Carnero v. Boston Scientific ( 2006 )

United States Court of Appeals
For the First Circuit
Nos. 04-1801
04-2291
RUBEN CARNERO,
Plaintiff, Appellant,
v.
BOSTON SCIENTIFIC CORPORATION,
Defendant, Appellee.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Rya W. Zobel, U.S. District Judge]
Before
Boudin, Chief Judge,
Campbell and Cyr, Senior Circuit Judges.
Edward Griffith, with whom Silvia Bolatti and Bolatti &
Griffith were on brief for appellant.
James W. Nagle, with whom Leslie S. Blickenstaff and Goodwin
Procter LLP were on brief for appellee.
January 5, 2006
CAMPBELL, Senior Circuit Judge. Plaintiff-appellant
Ruben Carnero ("Carnero") appeals from judgments of the United
States District Court for the District of Massachusetts dismissing
his federal and state law complaints against Boston Scientific
Corporation ("BSC"). Both complaints alleged that BSC had
terminated him in retaliation for "whistleblowing" -- for telling
BSC that Latin American subsidiaries had created false invoices and
had inflated sales figures. The district court determined that
Carnero, an Argentinian citizen resident in Brazil who worked for
the two BSC subsidiaries and whose whistleblowing pertained to
their alleged improprieties in Latin America, could not sue BSC
under the whistleblower protection provision contained in Title
VIII, Section 806, of the Sarbanes-Oxley Act of 2002, 18 U.S.C. §
1514A (2005). In the district court's view, that provision is
without extraterritorial effect. The court also held that Carnero
could not pursue state law claims against BSC as he "had no contact
with the defendant in Massachusetts" and as defendant did not "in
any way direct or control" his employment. For the reasons
discussed below, we affirm.
I. Background
As said, Carnero is a citizen of Argentina and currently
resides in Brazil. The defendant, BSC, is a Delaware corporation
with headquarters in Natick, Massachusetts. BSC manufactures
-2-
medical equipment and has operations in many countries throughout
the world.
In 1997, Carnero, while residing in Argentina, accepted
employment with a BSC subsidiary in Argentina, Boston Scientific
Argentina S.A. ("BSA"), an Argentinian company. His employment
agreement, entered into in Argentina although negotiated in various
countries including the United States, provided that his place of
work was BSA's headquarters (which is in Buenos Aires), that he
would be paid in pesos, and that the employment agreement was
governed by the laws of Argentina. Carnero initially worked for
BSA as Country Manager for Argentina and then served as the Latin
America Business Development Director. In 2001, he took an
assignment as Country Manager for a Brazilian subsidiary of BSC,
Boston Scientific Do Brasil Ltda. ("BSB"), while still employed by
BSA. Carnero asserts that he was terminated from BSB in August
2002, and from BSA in April 2003, in retaliation for reporting to
supervisors at BSC that BSC's Argentinian and Brazilian companies,
as well as other foreign companies, were engaged in accounting
misconduct by, inter alia, improperly inflating sales figures.
It is undisputed that Carnero was directly employed and
paid by BSC's Argentinian and Brazilian subsidiaries rather than by
BSC itself. It is also undisputed that the alleged fraudulent
conduct reported by Carnero was instituted in Latin America. But
Carnero also asserts he had an overarching employment relationship
-3-
with the United States parent, BSC, resulting from the extensive
and continuous control BSC's own Massachusetts employees allegedly
exercised over his work and duties in Latin America. He says that
he maintained contact with BSC, traveling frequently to
Massachusetts to meet with supervisors there. Carnero does not
dispute, however, that his employment duties were mainly performed
outside of the United States, nor that his immediate employers were
the two foreign subsidiaries.
In April 2003, Carnero pursued a "conciliation
proceeding" in Argentina, a prerequisite to filing suit in an
Argentinian court for statutory termination benefits from BSC and
BSA. Argentinian employees terminated without cause are entitled
to such benefits. An Argentinian mediator held a hearing with BSC,
BSA and Carnero, but a settlement could not be reached. On June
20, 2003, BSC and BSA brought their own claims in the Argentinian
court, alleging, inter alia, defamation based on Carnero's claims
of billing irregularities. On June 23, 2003, the Argentinian court
denied a preliminary injunction, finding that Carnero's claims of
"operating irregularities" had not been shown to be false or
publicized to third parties. The Argentinian action appears to be
ongoing.
On July 2, 2003, Carnero filed a complaint against BSC
with the United States Department of Labor ("DOL") pursuant to the
whistleblower protection provision contained in Title VIII, Section
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806, of the Sarbanes-Oxley Act of 2002. 18 U.S.C. § 1514A(b)(1)(A)
(providing for filing of complaint with the United States Secretary
of Labor).1 On August 8, 2003, Carnero filed a complaint against
BSC in the United States District Court for the District of
Massachusetts based on diversity of citizenship under 28 U.S.C. §
1332(a)(2) (1993 & Supp. 2005), asserting state law claims,
including breach of contract and retaliatory termination.
On December 19, 2003, the DOL issued a preliminary
decision dismissing Carnero's Sarbanes-Oxley whistleblower claim.
The DOL found that BSC was covered by the Sarbanes-Oxley
whistleblower provision because it is a publicly traded company on
the New York Stock Exchange. The DOL ruled, however, that the
whistleblower protection provision of the Act did not apply to
employees of covered companies working outside of the United
States. Carnero v. Boston Scientific Corp., 2004-SOX-22 (OSHA
Reg'l Adm'r) (Dec. 19, 2003) (citing Foley Bros., Inc. v. Filardo,
336 U.S. 281, 285 (1949) (noting that it is well settled that
"legislation of Congress, unless a contrary intent appears, is
1
The Secretary of Labor has delegated her responsibility for
receiving and investigating whistleblower complaints to the
Occupational Safety and Health Administration ("OSHA"), an agency
within the DOL. Secretary's Order 5-2002; Delegation of Authority
and Assignment of Responsibility to the Assistant Secretary for
Occupational Safety and Health, 67 Fed. Reg. 65008-01, 65008, 2002
WL 31358967 (Oct. 22, 2002); see 29 C.F.R. § 1980.103(c) (2005).
For convenience, we will frequently refer to the Secretary and OSHA
as the DOL.
-5-
meant to apply only within the territorial jurisdiction of the
United States")). Carnero then filed a complaint in the United
States District Court for the District of Massachusetts on January
7, 2004, seeking de novo judicial review of his Sarbanes-Oxley
whistleblower claim. See 18 U.S.C. § 1514A(b)(1)(B) (providing
that claimant may bring federal court action if Secretary of Labor
has not issued final decision within 180 days of filing of
complaint and there is no showing that delay is due to claimant's
bad faith).2 Both of Carnero's district court complaints sought
his reinstatement, among other relief.
BSC moved to dismiss both complaints. On March 25, 2004,
the district court dismissed Carnero's state law claims, finding
that Carnero "had no contact with the defendant in Massachusetts"
and that defendant did not "in any way direct or control" his
employment. Carnero v. Boston Scientific Corp., No. 03-11479-RWZ
(D. Mass.) (Mar. 25, 2004 endorsed order). The court subsequently
denied both Carnero's motion for reconsideration pursuant to Fed.
R. Civ. P. 59(e) and his motion to consolidate the state law action
with the federal law action pursuant to Fed. R. Civ. P. 42(a). Id.
(May 13, 2004 endorsed order). On August 27, 2004, the court
dismissed Carnero's claim brought under the whistleblower
2
Carnero also filed objections to the DOL's preliminary
findings. The DOL issued a final decision dismissing the complaint
because of the pending court action.
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protection provision of the Sarbanes-Oxley Act, after examining the
language and legislative history of the law. Carnero v. Boston
Scientific Corp., No. 04-10031-RWZ, 2004 WL 1922132 (D. Mass. Aug.
27, 2004) (citing Foley Bros., 336 U.S. at 285-86). The court
agreed with the DOL's preliminary determination that "[n]othing in
Section 1514A(a) remotely suggests that Congress intended it to
apply outside of the United States." Id. at *2. Carnero appeals
from these rulings.
II. The Federal Claim
We turn first to the dismissal of Carnero's complaint
brought under the whistleblower protection statute, 18 U.S.C. §
1514A, of the Sarbanes-Oxley Act. Insofar as we know, no court has
yet determined if this provision protects foreign citizens working
outside of the United States for foreign subsidiaries of covered
companies. The interpretation of a statute engenders our de novo
review. Bonano v. E. Caribbean Airline Corp., 365 F.3d 81, 83 (1st
Cir. 2004).
As noted, Carnero initially filed a complaint against BSC
(the parent U.S. company) with the United States Department of
Labor pursuant to 18 U.S.C. § 1514A(b)(1)(A). The DOL, acting
through its agency, OSHA, rejected this in a preliminary report, on
the ground that the whistleblower protection statute did not
protect employees of covered companies working outside of the
United States. Carnero v. Boston Scientific Corp., 2004-SOX-22
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(OSHA Reg' Adm'r) (Dec. 19, 2003), supra. No final agency report
having issued within 180 days, Carnero brought a similar complaint
against BSC in the United States District Court for the District of
Massachusetts, seeking, under the provisions of the statute, de
novo judicial review of his whistleblower claim. See 18 U.S.C. §
1514A(b)(1)(B). In its dismissal of that action, the district
court echoed OSHA's prior view that the whistleblower protection
provision of the Sarbanes-Oxley Act does not apply outside of the
United States. See supra.
A. Whether Carnero's Claim -- Apart from the Question of
Extraterritoriality -- Fits otherwise within the Terms of
the Whistleblower Protection Provision
Before proceeding to ask whether the instant
whistleblower protection provision of the Sarbanes-Oxley Act was
meant by Congress to provide extraterritorial relief, it is
sensible to ask whether Carnero's claim is of the kind that would,
if arising domestically, fit within that provision's language. If
not, little need would exist to explore the extraterritorial issue.
We conclude as an initial matter, without deciding finally, that
Carnero's claim would -- putting aside the issue of
extraterritoriality -- fit generally within the whistleblower
protection provision of 18 U.S.C. § 1514A.
The whistleblower protection provision codified in 18
U.S.C. § 1514A is a relatively small part of the Sarbanes-Oxley Act
which is composed of many separate statutes and statutory schemes
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aimed at achieving the Act's investor-protection goals. The
instant whistleblower protection statute creates an administrative
complaint procedure and, ultimately a federal civil cause of
action, designed to protect the "employees of publicly traded
companies" who lawfully "provide information . . . or otherwise
assist in an investigation regarding any conduct which the employee
believes constitutes a violation" of the federal mail, wire, bank,
or securities fraud statutes, any rule or regulation of the
Securities and Exchange Commission ("SEC"), or other provision of
the Federal law relating to fraud against the shareholders. 18
U.S.C. § 1514A(a).3
3
18 U.S.C. § 1514A(a) provides:
Whistleblower protection for employees of publicly
traded companies.--No company with a class of
securities registered under section 12 of the
Securities Exchange Act of 1934 (15 U.S.C. § 78l), or
that is required to file reports under section 15(d)
of the Securities Exchange Act of 1934 (15 U.S.C. §
78o(d)), or any officer, employee, contractor,
subcontractor, or agent of such company, may
discharge, demote, suspend, threaten, harass, or in
any other manner discriminate against an employee in
the terms and conditions of employment because of any
lawful act done by the employee--
(1) to provide information, cause information to be
provided, or otherwise assist in an investigation
regarding any conduct which the employee reasonably
believes constitutes a violation of section 1341,
1343, 1344, or 1348, any rule or regulation of the
Securities and Exchange Commission, or any provision
of Federal law relating to fraud against shareholders
. . . ; or
(2) to file, cause to be filed, testify, participate
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An individual complaining under this section of the Act
must, therefore, ordinarily be -- as Carnero alleges he is -- an
"employee" of a publicly traded company subject to the Act. Id.4
BSC is a publicly traded company listed on the New York Stock
Exchange although its two foreign subsidiaries, BSA and BSB, for
which Carnero directly worked, are not. Companies subject to the
Act are those "with a class of securities registered under section
12 of the Securities Exchange Act of 1934 (15 U.S.C. § 78l)" or
"required to file reports under section 15(d) of the Securities
Exchange Act of 1934 (15 U.S.C. § 78o(d))." Id. These
registration and reporting provisions apply to U.S. and foreign
companies listed on U.S. securities exchanges. See, e.g., Pinker
v. Roche Holdings Ltd., 292 F.3d 361, 367 (3d Cir. 2002) (noting
that foreign securities listed on U.S. securities exchanges must
abide by the Exchange Act's registration and reporting
requirements);5 see also http://www.sec.gov/divisions/corpfin/
in, or otherwise assist in a proceeding filed or
about to be filed (with any knowledge of the
employer) relating to an alleged violation [of the
above].
4
18 U.S.C. § 1514A(b), the enforcement provision, allows a
"person" who alleges discharge or discrimination in violation of
subsection (a) to seek relief. Id. § 1514A(b)(1).
5
15 U.S.C. § 78l(g)(3) (1997) allows the SEC to exempt from
that subsection "any security of a foreign issuer . . . if the
Commission finds that such exemption is in the public interest and
is consistent with the protection of investors." Also, 15 U.S.C.
§ 78o(d) (1997) provides that "[n]othing in this subsection shall
apply to securities issued by a foreign government or political
-10-
internatl/geographic.htm (listing more than one thousand foreign
companies registered and reporting with the SEC as of Dec. 31,
2003).
As noted, Carnero was directly in the employ of BSC's
foreign subsidiaries, BSA and BSB, not themselves listed foreign
companies. He claims, however, that supervision by U.S.
headquarters personnel of the parent made him an employee of BSC
also. Moreover, apart from that, the fact that he was employed by
BSC's subsidiaries may be enough to make him a BSC "employee" for
purposes of seeking relief under the whistleblower statute. The
DOL regulations pertaining to the whistleblower provision of the
Sarbanes-Oxley Act define "employee" as someone "presently or
formerly working for a [publicly-traded] company or company
representative" (emphasis supplied). The latter term is defined as
including a "contractor . . . or agent of a company." See 29
C.F.R. § 1980.101 (2005). If BSA and BSB were agents of BSC, as
seems quite possible, their own employee would fit this definition
of the parent's "employee." Hence Carnero, by virtue either of his
own asserted contacts with BSC or his direct employment by its
subsidiaries, or both, may well be an "employee" of BSC for
purposes of 18 U.S.C. § 1514A. Neither party, indeed, contests
that Carnero was a covered employee of BSC for purposes of seeking
whistleblower relief under Sarbanes-Oxley. See Collins v. Beazer
subdivision thereof."
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Homes USA, Inc., 334 F. Supp. 2d 1365, 1373 n.7 (N.D. Ga. 2004)
(holding that employee of subsidiary is covered "employee" within
meaning of 18 U.S.C. § 1514A where officers of publicly traded
parent company have authority to affect employment of subsidiary's
employees); Morefield v. Exelon Servs., Inc., 2002-SOX-2 (ALJ)
(Jan. 28, 2004) (holding that "subsidiaries, for Sarbanes-Oxley
purposes, are more than mere agents like an outside auditor or
consultant . . . [they] are an integral part of the publicly traded
company"). We shall, therefore, assume for present purposes, but
without deciding, that Carnero was a covered employee of BSC. We
shall also assume, for purposes of this appeal, again without
deciding, that there is evidence that Carnero's employment was
terminated in retaliation for conduct protected against by 18
U.S.C. § 1514A.
The whistleblower statute also makes clear that the
misconduct it protects against is not only that of the publicly
traded company itself, but also that of "any officer, employee,
contractor, subcontractor, or agent of such company," who
retaliates or otherwise discriminates against the whistleblowing
employee. See 18 U.S.C. § 1514A(a). Thus, the statute can be read
to embrace an agent-subsidiary's retaliation against a protected
employee. As Carnero may be an "employee" of BSC, supra, his
alleged retaliatory discharge by its subsidiaries for reasons
forbidden in the Act could (putting aside any question of
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extraterritorial application) violate the terms of the
whistleblower protection provision of the Sarbanes-Oxley Act.
We conclude, therefore, that if Carnero's whistleblowing
had occurred in this country relative to similar alleged domestic
misconduct by domestic subsidiaries, he might well have a potential
claim under the whistleblower protection provision of the Sarbanes-
Oxley Act. This being so, we proceed to the next question, whether
the whistleblower provision of the Act has extraterritorial effect,
so that a foreign employee such as Carnero who complains of
misconduct abroad by overseas subsidiaries, may bring suit under
the whistleblower provision of Sarbanes-Oxley against the listed
United States parent company. We think not.
B. The Presumption Against Extraterritorial Application
Carnero argues that the whistleblower protection statute,
18 U.S.C. § 1514A, should be given extraterritorial effect, so as
to allow him to pursue in federal court his whistleblower claim
brought under its provisions. He says his claim not only fits
within the literal language of the statute, supra, but that to
limit the operation of the statute to purely domestic conduct in
the United States would improperly insulate the foreign operations
of covered companies. This, he says, would frustrate the basic
purpose of the Sarbanes-Oxley Act of which the whistleblower
protection statute at issue is a part, to protect both the
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investors in U.S. securities markets and the integrity of those
markets.
While Carnero's argument has some force, it faces a high
and we think insurmountable hurdle in the well-established
presumption against the extraterritorial application of
Congressional statutes. Where, as here, a statute is silent as to
its territorial reach, and no contrary congressional intent clearly
appears, there is generally a presumption against its
extraterritorial application. E.E.O.C. v. Arabian Am. Oil Co., 499
U.S. 244, 248 (1991) ("Aramco") ("It is a longstanding principle of
American law 'that legislation of Congress, unless a contrary
intent appears, is meant to apply only within the territorial
jurisdiction of the United States.'") (quoting Foley Bros., 336
U.S. at 285); see also Small v. United States, 125 S. Ct. 1752,
1755 (2005) (recognizing that presumption is alive and well). In
the present case, whatever help to investors its overseas
application might in theory provide is offset not only by the
absence of any indication that Congress contemplated
extraterritoriality but by a variety of indications that Congress
thought the statute was limited to the territorial jurisdiction of
the United States.
The Supreme Court stated in Aramco that a court is to
assume that Congress legislates with an awareness of the
presumption against extraterritorial application. 499 U.S. at 248.
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Thus, the presumption can be overcome only if there is an
"'affirmative intention of the Congress clearly expressed.'" Id.,(quoting Benz v. Compania Naviera Hidalgo, S.A., 353 U.S. 138, 147
(1957)); see Smith v. United States, 507 U.S. 197, 204 (1993)
(requiring "clear evidence of congressional intent" to apply
statute extraterritorially). In searching for clear evidence of
Congress's intent, courts consider "all available evidence" about
the meaning of the statute, including its text, context, structure,
and legislative history. Cf. Sale v. Haitian Ctrs. Council, Inc.,
509 U.S. 155, 177 (1993).
The presumption serves at least two purposes. It
protects against "unintended clashes between our laws and those of
other nations which could result in international discord," and it
reflects the notion that when Congress legislates, it "'is
primarily concerned with domestic conditions.'" Aramco, 499 U.S.
at 248, (quoting Foley Bros., 336 U.S. at 285). The Supreme Court
has invoked the presumption in several cases involving the scope of
broad regulatory statutes. See, e.g., Sale, 509 U.S. at 173(holding that section 243(h) of Immigration and Nationality Act of
1952 did not protect aliens seized by authorities on high seas,
despite broad language in statute referring to "any alien");
Aramco, 499 U.S. at 249 (holding that the version of Title VII of
Civil Rights Act of 1964 then in force did not regulate employment
practices of U.S. firms employing U.S. citizens abroad, even though
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the statute contained broad provisions extending its prohibitions
to, for example, "any activity, business, or industry in
commerce"); Foley Bros., 336 U.S. at 285 (holding that federal
labor statute requiring an eight-hour day provision in "[e]very
contract made to which the United States . . . is a party" did not
apply to contracts for work performed in foreign countries).
To be sure, in appropriate circumstances Congress's
extraterritorial intent has on occasion been implied without
explicit statement in the text or even history. Courts, as noted,
will examine a statute's context and structure as well as its
purpose and "all available evidence" in order to determine
Congress's actual intent. Cf. Sale, 509 U.S. at 177. Carnero
would, as noted, have us find implicit evidence of Congress's
intent to apply the Act extraterritorially in the Act's purpose to
protect U.S. investors and markets against frauds. Frauds against
foreign subsidiaries uncovered by foreign whistleblowers may,
undoubtedly, threaten U.S. investors in the parent just as do
domestic frauds.
Carnero refers us to cases such as United States v.
Bowman, 260 U.S. 94, 98 (1922) (presumption against
extraterritoriality held not to limit a federal criminal statute,
the terms of which were violated by U.S. citizens when they
conspired abroad to defraud a domestic company partly owned by the
United States government). Similarly, Carnero notes that the
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Supreme Court has held the Sherman Act to apply to anti-competitive
conduct abroad "that was meant to produce and did in fact produce
some substantial effect in the United States." Hartford Fire Ins.
Co. v. California, 509 U.S. 764, 796 (1993). See also, e.g.,
Schoenbaum v. Firstbrook, 405 F.2d 200, 206 (2d Cir. 1968) (civil
antifraud provisions of the Exchange Act given extraterritorial
application to protect American investors who purchase foreign
securities on American exchanges and to protect the domestic
securities market from the effects of improper foreign transactions
in American securities).
But while the Sarbanes-Oxley purpose to protect investors
and build confidence in U.S. securities markets may be a factor
supporting extraterritorial application of the instant
whistleblower protection provision, the other pertinent factors run
strongly counter to finding an extraterritorial legislative intent.
These contrary indicia prevent our determining that Congress has
evidenced its "clear intent" for extraterritorial application. Not
only is the text of 18 U.S.C. § 1514A silent as to any intent to
apply it abroad, the statute's legislative history indicates that
Congress gave no consideration to either the possibility or the
problems of overseas application. In sharp contrast with this
silence, Congress has provided expressly elsewhere in the Sarbanes-
Oxley Act for extraterritorial enforcement of a different,
criminal, whistleblower statute. By so providing, Congress
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demonstrated that it was well able to call for extraterritorial
application when it so desired. Also in the Act, Congress has
provided expressly for the exterritorial application of certain
other unrelated statutes, tailoring these so as to cope with
problems of sovereignty and the like -- again demonstrating
Congress's ability to provide for foreign application when it
wished. Here, however, while placing the whistleblower provision's
enforcement in the hands of the DOL, a domestic agency, Congress
has made no provision for possible problems arising when that
agency seeks to regulate employment relationships in foreign
nations, nor has Congress provided the DOL with special powers and
resources to conduct investigations abroad. Furthermore, judicial
venue provisions written into the whistleblower protection statute
were made expressly applicable only to whistleblower violations
within the United States and to complainants residing here on the
date of violation, with no corresponding basis being provided for
venue as to foreign complainants claiming violations in foreign
countries.
These factors, and more, not only fail to imply a clear
congressional intent for extraterritorial application, but indicate
that Congress never expected such application. We discuss them
below.
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1. Provisions and Structure of the Sarbanes-Oxley Act
The whistleblower protection statute in 18 U.S.C. § 1514A
is one part of the Corporate and Criminal Fraud Accountability Act
of 2002. It is incorporated as Title VIII, Section 806, within the
Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, 116 Stat. 745(July 30, 2002). The Sarbanes-Oxley Act itself is a major piece of
legislation bundling together a large number of diverse and
independent statutes, all designed to improve the quality of and
transparency in financial reporting and auditing of public
companies. The Act increases criminal penalties for securities
fraud and other violations and provides for the promulgation of
codes of ethics and various other means for holding public
companies to higher reporting standards.
A major part of the Act is devoted to creating a new
body, the Public Company Accounting Oversight Board, which, serving
under the Securities and Exchange Commission, will supervise and
regulate the activities of public accounting firms. The latter, in
turn, are made responsible for auditing public companies. Unlike
the present whistleblower protection provision contained in Section
806, which makes no reference to foreign entities, Section 106 of
the Act deals expressly with foreign accounting firms, requiring
them to register with the Board if they audit public companies but
carving out exceptions tailored to difficulties inherent in U.S.
regulation of overseas professionals. See 15 U.S.C. § 7216(c)
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(2005) (providing that the SEC or the Board may, as it "determines
necessary or appropriate in the public interest or for the
protection of investors," exempt a foreign public accounting firm
from the Act). The accounting provision reflects Congress's
recognition that the application of domestic U.S. regulatory
statutes to persons abroad presents problems in addition to those
of purely domestic application, and of the need to address those
problems specifically.
Besides the whistleblower statute here at issue, found in
Section 806 of the Act, two other separate provisions in Sarbanes-
Oxley deal with whistleblower protection. Section 301 of the Act
requires the audit committees of issuers (which include foreign
issuers)6 to implement internal procedures that facilitate and
encourage "anonymous" whistleblowing by employees concerning
"questionable accounting or auditing matters." See 15 U.S.C. §
78j-1(m)(4) (2005).7 Section 301 does not, however, purport to
6
"Issuer" is defined in Section 2(a)(7) of the Act as "an
issuer (as defined in section 3 of the Securities Exchange Act of
1934 (15 U.S.C. 78c)), the securities of which are registered under
section 12 of that Act (15 U.S.C. 78l), or that is required to file
reports under section 15(d) (15 U.S.C. 78o(d)), or that files or
has filed a registration statement that has not yet become
effective under the Securities Act of 1933 (15 U.S.C. 77a et seq.),
and that it has not withdrawn." The definition of "issuer" is thus
slightly broader than the definition of companies subject to the
whistleblower protection provision, since it includes any company
that has not yet become listed on a U.S. securities exchange.
7
15 U.S.C. § 78j-1(m)(4) provides:
Complaints.--Each audit committee shall establish
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confer enforceable rights upon employees, hence does not implicate
the foreign sovereignty and other concerns, infra, raised by a
provision like Section 806 providing for an adjudicatory process
and remedies.8
The other whistleblower provision found in the Sarbanes-
Oxley Act, Section 1107, is significant here by way of contrast to
the instant Section 806. Section 1107 amended 18 U.S.C. § 1513procedures for--(A) the receipt, retention, and
treatment of complaints received by the issuer
regarding accounting, internal accounting controls,
or auditing matters; and (B) the confidential,
anonymous submission by employees of the issuer of
concerns regarding questionable accounting or
auditing matters.
8
Section 307 of the Sarbanes-Oxley Act directs the SEC to
"issue rules, in the public interest and for the protection of
investors, setting forth minimum standards of professional conduct
for attorneys appearing and practicing before the Commission in any
way in the representation of issuers," including a rule requiring
the internal reporting "of a material violation of securities law
or breach of fiduciary duty or similar violation by the company or
any agent thereof." See 15 U.S.C. § 7245 (2005). The SEC has
applied this internal reporting provision to domestic and foreign
attorneys. See 17 C.F.R. § 205.2(a)(2)(ii), (c), and (j) (2005)
(defining "attorney" to include "any person who is admitted,
licensed, or otherwise qualified to practice law in any
jurisdiction, domestic or foreign," but excepting a "non-appearing
foreign attorney"); see generally Implementation of Standards of
Professional Conduct for Attorneys, 68 Fed. Reg. 6296-01, 2003 WL
247093 (Feb. 6, 2003) (SEC Final Rule implementing Section 307).
As with Section 301, we find this provision of limited value
in discerning the geographic reach of the employee protections in
Section 806. It does not implicate the foreign sovereignty and
other concerns that are raised by a provision providing for an
adjudicatory process and remedies.
-21-
(2000 & Supp. 2005) by adding subsection (e)9 providing criminal
sanctions for retaliation against anyone giving truthful
information to law enforcement officers relating to the commission
of any federal offense.10 There is express provision for
extraterritorial jurisdiction of § 1513 including subsection (e).
See 18 U.S.C. § 1513(d) ("There is extraterritorial Federal
jurisdiction over an offense under this section."). That Congress
provided for extraterritorial reach as to Section 1107 but did not
do so as to Section 806 (the provision relevant here) conveys the
implication that Congress did not mean Section 806 to have
extraterritorial effect. See Russello v. United States, 464 U.S.
16, 23 (1983) ("'[W]here Congress includes particular language in
one section of a statute but omits it in another section of the
same Act, it is generally presumed that Congress acts intentionally
and purposely in the disparate inclusion or exclusion.'") (citation
omitted); see also Aramco, 499 U.S. at 258 ("Congress' awareness
of the need to make a clear statement that a statute applies
9
It appears that through a drafting error, Congress enacted
two subsections (e). The other subsection covers conspiracy.
10
18 U.S.C. § 1513(e) provides:
Whoever knowingly, with the intent to retaliate,
takes any action harmful to any person, including
interference with the lawful employment or
livelihood of any person, for providing to a law
enforcement officer any truthful information
relating to the commission or possible commission of
any Federal offense, shall be fined under this title
or imprisoned not more than 10 years, or both.
-22-
overseas is amply demonstrated by the numerous occasions on which
it has expressly legislated the extraterritorial application of a
statute.").
2. Legislative History
The legislative history of the instant Section 806, 18
U.S.C. § 1514A, gives no indication that Congress meant to apply
its civil whistleblower protections extraterritorially. The
relevant congressional debate focused upon concern over the lack of
whistleblower protection for private corporate employees in many
states of the union. The original version of the statute was
introduced by Senator Leahy and three cosponsors (Senators Daschle,
Durbin and Harkin) on March 12, 2002, see 148 Cong. Rec. S1783-01,
2002 WL 384616, and reported by the Committee on the Judiciary on
May 6, 2002, see S. Rep. 107-146, 2002 WL 863249. Senator Leahy
explained that the purpose of the statute was to provide federal
protection to private corporate whistleblowers, as was already done
with government employees, in light of the "patchwork and vagaries
of current state [whistleblower protection] laws." See S. Rep.
107-146, at 10 (emphasis added). Senator Leahy addressed the need
to provide federal protection where state laws failed to protect
certain private corporate whistleblowers, like Sherron Watkins, an
employee at Enron Corporation in Texas. It is pertinent to quote
Senator Leahy's statements at length:
In a variety of instances when corporate
employees at both Enron and [Arthur] Andersen
-23-
attempted to report or "blow the whistle" on
fraud, [] they were discouraged at nearly
every turn. For instance, a shocking e-mail
from Enron's outside lawyers to an Enron
official was uncovered. This e-mail responds
to a request for legal advice after a senior
Enron employee, Sherron Watkins, tried to
report accounting irregularities at the
highest levels of the company in late August
2001. The outside lawyer[] counseled Enron,
in pertinent part, as follows: You asked that
I include in this communication a summary of
the possible risks associated with discharging
(or constructively discharging) employees who
report allegations of improper accounting
practices: 1. Texas law does not currently
protect corporate whistleblowers. The [Texas]
supreme court has twice declined to create a
cause of action for whistleblowers who are
discharged * * *
. . . .
According to media accounts, this was not an
isolated example of whistleblowing associated
with the Enron case. . . . . These examples
further expose a culture, supported by law,
that discourage employees from reporting
fraudulent behavior not only to the proper
authorities, such as the FBI and the SEC, but
even internally. This "corporate code of
silence" not only hampers investigations, but
also creates a climate where ongoing
wrongdoing can occur with virtual impunity.
The consequences of this corporate code of
silence for investors in publicly traded
companies, in particular, and for the stock
market, in general, are serious and adverse,
and they must be remedied.
. . . .
Corporate employees who report fraud are
subject to the patchwork and vagaries of
current state laws, although most publicly
traded companies do business nationwide.
Thus, a whistleblowing employee in one state
may be far more vulnerable to retaliation than
-24-
a fellow employee in another state who takes
the same actions. Unfortunately, as
demonstrated in the tobacco industry
litigation and the Enron case, efforts to
quiet whistleblowers and retaliate against
them for being "disloyal" or "litigation
risks" transcend state lines. This corporate
culture must change, and the law can lead the
way. That is why S. 2010 is supported by
public interest advocates, such as the
National Whistleblower Center, the Government
Accountability Project, and Taxpayers Against
Fraud, who have called this bill "the single
most effective measure possible to prevent
recurrences of the Enron debacle and similar
threats to the nation's financial markets."
. . . .
The bill does not supplant or replace state
law, but sets a national floor for employee
protections in the context of publicly traded
companies.
Id. at 4-5, 10, 20.11
Other parts of the legislative history confirm the
legislators' focus on problems within the United States. See 148
Cong. Rec. S6436-02, S6437, 2002 WL 1466715 (July 9, 2002)
(statement of Sen. Daschle) ("People like Sherron Watkins of Enron
will be protected from reprisal for the first time under federal
law. This bill is going to help prosecutors gain important insider
11
Some amendments to the original bill (offered by Senator
Grassley and cosponsored by Senator Leahy) made its protections
more consistent with those provided to other non-government
employees, like those in the aviation industry. The original bill
was revised to exclude punitive damages and to remove a provision
that allowed immediate access to federal district courts. However,
a compromise provided corporate whistleblowers with access to
federal court in the event the Secretary of Labor fails to issue a
final decision within six months. Id. at 22, 26.
-25-
testimony on fraud and put a permanent dent in the 'corporate code
of silence.'"); id. S6439 (statement of Sen. Leahy) (emphasizing
that the Enron case "demonstrates the vulnerability of corporate
whistleblowers to retaliation under current law" by pointing to
outside counsel's memorandum that "Texas law does not currently
protect corporate whistleblowers"); 148 Cong. Rec. S6734-02, S6761,
2002 WL 1532280 (July 15, 2002) (statement of Sen. Snowe) ("[T]he
Leahy amendment grants important whistleblower protections to
company employees-like Enron's Sherron Watkins-who bravely report
wrongdoing occurring within their own corporation."); 148 Cong.
Rec. S7350-04, S7358, 2002 WL 1724193 (July 25, 2002) (statement of
Sen. Leahy) ("[W]e include meaningful protections for corporate
whistleblowers, as passed by the Senate. We learned from Sherron
Watkins of Enron that these corporate insiders are the key
witnesses that need to be encouraged to report fraud and help prove
it in court. Enron wanted to silence her as a whistleblower
because Texas law would allow them to do it."); 148 Cong. Rec.
H5462-02, H5473, 2002 WL 1724141 (July 25, 2002) (statement of Rep.
Jackson-Lee) ("S.2673 extends whistleblower protections to
corporate employees. . . . Whistleblowers in the private sector,
like Sh[e]rron Watkins, should be afforded the same protections as
government whistleblowers."); 148 Cong. Rec. S7418-01, S7420, 2002
WL 1731002 (July 26, 2002) (statement of Sen. Leahy) (repeating,
almost verbatim, his May 2002 statements in relaying the
-26-
legislative history of Section 806; emphasizing that private
corporate whistleblowers need federal protection because of "the
patchwork and vagaries of current state laws").
Carnero argues that the statute was meant to have
extraterritorial reach by pointing to a later statement by Senator
Leahy that the statute was "intentionally written to sweep broadly,
protecting any employee of a publicly traded company who took such
reasonable action to try to protect investors and the market." See
149 Cong. Rec. S1725-01, S1725, 2003 WL 193278 (Jan. 29, 2003).
Senator Leahy's overall statements that day were directed to the
White House's incorrect interpretation that a whistleblower's
disclosure to Congress would only be protected if made to a member
conducting an investigation. The specific statement cited by
Carnero, however, was once again focusing on the need for federal
protection where state law failed to protect corporate
whistleblowers. Here is the statement in context:
The law was designed to protect people like
Sherron Watkins from Enron . . . from
retaliation when they report fraud to Federal
investigators, regulators, or to any Member of
Congress. The law was intentionally written
to sweep broadly, protecting any employee of a
publicly traded company who took such
reasonable action to try to protect investors
and the market.
The reason that Senator Grassley and I know so
much about the legislative intent behind this
provision is that we crafted it together last
year in the Judiciary Committee and worked to
make it part of the Sarbanes-Oxley Act on the
Senate floor. We had both seen enough cases
-27-
where corporate employees who possessed the
courage to stand up and "do the right thing"
found out the hard way that there is a severe
penalty for breaking the "corporate code of
silence." Indeed, in the Enron case itself we
discovered an e-mail from outside counsel that
noted that the Texas Supreme Court had twice
refused to find a legal protection for
corporate whistleblowers and that implicitly
gave Enron the go ahead to fire Ms. Watkins
for reporting accounting irregularities.
Id. (emphasis added).
The legislative history thus suggests that Congress was
concerned about providing whistleblower protections for corporate
employees in the various states. Nowhere in the legislative
history is there any indication that 18 U.S.C. § 1514A was drafted
with the purpose of extending to foreign employees working in
nations outside of the United States the right to seek
administrative and judicial civil relief under the Act. While the
legislative history contains repeated references to the "states,"
particularly Texas, there are no parallel references to foreign
countries.12 See Foley Bros., 336 U.S. at 286-87 (holding that
federal Eight Hour Law did not apply overseas where legislative
history revealed that Congress was primarily concerned with
domestic employment conditions).
12
The legislative history also indicates that the whistleblower
protections for corporate employees were meant to closely track the
protections offered to airline employees under the Wendell H. Ford
Aviation Investment and Reform Act for the 21st Century ("AIR21"),
49 U.S.C. § 42121 (2005). See S. Rep. 107-146, at 26. We have
found no indication that AIR21's whistleblower protections apply
extraterritorially.
-28-
By contrast, the legislative history of certain other
provisions of the Sarbanes-Oxley Act shows that Congress expressly
considered the application of those provisions to foreign entities.
For instance, Section 106, whose text as already mentioned applies
to foreign public accounting firms, also has history revealing
Congress's thoughts in applying that statute abroad. See S. Rep.
107-205, at 11, 2002 WL 1443523 (July 3, 2002). Senator Sarbanes
stated:
Companies that sell shares to U.S. investors,
and are subject to the federal securities
laws, can be organized and operate in any part
of the world. Their financial statements are
not necessarily audited by U.S. accounting
firms, and the Committee believes that there
should be no difference in treatment of a
public company's auditors under the bill
simply because of a particular auditor's place
of operation. Otherwise, a significant
loophole in the protection offered U.S.
investors would be built into the statutory
system.
Thus, accounting firms organized under the
laws of countries other than the United States
that issue audit reports for public companies
subject to the U.S. securities laws are
covered by the bill in the same manner as
domestic accounting firms, subject to the
exemptive authority of both the [Public
Company Accounting Oversight] Board and the
SEC.
Section 302 of the Act provides that a company's
principal executive officers and principal financial officers, or
persons performing similar functions, must certify the material
-29-
completeness and accuracy of SEC filings. See 15 U.S.C. § 7241(2005). While the statute itself does not indicate whether
officers of both U.S. and foreign companies are covered, its
legislative history is suggestive on the subject. See 148 Cong.
Rec. S6687-01, S6698, 2002 WL 1486863 (July 12, 2002). Senator
Graham stated:
If companies are being publically traded in
the United States, regardless of where their
headquarters are located, they ought to be
required to meet the same level of
accountability that we are establishing for
everyone else in this legislation.
Other parts of the legislative history reveal Congress's
sensitivity to the application of some of the Act's provisions to
foreign entities. Some members of Congress, for instance, were
reluctant to impose U.S. corporate reforms on countries with
adequate or superior corporate governance regimes. See 148 Cong.
Rec. S7350-04, S7356, 2002 WL 1724193 (July 25, 2002). Senator
Enzi commented:
I believe we need to be clear with respect to
the area of foreign issuers and their coverage
under the bill's broad definitions. While
foreign issuers can be listed and traded in
the U.S. if they agree to conform to GAAP and
New York Stock Exchange rules, the SEC
historically has permitted the home country of
the issuer to implement corporate governance
standards. Foreign issuers are not part of
the current problems being seen in the U.S.
capital markets, and I do not believe it was
the intent of the conferees to export U.S.
standards disregarding the sovereignty of
other countries as well as their
-30-
regulators. . . . Under the conference report,
section 3(a) [which was enacted] gives the SEC
wide authority to enact implementing
regulations that are "necessary or appropriate
in the public interest." I believe it is the
intent of the conferees to permit the
Commission wide latitude in using their
rulemaking authority to deal with technical
matters such as the scope of the definitions
and their applicability to foreign issuers.
The foregoing show Congress's keen awareness of the
application of some of the Sarbanes-Oxley Act provisions to
entities in other countries and of the associated problems.
Accordingly, Congress's complete silence as to overseas application
of the instant whistleblower protection provision (combined with
Congress's repeated reference to the need for that provision to
supplement state enforcement), provides significant indication that
Congress did not intend 18 U.S.C. § 1514A to apply
extraterritorially.
3. Other Factors
Other factors lend support to the conclusion that the
whistleblower protection provision in 18 U.S.C. § 1514A was not
meant to apply extraterritorially.
a. Problems of Extraterritorial Enforcement
If the whistleblower protection provision is given
extraterritorial reach in a case like the present one, it would
empower U.S. courts and a U.S. agency, the DOL, to delve into the
employment relationship between foreign employers and their foreign
-31-
employees. Carnero, whose direct employers were two Latin American
corporations, has asked the United States district court for, among
other relief, his reinstatement. The door would thus be opened for
U.S. courts to examine and adjudicate relationships abroad that
would normally be handled by a foreign country's own courts and
government agencies pursuant to its own laws. In enacting other
laws that affect employment relationships extraterritorially,
members of Congress have recognized "the well-established principle
of sovereignty . . . that no nation has the right to impose its
labor standards on another country." See S. Rep. 98-467, at 27-28
(1984), reprinted in 1984 U.S.C.C.A.N. 2974, 3000-01 (limiting age
discrimination law's extraterritorial reach to U.S. citizens
employed by U.S. corporations or their subsidiaries in countries
that do not have inconsistent laws); see also Foley Bros., 336 U.S.
at 578 (noting that "labor conditions [of its own citizens] are the
primary concern of a foreign country"). We believe if Congress had
intended that the whistleblower provision would apply abroad to
foreign entities, it would have said so, and certainly would have
considered, before enacting the law, the problems and limits of
extraterritorial enforcement. Yet Congress did not at any time
discuss the interest other countries would have in regulating these
employment relationships, nor did Congress include in the
whistleblower provision any mechanism for resolving potential
conflicts with foreign labor laws and procedures. Congress's
-32-
complete silence suggests that it had no thought or intention to
apply this provision to foreign employees and entities as now
proposed.
Further suggestive of Congress's lack of extraterritorial
intent is its failure to provide any mechanism for enforcing the
whistleblower protections in a foreign setting. Congress did not
grant, or even discuss the granting of, extraterritorial
investigatory powers to the Department of Labor, the agency charged
with administering whistleblower complaints.13 See Aramco, 499 U.S.
at 256 (concluding that Congress's restrictive intent as to
geographic reach of Title VII was evidenced by lack of
extraterritorial venue and other enforcement mechanisms in
statute). No reference is made to providing for interpreters, for
coordinating with the Department of State, or for the utilization
of foreign personnel. Significantly, the DOL is given only sixty
days to complete its entire investigation of a complaint and to
issue findings under the procedure mandated by 49 U.S.C. §
42121(b)(2)(A).14 See 18 U.S.C. § 1514A(b)(2). This short time
13
The DOL has been charged with administering whistleblower
complaints in a variety of employment contexts, even where another
agency, having the technical expertise in the subject area of the
complaints (such as the SEC here), has overall control. See, e.g.,
Kansas Gas & Elec. Co. v. Brock, 780 F.2d 1505, 1509 (10th Cir.
1985) (noting that DOL administers nuclear energy employee
whistleblower complaints, even though the Nuclear Regulatory
Commission has expertise on nuclear issues).
14
49 U.S.C. § 42121(b)(2)(A) provides, in relevant part:
-33-
frame seems unrealistic if the DOL were expected to conduct
investigations overseas.15 Moreover, if an administrative hearing
is held, the hearing "shall be conducted expeditiously" under 49
U.S.C. § 42121(b)(2)(A). See id. There is no provision either for
the resources or the flexibility that might be needed in dealing
with foreign matters; and, as said, the legislative history
contains no discussion of this or other problems likely to arise
had Congress meant this provision to apply outside the territorial
United States. The statute, it must be remembered, protects a
whistleblowing employee from retaliation or other discrimination by
a publicly traded company, or "any officer, employee, contractor,
Not later than 60 days after the date of receipt of
a complaint filed under paragraph (1) and after
affording the person named in the complaint an
opportunity to submit to the Secretary of Labor a
written response to the complaint and an opportunity
to meet with a representative of the Secretary to
present statements from witnesses, the Secretary of
Labor shall conduct an investigation and determine
whether there is reasonable cause to believe that the
complaint has merit and notify, in writing, the
complainant and the person alleged to have committed
a violation of subsection (a) of the Secretary's
findings.
15
While other whistleblower protection statutes provide for a
sixty-day investigation time frame, see Procedures for the Handling
of Discrimination Complaints Under Section 806 of the Corporate and
Criminal Fraud Accountability Act of 2002, Title VIII of the
Sarbanes-Oxley Act of 2002, 69 Fed. Reg. 52104-01, 52108, 2004 WL
1876043 (Aug. 24, 2004) ("Sarbanes-Oxley Regulations") (citing
AIR21 and the Surface Transportation Assistance Act), to our
knowledge, none of these statutes have been applied
extraterritorially to employees resident and working outside of the
United States.
-34-
subcontractor, or agent of such company." Id. § 1514A(a). If the
statute has extraterritorial effect, this broad coverage would
create an expansive class of potential whistleblowers by extending
its protections to countless employees in countless areas around
the world. And yet, there is no discussion about the increased
administrative and logistical burdens that would fall on the DOL to
administer such a far-reaching statute. These omissions are
striking. They indicate that Congress did not focus on the
possibility of extraterritorial application, with its attendant
problems.
b. The Venue Provisions Contemplate Domestic Claims Only
The whistleblower provision in question includes venue
provisions instructing as to the particular federal court within
which judicial claims are to be brought. There is no venue
provision specifically tailored to claims based on conduct abroad,
and, significantly, two of the venue provisions for various stages
of court review would exclude foreign claims of the instant sort.
For whistleblower complaints brought under 18 U.S.C. §
1514A, the Act incorporates by reference the procedural structure
for whistleblower complaints filed with the United States
Department of Labor under the Wendell H. Ford Aviation Investment
and Reform Act for the 21st Century ("AIR21"), 49 U.S.C. § 42121(2005). Id. § 1514A(b)(2)(A) ("An action under paragraph (1)(A)
shall be governed under the rules and procedures set forth in
-35-
section 42121(b) of title 49 United States Code.").16 AIR21
contains nothing prescribing a federal venue for whistleblower
complaints or appeals based on conduct abroad, brought by employees
resident and working in a foreign country. While de novo review,
such as in this case, may be sought "in the appropriate district
court of the United States," the "appropriate court" is not
defined, 18 U.S.C. § 1514A(b)(1)(B). 49 U.S.C. § 42121(b)(6) and
related provisions suggest that the appropriate court is one in the
jurisdiction of which the whistleblower violation occurred or the
complainant resided. Hence 49 U.S.C. § 42121(b)(4)(A) provides
that appeal from the Secretary's final order should be directed to
the federal court of appeals "for the circuit in which the
violation, with respect to which the order was issued, allegedly
16
The "Whistleblower Protection Program" under AIR21 provides
for: (1) the filing of a complaint with the Secretary of Labor
alleging retaliatory discharge or discrimination; (2) an
opportunity for the person named in the complaint to submit a
written response and meet with a representative of the Secretary to
present witness statements; (3) an investigation by the Secretary
into the merits of the complaint; (4) a preliminary order by the
Secretary providing relief, including reinstatement, if there is
reasonable cause to believe a violation occurred, (5) the
opportunity to file objections and request a hearing; (6) a final
order by the Secretary providing relief or denying the complaint;
(7) appellate court review of the Secretary's final order; and (8)
enforcement of the final order in the federal district court by the
Secretary or parties. See 49 U.S.C. § 42121(b).
The DOL regulations implementing AIR21 and Sarbanes-Oxley
whistleblower protection provisions provide for the receipt and
investigation of complaints by OSHA, hearings by the Office of
Administrative Law Judges, and appeals of ALJ decisions by the
Administrative Review Board (all acting on behalf of the Secretary
of Labor). See 29 C.F.R. pt. 1980 (2005) (Sarbanes-Oxley
Regulations); 29 C.F.R. pt. 1979 (2005) (AIR21 Regulations).
-36-
occurred or the circuit in which the complainant resided on the
date of such violation." Section 42121(b)(5) provides that the
Secretary may enforce a final order by filing a civil action "in
the United States district court for the district in which the
violation was found to occur." Even if the "appropriate court"
language is broadly construed to allow venue at a stage like the
present, the above restrictive venue provisions would deny venue at
other key stages of proceedings instituted by a foreign employee.
For Congress to have deliberately created such a discrepancy would
seem highly improbable. It is more likely Congress simply did not
contemplate the filing of administrative complaints by foreign
employees working abroad, and hence enacted no comprehensive set of
venue provisions suited to that eventuality.
c. The Department of Labor's Preliminary Rulings
The DOL has not issued any policy statement on the
geographic reach of the whistleblower protection statute. Indeed,
the DOL has declined to make a statement of policy. When asked by
commentators prior to the promulgation of its final regulations to
exclude from the statute's coverage employees working outside of
the United States, the DOL replied: "The purpose of this rule is
to provide procedures for the handling of Sarbanes-Oxley
discrimination complaints; this rule is not intended to provide
statutory interpretations." See Sarbanes-Oxley Regulations, 69
Fed. Reg. 52104-01, 52105, 2004 WL 1876043 (Aug. 24, 2004).
-37-
OSHA's Regional Administrator and the DOL's
Administrative Law Judges, however, have held on at least three
occasions (in this case and two others) while adjudicating
whistleblower complaints under 18 U.S.C. § 1514A that the statute
does not apply extraterritorially to employees working outside of
the United States, based on their examination of the statute and
their interpretation of the case law. See Carnero v. Boston
Scientific Corp., 2004-SOX-22 (OSHA Reg'l Adm'r) (Dec. 19, 2003);
Concone v. Capital One Fin. Corp., 2005-SOX-6 (ALJ) (Dec. 3, 2004);
Ede v. Swatch Group, 2004-SOX-68, 2004-SOX-69 (ALJ) (Jan. 14,
2005). These determinations suggest at least the misgivings of the
designated enforcement agency about interpreting 18 U.S.C. § 1514A
as embracing extraterritorial enforcement.
4. No Clear Expression of Congressional Intent
Whether to confer extraterritorial effect is a policy
choice for Congress. Our role is limited to ascertaining
Congress's intent. "In essence, [the foreign claimant such as
Carnero] asks this court to conclude that Congress balanced [the
provision's] important goals against the foreign sovereignty
concerns that underlie the presumption against extraterritoriality,
considered the implications of application abroad and then
addressed these concerns by inviting courts to read between the
lines." Boureslan v. Aramco, Arabian Am. Oil Co., 892 F.2d 1271,
1274 (5th Cir. 1990) (en banc), aff'd sub nom. E.E.O.C. v. Arabian
-38-
Am. Oil Co., 499 U.S. 244 (1991). For the reasons stated above, we
see no indication that Congress entered into any such balancing.
To the contrary, it made no reference to application abroad and
tailored the relevant statute to purely domestic application. We
hold that 18 U.S.C. § 1514A does not reflect the necessary clear
expression of congressional intent to extend its reach beyond our
nation's borders.17 We hold, therefore, that the district court
properly dismissed Carnero's complaint under 18 U.S.C. § 1514A.
III. The State Law Claims
We turn next to the dismissal of Carnero's claims under
Massachusetts law for, among other things, breach of contract and
retaliatory termination. The district court based the dismissal on
two factual findings: (1) Carnero "had no contact with the
defendant in Massachusetts," and (2) "defendant [did not] in any
way direct or control plaintiff [in his employment]." Carnero, No.
03-11479-RWZ (D. Mass.) (Mar. 25, 2004 endorsed order).
Carnero argues that these findings are not supported by
the record. We need not decide the correctness of these findings,
however, because we agree with BSC that we may affirm the district
17
We decide this case necessarily on its own facts. One can
imagine many other fact patterns that may or may not be covered by
our reasoning in today's decision. We do not, for example, decide
today whether Congress intended to cover an employee based in the
United States who is retaliated against for whistleblowing while on
a temporary assignment overseas. That issue is not before us as
Carnero was a resident of Argentina and Brazil directly employed by
foreign companies operating in those countries.
-39-
court's judgment based on an alternative ground presented below in
BSC's motion to dismiss the complaint: that BSA is an indispensable
party under Fed. R. Civ. P. 19 and could not be joined without
destroying the court's diversity jurisdiction. See Gabriel v.
Preble, 396 F.3d 10, 12 (1st Cir. 2005) (noting that appellate
court may affirm order of dismissal on any ground fairly presented
by the record); see also Am. Fiber & Finishing, Inc. v. Tyco
Healthcare Group, LP, 362 F.3d 136, 138-39 (1st Cir. 2004) (noting
that challenge to federal subject matter jurisdiction may be
considered for the first time on appeal).
Even assuming that BSC played a significant role in
Carnero's employment, it is clear from Carnero's complaint that
Carnero worked for BSA, was paid by BSA, complained about alleged
billing irregularities at BSA, was terminated from BSA, and seeks
to be reinstated at BSA. BSA is obviously needed for a full and
just adjudication of this dispute, and could not be joined without
destroying the court's diversity jurisdiction because BSA and
Carnero are both Argentinian citizens. See, e.g., H.D. Corp. of
P.R. v. Ford Motor Co., 791 F.2d 987, 993 (1st Cir. 1986) (reciting
Fed. R. Civ. P. 19(b) factors and affirming dismissal of action
where non-diverse parent company was indispensable party in part
because it was signatory to agreements at issue).18
18
Carnero does not present any argument on appeal as to why BSA
should not be treated as an indispensable party. He merely argues
that we should reverse and remand the state law action to the
-40-
For the foregoing reasons, the judgments of the district
court are affirmed.
So Ordered.
district court for further factual findings. No additional
findings are required, though, given the nature of Carnero's
relationship with BSA as alleged in his complaint. And, although
Carnero includes a brief reference in his reply brief to an
argument he raised below regarding BSA's necessity as a party, we
find that argument waived, see Hoult v. Hoult, 373 F.3d 47, 53 (1st
Cir. 2004) (noting that appellant cannot raise argument for first
time in reply brief); United States v. Bongiorno, 106 F.3d 1027,
1034 (1st Cir. 1997) (noting that court will not consider argument
raised in perfunctory manner), and without merit in any event.
-41-