Sarbanes-Oxley Federal Whistleblower Claim Is Precluded By Issues Decided In Arbitration, Though Employees Are Protected Against Mandatory Arbitration Of Whistleblower Claims.
Section 806 of the Sarbanes-Oxley Act (SOX) provides whistleblower protections, including protection against mandatory arbitration. Can issues decided against a former Tesla employee in arbitration preclude the employee's relitigation of issues in a whistleblower retaliation claim under SOX? Yes, holds a Ninth Circuit panel majority. Karl Hansen v. Elon Musk, Tesla Motors, Inc., and U.S. Security Associates, Inc., No. 23-15296 (9th Cir. 12/10/24) (H.A. Thomas, Johnstone; partial conc. and dsst. by Collins).
The Ninth Circuit affirmed the district court, holding that while SOX claims cannot be compelled to arbitration under predispute agreements, a confirmed arbitral award may preclude relitigation of issues common to arbitrable and non-arbitrable claims.
Judge Daniel Collins dissented from the majority's decision to apply issue preclusion to Hansen’s SOX claim, arguing that doing so was contrary to the statutory protections provided under SOX. SOX prohibits its claims from being subject to predispute arbitration agreements (18 U.S.C. § 1514A(e)). By granting preclusive effect to the arbitrator's findings on issues related to the SOX claim, the court circumvented this statutory safeguard.
Puzzled about how to enforce restrictions?
The Library of Congress caption reads: "What's a fellow to do?' Washington, D.C., Nov. 8, 1939. A policeman whose beat is on Washington's waterfront seems puzzled over how he is going to enforce the restrictions in the sign, especially as applied to seagulls. Maybe the seagulls don't read or believe in signs."
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