By John F. Fullerton III and Jason Kaufman
In its recent decision in Santoro v. Accenture Federal Services, LLC [pdf], the Fourth Circuit Court of Appeals has joined the Fifth Circuit [pdf] in narrowly interpreting the prohibition against predispute arbitration agreements in the Dodd Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”) — and employers can breathe a further sigh of relief.
Dodd-Frank amended the Sarbanes-Oxley Act (“SOX”) to, among other things, prohibit agreements requiring predispute arbitration of SOX claims (see 18 U.S.C. § 1514A(e)(2)). The language Congress used, however, is quite broad, and when the statute was first enacted, caused concern among employers that the prohibition meant that the entire arbitration agreement could be invalidated with respect to all types of claims if SOX claims were not expressly carved out:
“No predispute arbitration agreement shall be valid or enforceable, if the agreement requires arbitration of a dispute arising under this section.”
Compounding the concern, courts in some jurisdictions have extended the reach of this ban, holding that it applies retroactively to agreements made even before Dodd-Frank was enacted, when they would not have had an express carve-out for SOX claims. Indeed, for the most part, court decisions prior to Dodd-Frank had held that SOX whistleblower retaliation claims could be compelled to arbitration.
In this case, Santoro had entered into an employment contract with Accenture Federal Services that contained an arbitration clause requiring all disputes arising out his employment with Accenture to be brought in arbitration. After he was terminated and replaced by a younger employee, Santoro filed a complaint against Accenture in the Eastern District of Virginia, alleging claims under the Age Discrimination in Employment Act, Family and Medical Leave Act, and Employee Retirement Income Security Act – but, significantly, no whistleblower retaliation claims under Dodd-Frank or SOX.
Accenture moved to compel arbitration pursuant to the employment contract, but Santoro argued in opposition that the entire arbitration agreement was invalid under Dodd-Frank. He argued that in the post-Dodd-Frank era, all predispute arbitration agreements lacking a Dodd-Frank carve-out are invalid, even for plaintiffs who are not pursuing any whistleblower claims. In other words, because the contract did not specifically exempt Dodd-Frank claims from arbitration, and thus could allegedly be interpreted as requiring arbitration of such claims, the entire arbitration agreement was invalid. The District Court rejected this argument and Santoro appealed.
Noting first that it was undisputed that the employment contract contained an arbitration agreement and that Santoro’s claims fell within the agreement’s scope, the Court determined that, based on the statutory language and the context surrounding its enactment, Dodd-Frank’s statutory prohibitions against predispute arbitration agreements apply only to the extent such agreements waive or limit judicial resolution of whistleblower retaliation claims:
“Under Dodd-Frank, Congress has protected the right to bring a whistleblower cause of action in a judicial forum, nothing more. . . . Nothing in Dodd-Frank even refers to arbitration apart from this limited reference in [18 U.S.C. § 1514A(e) and 7 U.S.C. § 26(n)] that are otherwise concerned solely with the creation of a cause of action for whistleblowing employees.”
Accordingly, the Court held that Dodd-Frank did not invalidate Santoro’s arbitration agreement because Accenture was not seeking to compel him to arbitrate any whistleblower claims; and, more generally, when there are no whistleblower causes of action at issue in a litigation, Dodd-Frank does not invalidate an enforceable arbitration agreement. While this is a positive outcome for employers, particularly with respect to their older agreements, employers should continue to review their arbitration provisions and agreements going to forward to ensure that they do not require arbitration of whistleblower retaliation claims arising under Section 806 of SOX.