On December 8, 2014, the United States Court of Appeals for the Third Circuit held in Khazin v. TD Ameritrade Holding Corp., 2014 U.S. App. LEXIS 23098 (3d Cir., Dec. 8, 2014), that Dodd-Frank Act whistleblower retaliation claims are not exempt from pre-dispute arbitration agreements. The plaintiff, a former financial services professional, alleged that he discovered violations of the federal securities laws relating to his employer’s pricing practices. The plaintiff prepared an analysis showing that changing the practice would cost the company more than one million dollars in revenues. The plaintiff alleged that, after seeing the analysis, his supervisor told him to drop the matter, and he was fired. The district court dismissed the plaintiff’s anti-retaliation claim based on the plaintiff’s arbitration agreement, finding that the Act’s anti-arbitration provision did not apply retroactively. (See April 1, 2014, newsletter, Two District Courts Grant Defendants’ Motions to Arbitrate Whistleblower Employment Disputes.)
The Third Circuit did not address whether the Act’s anti-arbitration provision applied retroactively, but affirmed on the ground that the “text and structure” of the Act did not preclude arbitration of a Dodd-Frank anti-retaliation claim. Even though the Act’s anti-arbitration restrictions apply to retaliation claims brought under the Sarbanes-Oxley Act of 2002, the Commodity Exchange Act, and the Consumer Financial Protection Act, the court noted that there was no provision in the Act that would preclude arbitration of the newly created Dodd-Frank anti-retaliation claims. The Third Circuit rejected the plaintiff’s position that this was an error, finding that the statutory scheme suggested that the omission was “deliberate” and that Congress had “expressed its intent unambiguously.” The Third Circuit also rejected the plaintiff’s argument that requiring arbitration would undermine the Dodd-Frank Act’s broader purpose of enhancing protection for whistleblowers, stating that the plaintiff could not invoke the purported purpose of legislation “at the expense of the terms of the statute itself.”
This was the first federal Court of Appeals decision to address the enforceability of arbitration agreements for claims brought under Dodd-Frank’s anti-retaliation provision. This decision will be viewed largely as a victory for employers, and it will also require plaintiffs to seriously consider whether they wish to pursue whistleblower claims under SOX versus Dodd-Frank in light of the fact that the latter may be subject to mandatory arbitration agreements.