No U.S. whistleblower protection for noncitizen working abroad for non-U.S. firmReprints
The Dodd-Frank Wall Street Reform and Consumer Protection Act's whistleblower provisions do not protect a noncitizen working for a foreign company on foreign soil, even if the company does sell its shares on the New York Stock Exchange, an appeals court ruled Thursday in a victory for Munich-based Siemens A.G.
Meng-Lin Liu, a citizen and resident of Taiwan, worked as a compliance officer for the health care division of Siemens China, a wholly owned subsidiary of Siemens, which is listed on the New York Stock Exchange, according to the ruling by the 2nd U.S. Circuit Court of Appeals in New York in Meng-Lin Liu v. Siemens A.G.
Mr. Liu said he discovered that Siemens employees were indirectly making improper payments to officials in North Korea and China in connection with the sale of medical equipment in those countries, which he believed violated both company policy and U.S. anticorruption measures, according to the ruling.
After he reported this conduct to his superiors, however, Siemens progressively restricted his authority as a compliance officer, demoted him and ultimately fired him, all events that took place outside the United States, according to the ruling.
Two months after his firing in 2011, he reported the allegedly corrupt conduct to the U.S. Securities and Exchange Commission, charging Siemens had violated the Foreign Corrupt Practices Act, and filed suit in U.S. District Court in New York, charging that Siemens had violated Dodd-Frank's anti-retaliation provision by firing him.
The District Court dismissed the case last year, holding in part that Dodd-Frank does not have an “extraterritorial reach.”
A three judge appellate panel of the 2nd Circuit unanimously agreed. To survive the motion to dismiss, Mr. Liu must demonstrate either that the anti-retaliation provision has a domestic application or that it is intended to apply extraterritorially, says the ruling.
On the first point, “The facts alleged in the complaint reveal essentially no contact with the United States regarding either the wrongdoing or the protected activity,” said the ruling.
To support his argument, Mr. Liu pointed to the U.S. Supreme Court’s ruling in Robert Morrison et al. v. National Australia Bank Ltd., in which the high court held that the Securities and Exchange Acts anti-fraud provision can apply to “a manipulative or deceptive device or contrivance” in connection with the purchase or a sale of a security listed on an American stock exchange.
The Supreme Court, however, dismissed the Morrison complaint despite the fact that the company had American Depository Receipts listed on the New York Stock Exchange, said the 2nd Circuit.
“Far from helping Liu, Morrison establishes that where a plaintiff can point only to the fact that a defendant has listed securities on a U.S. Exchange, and the complaint alleges no further meaningful relationship between the harm and those domestically listed securities, the listing of securities alone is the sort of ‘fleeting’ connection that ‘cannot overcome the presumption against extraterritoriality,’ ” said the appellate panel, in quoting an earlier ruling.
The appeals court also held that Dodd-Frank’s anti-retaliation provision is not intended to apply extraterritorially.
“The support for the conclusion that the anti-retaliation provision has no extraterritorial application is straightforward: There is absolutely nothing in the text of the provision … or in the legislative history of the Dodd-Frank Act that suggests that Congress intended the anti-retaliation provision to regulate the relationships between foreign employers and their foreign employees working outside the United States,” said the court, in affirming the District Court’s dismissal of the case.