December 5, 2021

Volume XI, Number 339

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December 03, 2021

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December 02, 2021

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3rd Circuit: Dodd-Frank Anti-Arbitration Provisions Do Not Apply To Dodd-Frank Whistleblower Retaliation Claims

On December 8, 2014, the Third Circuit ruled that Dodd-Frank’s anti-arbitration provisions do not invalidate pre-dispute arbitration agreements with respect to whistleblower retaliation claims brought pursuant to the anti-retaliation provision in Dodd-Frank, 15 U.S.C. §78u-6(h)(1)(A). Khazin v. TD Ameritrade Holding Corp., No. 14-689, –F.3d–, 2014 WL 6871393 (3d Cir. 2014).

U.S. Court of Appeals, Third Circuit

Background

Plaintiff Boris Khazin (Plaintiff), a former investment oversight officer, commenced a lawsuit against the Company in the District of New Jersey, alleging that it terminated his employment in retaliation for whistleblowing activity in violation of Dodd-Frank, §78u-6(h)(1)(A).  The Company moved to compel arbitration pursuant to the parties’ predispute arbitration agreement, asserting that Dodd-Frank’s anti-retaliation provisions (i) did not apply to Plaintiff’s Dodd-Frank retaliation claim, and (ii) should not be applied retroactively.  As discussed in our March 21, 2014 post, the district court granted the Company’s motion on the grounds that Dodd-Frank’s anti-arbitration provisions do not retroactively bar predispute arbitration agreements.  Because the parties executed the arbitration agreement prior to Dodd-Frank’s enactment, the district court dismissed the lawsuit and compelled arbitration.  The court passed on the issue of whether Dodd-Frank’s anti-arbitration provisions applied to Plaintiff’s Dodd-Frank retaliation claim.  Plaintiff appealed.

Third Circuit’s Ruling

The Third Circuit affirmed the decision compelling arbitration, but on different grounds.  It expressed “no opinion” on Dodd-Frank’s anti-arbitration provisions’ retroactivity and, instead, concluded that the Dodd-Frank retaliation claim is not subject to anti-arbitration provisions.  It ruled that the “text and structure of Dodd-Frank compel the conclusion that whistleblower retaliation claims brought pursuant to 15 U.S.C. §78u-6(h) are not exempt from predispute arbitration agreements.”  It explained that although the anti-arbitration provisions are included in Dodd-Frank, they are “expressly limited to” specific sections of other whistleblower laws—i.e., Section 806 of SOX, the Commodity Exchange Act, 7 U.S.C. §26(n)(2) and the Consumer Financial Protection Act, 12 U.S.C. §5567(d)(2)—and “expressly” placed their constituent parts in those sections.  It went on to explain that Congress’s omission of Dodd-Frank retaliation claims was “deliberate” and that the differences between a SOX retaliation claim and a Dodd-Frank retaliation claim might “explain Congress’s reluctance to exempt Dodd-Frank claims from arbitration.”

Implications

This is the first federal appellate decision to address the issue of whether Dodd-Frank’s anti-arbitration provisions invalidate pre-dispute arbitration of Dodd-Frank retaliation claims.  This decision, however, is consistent with the case law being developed at the district court level.

© 2021 Proskauer Rose LLP. National Law Review, Volume IV, Number 347
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About this Author

Steven J Pearlman, Labor Employment Law Firm, Proskauer Law firm
Partner

Steven Pearlman is a partner in the Labor & Employment Law Department and co-head of the firm's Whistleblowing & Retaliation Group, resident in the Chicago office. Steven’s practice focuses on defending complex employment litigation involving claims of discrimination and harassment, wage-and-hour laws and breaches of restrictive covenants (e.g., non-competition agreements). He has successfully tried cases to verdict before judges and juries in Illinois, Florida and California, and defended what is reported to be the largest Illinois-only class action in the history of the U.S....

312-962-3545
Alychia L. Buchan, Labor & Employment attorney, Proskauer Rose law firm
Associate

Alychia L. Buchan is an Associate in the Newark office and a member of the Labor & Employment Law Department. 

The majority of Alychia’s practice is devoted to representing management in employment litigation. She specifically focuses on defending companies and supervisors in discrimination, harassment, retaliation, wrongful discharge, tort and contract, wage-and-hour and restrictive covenant cases before federal and state courts, arbitral tribunals (e.g., FINRA and AAA) and civil rights agencies, including the Equal Employment Opportunity Commission, the New...

973-274-3236
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