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A federal district court in Connecticut ordered arbitration of a whistleblower claim alleging a violation of the Sarbanes-Oxley Act (SOX), finding that contractual arbitration is consistent with the purpose of the Act.
In Guyden v. Aetna, Inc., No. 3:05cv1652(WWE), 2006 WL 2772695, (D. Conn. Sept. 25, 2006), Linda Guyden sued her former employer, Aetna, for retaliatory discharge in violation of SOX. Guyden alleged that she was wrongfully terminated after warning company executives of SEC violations.
Aetna moved to compel arbitration pursuant to an offer letter signed by Guyden. The offer letter contained an arbitration clause providing that the arbitrator would “have the authority to order the same remedies (but no others) as would be available in a court proceeding.”
Guyden challenged the arbitration clause on two grounds. First, she argued that the confidentiality of arbitration was inconsistent with SOX’s purpose of promoting corporate transparency. Second, she argued that arbitration would discourage employees from reporting misconduct by subjecting whistleblower claims to “the whims of an arbitrator.”
The Court rejected both arguments. First, the Court found that Congress specifically addressed SOX’s compatibility with arbitration by eliminating a provision which stated that “[n]o employee may be compelled to adjudicate his or her rights under this section pursuant to an arbitration agreement.”
Moreover, the confidentiality of arbitration would not undermine SOX’s purpose of promoting corporate transparency because the arbitrator’s authority to order all available remedies, including reinstatement and back pay, would fulfill the statute’s compensatory function.
The Court found Guyden’s second argument similarly unpersuasive. As the Court observed, Guyden’s complaints about subjecting whistleblower claims to the “whims of an arbitrator” were simply a generalized attack on arbitration and thus “out of step” with the Supreme Court’s “strong endorsement of the federal statutes favoring this method of resolving disputes.”
The Court’s holding is consistent with several decisions approving of arbitration as a forum for resolving a variety of complaints related to federal statutes. The general rule is that absent express statutory language to the contrary, federal statutory claims are arbitrable.
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