By William L. Carr

In March, we wrote about a ruling out of the District of New Jersey enforcing an arbitration provision contained in an employment agreement that pre-dated Dodd-Frank.  The court reasoned that to disregard a pre-Dodd-Frank arbitration provision “would fundamentally interfere with the parties’ contractual rights and would impair the predictability and stability of their earlier agreement.” Khazin v. TD Ameritrade Holding Corp., Civil Action No. 13-4149 (SDW)(MCA), 2014 U.S. Dist. LEXIS 31142 (D.N.J. Mar. 11, 2014). The court also emphasized the “strong federal policy in favor of the resolution of disputes through arbitration” and cited a number of other federal courts that have reached a similar result. Id.

The Third Circuit, though, declined to reach this issue. Instead, it determined that Khazin’s claim, which was brought under Dodd-Frank, was not subject to the Anti-Arbitration Provision at all. 2014 WL 6871393, at *2. Dodd-Frank’s Anti-Retaliation Provision states: “Predispute Arbitration Agreements.—No predispute arbitration agreement shall be valid or enforceable, if the agreement requires arbitration of a dispute arising under this section.” Although the Anti-Arbitration Provision was included in Dodd-Frank, it followed language that said, “Section 1514A(a) of title 18, United States Code [Sarbanes-Oxley], is amended ....” The Dodd-Frank retaliation cause of action, on the other hand, was added to the Securities Exchange Act of 1934 located at 15 U.S.C. § 78a et seq. The court explained, “[i]t would be nonsensical for the word ‘section’ in the Anti-Arbitration Provision to refer to Section 922 of the Act [the whistleblower protection section of Dodd-Frank] when Section 922 expressly places its constituent parts in separate “sections” of the Code.” 2014 WL 6871393, at *3 n.3.

In light of this interpretation, the court did not express any opinion on whether the district court properly determined that Dodd-Frank’s Anti-Arbitration Provision did not invalidate the arbitration clause in his pre-Dodd-Frank employment agreement.

Source: SECurities Law Perspective Blog