District Court Holds Anti-Retaliation Provision of Dodd-Frank Act Does Not Apply in Case Virtually Lacking Any U.S. Connections

A recent decision in the United States District Court for the Southern District of New York has reinforced the United States Supreme Court’s jurisprudence on the extraterritorial application of federal statutes.

In Liu v. Siemens A.G., the plaintiff asserted that he was fired as a consequence of his disclosure of business practices by his employer in connection with sales in China and North Korea that he believed to be in violation of the Foreign Corrupt Practices Act, and sought damages from Siemens under the anti-retaliation provision of the Dodd-Frank Act.  But the multinational character of the case – with almost no contacts with the United States – led the Court to grant Siemens’ motion to dismiss on the ground that the anti-retaliation provision of Dodd-Frank has no extraterritorial application.

In Morrison v. National Australia Bank, the United States Supreme Court significantly limited the extraterritorial reach of federal statutes that do not affirmatively provide for such application.  That case involved alleged fraud in the shares of an Australian bank whose shares were not sold on any American exchange, and involved purchases of those shares outside of the United States.  Though the bank had American Depositary Receipts (ADRs) the Supreme Court affirmed dismissal of the securities fraud claims in that case.

The Liu case reaffirmed this principle based on a tailor-made set of facts.  As the Court explained: “This is a case brought by a Taiwanese resident against a German corporation for acts concerning its Chinese subsidiary relating to alleged corruption in China and North Korea.”  The Court noted that the only contact with the United States was that Siemens had ADRs traded on an American exchange, just as was the case in Morrison.

In granting Siemens’ motion to dismiss, the court observed that the anti-retaliation provision of the Dodd-Frank Act is silent as to extraterritoriality – a fact that the court viewed as weighing heavily against a finding of extraterritoriality.  The court also noted that other parts of the Dodd-Frank Act do provide for extraterritoriality – making the silence of the anti-retaliation provision even more meaningful.  The court also observed that the only other court to consider this issue also ruled against extraterritorial application of this portion of the statute.

While the court engaged in a lengthy discussion of whether the disclosures at issue fell within the scope of the statute, it ultimately concluded that there was no need to resolve that issue given that the statute simply did not apply to this conduct lacking almost any connection to the United States.  The court’s decision signals a willingness of the federal judiciary – at least in the context of civil litigation – to limit the extraterritorial reach of federal statutes where Congress has failed affirmatively to provide for such an application of the statute.  On the other hand, the case leaves open the question of whether a court might rule otherwise in a case in which there were greater contacts with the United States.