On October 24, 2014, in Khazin v. TD Ameritrade Holding Corp, et al., the U.S. Court of Appeals for the Third Circuit heard oral argument on an issue of first impression (within that forum):  whether Dodd-Frank applies retroactively to invalidate pre-dispute arbitration agreements.  Dodd Frank expressly invalidates pre-dispute arbitration agreements of whistleblower claims brought under Section 1057,  SOX and the Commodities Exchange Act.  Notably, however, Dodd-Frank does not invalidate pre-dispute arbitration agreements of whistleblower claims under Securities Exchange Act (“SEA”), 15 U.S.C. §78u-6(h)(1)(A).  Nor does Dodd-Frank explicitly address the retroactivity of its anti-arbitration provisions.      

Plaintiff-Appellant Boris Kharzin (“Plaintiff-Appellant”) urged the Court to retroactively apply Dodd-Frank’s anti-arbitration provision to invalidate his pre-dispute arbitration agreement.  Khazin, a former TD Ameritrade Inc. (Company) investment oversight officer, executed a pre-dispute arbitration agreement in 2006.  He was discharged in August 2012 and filed suit under the SEA whistleblower provision.  The U.S. District Court for the District of New Jersey ignored the fact that Dodd Frank did not amend the SEA to invalidate pre-dispute arbitration agreements, and instead compelled arbitration on the grounds that Dodd-Frank did not operate retroactively to bar pre-dispute arbitration agreements.

On appeal, Plaintiff-Appellant’s counsel argued that the District Court’s denial of retroactive application was incorrect because the goal of Dodd-Frank is to protect whistleblowers and encourage them to come forward, which would may not be realized if a case is relegated to arbitration.

As reported by The Legal Intelligencer, during the argument Senior Judge Morton Greenberg commented:

“you know what I couldn’t understand about this … I cannot understand how Congress didn’t deal with this … .  It would have been so easy to say, ‘This shall only apply … hereafter,’ or, ‘applies retroactively.’  I just can’t  understand that.”

Judge Greenberg further questioned the Company’s counsel, stating: “[t]hese agreements were in very large use … and Congress must have known that … maybe Congress just assumed that this was just outlawing those agreements.”  The Company’s counsel responded: “[o]r Congress could have been taking the prospective approach.”  He further argued that allowing for retroactive application would improperly dissolve portions of contracts that individuals had freely entered in the past.  And he noted that while this question is one of first impression before the Third Circuit, there were about 12 to 13 cases that addressed the retroactivity question and only two of these courts applied Dodd-Frank’s anti-arbitration provision retroactively.

We recognize that this is a matter of significance to our readers and will monitor this case closely.


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Photo of Steven J. Pearlman Steven J. Pearlman

Steven J. Pearlman is a partner in the Labor & Employment Law Department and Co-Head of the Whistleblowing & Retaliation Group and the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Steven’s practice covers the full spectrum of employment law, with a particular…

Steven J. Pearlman is a partner in the Labor & Employment Law Department and Co-Head of the Whistleblowing & Retaliation Group and the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Steven’s practice covers the full spectrum of employment law, with a particular focus on defending companies against claims of employment discrimination, retaliation and harassment; whistleblower retaliation; restrictive covenant violations; theft of trade secrets; and wage-and-hour violations. He has successfully tried cases in multiple jurisdictions, and defended one of the largest Illinois-only class actions in the history of the U.S. District Court for the Northern District of Illinois. He also secured one of only a few ex parte seizures orders that have been issued under the Defend Trade Secrets Act, and obtained a world-wide injunction in federal litigation against a high-level executive who jumped ship to a competitor.

Reporting to boards of directors, their audit committees, CEOs and in-house counsel, Steven conducts sensitive investigations and has testified in federal court. His investigations have involved complaints of sexual harassment involving C-suite officers; systemic violations of employment laws and company policies; and fraud, compliance failures and unethical conduct.

Steven was recognized as Lawyer of the Year for Chicago Labor & Employment Litigation in the 2023 edition of The Best Lawyers in America. He is a Fellow of the College of Labor and Employment Lawyers.  Chambers describes Steven as an “outstanding lawyer” who is “very sharp and very responsive,” a “strong advocate,” and an “expert in his field.” Steven was 1 of 12 individuals selected by Compliance Week as a “Top Mind.” Earlier in his career, he was 1 of 5 U.S. lawyers selected by Law360 as a “Rising Star Under 40” in the area of employment law and 1 of “40 Illinois Attorneys Under Forty to Watch” selected by Law Bulletin Publishing Company. Steven is a Burton Award Winner (U.S. Library of Congress) for “Distinguished Legal Writing.”

Steven has served on Law360’s Employment Editorial Advisory Board and is a Contributor to Forbes.com. He has appeared on Bloomberg News (television and radio) and Yahoo! Finance, and is regularly quoted in leading publications such as The Wall Street Journal.

The U.S. Chamber of Commerce has engaged Steven to serve as lead counsel on amicus briefs to the U.S. Supreme Court and federal circuit courts of appeal. He was appointed to serve as a Special Assistant Attorney General for the State of Illinois in employment litigation matters. He has presented with the Solicitor of the DOL, the Acting Chair of the EEOC, an EEOC Commissioner, Legal Counsel to the EEOC and heads of the SEC, CFTC and OSHA whistleblower programs. He is also a member of the Sedona Conference, focusing on trade secret matters.