The plaintiff, defendant’s Director of Internal Audit, believed that defendant’s internal audit department was ineffective and “without independence or objectivity.” After bringing her concerns to the attention of senior management, the plaintiff hired an outside auditor firm to review the company’s internal controls. However, mere days before she was scheduled to discuss the outside auditor’s findings with defendant’s audit committee, plaintiff’s employment was terminated.
Following her termination, plaintiff filed a lawsuit against her employer for violation of the whistleblower protection provision of the Sarbanes-Oxley Act (SOX). The defendant moved to dismiss on the grounds that plaintiff had agreed in writing to arbitrate all employment-related legal disputes before the American Arbitration Association. The plaintiff argued, among other things, that the SOX whistleblower claim was “categorically nonarbitrable” because arbitration of such claims would conflict with policy objectives of the whistleblower provision specifically and of SOX generally. The district court disagreed. Following its dismissal of the lawsuit, plaintiff appealed.
The Second Circuit also was not persuaded by plaintiff’s argument that enforcing the arbitration clause would conflict with SOX’s policy of providing the public with information about corporate fraud. After examining the legislative history of the whistleblower statute, the Second Circuit found that the purpose of the statute was to make the defendant whole, not to publicly denounce the company. The court specifically noted that both houses of Congress separately rejected versions of the Sarbanes-Oxley Act that would have prohibited mandatory arbitration of whistleblower claims. Accordingly, the court held that “the loss of a public forum in which to air allegations of fraud does not undermine the statutory purpose of a whistleblower protection provision.” For this reason, and in order to uphold the strong federal policy favoring arbitration, the court affirmed the district court’s dismissal of the plaintiff’s claims. (Guyden v. Aetna, Inc., 2008 WL 4426478 (2nd Cir. Oct. 2, 2008))