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).

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.

 

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Photo of Steven J. Pearlman Steven J. Pearlman

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

Employment, Whistleblower, Restrictive Covenant and Trade Secret Practice.

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

Employment, Whistleblower, Restrictive Covenant and Trade Secret Practice. Steven’s national practice focuses on defending companies in federal and state courts and arbitration against claims of: discrimination, retaliation and harassment, including claims brought by high-level executives; whistleblower retaliation; restrictive covenant violations; theft of trade secrets; and wage-and-hour violations (including class, collective and PAGA actions).

Illustrating his versatility, Steven has successfully handled bench and jury trials in multiple jurisdictions (e.g., Illinois, California, Florida and Texas); defended one of the largest Illinois-only class actions in the history of the federal courts in Chicago; and prevailed following his oral arguments before the Seventh Circuit and state appellate courts. Steven brings his litigation experience to bear in counseling clients to minimize risk and avoid or prepare for success in litigation.

Investigations. 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.

Thought Leadership and Accolades. Steven was named Lawyer of the Year for Chicago Labor & Employment Litigation in the 2023 edition of The Best Lawyers in America. He was also named as One of the Top 10 Impactful Labor & Employment Lawyers in Illinois for 2023 by Business Today. 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.” Chambers also reports that “He is someone who can navigate the twists and turns of litigation without difficulty. Steven is great with brief-writing, crafting arguments, and making sure the client is always happy.”

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 was appointed to Law360’s Employment Editorial Advisory Board and selected as a Contributor to Forbes.com. He has appeared on Bloomberg News (television and radio) and Yahoo! Finance, and is often 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.

In 2024, Steven received the Excellence in Pro Bono Service Award from the United States District Court for the Northern District of Illinois and the Chicago Chapter of the Federal Bar Association.