Court Enforces Arbitration Agreement in Dodd-Frank Act Retaliation Case

The court in Wussow v. Bruker Corp., decided on June 28, 2017, ruled that whistleblower claims brought under the Dodd-Frank Act are subject to mandatory arbitration.

In Wussow, the employee signed an arbitration agreement requiring that “all controversies, claims, or disputes… arising out of, relating to, or resulting from [his] employment with the company or the termination of [his] employment… shall be subject to binding arbitration.” The plaintiff alleged that the company retaliated against him by stripping him of job responsibilities and ultimately terminating his employment after he reported instances of possibly fraudulent revenue recognition practices that potentially violated SEC rules and federal law.

Wussow filed whistleblower retaliation claims under the Sarbanes-Oxley Act (SOX) and the Dodd-Frank Act. Wussow alleged that the change in job duties and termination were retaliation against him for engaging in protected whistleblowing activity.

The Sarbanes-Oxley Act prohibits a publicly traded company, or any contractor or agent of such company, from retaliating against an employee who blows-the-whistle on what she reasonably believes to be a violation of statutes prohibiting mail fraud, wire fraud, bank fraud, securities fraud, any rule or regulation of the Securities and Exchange Commission (SEC), or any provision of Federal law relating to fraud against shareholders.

How the Dodd-Frank Act and SOX Differ

The Dodd-Frank Act contains similar anti-retaliation protections to the Sarbanes-Oxley Act. However, SOX (a) does not have an administrative exhaustion requirement, (b) has a much longer statute of limitations, and (c) allows for a doubling of backpay as part of the whistleblower’s remedy.

SOX includes language voiding any previous arbitration agreement between the employee and the company involving whistleblower claims. However, Section 21F of the Dodd-Frank Act (the anti-retaliation provision) does not include any anti-arbitration provision. Wussow argued that the arbitration agreement should be void under both because the Dodd-Frank Act claim “arises under” SOX. The court rejected this argument and ruled that Wussow was required to arbitrate his Dodd-Frank retaliation claim. Previously, the court in Khazin v. TD Ameritrade Holding Corp., 773 F.3d 488, 495 (3d Cir. 2014) came to the same conclusion. Mandatory arbitration clauses are enforceable when related to whistleblower retaliation claims under the Dodd-Frank Act.

Benefits

This ruling is a blow to whistleblowers and the broader societal benefits that whistleblowers provide. By forcing whistleblower retaliation claims into the secretive and confidential private arbitration forum whistleblowers are denied both the leverage that comes with a public trial and the personal moral satisfaction of exposing the defendant’s wrongdoing. Society as a whole is also injured by such rulings. Forced arbitration of whistleblower claims allows private corporate wrongdoers to essentially continue their cover-up of the wrongdoing reported by the whistleblower. One of the primary purposes of encouraging whistleblowers to come forward with information is to benefit society as a whole by exposing potential fraud and illegal conduct. Arbitration is the very antithesis of this purpose, as it is private and confidential.

Individuals who believe that they’ve been retaliated against for internally or externally reporting wrongful conduct should consult with an attorney. An attorney can help to determine whether their disclosures may be protected under state or federal law. For more information on the Dodd-Frank Act and other whistleblower claims, please visit whistleblower-attorney.com.