Thursday, September 27, 2018
Johnny Burris, a whistleblower whose case has drawn national attention, recently filed a complaint in the United States District Court for the District of Arizona. The complaint alleges that he was wrongfully terminated because he "objected to pushing proprietary J.P. Morgan Private Bank Managed Accounts, Chase Strategic Portfolio Managed Accounts, and proprietary mutual funds into his clients' portfolios on the grounds that he viewed such 'bank managed products' as not always suitable for his retired clients."
Burris's objections may ring familiar. J.P. Morgan paid about $307 million in fines for steering clients toward proprietary funds.
The complaint sets out two different causes of action. The first is under Sarbanes-Oxley, and the second is under Dodd-Frank. The oddly-drafted Dodd-Frank whistleblower provision has already reached the U.S. Supreme Court once with the court construing it to only apply to whistleblowers that report out to the SEC and not just internally. Because Burris made a complaint to the SEC, he will not have any issues with that requirement.
Nizan Packin and I have written about another issue with the Dodd-Frank cause of action. (Our short 2016 article opens with a discussion of Burris' whistleblowing to frame the issue.) Unlike the Sarbanes-Oxley cause of action, Dodd-Frank's whistleblower provision doesn't have an anti-arbitration provision immediately preceding it in the text. This has resulted in some division in lower court views over whether defendants can compel whistleblowers to arbitrate their Dodd-Frank claims. We featured a decision reading the Dodd-Frank cause of action as incorporating the Sarbanes-Oxley antiarbitration provision:
Not all courts have construed the Sarbanes-Oxley anti-arbitration provision narrowly. In a decision from the District Court of Connecticut, which has been appealed to the Second Circuit, Chief Judge Hall focused on what it means for a cause of action to “arise under” a particular statutory section. For guidance construing the language, the court turned to Jones v. R.R. Donnelley & Sons Co., in which the Supreme Court found that a claim arises under any statutory provision that “provides a necessary element of the plaintiff's claim for relief.” Because Dodd-Frank’s legal Lohengrin protects whistleblowers making disclosures protected under Sarbanes-Oxley, those whistleblowers’ claims may also arise under Sarbanes-Oxley. If Dodd-Frank Claims arise under Sarbanes-Oxley, they should also be protected by its anti-arbitration provision.
Although it is a close issue, this Article argues that this broader interpretation remains sufficiently faithful to the statute’s internally inconsistent text and better serves the statute’s objectives. If a claim is made possible by a particular statute, it may be fairly described as “arising under” that statute even if it also arises under a different statute. Here, a whistleblower’s Dodd-Frank Claim may be made possible by, and thus arise under, the Sarbanes-Oxley section containing the anti-arbitration provision.
It will be interesting to watch this case proceed because it may bring more information to light about what happened to Burris. It may also show how defendants may sometimes use arbitration provisions to attempt to force whistleblowers out of public courts. It may be worth looking again at how courts are construing arbitration agreements for Dodd-Frank claims.