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Volume XII, Number 181

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SDNY Dismisses Extraterritorial SOX and Dodd-Frank Whistleblower Claims

Failing to heed a powerful message from the Second Circuit, overseas plaintiffs are continuing to seek to pursue  SOX and Dodd-Frank whistleblower claims.  On September 30, 2014, the Southern District of New York in Ulrich v. Moody’s Corp.2014 U.S. Dist. LEXIS 138082 (S.D.N.Y. Sept. 30, 2014), dismissed SOX and Dodd-Frank whistleblower claims on the grounds that the statutes’ respective anti-retaliation provisions do not apply extraterritorially.

Background

Plaintiff Paul Ulrich (Plaintiff) is a US citizen and former employee of Moody’s Corporation (Company) based in Hong Kong.   During his employment, Plaintiff allegedly complained to the SEC and OSHA that the Company engaged in securities violations by disclosing non-public information in Hong Kong.  Plaintiff also allegedly voiced concern to others at the Company about the rating methodology applied to Asian securities.  After he allegedly refused certain work, in September 2012, Plaintiff was suspended without pay for 14 days and was subsequently terminated.    He then filed a whistleblower complaint under SOX and Dodd-Frank in the Southern District of New York alleging that he was retaliated against for his complaints regarding potential securities law violations.

Court’s Decision

The Court dismissed Plaintiff’s SOX and Dodd-Frank whistleblower claims, holding that the statutes’ anti-retaliation provisions do not apply extraterritorially and that his claims were not domestic because despite being a U.S. citizen, Plaintiff “had little if any connection to the United States as part of his employment.”   It noted that Plaintiff resided in Hong Kong during the entirety of his employment with the Company and that his alleged whistleblowing activities concerned “non-public information disclosed in Hong Kong” and “articles written for publication that concerned the ratings methodology applied to Indonesian corporate bond issuers, Korean government-related bond issuers and Asian steel companies.”   The Court further noted that Plaintiff’s suspension and termination occurred in Hong Kong.  Ulrich alleged that “managers in New York orchestrated retaliation,” but the Court rejected that assertion as speculative and, in any event, insufficient on its own to make the conduct domestic.

Implications

In the wake of Liu v. Siemens A.G., No. 13-cv-4385, 2014 WL 3953672 (2d Cir. Aug. 14, 2014) and Villanueva v. Core Laboratories NV, ARB Case No. 09-108, 2011 DOLSOX LEXIS 82 (DOL Dec. 22, 2011), it is clear that SOX and Dodd Frank’s anti-retaliation provisions do not apply extraterritorially.  Nevertheless, multinational employers still need to recognize that courts take a “case-by-case” approach in assessing extraterritoriality and that a more balanced mix of significant domestic and foreign elements may raise the potential for different results.

© 2022 Proskauer Rose LLP. National Law Review, Volume IV, Number 289
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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,...

212-969-3341
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
Rachel S Fischer, Labor Employment Attorney, Proskauer Law firm
Associate

Rachel Fischer is an Associate in the Labor & Employment Law department and resident in the New York office. She handles a wide range of employment litigation matters, including wage-and-hour issues, reductions in force and unlawful discrimination.

212-969-5076
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