September 25, 2022

Volume XII, Number 268

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CA District Court: SOX and Dodd-Frank’s Whistleblower Provisions Do Not Apply to Individual Employed Abroad

On June 7, 2022, the United States District Court for the Northern District of California, relying on recent ARB decisions, held that a plaintiff who lived and worked for a Canadian subsidiary of a US company could not avail himself to the anti-retaliation provisions of SOX and the Dodd-Frank Act.  Daramola v. Oracle Am., Inc., No. 19-cv-07910.  In so doing, the court solidified an increasingly well-defined test for what constitutes a domestic application of these statutes.

Background

Plaintiff lived in and worked in Montreal, Canada, where he worked for Oracle Canada (the “Company”).  Following his resignation, Plaintiff sued the Company in the United States, alleging, inter alia, whistleblower retaliation in violation of SOX and Dodd-Frank.  He alleged that the Company made millions of dollars selling subscriptions for software that did not exist to colleges throughout the United States.  He further alleged that he was constructively discharged after he internally reported his concerns that the Company had engaged in fraud.  The Company moved to dismiss on the grounds that SOX and Dodd-Frank do not apply extraterritorially.

Ruling

The court first observed that the anti-retaliation provisions in both SOX and Dodd-Frank do not apply extraterritorially, i.e., outside the United States.  While the Ninth Circuit has not expressly addressed the issue, the court relied on the Second Circuit’s holding in Liu Meng-Lin v. Siemens AG, 763 F.3d 175 (2d Cir. 2014), that the anti-retaliation provisions of SOX and Dodd-Frank do not apply outside of the United States.  (See our post on Liu here.)  Indeed, as neither statute indicates any affirmative intent to apply outside the US, there appears to be little debate on this point.  See, e.g., Villanueva v. United States Department of Labor, No. 12-60122, 2014 WL 550817 (5th Cir. Feb. 12, 2014)[1] (See our post on Villanueva here.); Ulrich v. Moody’s Corp., No. 13 Civ. 00008 (VSB), 2014 WL 4977562, at *7 (S.D.N.Y. Sept. 30, 2014) (“There is no clear indication of extraterritorial application in…the anti-retaliation provision of the SOX Act.”).

The court also held that two more-recent ARB decisions which reached the same conclusion were entitled to Skidmore deference.  Specifically, in Garvey v. Morgan Stanley, ARB Case No. 2020-0034 (ARB July 16, 2021), the ARB determined that the complainant’s “daily interactions” with supervisors and colleagues in the United States, and allegations that U.S. customers were being harmed, did not demonstrate “sufficient, tangible domestic contacts” to apply SOX.  In Hu v. PTC, Inc., ARB Case No. 2017-0068 (ARB Sept. 18, 2019), the ARB similarly held that “the location of the employee’s permanent or principal worksite is the key factor to consider when deciding whether a claim is a domestic or extraterritorial application.”  At bottom, “an adverse action which affected an employee at a principal worksite abroad does not become territorial because the alleged misconduct occurred in the U.S., or because it had, or would have, effects on U.S. securities markets, or because the alleged retaliatory decision was made in the United States.”  Id.  (See our post on Garvey and Hu here).

The court concluded that because Plaintiff lived and worked in Canada, he failed to state a claim under the SOX and Dodd-Frank anti-retaliation provisions.

Implications

This decision confirms that employees of multinational employers who live and work abroad cannot invoke the whistleblower protections of SOX and Dodd-Frank.


FOOTNOTES

[1] Villaneuva v. Core Labs. NV Saybolt de Columbia Limitada, ARB Case No. 09-108, ALJ Case No. 2009-SOX-006, slip op. at 12 (ARB Dec. 22, 2011) (“Section 806(a)(1) does not allow for its extraterritorial application.”).

© 2022 Proskauer Rose LLP. National Law Review, Volume XII, Number 199
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About this Author

Lloyd B Chinn, Financial, Whistleblower Attorney, Proskauer Law Firm
Partner

Lloyd B. Chinn is a Partner in the Labor & Employment Law Department and co-head of the Whistleblowing & Retaliation Group. He litigates employment disputes of all types before federal and state courts, arbitration tribunals (e.g., FINRA, JAMS and AAA), and before administrative agencies in New York and across the country. Lloyd's practice ranges from litigating compensation disputes to defending whistleblower, discrimination and sexual harassment claims. Although he represents employers in a wide range of industries, including law, insurance, health care, consulting, media,...

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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...

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Associate

Hayden F. Bashinski earned his J.D. cum laude from the Cumberland School of Law, Samford University, where he was the Student Materials Editor for the Cumberland Law Review. Prior to attending law school, Hayden attended the University of Mississippi, and spent time studying abroad at the London School of Economics.

Hayden focuses his practice on labor and employment law matters. He has experience defending clients in matters pending before administrative personnel boards and agencies, the AAA, JAMS, FINRA, and state and federal courts. In addition to his litigation...

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