Daramola v. Oracle Am., Inc.

92 F.4th 833

Tayo E. DARAMOLA, Plaintiff-Appellant, v. ORACLE AMERICA, INC., a Delaware Corporation,on its own behalf and through its wholly owned subsidiaries NetSuite Inc.,and Oracle Canada; Pat Merell; Mita Patniak; James Bork;Dionis Gauvin; Doug Harris; Doug Riseberg, Defendants-Appellees.

No. 22-15959

United States Court of Appeals, Ninth Circuit

Argued and Submitted May 9, 2023 San Francisco, California

Filed February 6, 2024

Appeal from the United States District Court for the Northern District of California, James Donato, District Judge, Presiding, D.C. No. 3:19-cv-07910-JD

Mary E. Schultz (argued), Mary Schultz Law PS, Spangle, Washington, for Plaintiff-Appellant.

Sarah E. Bouchard (argued) and Eric C. Kim, Morgan Lewis & Bockius LLP, Philadelphia, Pennsylvania, for Defendant-Appellee.

Before: Sidney R. Thomas, Morgan Christen, and Daniel A. Bress, Circuit Judges.

OPINION

PER CURIAM:

We are asked to decide whether the whistleblower anti-retaliation provisions in the Sarbanes-Oxley and Dodd-Frank Acts apply outside the United States, and, if not, whether this case involves a permissible domestic application of the statutes. Our answer to both questions is no. We therefore affirm the dismissal of the plaintiff's complaint.

I

The alleged facts are as follows. Plaintiff Tayo Daramola, a Canadian citizen, is a former employee of Oracle Canada. He resided in Montreal at all relevant times. Daramola's offer letter from Oracle stated that Daramola would be assigned to an office in Canada, but Daramola worked remotely. His employment agreement with Oracle stated that it was governed by Canadian law.

By logging into Oracle's computer systems, Daramola could conduct business and collaborate with colleagues in the United States, including employees of Oracle America. Both Oracle America and Oracle Canada are wholly owned subsidiaries of Oracle Corporation, a California-based company that develops and hosts software applications for institutional customers.

One such Oracle product was the "Campus Store Solution," a subscription software service for college bookstores. In July 2017, Daramola was assigned as lead project manager for the implementation of Campus Store Solution at institutions of higher education in Texas, Utah, and Washington.

Daramola came to believe that Campus Store Solution was defrauding customers. The product was billed as an e-commerce platform with specific functionalities, but Daramola thought Oracle had no way of delivering the promised features, at least at the agreed-upon price. Daramola reported the suspected fraud to Oracle America and the SEC.

After doing so, Daramola was removed as a project manager. Daramola's supervisor at Oracle America, Douglas Riseberg, offered Daramola an opportunity to work on another Campus Store Solution project, but Riseberg revoked the offer when Daramola again expressed his unwillingness to take part in fraud. Riseberg also downgraded Daramola's job performance rating. Believing he had no other option, Daramola resigned from the company. He sent his resignation letter to an HR representative of Oracle Canada in Montreal and copied his "U.S. manager," Matthew Posey.

Daramola then filed this lawsuit in federal court in California against Oracle America, Riseberg, and other Oracle America employees. As relevant here, Daramola claimed that the defendants violated the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1514A, the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, 15 U.S.C. § 78u-6(h)(1), and California law, Cal. Lab. Code § 1102.5, by retaliating against him for protected whistleblower activity.

After allowing jurisdictional discovery, the district court dismissed the claims under Federal Rule of Civil Procedure 12(b)(6). The court concluded that the anti-retaliation provisions in the two Acts do not apply extraterritorially, and that here, applying those provisions would be extraterritorial because Daramola's principal worksite was in Canada. The California law claims "founder[ed] on the same extraterritoriality barrier." Because Daramola had already amended his complaint twice before, the district court dismissed the case with prejudice.

Daramola timely appeals. Our review is de novo. See United States v. Hussain, 972 F.3d 1138, 1142 (9th Cir. 2020) ("We review questions of statutory interpretation de novo."); Nguyen v. Endologix, 962 F.3d 405, 413 (9th Cir. 2020) (reviewing a motion to dismiss for failure to state a claim de novo).

II

Although the Sarbanes-Oxley and Dodd-Frank Acts "differ in important respects," they both contain provisions designed to "shield whistleblowers from retaliation." Digital Realty Tr., Inc. v. Somers, 583 U.S. 149, 152, 138 S.Ct. 767, 200 L.Ed.2d 15 (2018). Both laws mandate that employers may not "discharge, demote, suspend, threaten, harass" or otherwise "discriminate against" an employee "in the terms and conditions of employment" based on the employee's protected whistleblowing activities. 18 U.S.C. § 1514A(a) (Sarbanes-Oxley); 15 U.S.C. § 78u-6(h)(1)(A) (Dodd-Frank).¹

The question in this case is whether either of these anti-retaliation provisions apply to Daramola, a Canadian working out of Canada for a Canadian subsidiary of a U.S. parent company. To answer that question, we apply a well-known principle of statutory interpretation known as the "presumption against extraterritoriality." See, e.g., Abitron Austria GmbH v. Hetronic Int'l, Inc., 600 U.S. 412, 417, 143 S.Ct. 2522, 216 L.Ed.2d 1013 (2023); RJR Nabisco, Inc. v. European Cmty., 579 U.S. 325, 335, 136 S.Ct. 2090, 195 L.Ed.2d 476 (2016); United States v. Alahmedalabdaloklah, 76 F.4th 1183, 1202-03 (9th Cir. 2023). That presumption is this: "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." Abitron, 600 U.S. at 417, 143 S.Ct. 2522 (quoting Morrison v. Nat'l Austl. Bank Ltd., 561 U.S. 247, 255, 130 S.Ct. 2869, 177 L.Ed.2d 535 (2010)). Presumptively, "foreign conduct is generally the domain of foreign law." Id. (alteration omitted) (quoting Microsoft Corp. v. AT&T Corp., 550 U.S. 437, 455, 127 S.Ct. 1746, 167 L.Ed.2d 737 (2007)).

The Supreme Court has explained that "[d]ual rationales support the presumption against extraterritoriality." Yegiazaryan v. Smagin, 599 U.S. 533, 541, 143 S.Ct. 1900, 216 L.Ed.2d 521 (2023). First, the presumption "serves to avoid the international discord that can result when U.S. law is applied to conduct in foreign countries." Abitron, 600 U.S. at 417, 143 S.Ct. 2522 (quoting RJR Nabisco, 579 U.S. at 335-36, 136 S.Ct. 2090). And second, the presumption reflects " 'the commonsense notion that Congress generally legislates with domestic concerns in mind.' " Yegiazaryan, 599 U.S. at 541, 143 S.Ct. 1900 (quoting Smith v. United States, 507 U.S. 197, 204 n.5, 113 S.Ct. 1178, 122 L.Ed.2d 548 (1993)). The effect of the presumption is to "preserve a stable background against which Congress can legislate with predictable effects." Morrison, 561 U.S. at 261, 130 S.Ct. 2869. The presumption is thus "a 'canon of construction,' not 'a limit upon Congress's power to legislate.' " Alahmedalabdaloklah, 76 F.4th at 1203 (quoting Morrison, 561 U.S. at 255, 130 S.Ct. 2869).

We apply the presumption against extraterritoriality using a two-step framework. See Abitron, 600 U.S. at 417-18, 143 S.Ct. 2522; RJR Nabisco, 579 U.S. at 337, 136 S.Ct. 2090. "At step one, we determine whether a provision is extraterritorial, and that determination turns on whether 'Congress has affirmatively and unmistakably instructed that' the provision at issue should 'apply to foreign conduct.' " Abitron, 600 U.S. at 417-18, 143 S.Ct. 2522 (quoting RJR Nabisco, 579 U.S. at 335, 337, 136 S.Ct. 2090). If so, the presumption against extraterritoriality is overcome, and "claims alleging exclusively foreign conduct may proceed." Id. at 418, 143 S.Ct. 2522.

If not, we proceed to step two to "resolve[ ] whether the suit seeks a (permissible) domestic or (impermissible) foreign application of the provision." Id. At step two, "we 'determine whether the case involves a domestic application of the statute' by 'looking to the statute's focus.' " Hussain, 972 F.3d at 1142 (quoting RJR Nabisco, 579 U.S. at 337, 136 S.Ct. 2090). In conducting this analysis, we ask "whether the conduct relevant to that focus occurred in United States territory." Abitron, 600 U.S. at 418, 143 S.Ct. 2522 (emphasis omitted) (quoting WesternGeco LLC v. ION Geophysical Corp., 585 U.S. 407, 138 S. Ct. 2129, 2136, 201 L.Ed.2d 584 (2018)). " 'If the conduct relevant to the statute's focus occurred in the United States, then the case involves a permissible domestic application' of the statute, 'even if other conduct occurred abroad.' " WesternGeco, 138 S. Ct. at 2137 (quoting RJR Nabisco, 579 U.S. at 337, 136 S.Ct. 2090).

A

Beginning at step one, we conclude that nothing in the anti-retaliation provisions in the Sarbanes-Oxley and Dodd-Frank Acts overcomes the presumption that Congress does not regulate foreign conduct.

Focusing specifically "at the level of the particular provision implicated," Abitron, 600 U.S. at 419 n.3, 143 S.Ct. 2522, we will not find that a statutory provision regulates foreign conduct unless "Congress has affirmatively and unmistakably instructed that [it] will do so." RJR Nabisco, 579 U.S. at 335, 136 S.Ct. 2090. The anti-retaliation provisions in Sarbanes-Oxley and Dodd-Frank contain no such "affirmative[ ] and unmistakabl[e]" language. Id. They do not expressly discuss regulating foreign conduct. Nor do they otherwise provide any indication that Congress contemplated an extraterritorial application. See Abitron, 600 U.S. at 420, 143 S.Ct. 2522 ("It is a 'rare statute that clearly evidences extraterritorial effect despite lacking an express statement of extraterritoriality.' ") (quoting RJR Nabisco, 579 U.S. at 340, 136 S.Ct. 2090). "When a [p...