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Second Circuit affirms dismissal of compliance officer retaliation suit against Siemens

The United States Court of Appeals for the Second Circuit on Thursday affirmed the dismissal of lawsuit filed by a former Siemens compliance officer in China who said the company retaliated against him after he internally reported alleged corrupt sales practices.

Meng-Lin Liu, a Taiwan citizen, said in his lawsuit filed in January 2013 in the U.S. district court in New York that by firing him, Siemens violated the whistleblower anti-retaliation provision of the Dodd‐Frank Act (15 U.S.C. § 78u‐6(h)(1)).

The trial court judge, William H. Pauley, III, granted Siemens’s motion to dismiss with prejudice, holding that the anti-retaliation provision doesn’t apply extraterritorially, and that, on the facts alleged by Liu, his civil complaint sought an extraterritorial application of the statute.

The appeals court Thursday affirmed Judge Pauley’s dismissal of Liu’s complaint. It said:

Because a statute is presumed, in the absence of clear congressional intent to the contrary, to apply only domestically, and because there is no evidence that the anti-retaliation provision is intended to have extraterritorial reach, we conclude that that provision does not apply extraterritorially. We furthermore conclude that because Liu’s complaint alleges that he was a non‐citizen employed abroad by a foreign company, and that all events allegedly giving rise to liability occurred outside the United States, applying the anti-retaliation provision to these facts would constitute an extraterritorial application of the statute.

Liu had claimed the Siemens’ China medical unit routinely engaged in kickbacks by inflating bids to sell medical-imaging equipment to hospitals in North Korea and China.

He said he raised his concerns about the practices in a variety of ways, all of them internally. In response, he claimed, he was demoted and finally fired.

Following his termination in May 2011, Liu reported the possible FCPA violations by Siemens China directly to the SEC and filed his civil action against Siemens.

In February this year, the SEC filed an amicus brief supporting Liu.

In the amicus brief, the SEC argued an issue separate from extraterritoriality — that employees who report offenses internally should be treated the same as those who report only to the SEC.

“There is no logic in creating a two-tiered system of whistleblower protections that rewards employees who report problems to the SEC but penalizes those who only complain internally, the SEC said.”

The appeals court Thursday didn’t deal with any other issues once it found that Dodd-Frank doesn’t apply extraterritorially.

The case was Liu Meng Lin v. Siemens AG (Docket No. 13‐4385‐cv, decided August 14, 2014).


Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

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