Image of Third Circuit Decision Highlights Key Procedural Distinctions Between Sarbanes-Oxley and Dodd-Frank Whistleblower Protection Provisions

Third Circuit Decision Highlights Key Procedural Distinctions Between Sarbanes-Oxley and Dodd-Frank Whistleblower Protection Provisions

 Section 922 Claims Not Exempt from Mandatory Arbitration

On December 8th, the Third Circuit held in Khazin v. TD Ameritrade Holding Corp that Section 922 Dodd-Frank whistleblower retaliation claims are subject to mandatory arbitration. In what appears to have been a drafting error, the Dodd-Frank Act carves out three whistleblower protection provisions from mandatory arbitration (Section 806 of the Sarbanes-Oxley Act, Section 1057 of Dodd-Frank, and Section 748 of the Dodd-Frank Act), but fails to exempt Section 922 claims from mandatory arbitration. The Third Circuit, however, reasoned that since Congress did not append an anti-arbitration provision to Section 922 while contemporaneously adding such provisions elsewhere, the omission was deliberate.

Khazin is the first appellate decision holding that Section 922 Dodd-Frank Act whistleblower claims are subject to mandatory arbitration, but is consistent with prior district court decisions, including Murray v. UBS Securities LLC, 2014 WL 285093, at *8 (S.D.N.Y. Jan. 27, 2014) and Ruhe v. Masimo Corp., SACV 11-00734-CJC(JCGx), 2011 WL 4442790, at *4 (C.D. Cal. Sept. 16, 2011).

Procedural Distinctions Between Sarbanes-Oxley and Dodd-Frank Whistleblower Protection

In Khazin, the Third Circuit notes that “the Sarbanes-Oxley and Dodd-Frank causes of action differ significantly in a number of respects.” Recent developments in SOX and Dodd-Frank Act jurisprudence reveal that there are indeed key distinctions between these whistleblower remedies. And as these distinctions continue to emerge, Sarbanes-Oxley appears to be a stronger remedy than Section 922 of Dodd-Frank in several respects. Accordingly, whistleblowers should strongly consider filing a SOX claim within the short 180-day SOX statute of limitations rather than assuming that they can pursue a retaliation claim under the longer Section 922 Dodd-Frank statute of limitations.

The following chart summaries these distinctions. More information about these distinctions is available in a panel that Zuckerman co-authored for a panel titled Developments and Trends in Sarbanes-Oxley and Dodd-Frank Whistleblower Litigation at the ABA’s Annual Section of Labor and Employment Law Conference.

procedural distinctions

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Jason Zuckerman, Principal of Zuckerman Law, litigates whistleblower retaliation, qui tam, wrongful discharge, and other employment-related claims. He is rated 10 out of 10 by Avvo, was recognized by Washingtonian magazine as a “Top Whistleblower Lawyer” in 2015 and selected by his peers to be included in The Best Lawyers in America® and in SuperLawyers.