One More Thing about Liu v. Siemens, the Foreign Whistleblower Case

by Brooks Pierce

Last week I wrote about the Second Circuit’s recent decision in Liu v. Siemens AG, in which the court held that the Dodd-Frank Act’s anti-retaliation provisions do not apply to whistleblowers overseas.  As I think about it, one more aspect of that opinion is probably worth mentioning.

One of the arguments the whistleblower’s lawyers made on his behalf was that because the Dodd-Frank whistleblower bounty provisions have extraterritorial application, the anti-retaliation provisions should as well.  The court was unmoved, and appeared not to care very much what the SEC thought about it.  Among other things, it said,

Given the strong presumption that statutes are limited to domestic application in the absence of clear expression of congressional intent to the contrary, it is far from clear that an agency’s assertion that a statute has extraterritorial effect, unmoored from any plausible statutory basis for rebutting the presumption against extraterritoriality, should be given deference.

Because the whistleblower was going to lose on the anti-retaliation question, the court didn’t have to resolve this one.  It assumed for the sake of argument that the bounty provisions would apply overseas.  But if they didn’t, it would be a pretty serious shot to the SEC’s whistleblower program.  Not fatal.  But it would be a tough day at the office for SEC Whistleblower Chief Sean McKessy and FCPA Unit Chief Kara Brockmeyer, who are both looking to foreign whistleblowers to supplement the tips coming from domestic sources.

To me, the interesting thing about this is that there may not be many natural opportunities for this question to be resolved by a court.  If a foreign whistleblower makes a tip to the SEC and applies for an award, the whistleblower herself will obviously want the award to be paid and would argue for extraterritorial application if necessary.  The SEC, whose whistleblower program would have to be called a success by many measures but is still in the single digits in terms of awards granted, probably also will want to pay the award to incentivize others to step forward.  The SEC certainly wouldn’t want to deny an award on the basis of the whistleblower’s location.

Given the SEC’s aggressive protection of whistleblowers’ confidentiality, the people or entities who have been exposed may not even know it was a whistleblower who started or advanced the case.  If they did know it was a whistleblower, and who it was, it’s hard for me to see how they would have standing to challenge an award.

But if two whistleblowers, one domestic and one abroad, started to fight over the same award, that’s when we might have a vehicle to answer this question.  The domestic whistleblower would surely argue that the foreign one had no legal basis to collect.  All of this sort of happened in the Anshoo Sethi case, just with two domestic whistleblowers.  In trying to protect its larger program, I suspect the SEC would submit an amicus brief on the side of the foreign whistleblower.  Anyway, that’s how it would probably happen.  But it could take a long time to get there.

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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