Extraterritorial Application of SOX Whistleblower Law
Some courts have held that SOX whistleblower protection does not apply extraterritorially, but in certain circumstances, the whistleblower protection provision of SOX can apply to covered employees working outside the United States. One of our attorneys prevailed in defeating a dispositive motion in a SOX case on the issue of extraterritoriality where the employee of a US public company worked abroad but 1) blew the whistle to senior management working in the US headquarters and 2) management in the US office played a role in the decision to terminate the whistleblower’s employment.
Recently the ARB held in Perez v. Citigroup, Inc., ARB No. 2017-0031, ALJ No. 2015-SOX-00014 (ARB Sept. 30, 2019) (per curiam) that Section 806 does not apply extraterritorially and that applying Section 806 outside the United States could lead to conflict with the laws of foreign nations and potentially inconsistent results for employees. According to the current ARB, the key factor to consider is the location of the employee’s permanent or principal worksite.
However, the ARB that served during the Obama Administration took a broader view of SOX extraterritorial jurisdiction and interpreted the scope of SOX protection in light of the purpose of the statute. In particular, the Obama-era ARB held in Blanchard v. Exelis Systems Corp., ARB No. 15-031, ALJ No. 2014-SOX-20 (ARB Aug. 29, 2017) that Section 806 of SOX is a securities statute (not just an employment statute) and therefore there is no presumption limiting its application to U.S. territory. Judge Brown concluded: “It is by analyzing the Sarbanes-Oxley Act as a whole that one finds Congress’s intent to protect both domestic and foreign-based employees of U.S. domestic or foreign publicly traded companies who ‘blow the whistle’ on activity the employee reasonably believes violates one or more of the ‘predicate’ acts or provisions of Section 806, provided the alleged wrongdoing of which the employee complains involves U.S. domestic violations of the ‘predicate’ act or provision unless the ‘predicate’ act/provision itself extends its reach extraterritorially.”
In January 2018, the Second Circuit affirmed the dismissal of a SOX whistleblower case where the plaintiff Paul Ulrich, a United States citizen who sometimes interacted with Moody’s United States managers, was an overseas permanent resident working for a foreign subsidiary of Moody’s, and the alleged wrongdoing and protected activity took place outside the United States. The non-precedential order in Ulrich v. Moody’s Corp. is available here.
In a SOX case litigated in the Southern District of New York, the court permitted an employee of Accenture working in France to proceed with her claim. O’Mahony v. Accenture Ltd and Accenture LLP, 07 Civ. 7916 (S.D.N.Y. Feb. 5, 2008). The plaintiff alleged that the retaliation against her occurred in the United States and the conduct about which she complained, a scheme to evade social security taxes owed to France, also occurred in the United States. Weighing the pertinent material acts (the commission of the alleged fraud and the decision by Accenture LLP to retaliate against O’Mahon) against the fact that O’Mahony was employed in France and that Accenture SAS allegedly carried out the retaliation against O’Mahony at the command of Accenture LLP, the court found that “the center of gravity of the alleged misconduct was located within the United States.”
Remedies for SOX Whistleblowers
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The whistleblower lawyers at Zuckerman Law have substantial experience litigating Sarbanes Oxley whistleblower retaliation claims and have achieved substantial recoveries for officers, executives, accountants, auditors, and other senior professionals. To schedule a free preliminary consultation, click here or call us at 202-262-8959.
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