Labor & Employment Law Daily Congress didn’t intend for Dodd-Frank claims to avoid arbitration; Title VII and EPA claims also compelled
Tuesday, September 24, 2019

Congress didn’t intend for Dodd-Frank claims to avoid arbitration; Title VII and EPA claims also compelled

By Kathleen Kapusta, J.D.

The appeals court refused to lump the employee’s other claims together with her SOX claim for purposes of determining their arbitrability even if they arose out of the same act of whistleblowing.

Agreeing with the Third Circuit, the only other federal circuit to have ruled on this issue, the Second Circuit found that Congress did not intend for Dodd-Frank whistleblower claims to be precluded from arbitration. Accordingly, the appeals court affirmed the lower court’s order compelling arbitration of a former Citigroup employee’s Dodd-Frank, Title VII, and Equal Pay Act claims, finding that her nonarbitrable SOX whistleblower claim could not save her otherwise arbitrable claims from their fate. Further, in an issue of first impression, the appeals court held that SOX’s administrative exhaustion requirements are a jurisdictional prerequisite to suit and thus the lower court also properly dismissed the employee’s SOX whistleblower claim for failure to exhaust her administrative remedies (Daly v. Citigroup Inc., September 19, 2019, Sack, R.).

The boys are in charge. During her seven-year tenure with the Citi defendants, the employee entered into three successive arbitration agreements that required arbitration of all employment-related disputes. Two years after she was promoted to an assistant VP position, she was purportedly stripped of some of her privileges and responsibilities, actions she claimed were intended to make clear that the “boys were in charge.”

Fired. She also claimed her supervisor constantly demanded that she disclose material nonpublic information in her possession so that he could pass it on to his clients. Less than two weeks after she informed Citi attorneys of this, she was fired. Citi subsequently filed a Form U-5 with the Financial Industry Regulatory Authority, which contained assertions that, among other things, she had been late to work and had mishandled confidential information. Because the Form U-5 is available in the FINRA database, she alleged these statements continue to adversely impact her employment opportunities.

Lower court proceedings. The employee then sued, alleging gender discrimination and whistleblower retaliation claims, including claims under Title VII, the EPA, Sarbanes-Oxley, and Dodd-Frank. Citi moved to compel arbitration and dismiss. Granting its motion, the district court found that, except for her SOX claim which was nonarbitrable by statute, her claims fell within the scope of her arbitration agreements and she failed to establish they were nonetheless precluded from arbitration by law. The court also dismissed the SOX whistleblower claim because she failed to timely file an administrative complaint.

Title VII and EPA claims. On appeal, the Second Circuit first determined that pursuant to the plain terms of her arbitration agreements, the parties agreed to arbitrate “all employment-related disputes,” and her claims all fell within that broad category. Thus, the only question was whether Congress intended for any of her federal statutory claims to be nonarbitrable as a matter of law. Concluding that her Title VII and EPA claims were arbitrable, the court noted it has previously found there is insufficient evidence “that with respect to claims under Title VII, Congress intended to preclude the waiver of judicial remedies.” Nor did she present any evidence that Congress intended for EPA claims to be nonarbitrable, said the court, and thus the district court correctly compelled arbitration of both these claims.

Dodd-Frank claim. Finding it less certain whether her Dodd-Frank claim was arbitrable, the court turned to its statutory framework. Passed in 2010, Dodd-Frank amended, among other federal statutory provisions, the SOX whistleblower retaliation provision to include an anti-arbitration provision. Importantly, observed the court, Dodd-Frank did not include a comparable anti-arbitration provision in its own whistleblower provision. Noting that the Third Circuit was the only federal circuit to have ruled on whether claims arising under Dodd-Frank’s whistleblower provision are also precluded from arbitration, the court joined with its sister circuit in concluding that Congress did not intend to preclude arbitration of Dodd-Frank whistleblower claims.

That Dodd-Frank amended several statutory provisions to include anti-arbitration provisions but did not do so with respect to its own whistleblower provision was a strong indication of Congress’ intent not to preclude Dodd-Frank whistleblower claims from arbitration. In addition, the language of the SOX anti-arbitration provision restricts its applicability to its own statutory scheme, further reflecting congressional intent to limit its terms to the claims arising under its particular statutory scheme. Moreover, the court pointed out, the whistleblower retaliation provisions of the two statutes “diverge significantly” in their prohibited conduct, statute of limitations, and remedies. These differences, said the court, “support our conclusion that Congress did not intend for SOX’s anti-arbitration provision to extend to whistleblower claims arising under Dodd-Frank.”

Can’t lump them together. The employee argued, however, that her Title VII, EPA, and Dodd-Frank claims could not be separated from her SOX claim for purposes of determining arbitrability because they all arose out of the same act of whistleblowing. Refusing to “simply lump all of the plaintiff’s claims together for purposes of determining their arbitrability, even if they pertain to the same conduct,” the court found the district court correctly compelled arbitration of all but her SOX claim.

Failure to exhaust. Turning to the lower court’s dismissal of the employee’s SOX whistleblower claim on failure to exhaust grounds, the appeals court noted that she did not file her administrative complaint until at least two years after she became aware of the alleged violation, long after the 180 days provided by the statute. Noting that it had not yet addressed whether SOX’s administrative exhaustion requirements are a jurisdictional prerequisite to suit, and that it found no clear guidance among its sister circuits, the court concluded that “the text of SOX makes clear that Congress intended for its administrative exhaustion requirements to be a jurisdictional prerequisite to suit in federal court.” The exhaustion requirements are included in the statute’s same provision—and same sentence—as the jurisdictional provision and that provision expressly grants federal jurisdiction only when specific administrative remedies have been exhausted.

Further, the court pointed out, the statute goes on to state that an employee asserting a SOX whistleblower claim must file her complaint with the Secretary of Labor “not later than 180 days after the date on which the violation occurs, or after the date on which the employee became aware of the violation.” “This procedural structure,” said the court, “reflects Congress’s clear intent for federal courts to exercise jurisdiction over a SOX claim only after the claimant has first exhausted the statute’s administrative remedies.”

Continuing violation. Further finding that the employee failed to exhaust her administrative remedies, the court rejected her argument that because Citi’s filing of a false and defamatory Form U-5 about her on the FINRA database continues to prevent her from obtaining employment in the financial sector, the violation is ongoing and, therefore, her 180-day filing deadline has not yet elapsed under the continuing violation doctrine. But Citi’s alleged misconduct, said the court, consisted of discrete, discriminatory acts including her exclusion from workplace meetings, ultimate termination, and the filing of a disparaging Form U-5. “They do not amount to an overarching policy of discrimination and are, therefore, insufficient to establish a continuing violation for purposes of deferring her administrative filing deadline.”

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