TD Ameritrade Worker Must Arbitrate Claims

NEWARK, N.J. (CN) - A former TD Ameritrade employee who claims he was fired in retaliation for being a whistleblower must arbitrate his dispute with the company, despite Dodd-Frank's no-arbitration provisions, a federal judge ruled.

Boris Khazin worked for TD Ameritrade from 2006 until he was fired on August 14, 2012. He sued the company on January 18, 2013, claiming he his termination stemmed from his discovery that one of TD Ameritrade's consumer products was priced in a manner that did not comply with securities regulations.

Khazin said that after he discovered the problem, he took his concerns to his supervisor, Lule Demmissie, who asked him to work up a "revenue impact" on his proposed change. Khazin said his analysis showed the change would cost the company $1.1 million and would also negatively impact the balance sheet of one of the divisions Demmissie oversaw.

He claims that his supervisor responded by telling him no change would be made, and when he persisted in pushing for the change, he found himself confronted by a representative from TD Ameritrade's human resources department, who accused him of a "billing irregularity" unrelated to his work.

Khazin says the accusation was unfounded, but as a result of it, he was told "he could no longer be trusted," and was fired from his position.

In filing his lawsuit against his former employer, Khazin conceded that he signed an arbitration agreement with TD Ameritrade when he was hired, but argued it had been nullified by a provision in the Dodd-Frank Act that prohibits the enforcement of pre-dispute arbitration agreements in certain whistleblower disputes.

The State court dismissed his lawsuit, holding that federal courts had exclusive jurisdiction over the Dodd-Frank claim. Khazin moved his case to District Court last July.

TD Ameritrade responded by seeking dismissal on the grounds that the arbitration agreement was still valid.

Ultimately, the district court sided with the employer on the grounds that the anti-arbitration provision of Dodd-Frank did not prohibit the enforcement of arbitration agreements executed before the bill was passed in 2010, and concluding that "nullifying existing contractual rights to arbitration would violate the presumption against retroactivity."

However, the Court did not comment on whether the provision covered the specific retaliation claim advanced by Khazin, and on that basis, he filed an appeal with the 3rd Circuit.

On December 8, U.S. Circuit Judge Julio Fuentes, writing for the three-judge panel, found that "neither the Anti-Arbitration Provision nor any other provision of Dodd-Frank prohibits the arbitration of the sort of claim that Khazin chose to bring against TD."

Fuentes noted that "the Dodd-Frank Act did not merely create a new cause of action for whistleblowers-it also appended the Anti-Arbitration Provision to the Sarbanes-Oxley [Act] cause of action."

The Sarbanes-Oxley Act was passed in 2002 in the wake of the Enron scandal and was also designed to set enhanced standards for all public companies.

The panel ruled that "the text and structure of Dodd-Frank compel the conclusion that whistleblower retaliation claims brought pursuant to 15 U.S.C. § 78u-6(h) are not exempt from predispute arbitration agreements. As this is the only type of claim that Khazin asserts, nothing prevents TD from seeking to enforce their arbitration agreement."

Fuentes wrote that "recognizing that no provision expressly restricts the arbitration of Dodd-Frank retaliation claims, Khazin contends that a bill as massive as Dodd-Frank will inevitably contain gaps not intended by Congress. The fact that Congress did not append an anti-arbitration provision to the Dodd-Frank cause of action while contemporaneously adding such provisions elsewhere suggests, however, that the omission was deliberate."

Khazin had further argued that it would be counterintuitive for Congress to treat Sarbanes-Oxley claims differently than Dodd-Frank claims, and that requiring his to arbitrate his claim would undermine Dodd-Frank's broader purpose of enhancing protections for whistleblowers.

But Fuentes and his colleagues felt "the Sarbanes-Oxley and Dodd-Frank causes of action differ significantly in a number of respects that might explain Congress's reluctance to exempt Dodd-Frank claims from arbitration."

The judges concluded that "although Congress conferred on whistleblowers the right to resist the arbitration of certain types of retaliation claims, that right does not extend to Dodd-Frank claims arising under 15 U.S.C. § 78u-6(h)."

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