The scope of whistleblower protection under the Dodd-Frank Wall Street Reform and Consumer Protection Act remains murky for now, as the U.S. Court of Appeals for the Second Circuit on Thursday declined to address an important question about the law.
The court handed defendant Siemens AG a victory on Thursday by affirming the dismissal of a whistleblower anti-retaliation suit. But it sidestepped the question of whether whistleblower protections apply to employees who are fired after reporting problems internally but before taking complaints to the Securities and Exchange Commission.
Instead, the panel, led by Judge Gerard Lynch, chose a simpler approach, and dismissed the suit because both Siemens’ alleged bribery and its alleged retaliation occurred outside the United States. Like the district court judge who originally dismissed the case in October, the Second Circuit relied on the U.S. Supreme Court’s 2010 ruling in Morrison v. National Australia Bank that U.S. laws don’t extend to overseas conduct unless Congress explicitly crafted them to do so.
Plaintiff Liu Meng-Lin was a Taiwanese compliance officer at Siemens’ Chinese subsidiary, Siemens China Ltd. Liu claimed that company employees were funneling payments to officials in North Korea and China to further sales of medical equipment there. After he reported these concerns internally, Liu alleged, the company demoted him and then fired him. He later went to the SEC, alleging that Siemens violated the Foreign Corrupt Practices Act. Liu maintained that his firing violated the anti-retaliation provisions of Dodd-Frank.
In its ruling Thursday, the Second Circuit rejected Liu’s argument that Morrison didn’t apply because Siemens has a class of stock listed on the New York Stock Exchange. The panel also held that although Dodd-Frank gives the government the right to pursue certain cases where the conduct in question occurred abroad, that extraterritorial reach doesn’t apply to private plaintiffs.
Eric Liebeler, in in-house laywer at Siemens Corporation, handled the oral argument in June. Kirkland & Ellis partners Brant Bishop and Ragan Naresh also represent Siemens. Liu is represented by David Mair of Kaiser Saurborn & Mair.
The Dodd-Frank Act was initially silent on whether whistleblower protections apply to employees like Liu who are fired after reporting alleged violations internally. The SEC in 2011 published rules that clarified that such employees are entitled to protection under the law. Siemens and other companies, however, have argued that those rules are invalid, and the law only applies to workers who are fired after going to the SEC.
The SEC weighed in the Siemens case with an amicus brief, arguing that the Dodd-Frank protections should apply to whistleblowers like Liu.
The only appellate court that has addressed the issue is the U.S. Court of Appeals for the Fifth Circuit, which last year sided with defendant G.E. Energy (USA) and held that the law only applies to employees who are fired after reporting alleged problems to the SEC. But several districts courts, including judges in the Southern District of New York, have sided with the SEC’s more expansive reading of the law.
Plaintiffs lawyer Mair called Thursday’s ruling disappointing but noted that it leaves open the question of the type of conduct that must take place within the United States to allow the statute to apply. “For example,” he said, “the Court has left open the possibility that the statute may apply in a case where an overseas employee complains to United States executives and is retaliated against by or at the behest of those United States executives.”
Counsel for Siemens at Kirkland didn’t immediately respond to a request for comment. In a statement, a Siemens spokesperson said it was pleased with the decision. “Our investigation showed [Liu's] accusations against the company to be meritless,” the statement said. “His departure from the company resulted from legitimate performance reasons having nothing to do with his internal complaints.”