First Circuit rules that civil whistleblower provision in Sarbanes-Oxley Act does not provide remedy for foreign employee's discharge resulting from reporting to U.S. parent company dishonest behavior by fellow employees of foreign subsidiaries
Ruben Carnero (plaintiff), an Argentine citizen residing in Brazil, sued Boston Scientific Corporation (BSC or defendant), a Delaware corporation with its headquarters in Massachusetts in the federal court in that state. BSC manufactures medical equipment.
In 1997, the Argentine subsidiary, Boston Scientific Argentina S.A. (BSA) hired plaintiff, and later on he also served as the Country Manager for a Brazilian subsidiary of BSC.
Plaintiff had informed BSC that its Latin American subsidiaries had created false invoices and had inflated sales figures. The complaint alleged that the defendant had fired him in retaliation for his "whistleblowing."
The district court dismissed plaintiff's federal and state law claims, holding that the whistleblower protection under Title VIII, Section 806, of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1514A (2005), does not apply extraterritorially. As for his state law claims, the court found that plaintiff had no contact at all with defendant in Massachusetts. Plaintiff appealed but the U.S. Court of Appeals for the First Circuit affirms.
The Court first points out that no court has yet addressed the extraterritorial application of a whistleblower claim under 18 U.S.C. Section 1514A. As a threshold matter, the Court determines that plaintiff's claim would otherwise fit within the whistleblower protection of the statute. Section 1514A applies to employees of publicly traded companies who lawfully "provide information ... or otherwise assist in an investigation regarding any conduct which the employee believes constitutes a violation" of the federal mail, wire, bank, or securities laws and regulations.
"The whistleblower statute ... makes clear that the misconduct it protects against is not only that of the publicly traded company itself, but also that of "any officer, employee, contractor, subcontractor, or agent of such company,' who retaliates or otherwise discriminates against the whistleblowing employee. See 18 U.S.C. Section 1514A(a). Thus, the statute can be read to embrace an agent-subsidiary's retaliation against a protected employee. As Carnero may be an "employee' of BSC, ... his alleged retaliatory discharge by its subsidiaries for reasons forbidden in the Act could (putting aside any question of extraterritorial application) violate the terms of the whistleblower protection provision of the Sarbanes-Oxley Act." [Slip op. 7]
The Court concludes, however, that the relevant provisions of The Act do not have an extraterritorial impact. " ... [W]hile the Sarbanes-Oxley purpose to protect investors and build confidence in U.S. securities markets may be a factor supporting extraterritorial application of the instant whistleblower protection provision, the other pertinent factors run strongly counter to finding an extraterritorial legislative intent. These contrary indicia prevent our determining that Congress has evidenced its "clear intent' for extraterritorial application. Not only is the text of 18 U.S.C. Section 1514A silent as to any intent to apply it abroad, the statute's legislative history indicates that Congress gave no consideration to either the possibility, or the problems , of overseas application."
"In sharp contrast with this silence, Congress has provided expressly elsewhere in the Sarbanes-Oxley Act for extraterritorial enforcement of a different, criminal, whistleblower statute. By so providing, Congress demonstrated that it was well able to call for extraterritorial application when it so desired. Also in the Act, Congress has provided expressly for the exterritorial application of certain other unrelated statutes, tailoring these so as to cope with problems of sovereignty and the like -- again demonstrating Congress's ability to provide for foreign application when it wished."
"Here, however, while placing the whistleblower provision's enforcement in the hands of the [Department of Labor (DOL)], a domestic agency, Congress has made no provision for possible problems arising when that agency seeks to regulate employment relationships in foreign nations, nor has Congress provided the DOL with special powers and resources to conduct investigations abroad. Furthermore, judicial venue provisions written into the whistleblower protection statute were made expressly applicable only to whistleblower violations within the United States and to complainants residing here on the date of violation, with no corresponding basis being provided for venue as to foreign complainants claiming violations in foreign countries." [Slip op. 9-10]
Citation: Carnero v. Boston Scientific Corp., Nos. 04-1801 & 04-2291 (1st Cir. January 5, 2006).
USA visa and immigration information is available at www.immigrationtelevision.com.
|
