Carnero v. Boston Scientific Corp.

• Citation: 433 F.3d 1
• Decision Date: 05 January 2005
• Docket Number: No. 04-2291.,No. 04-1801.,04-1801.,04-2291.
• Parties: Ruben CARNERO, Plaintiff, Appellant, v. BOSTON SCIENTIFIC CORPORATION, Defendant, Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

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433 F.3d 1

Ruben CARNERO, Plaintiff, Appellant, v. BOSTON SCIENTIFIC CORPORATION, Defendant, Appellee.

No. 04-1801.

No. 04-2291.

United States Court of Appeals, First Circuit.

Heard March 9, 2005.

Decided January 5, 2005.

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.

Before BOUDIN, Chief Judge, CAMPBELL and CYR, Senior Circuit Judges.

LEVIN H. 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 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 over-arching employment relationship 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 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, 69 S.Ct. 575, 93 L.Ed. 680 (1949) (noting that it is well settled that "legislation of Congress, unless a contrary intent appears, is 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 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, 69 S.Ct. 575). 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, 2004 WL 1922132. 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 (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...