A
federal district
court held that the
Dodd-Frank Act ban
on pre-dispute
arbitration
agreements for
whistleblower claims
under Section 806 of
the Sarbanes-Oxley
Act applied to
alleged misconduct
that occurred before
enactment of the
Wall Street reform
legislation. U.S.
District Judge
Douglas P. Woodlock
decided that the
court (DC Mass),
rather than a FINRA
arbitration panel,
had subject matter
jurisdiction over a
whistleblower claim
and denied a defense
motion to compel
arbitration.
Section 922 of the
Dodd-Frank Act added
new subsection (e)
to Sarbanes-Oxley
Act Section 806 to
ban pre-dispute
arbitration
agreements
concerning civil
whistleblower
claims. The
plaintiff in this
case, after
complying with the
Department of
Labor’s
administrative
claims process,
filed suit alleging
retaliation in
violation of the
Sarbanes-Oxley Act’s
whistleblower
protection
provisions. The
Dodd-Frank Act
Section 922 ban
became effective
during the court's
consideration of the
defense motion to
compel arbitration.
Initially, the court
found that it was
unclear whether
Congress intended
the section to apply
retroactively. Judge
Woodlock then
determined that
retroactive
application of
Section 922 would
not produce a
significant
prejudicial
consequence. The
court, referring to
the 1994 Supreme
Court holding in
Landgraf v. USI Film
Products, noted
that jurisdictional
statutes may be
applied in suits
arising before their
enactment without
raising concerns
about retroactivity.
The rationale is
that this type of
statute takes away
no substantive right
but simply changes
the tribunal that is
to hear the case.
The judge stated
that
"[w]hile Section 922
affects the validity
of the arbitration
clause, a
contractual term
agreed upon by the
parties, I am of the
view that this
section principally
concerns the type of
jurisdictional
statute envisioned
in Landgraf."
□
Pezza v. Investors
Capital Corporation
(DC Mass) will be
published in a
forthcoming
Report.