June 29, 2022

Volume XII, Number 180

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CA District Court: Dodd Frank Whistleblower Provision Does Not Apply Extraterritorially

On June 28, 2021, the United States District Court for the Northern District of California granted the Company’s Rule 12(b)(6) motion to dismiss after an executive claimed he was discharged in violation of the Dodd-Frank Act’s (DFA) whistleblower protection provision for alerting the Company and authorities about possible tax fraud.  Airton Amorim De Almeida v. Western Digital Corp., No. 3:20-cv-04735.  According to the court, the DFA whistleblower provision did not apply because the relevant events occurred in Brazil.

Background

Plaintiff, a citizen and resident of Brazil, brought suit against the company and a Brazilian entity that is wholly owned and operated by the Company.  While working in Brazil for the Company, Plaintiff allegedly became concerned with potentially fraudulent conduct.  He notified the SEC and the DOJ, and allegedly submitted an anonymous email to company executives alerting them of his concerns.  This resulted in both an SEC investigation and an internal investigation.

About a year after lodging his complaints, Plaintiff allegedly was “duped into” participating in a phishing scam that cost the Company $2 million.  As a result, the Company relieved Plaintiff of some of his responsibilities, and in 2017, his employment with the Company ended.  There was some disagreement with respect to whether Plaintiff was terminated or whether there was mutual agreement to end his employment.  Over two years after Plaintiff’s separation, he brought suit against the Company and its wholly owned Brazilian subsidiary, alleging whistleblower retaliation in violation of the DFA.  Both entities sought to dismiss Plaintiff’s claims.

Ruling

The court held that because Plaintiff relied on the DFA anti-retaliation provision and that provision does not apply to alleged retaliatory conduct that takes place overseas, Plaintiff failed to state a claim.  Plaintiff was a resident of a foreign country, was employed by a foreign company, and the allegedly corrupt activities took place in a foreign country.  Further, any potential adverse employment action took place in Brazil.

In addition, even though the court refused to allow such extraterritorial application of the provisions under the DFA, it could rely on the following to conclude that Plaintiff failed to allege sufficient facts to give rise to a plausible inference that he suffered adverse employment actions in retaliation for whistleblowing:  Plaintiff fell prey to a phishing scam, costing the Company $2 million, and the fact that over a year had elapsed between the alleged whistleblowing behavior and Plaintiff’s eventual separation.

Implications

This decision confirms that the DFA whistleblower protection provision does not extend extraterritorially.

© 2022 Proskauer Rose LLP. National Law Review, Volume XI, Number 315
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About this Author

Steven J Pearlman, Labor Employment Law Firm, Proskauer Law firm
Partner

Steven Pearlman is a partner in the Labor & Employment Law Department and co-head of the firm's Whistleblowing & Retaliation Group, resident in the Chicago office. Steven’s practice focuses on defending complex employment litigation involving claims of discrimination and harassment, wage-and-hour laws and breaches of restrictive covenants (e.g., non-competition agreements). He has successfully tried cases to verdict before judges and juries in Illinois, Florida and California, and defended what is reported to be the largest Illinois-only class action in the history of the U.S....

312-962-3545
Pinny Goldberg Labor and Employment Lawyer Proskauer Rose Law Firm
Associate

Pinny Goldberg is an associate in the Labor & Employment Law Department. Pinny represents employers in a broad array of matters before federal and state courts, FINRA and other arbitration panels, and administrative agencies, including the EEOC and its state equivalents, and in pre-litigation negotiations. Matters he works on include discrimination and harassment, wage and hour, wrongful discharge, whistleblowing and retaliation, covenants not to compete, breaches of fiduciary duty, unjust enrichment, and tort and contract claims. 

In...

212.969.3074
Abigail Rosenblum Employment Law Associate Proskauer Rose New York
Associate

Abigail Rosenblum is an associate in the Labor & Employment Law Department and a member of the Employment Litigation & Arbitration Group.

Abigail earned her J.D. from the University of Pennsylvania Law School, where she also completed a certificate program in business management at The Wharton School and served as a Senior Editor of the Journal of International Law. During law school, she interned for the Honorable Eduardo C. Robreno of the Eastern District of Pennsylvania.

Prior to law school, Abigail...

212.969.3854
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