The U.S. District Court for the District of New Jersey recently held that the Dodd-Frank Act does not operate retroactively to bar pre-dispute arbitration agreements, and thus required a plaintiff to arbitrate his Dodd-Frank whistleblower retaliation claim. Boris Khazin v. TD Ameritrade Holding, No. 13-cv-4149 (D.N.J. March 11, 2014).
Plaintiff Boris Khazin commenced his employment with the Company as an investment oversight officer in 2006 and, as part of that employment, executed a pre-dispute arbitration agreement whereby he agreed to arbitrate any and all claims relating to his employment. In April 2012, Plaintiff became aware of a certain financial product that allegedly failed to comply with relevant securities regulations. According to Plaintiff, that product was overpriced and charged customers excessive overhead fees. Plaintiff allegedly expressed his concerns to his supervisor, who instructed him to conduct a “revenue impact analysis” for the product. His analysis allegedly showed that instituting a corrective change would result in a $1.15 million loss for the Company. Plaintiff was allegedly instructed not to institute such corrective change and his employment was terminated a few months later. Thereafter, he reported his concerns to the SEC and filed a retaliation claim against TD Ameritrade under the Dodd-Frank whistleblower protection provision.
The Company moved to dismiss the Dodd Frank claim or, alternatively, to compel arbitration pursuant to the pre-dispute arbitration agreement. The court denied the motion to dismiss, rejecting the argument that Plaintiff’s claim failed because he did not report his concerns to the SEC prior to his discharge. However, the court granted the Company’s motion to arbitrate. Although Dodd Frank invalidates a range of pre-dispute arbitration agreements, the court ruled that the law does not retroactively bar any pre-dispute arbitration agreements and that the arbitration agreement was enforceable because the parties executed a valid arbitration agreement prior to Dodd-Frank’s enactment.
Dodd-Frank invalidates pre-dispute agreements regarding whistleblower claims under the Sarbanes-Oxley Act, the Commodities Exchange Act and claims filed by employees who report potential violations of federal consumer financial laws. 18 U.S.C. §1514A(e); 7 U.S.C. § 26(n)(2); 12 U.S.C. § 5567(d)(2). But, Dodd-Frank does not invalidate pre-dispute arbitration agreements regarding whistleblower claims under the Securities Exchange Act (Section 922). This decision does not directly address the issue of whether employers may in all instances compel arbitration of Section 922 claims. Rather, the court simply ruled that the pre-dispute arbitration agreement at issue was enforceable because it was entered into prior to Dodd-Frank’s enactment. The court therefore left unanswered whether it would have compelled arbitration if the parties had entered into the arbitration agreement after Dodd-Frank was enacted.