Whistleblower wins U.S. appeals court victory; split created

* Court: SEC notice not needed before suing under Dodd-Frank

* WPP (LSE: WPP.L - news) 's Neo@Ogilvy unit was sued over executive's firing

* U.S (Other OTC: UBGXF - news) . courts divided over scope of whistleblower protection (Adds comments throughout, Dodd-Frank details)

By Jonathan Stempel

NEW YORK, Sept 10 (Reuters) - A divided U.S. appeals court on Thursday made it easier for some corporate whistleblowers to sue over alleged retaliation, raising the prospect that the U.S. Supreme Court may need to address the issue.

By a 2-1 vote, the 2nd U.S. Circuit Court of Appeals in New (KOSDAQ: 160550.KQ - news) York revived a lawsuit in which Daniel Berman, a former finance director at the Neo@Ogilvy digital media unit of advertising company WPP Plc, claimed he was fired because he reported accounting irregularities to his superiors.

Circuit Judge Jon Newman accepted the U.S. Securities and Exchange Commission's view that Berman could seek whistleblower protection under the 2010 Dodd-Frank financial reforms, despite not having reported his concerns to the SEC before his firing.

That marked a departure from the 5th U.S. Circuit Court of Appeals in New Orleans, which in 2013 found a reporting requirement. The Supreme Court often reviews matters where circuit courts are split.

"From the employer perspective, it raises the stakes and the importance of avoiding retaliation claims," said Jill Rosenberg, an employment law partner at Orrick, Herrington & Sutcliffe in New York. "This is an issue the Supreme Court will have to decide."

Neo@Ogilvy and its lawyers did not respond to requests for comment.

Jardim, Meisner & Susser, a law firm representing Berman, said their client is "delighted" with the decision, which "gives teeth" to Dodd-Frank's anti-retaliation provisions. The 2nd Circuit covers New York, Connecticut and Vermont.

FEAR OF RETALIATION

At issue was a last-minute Dodd-Frank addition creating a private cause of action for whistleblowers whose employers retaliate against them for lawfully providing information to the SEC or making protected disclosures under the 2002 Sarbanes-Oxley governance law.

Dodd-Frank affords whistleblowers potentially larger damages and a longer statute of limitations than Sarbanes-Oxley.

Berman, 43, said he was fired in April 2013 after uncovering suspected fraud, including delayed payments and improperly recognized revenue. He went to the SEC six months later and sued in January 2014.

In December, U.S. District Judge Gregory Woods in New York dismissed Berman's lawsuit, saying Dodd-Frank's "plain language" required him to notify the SEC first.

But Newman said this would leave whistleblowers only "extremely limited" opportunities to pursue Dodd-Frank claims.

Newman said some whistleblowers might fear a "substantial risk" of retaliation by going to the SEC first, while others, including auditors and lawyers, cannot report wrongdoing to the SEC at all before telling their employers.

"We think it doubtful" that Congress intended the law to be read so narrowly, Newman wrote.

The appeals court returned the case to Woods to review the merits of Berman's retaliation claims.

"NO CASTLES FALL"

Circuit Judge Dennis Jacobs dissented, saying the law should not be twisted because the SEC thought it "sub-optimal," and noting that whistleblowers still have Sarbanes-Oxley protection.

"No markets collapse, no castles fall," he wrote. "A shorter statute of limitations may be inconvenient for some plaintiffs, but it does not threaten the entire statutory scheme."

Scott Oswald, managing principal at The Employment Law Group in Washington, which represents whistleblowers, said the decision might help companies by encouraging employees to point out wrongdoing without fear of losing their jobs.

"Good companies with robust compliance procedures ought to be able to resolve internal control weaknesses quickly, at the lowest level," he said.

Christopher Robertson, who co-chairs the whistleblower practice at Seyfarth Shaw in Boston, which defends companies, said Thursday's decision renders "almost superfluous" the protections of Sarbanes-Oxley.

"Just because you come forward doesn't mean you can't be fired," he said, "but employers still need defined processes for handling these claims, and strong documentation to show that employment decisions are not affected by whistleblowing activity."

The case is Berman v Neo@Ogilvy LLC et al, 2nd U.S. Circuit Court of Appeals, No. 14-4626. (Reporting by Jonathan Stempel in New York; editing by Chizu Nomiyama and Lisa Von Ahn)