In Pezza v. Investors Capital Corp., (D. Mass. Civ. Ac. No. 10-10113-DPW), the plaintiff claimed he was wrongfully retaliated against, in violation of the Sarbanes-Oxley Act, after having raised concerns regarding misconduct by the defendants in connection with securities transactions. The defendants raised the obligation to arbitrate as an affirmative defense and moved to compel arbitration and either stay or dismiss the action. On July 21, 2010, while defendants’ motion to compel arbitration was under advisement, the Dodd-Frank Act enacted a bar to pre-dispute arbitration agreements for whistleblower claims brought under the Sarbanes-Oxley Act. The plaintiff then contended that Section 922 of the Dodd-Frank Act was dispositive of defendants’ demand for arbitration. The defendants contended the Dodd-Frank Act bar on Sarbanes-Oxley whistleblower arbitration agreements was not retroactive.
The court then applied the test set forth in Fernandez-Vargas v. Gonzales, 548 U.S. 30, 37-38 (2006) to determine whether a statute should be applied retroactively. The analysis in that case requires a court to “look to whether Congress has expressly prescribed the statute’s proper reach, and in the absence of language as helpful as that we try to draw a comparably firm conclusion about the temporal reach specifically intended by applying our normal rules of construction. If that effort fails, we ask whether applying the statute to the person objecting would have a retroactive consequence in the disfavored sense of affecting substantive rights, liabilities, or duties on the basis of conduct arising before its enactment. If the answer is yes, we then apply the presumption against retroactivity by construing the statute as inapplicable to the event or act in question owing to the absence of a clear indication from Congress that it intended such a result.”
The court then noted nothing in Section 922 of the Dodd-Frank Act provides an express congressional intent regarding retroactivity. The court then examined other provisions of the Dodd-Frank Act that restrict the use of predispute arbitration. Finding congressional intent unclear, the court next looked to whether Section 922 of the Dodd-Frank Act would produce any prejudicial “retroactive consequence.” The court noted the parties did not claim that a different substantive result will obtain merely because Pezza’s claim will be heard by a court rather than by a FINRA arbitration panel. Consequently, the court held that Section 922 of the Dodd-Frank Act should also be applied to conduct that arose prior to its enactment.
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