The World in U.S. Courts: Winter 2014 - Foreign Corrupt Practices Act (FCPA)/Dodd-Frank Act Anti-Retaliation Provision
The plaintiff, Liu, is a former employee of Siemens in China who claims he was fired as a result of bringing to Siemens’ attention a kickback scheme involving healthcare products in China and North Korea that allegedly violated the U.S. Foreign Corrupt Practices Act (FCPA). He sued Siemens in federal court in Texas under the Dodd-Frank Act’s anti-retaliation provision, which prohibits employees of public companies from being adversely affected by their reporting of alleged violations of the securities laws. The court found that it had no jurisdiction, based on two alternative grounds.
First, the court applied the Supreme Court’s Morrison extraterritoriality test, which presumes that a statute is not intended to act on conduct outside the U.S. absent evidence to the contrary. The court observed that certain provisions of the Dodd-Frank Act do expressly provide for extraterritorial application, but the retaliation provision is not one of them, suggesting the absence of extraterritorial intent. Also, the court observed that the only connection between the claim and the U.S. was that Siemens’ securities were traded on U.S. exchanges, and on this basis saw an insubstantial link to U.S. interests.
Second, the court considered whether the Dodd-Frank Act covered alleged retaliation for reporting FCPA violations. Concluding that the statute required at least an allegation that the retaliation was part of a scheme to deceive stockholders, the court found jurisdiction not to attach on this alternative ground.