November 20, 2017

November 20, 2017

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November 17, 2017

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Federal Court Compels Arbitration of Dodd-Frank Whistleblower Claim

In a recent decision, the U.S. District Court for the Western District of Wisconsin held that Dodd-Frank whistleblower claims (Section 922 claims) are subject to mandatory arbitration.  Wussow v. Bruker Corp., No. 16-CV-444-WMC, 2017 WL 2805016 (W.D. Wis. June 28, 2017).

In Wussow, upon his hire, the plaintiff executed an arbitration agreement in which he “agree[d] that any and all controversies, claims, or disputes with anyone . . . arising out of, relating to, or resulting from [his] employment with the Company or the termination of [his] employment with the Company . . . shall be subject to binding arbitration.”  Id. at *2.  The plaintiff alleged that he discovered that certain company employees were engaging in improper and possibly fraudulent revenue recognition practices that potentially violated company policy, SEC rules, and federal law.  After he reported this conduct, he alleged that the company and the individual supervisory defendants retaliated against him by stripping him of critical job functions and, ultimately, by terminating his employment.  Wussow filed claims under the Sarbanes-Oxley Act (“SOX”) and the Dodd-Frank Act, 15 U.S.C. § 78u-6, alleging that the defendants retaliated against him for engaging in the protected whistleblowing activity.

The court noted, and the defendants admitted, that the arbitration agreement could not be enforced as to plaintiff’s SOX claim because the Dodd-Frank Act’s amendments to SOX state that “[n]o predispute arbitration agreement shall be valid or enforceable, if the agreement requires arbitration of a dispute arising under this section.”  18 U.S.C. § 1514A(e)(2).  The court pointed out, however, that “[i]ronically enough . . . a similar cause of action for whistleblower retaliation under Dodd-Frank (15 U.S.C. § 78u-6(h)(1)) includes no express anti-arbitration provision.”  Wussow, 2017 WL 2805016 at *1 (emphasis in original).

Notwithstanding the absence of any anti-arbitration provision in Dodd-Frank itself, Wussow argued that his Dodd-Frank claim, like his SOX claim, was exempt from his arbitration agreement because it too “arises under” SOX.  The court rejected that argument and held that the plaintiff was required to arbitrate his Dodd-Frank retaliation claim.

The Wussow court is not the first court to address this issue.  Indeed, the Third Circuit Court of Appeals is among the courts to have held that mandatory arbitration clauses are enforceable with respect to whistleblower retaliation claims arising under the Dodd-Frank Act.  See Khazin v. TD Ameritrade Holding Corp., 773 F.3d 488, 495 (3d Cir. 2014).

© 2017 Proskauer Rose LLP.

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About this Author

Harris M Mufson, Class/Collective Action Attorney, Proskauer
Associate

Harris Mufson is a senior associate in the Labor & Employment Law Department and a member of the Employment Litigation & Arbitration and Whistleblowing & Retaliation Groups.

Adept at counseling clients at every turn of the litigation process, Harris represents employers in a variety of industries, including financial services, health care, entertainment, sports and legal, with respect to a wide range of labor and employment law matters. These include compensation disputes, employment discrimination and retaliation, whistleblowing,...

212.969.3794
Associate

Jay Cohen is an associate in the Labor & Employment Law Department, assisting clients in a wide range of labor and employment law matters.

Prior to joining Proskauer, Jay served as a law clerk to the Honorable Thomas P. Griesa of the U.S. District Court for the Southern District of New York.

Jay graduated from Harvard Law School in 2015, where he was a member of the winning team in the Ames Moot Court Competition. Jay was also Executive Editor for Submissions for the Harvard Journal of Sports and Entertainment Law, a teaching assistant for a course on contract drafting in sports law, and a member of the Board of Student Advisers.

212-969-3657