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CA District Court: SOX And Dodd-Frank’s Whistleblower Provisions Do Not Apply To Individual Employed Abroad – Dodd-Frank, Consumer Protection Act



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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.

Footnote

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.”).


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

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