A Case of First Impression from the Southern District of New York

In O'Mahony v. Accenture Ltd., 07 Civ. 7916, 02/05/08 (S.D.N.Y.), U.S. District Judge Victor Marrero, in a case of first impression, held that the whistleblower protection provisions of Sarbanes-Oxley applied to the U.S. subsidiary of a foreign Bermuda-based corporation founded upon conduct engaged in on foreign soil, under foreign law and affecting an employee based in and performing services in the foreign jurisdiction. While the case is related to the non-payment of Social Security taxes in France for an employee of Accenture's U.S. subsidiary who had worked in France for more than five years, as required by French law, the decision is worth watching because it is the first case to hold that the whistleblower provisions of SOX apply to an employee working overseas.

Significantly, District Judge Marrero rejected the previously assumed limitation of SOX to securities matters involving "fraud against shareholders," holding that "general principles of statutory construction weigh against reading [the statute] as providing whistleblower protection only to employees who provide information concerning fraud against shareholders."

O'Mahony had claimed she was demoted and fired for refusing to remain silent and conceal from French authorities that while the original certificate of exemption of coverage from France's Social Security taxes was for five years, she had been working in France for more than five years, necessitating payment to France of the taxes by Accenture's U.S. subsidiary by whom she was employed.

In rendering his decision, District Judge Marrero distinguished the First Circuit's decision in Canero v. Boston Scientific, 433 F.3d 1 (1st Cir. 2006). Canero was an Argentine citizen, living in Brazil, who complained of conduct that occurred at Boston Scientific's Latin American subsidiaries. In O'Mahony, the Court found "three notable differences to distinguish [O'Mahony]." These were:

  1. O'Mahony had worked at the U.S. subsidiary before being posted to France and was an employee of and compensated by the U.S. subsidiary although working in France; therefore, the employment relationship was between a U.S. employer and its employee;
  2. The alleged wrongful conduct "involved employees of Defendants located in the United States and occurred in the United States" [presumably the decision that Social Security taxes were not due and owing in France]; and
  3. Unlike Canero, the Plaintiff in O'Mahony was bringing suit against a "foreign parent and its U.S. subsidiary for alleged misconduct of the United States subsidiary in the United States."

This case is noteworthy and bears watching to see if it is upheld on appeal and followed by other courts for not only the breadth of its jurisdictional reach, but also for its extension of SOX to cases not involving fraud on shareholders.