TD Ameritrade Whistleblower’s Case Dismissed Due to Arbitration Clause

The Third Circuit Court of Appeals, in Khazin v. TD Ameritrade Holding Corp., No. 14-1689, December 8, 2014, recently upheld the dismissal of a whistleblower claim brought by a former employee of TD Ameritrade, because his claim was barred by an arbitration agreement.  The employee was responsible for performing due diligence on financial products offered by the company.   When he discovered that one product was priced in an unlawful manner, he reported it to his supervisor.  She instructed him to analyze the “revenue impact” of pricing the product properly.  He did so, finding that fixing the product would save customers $2,000,000 but cost the company $1,150,000.  The supervisor then told him to not correct the problem.  Thereafter, the supervisor and the Company found a pretextual reason to terminate his employment.

The employee brought a claim under the whistleblower section of the Dodd-Frank Act.  The employer answered that these claims were barred by the employee’s agreement to arbitrate.  The trial court agreed and dismissed the claim.  On appeal, the Third Circuit agreed with the lower court.  Although the Dodd-Frank whistleblower statute contains an “anti-arbitration provision,” the court found that this provision did not apply to this particular employee’s whistleblower claim.  Thus, the plaintiff’s only remedy is to submit his claim to arbitration.

Arbitration is not an ideal forum for whistleblower and discrimination claims.  Besides the fact that there is no jury to hear the case properly, there is no record of the proceedings or any appeal if a mistake is made.  In our view, lawsuits which seek to vindicate a social good, such as eradicating discrimination or corporate corruption, should be exempted from arbitration.  These cases are too important to be kept in the dark.