Carnero v. Boston Scientific

• Court: Court of Appeals for the First Circuit
• Decided: January 5, 2006
• Docket: 04-1801
• Status: Published

Opinion

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

-4- 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.

-6- 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

-7- (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

-8- 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

-9- 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."

-11- 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

-12- 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

-13- 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.

-14- 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

-15- 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

-16- 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

-17- 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.

-18- 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)

-19- (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

-20- 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. § 1513

procedures 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-