB so that it conformed with constitutional requirements. Concurrence at 5. As an initial matter, the D.C. Circuit found that the CFPB’s construction as an independent agency led by a single Director (as opposed to a typical multi-member board or commission) who was removable by the President only for cause violated Article II of the Constitution because the Director exercised significant executive power largely unchecked. That is, the court found that the CFPB was “unconstitutionally structured” because it lacked the “critical substitute check on the excesses of any individual independent agency head” that a traditional multi-member structure would provide. PHH, 839 F.3d at 8. But rather than “shut down the entire CFPB . . . [t]o remedy the constitutional flaw,” the court “simply sever[ed] the statute’s unconstitutional for-cause provision from the remainder of the statute.” Id. The result was that the President was given “the power to remove the Director at will, and to supervise and direct the Director” as the head of an executive agency without otherwise disturbing “the ongoing operations of the CFPB” or its ability to uphold previously entered orders. Id. at 8, 39.

These decisions suggest that even if the Supreme Court agrees with the Bandimere decision, the probable remedy will be to modify the unconstitutional characteristics of the SEC ALJ structure. For example, it may consider altering certain conditions of the ALJs’ employment relationship. See Concurrence at 5–6. Moreover, as the dissent recognized, the Supreme Court could also make “an explicit statement that the opinion does not apply retroactively.” Dissent at 15 n.9.

Since 2010, in the wake of Dodd-Frank, the SEC has consistently increased its use of administrative proceedings. It seems likely now that there is a circuit split, and Supreme Court review seems certain, the SEC may well scale back its reliance on administrative proceedings until this constitutional issue is settled.

Supreme Court Reaffirms Dirks and Tosses Prosecution a Win

In Salman v. United States, 580 U.S. __ (2016), the U.S. Supreme Court upheld Bassam Salman’s conviction, giving prosecutors a win on the first insider trading case to be heard by the Court in nearly two decades. The unanimous decision, written by Justice Samuel Alito, is short and to the point. The Court reaffirmed the continued validity of Dirks v. S.E.C., 463 U.S. 646 (1983), and determined that a tipper receives a personal benefit by providing insider information to a “trading relative or friend.”

In Dirks, the Court ruled that a tippee’s liability for trading on inside information hinges on whether the tipper breached a fiduciary duty by disclosing the information. The fiduciary duty is breached when the insider will personally benefit, directly or indirectly, from his disclosure. In Salman, the Supreme Court stated that the benefit did not have to be money, property, or something of tangible value, because “giving a gift of trading information is the same thing as trading by the tipper followed by a gift of the proceeds.”

This decision resolved a circuit split between the Ninth Circuit, which had affirmed Salman’s conviction, and the Second Circuit, which ruled in United States v. Newman, 773 F.3d 438 (2d Cir. 2014), that prosecutors had to prove that insiders received monetary or some sort of valuable benefit in exchange for disclosing information in order to convict the tippee who had used said information. The Supreme Court found that “[t]o the extent the Second Circuit held that the tipper must also receive something of a ‘pecuniary or similarly valuable nature’ in exchange for a gift to family or friends, Newman 773 F.3d at 452, we agree with the Ninth Circuit that this requirement is inconsistent with Dirks.” Yet, the Supreme Court seemed careful to imply that some portions of Newman remain good law, such as the requirement that the tippee knows the insider received a personal benefit from providing the inside information.

Despite, or perhaps because of the brevity of the opinion, questions still remain about what exactly is a benefit to the tipper. Clearly, familial connections or close friendships between the tipper and the tippee mean that prosecutors do not have to prove a specific pecuniary benefit occurred for the tipper, but would the same hold true if the tippee was a neighbor? Or, as the Second Circuit opined in Newman, an acquaintance from church or business school? The Supreme Court dodged these questions and more by deciding Salman narrowly on the facts, a model of judicial restraint in the wake of far ranging decisions like McDonell v. United States that essentially rewrote how prosecutors handle corruption cases.

The Supreme Court Appears Poised to Reaffirm Dirks v. SEC and Maintain Current Insider Trading Rules

For the first time in two decades, the Supreme Court heard oral argument in a case that could change the landscape for the government’s pursuit of insider trading violations. In Salman v. United States (Dkt. No. 15-628), the Court reviewed the government’s burden of proof when it prosecutes for insider trading. Specifically, the primary issue involves whether Salman’s “tipper” had received the kind of “personal benefit” required by precedent to hold Salman criminally liable for insider trading. The United States Court of Appeals for the Ninth Circuit affirmed Salman’s conviction. However, just two years ago, the United States Court of Appeals for the Second Circuit overturned the convictions of several insider traders because the government failed to establish that the insiders had received “a potential gain of a pecuniary or similar valuable nature.” In other words, the Second Circuit rejected governmental theories where insider tips were given to friends or even family members without any monetary gain to the insider. Thus, the Court’s ruling in Salman will also settle a current split between the Second and Ninth Circuits.

By way of background, for tipper–tippee cases, courts have determined that it is a crime for an insider with a duty of confidentiality (otherwise known as a tipper) to intentionally or recklessly provide confidential information (otherwise known as a tip) to another (otherwise known as the tippee) and to receive a personal benefit, directly or indirectly, from such action. The tippee, to be criminally liable, must also know about the confidential nature of the information (which has been breached) and the benefit the insider received. The Court specified much of these requirements in Dirks v. SEC, 463 U.S. 646 (1983), where it also stated “absent some personal gain, there has been no breach of duty to stockholders.” 

How is personal gain defined? This is the main question the Court must decide in Salman, thereby resolving the federal circuit split. In Salman, the Court seemed both unwilling to take steps away from its prior precedent and suspect of the additional sweeping arguments made by the petitioner and the government. During the petitioner’s argument, Salman’s attorney contended that a line needed to be drawn as to what constituted a personal benefit. She suggested that the Court require the benefit to be tangible—not necessarily monetary or personal—but tangible. Justice Breyer, however, countered that helping “a close family member is like helping yourself.” Justice Kennedy clarified that in the law of gifts “we don’t generally talk about benefit to the donor” but that giving to a family member “ennobles you.”

The Justices’ statements appeared to indicate that they seemed more comfortable agreeing with the government, that insider information packaged as gifts to close friends or family crossed the line into creating or manifesting personal gain for the tipper, consistent with precedent. But they appeared unwilling to go further than that, despite the government’s urging that insider trading occurs whenever the insider provides confidential information for the purpose of obtaining a personal advantage for somebody else, regardless of previous or future relationships between the tipper and tippee. The government seemed not to view the personal advantage as a gain or benefit as those words are used colloquially. Instead, the government contended that the access to and communication of the confidential information in breach of the duty of confidentiality is in and of itself “a personal gain,” “a gift with somebody else’s property.” This interpretation was met with skepticism by the Court and the government seemed to back away from its argument, stating instead that it would not seek to hold liable somebody who was “loose in their conversations but had no anticipation that there would be trading.”

Justice Alito commented disapprovingly that neither side’s argument was consistent with the Court’s precedent in Dirks. Indeed, the Court appeared worried that any outcome other than affirmance would require new lines to be drawn. Any change to the law, as a result of this case, would impact the Court’s own judicially created insider trading standard from Dirks. As Justice Kagan put it to the petitioner: “[y]ou’re asking us to cut back significantly from something that we said several decades ago, something that Congress has shown no indication that it’s unhappy with, . . . [when] the integrity of the markets are a very important thing for this country. And you’re asking us essentially to change the rules in a way that threatens that integrity.” By the end of the argument, the government basically summarized what seemed to many observers, the Court’s preference: “If the Court feels more comfortable given the facts of this case of reaffirming Dirks and saying that was the law in 1983, it remains the law today, that is completely fine with the government.”

In light of the arguments and interactions with the Justices, the Court seems most comfortable with reaffirming the standards established with Dirks. Thus, it appears that despite the ruling in Newman, Salman may have provided the Court with nothing more than an opportunity to affirm its long-standing precedent.