Taiwanese Siemens whistleblower not entitled to anti-retaliatory protections under Dodd-Frank, Second Circuit rules

by Jay Pate

The United States Court of Appeals for the Second Circuit recently ruled that the anti-retaliatory provisions for whistleblowers passed by Congress in the Dodd-Frank Act apply “only within the territorial jurisdiction of the United States.” The court ruled in Liu v. Siemens A.G., No. 13-4385 that foreign-based employees who report corporate misconduct on the part of multinational companies are not entitled to whistleblower protection under Dodd-Frank, even if the companies do business in the U.S.

The Second Circuit’s ruling involved the case of Men-Lin Liu, a Taiwanese citizen who formerly worked as a compliance officer for Siemens China Ltd., a Taiwan-based subsidiary of Siemens AG. In his lawsuit against Siemens, Liu alleged that he was fired after reporting improper payments that were made by Siemens employees involving the sale of medical equipment to officials in North Korea and China.

After he was fired by Siemens, Liu reported his allegations to the U.S. Securities and Exchange Commission and filed a lawsuit against Siemens with the U.S. District Court for the Southern District of New York. Liu argued that he was entitled to damages and back pay from Siemens on the grounds that his termination by the company violated the anti-retaliation provisions of the Dodd-Frank Act, which make it illegal for employers to discriminate against most whistleblowers. After his lawsuit was dismissed by the district court, Liu filed an appeal with the Second Circuit.

In ruling on Liu’s lawsuit, the Second Circuit relied heavily on the U.S. Supreme Court’s decision in Morrison v. National Australian Bank Ltd., as well as statutory presumption that domestic laws, absent affirmative Congressional intent, apply only to conduct takes place within United States jurisdiction. The court rejected Liu’s arguments that, because Siemens stock was traded on the New York Stock Exchange, it had subjected itself to regulation under the anti-retaliatory provisions of Dodd-Frank. The Second Circuit ruling stated that because the stock listing was Siemen’s only connection to the U.S. and because this listing had no meaningful connection to the allegations in Liu’s lawsuit, it was insufficient to overcome the statutory presumption of a domestic restriction to the non-retaliatory provisions of Dodd-Frank.

Financial Whistleblower Protections Under Dodd-Frank

The Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law by President Barack Obama on July 21, 2010. The law contains a number of provisions designed to safeguard the economy following the financial collapse of 2008, including laws to regarding whistleblowers who report financial misconduct to federal regulators to free them from having to make “the difficult choice between telling the truth and the risk of committing ‘career suicide.’”

Sections 748 and 922 deal specifically with the financial incentives and protections afforded to whistleblowers under Dodd-Frank. Section 922 of the law appended a new section to Securities Exchange Act of 1934 known as section 21F. Under section 21F, whistleblowers who voluntarily provide original information to the SEC about of securities law violations are eligible to receive between 10-30% of any monetary sanctions imposed by the agency in cases where these sanctions exceed $1 million.

Under Dodd-Frank, section 21F also contains provisions designed to protect financial whistleblowers from retaliation for reporting securities violations to the SEC. The law makes it illegal for a company to “discharge, demote, suspend, threaten, harass, directly or indirectly, or in any other manner discriminate against, a whistleblower” who reports violations of securities laws. Section 21F strengthens the remedies available der the Sarbanes–Oxley Act to whistleblowers who were the victims of retaliation on the part of an employer. Section 21F provides for the whistleblower’s reinstatement with their company and entitles them to recover double back pay (as opposed back pay that was recoverable under Sarbanes–Oxley), as well as attorneys’ fees and other litigation costs.

Section 748 of the Dodd-Frank Act extends similar provisions to whistleblowers who report commodities law violations to the Commodity Futures Trading Commission (CFTC). This section creates an amendment to the Commodity Exchange Act (CEA) by adding a new section to the law known as section 23, or “Commodity Whistleblower Incentives and Protections.” As with Dodd-Frank’s amendments to the Securities Exchange Act, the Commodity Whistleblower Incentives and Protections allows whistleblowers to recover 10-30% of sanctions imposed by the CFTC in excess of $1 million and provides anti-retaliatory protections to whistleblowers who report violations of the CEA to the CFTC.

Dodd-Frank also provides protections to whistleblowers who report violations related to consumer financial products or services. Section 1057 prohibits employer retaliation against whistleblowers who report violation of the Consumer Financial Protection Act of 2010 (Title X of the Dodd-Frank Act). The financial products and services covered under this provision include servicing loans, brokering leases, appraisals of real estate, transmitting or exchanging funds, debt collections, check cashing, payment processing, activities related to consumer report information, and providing financial advisory services. Employees who report violations of Consumer Financial Protection Act provisions regarding these services are entitled to reinstatement in their former position, back pay or other compensation, compensatory damages, and attorneys’ fees and other litigation costs.

Whistleblower Lawsuits Filed By Heygood, Orr & Pearson

In addition to the protections and incentives provided under Dodd-Frank for financial whistleblowers, U.S. law also provides whistleblower incentives for individuals who report fraud against the federal government. Under the False Claims Act, whistleblowers who report fraud against Medicare, Medicaid, the IRS, the FDA, or other federal agencies may be eligible to recover a portion of the final settlement awarded to the government.

The law firm of Heygood, Orr & Pearson has filed numerous qui tam lawsuits on behalf of whistleblowers who reported cases of government fraud committed by corporations or contractors hired by the government. Our attorneys have the knowledge and experience to ensure that whistleblowers receive the highest possible compensation for pursuing fraud allegations involving government agencies.

The attorneys at Heygood, Orr & Pearson have the experience, expertise, and resources to handle even the most complex claims under the False Claims Act. Our firm is AV-rated, the highest legal and ethical rating available from the leading law firm rating service. Our partners Michael Heygood, Jim Orr, and Eric Pearson are all Board Certified in Personal Injury Trial Law by the Texas Board of Legal Specialization. Mr. Heygood and Mr. Orr are additionally Board Certified in Civil Trial Advocacy Law by the National Board of Trial Advocacy. Our partners been voted by their peers as “Super Lawyers” in the state of Texas for several years in a row.*

For more information about how to pursue a claim under the False Claims Act or other state and federal laws protecting whistleblowers, contact the Heygood, Orr & Pearson for a free legal consolation. You can reach us by calling toll-free at 1-877-446-9001, or by following the link to our free case evaluation form on this website.


* Michael Heygood, James Craig Orr, Jr. and Eric Pearson were selected to the Super Lawyers List, a Thomson Reuters publication, for the years 2003 through 2014.

by Jay Pate

John “Jay” Pate is a licensed attorney who focuses his practice on complex tort litigation involving catastrophic personal injury, wrongful death, medical malpractice, and product liability cases.