A federal judge has halted a lawsuit from a former Snapchat employee who claims the company deceived its investors with phony growth metrics.
Anthony Pompliano filed suit in state court in January 2017, alleging that he had been fired as head of growth for the company after raising concerns about the numbers. He later withdrew the suit and filed a federal whistleblower claim, alleging the company had retaliated against him in violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Snap Inc., the parent of Snapchat, has sought to force Pompliano into private arbitration. On Wednesday, Judge Dolly Gee granted Snap’s motion, finding that Pompliano’s claims are covered by the arbitration provision of his contract.
Pompliano had argued that his contract was “unconscionable” because he was forced to sign it the same day the offer was made, and was not able to have an attorney review it. He also argued that it should be voided under the whistleblower protection provisions of the Dodd-Frank act.
Gee, however, held that Pompliano was sufficiently sophisticated to analyze the contract. She also ruled that the Sarbanes-Oxley Act of 2002, which provides for the nullification of certain arbitration clauses, does not apply to claims arising under Dodd-Frank.
“Without a clear Congressional command to the contrary, the Court will not extend the reach of an anti-arbitration rule when it is ambiguous whether it applies,” the judge ruled.
Snap declined to comment on the ruling.
Pompliano was fired after three weeks on the job in 2015. In his complaint, he alleged that Snapchat was exaggerating its growth metrics in order to pump up its IPO. He also alleged that CEO Evan Spiegel was dismissive when he raised concerns about this, and about Snapchat’s sluggish growth in overseas markets. Snap countered that Pompliano was a disgruntled employee who was fired for poor performance, and that he was misinformed about Snapchat’s growth numbers. After leaving Snapchat, Pompliano went to work at Brighten Labs, which he also subsequently sued for wrongful termination and fraud.
Pompliano was seeking lost salary and stock options, which he said would have been valued at more than $5 million.
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