SDNY Holds Dodd-Frank Anti-Retaliation Provision Does Not Protect Foreign Whistleblower

On October 21, 2013, the U.S. District Court for S.D.N.Y. issued an order dismissing a whistleblower retaliation complaint under the Dodd-Frank Act.  The complaint was brought by a former Siemens AG employee against the German conglomerate, alleging that he was retaliated against for raising internal complaints regarding the company’s violations of the Foreign Corrupt Practices Act (FCPA).

Siemens initially moved to dismiss the complaint on the basis that, inter alia, the Dodd-Frank Act’s anti-retaliation provisions (1) are inapplicable to those who blow-the-whistle internally and (2) do not have extra-territorial application.

The plaintiff was the Division Compliance Officer for Siemens China, a subsidiary of Siemens AG, and resided in Taiwan.  According to his complaint, the plaintiff repeatedly raised his concerns that Siemens China was engaging in an illegal kickback scheme that violated the FCPA, through sales of medical equipment to China and North Korea.  Siemens China eventually removed the plaintiff’s responsibilities and suspended him for the remaining term of his contract.  The plaintiff only reported to the SEC after his contract had terminated.

In his order, Judge Pauley initially found that the anti-retaliation provisions of the Dodd-Frank Act do not have extra-territorial application.  The court relied on the Supreme Court’s decision in Morrison v. Nat’l Austl. Bank and the district court’s order in Asadi v. G.E. Energy in determining that the Dodd-Frank Act’s anti-retaliation provision does not apply to a foreign resident working for a foreign company in another country.  The court noted that Siemens only contact with the United States’ securities arena was that its American Depository Receipts were listed on the New York Stock Exchange.

The court drew a stark contrast between the award or bounty eligibility requirements of the Dodd-Frank Act, and the statute’s anti-retaliation provision.  The court noted that while a foreign national working in another country for a foreign company may be eligible for an award under the Dodd-Frank Act, the same person is not necessarily subject to the protections of the statute’s anti-retaliation provisions.  “The fact that a person outside the United States may be a “whistleblower” under Dodd-Frank does not compel the conclusion he is protected by the Anti-Retaliation Provision.”  The court specifically cited to SEC Rule 21F-2(b)(1)(iii), which states that a person need not qualify as a “whistleblower” for purposes of the Dodd-Frank Act’s bounty provision in order to fall within the same statute’s anti-retaliation provision.

Given the court’s decision that the Dodd-Frank Act’s anti-retaliation provision does not have extra-territorial application, it declined to determine whether the plaintiff qualified as a “whistleblower” under Dodd-Frank’s anti-retaliation provisions, given that he only reported to the SEC after he was retaliated against for his internal reporting.  The court did note the apparent disagreement between the Fifth Circuit’s decision in Asadi on one hand, and the SEC’s Rules and other district court decisions, on the other.