On August 14, the United States Court of Appeals for the Second Circuit became the first U.S. appellate court to weigh in on the extraterritorial application of the whistleblower provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.1 In Liu v. Siemens, A.G.,2 the Second Circuit affirmed the U.S. District Court for the Southern District of New York’s dismissal of a whistleblower claim on the ground that Dodd-Frank’s anti-retaliation provision had no extraterritorial effect.

Liu, a Taiwanese resident, was employed as a compliance officer for a Chinese subsidiary of Siemens, AG, a German company (whose securities were traded on the New York Stock Exchange). Liu sued Siemens for firing him after he complained about the Chinese subsidiary’s allegedly corrupt business practices in Asia. The bases for the plaintiff’s claim were his disclosures to the U.S. Securities and Exchange Commission and Dodd-Frank’s prohibition on discriminating against a whistleblower for “making disclosures that are required or protected under the Sarbanes-Oxley Act of 2002.”3

The trial court dismissed Liu’s complaint after reasoning that Dodd-Frank’s silence on the extraterritoriality question “invokes a strong presumption against extraterritoriality,” and therefore “does not apply overseas.”4 To survive a motion to dismiss, the Second Circuit required Liu to demonstrate facts showing a domestic application of Dodd-Frank or that the anti-retaliation provision is intended to apply extraterritorially.

The Court readily rejected the first alternative, finding that Liu, his employer, and all other related entities are all foreigners based abroad, the corrupt activity occurred abroad, and the retaliation occurred abroad. The alleged events revealed “essentially no contact with the United States regarding either the wrongdoing or the protected activity.”6

Thus, the Court turned to the extraterritorial application of Dodd-Frank. The Second Circuit reaffirmed that “it is a longstanding principle of American law that legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States.”7 The Court concluded that “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.”8

Although Liu is only the second case9 addressing the extraterritoriality question under Dodd-Frank’s whistleblower anti-retaliation provision, the Second Circuit’s holding may represent the beginning of a consensus in favor of limiting Dodd-Frank’s anti-retaliation protections to employees in the United States whose claims are grounded in domestic activity.

1 Pub. L. No. 111-203, 124 Stat. 1376 (2010).
2 Case No. 13-4385, 2014 WL 3953672 (2d Cir. Aug. 14, 2014).
3 15 U.S.C. § 78u-6(h)(1)(A).
4 Liu v. Siemens, AG, 978 F. Supp. 2d 325, 329 (S.D.N.Y. Oct. 21, 2013).
5 2014 WL 3953672, at *3.
6 Id.
7 Id. at *2 (citing Morrison v. Nat’l Austl. Bank Ltd., 561 U.S. 247, 255 (2010)).
8 Id. at *4.
9 See Asadi v. G.E. Energy (USA), LLC, No. 4:12-345, 2012 WL 2522599 (S.D. Tex. June 28, 2012), aff’d on other grounds, 720 F.3d 620 (5th Cir. 2013)). For details, please see the following Sutherland Legal Alert: Federal Court Bars Extraterritorial Application of Dodd-Frank’s Anti-Retaliation Provision to Whistleblowers Employed Abroad (Oct. 23, 2012), http://www.sutherland.com/NewsCommentary/Legal-Alerts/83173/Legal-Alert-Federal-Courts-Bars-Extraterritorial-Application-of-Dodd-Franks-Anti-Retaliation-Provision-to-Whistleblowers-Employed-Abroad.

Topics:  Anti-Retaliation Provisions, Appeals, Chief Compliance Officers, Dodd-Frank, Extraterritoriality Rules, FCPA, Sarbanes-Oxley, Siemens, Whistleblowers

Published In: Civil Procedure Updates, General Business Updates, International Trade Updates, Labor & Employment Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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