On June 27, 2018, the U.S. District Court for the Central District of California granted Snap Inc.’s motion to compel arbitration of a Dodd-Frank whistleblower retaliation claim.  Pompliano v. Snap Inc., No. 17-cv-3664 (2018 WL 3198454).

Background.   Plaintiff signed an employment agreement (the “Agreement”) with Snap Inc. (the “Company”) without consulting an attorney.  Fired just “three tension-filled weeks” after starting, he sued under Dodd-Frank’s whistleblower provisions, claiming retaliation for allegedly opposing the use of faulty growth metrics prior to the Company’s IPO.

The Company contended the termination was performance-related and moved to compel arbitration per the Agreement’s terms.  In response, Plaintiff argued the Agreement and its arbitration provisions were unconscionable due to (i) the Company’s alleged demand that Plaintiff sign the Agreement the same day it was provided to him; (ii) Plaintiff’s non-legal background; and (iii) a “delegation provision” requiring that an arbitrator—not the court—decide the arbitrability of any disputes.  Finally, relying on an unpublished district court opinion from Connecticut, Plaintiff argued that his Dodd-Frank claims also arose under SOX, and thus SOX’s provision barring enforcement of pre-dispute arbitration agreements prevented arbitration of the dispute.

Rulings.  The court held the Agreement enforceable.  Plaintiff—who was heavily courted by the Company and had negotiated a higher salary than what was initially offered—was deemed savvy enough to evaluate its contents, despite some pressure to sign quickly.

Further, the delegation clause was not substantively unconscionable, because it applied to both sides equally.  Finally, the court sided with the vast majority of courts in holding that Dodd-Frank whistleblower claims do not per se arise simultaneously under SOX.  It noted that Dodd-Frank exists in an entirely different title of the U.S. Code from SOX and contains numerous distinct features.  Moreover, the Federal Arbitration Act favors arbitration, and the court declined to restrict its application in the absence of a clear Congressional mandate to do so.

Implications.  This result supports the enforceability of arbitration provisions generally—particularly against relatively sophisticated parties—and, in particular, delegation provisions.  The decision also follows decisions from other jurisdictions holding that SOX’s predispute arbitration ban is inapplicable to Dodd-Frank whistleblower claims.