NEW YORK (Reuters) - A U.S. judge has thrown out a lawsuit accusing Germany's Siemens AG (SIEGn.DE) of funneling kickbacks to Chinese and North Korean hospital officials, narrowing the ability of plaintiffs to use U.S. courts to sue over conduct outside the country.
U.S. District Judge William Pauley in Manhattan on Monday said the anti-retaliation provision of the 2010 Dodd-Frank financial reform law, which shields whistleblowers from discipline for reporting alleged violations by their employers, did not apply to conduct outside the United States.
The decision is the latest arising from the U.S. Supreme Court's 2010 ruling in Morrison v. National Australia Bank, which created a presumption that U.S. civil statutes do not apply to non-U.S. conduct unless Congress suggests otherwise.
Meng-Lin Liu, a former compliance officer at Siemens China's healthcare unit, accused Siemens of routinely making inflated bids for medical imaging equipment sales to public hospitals, and then selling the equipment at lower prices to intermediaries who gave kickbacks to hospital officials.
Liu, a Taiwan resident, said this violated the Foreign Corrupt Practices Act (FCPA), which bars companies with U.S.-listed securities from bribing foreign officials, and violated terms of Siemens' compliance obligations under its $1.6 billion settlement in 2008 with U.S. and German regulators of bribery charges.
Liu said he first raised his concerns in October 2009, only to be later stripped of his responsibilities, and fired in March 2011. He said the firing was illegal under Dodd-Frank, and sought twice his back pay plus other damages.
But Pauley concluded that while Dodd-Frank covers some non-U.S. activity, including in cases brought by the U.S. Securities and Exchange Commission, its whistleblower protections did not.
"There is simply no indication that Congress intended the anti-retaliation provision to apply extraterritorially," the judge wrote.
Pauley also rejected Liu's request for protection under the Sarbanes-Oxley Act of 2002, saying the relevant provision of that governance law did not apply outside the United States and did not "require or protect" disclosures of FCPA violations.
David Mair, a partner at Kaiser Saurborn & Mair representing Liu, did not immediately respond to requests for comment.
Brant Bishop, a partner at Kirkland & Ellis representing Siemens, declined to comment.
Lower courts have used the Supreme Court's Morrison decision to keep a wide range of lawsuits, many involving securities law, out of U.S. courts.
In June 2012, a federal judge in Houston dismissed a similar whistleblower claim against a General Electric (GE.N) unit over its hiring of a woman closely associated with an Iraqi official with whom it hoped to negotiate a joint venture agreement.
Meanwhile, this April the Supreme Court cited a presumption that U.S. law "governs domestically, but does not rule the world" in limiting the sweep of a 1789 law that had been used to bring cases in U.S. courts alleging human rights abuses outside the country.
Siemens has U.S.-listed American depositary receipts.
The case is Liu v. Siemens AG, U.S. District Court, Southern District of New York, No. 13-00317.
Reporting by Jonathan Stempel; Editing by Leslie Gevirtz