Snapchat Whistleblower Must Arbitrate, Court Rules

While we attorneys may not be too surprised when we're held to a higher standard when it comes to contracting, a former Snapchat employee is learning the curse of being educated: Being considered a sophisticated party in court.

Sadly for the spurned employee, the court found that he knew what he was doing when he signed an employment agreement with an arbitration clause. Despite the fact that he was not afforded the opportunity to have an attorney review the agreement, and had one day to sign it, the court said that it didn't matter because he seemed smart enough to be able to understand what he was signing.

What Happened?

Plaintiff Anthony Pompliano originally sued Snapchat in state court, then withdrew that complaint and re-filed his case in federal court for the Central District of California. Unfortunately for Pompliano, his case then got squashed down to arbitration on a motion by Snapchat to enforce the arbitration agreement in Pompliano's employment contract. The court stayed the case, pending the arbitration. It retained jurisdiction to handle ancillary matters, such as a motion for a preliminary injunction to compel arbitration.

What's This Case About?

Pompliano blew the whistle about Snapchat allegedly using inflated metrics to woo investors Pre-IPO. After only being employed for three short weeks, Pompliano believed that Snapchat was deceiving investors by exaggerating the company's growth. After he raised those concerns, he was fired. He believes his termination was related to his speaking up, but the company claims he was fired for poor performance.

Interestingly, Pompliano quickly moved on to another company, and ended up getting terminated from his next employer as well. He sued that employer for wrongful termination and fraud.

Sticky-Icky Tech Contracts

As the court explained, although SOX provides an out for arbitration clauses in employment contracts, Dodd-Frank, which Pompliano sued under, does not. Additionally, whereas one might think that only having a single day to sign a contract would lend itself to a finding of unconscionability or adhesion, the court was not convinced, particularly as it ruled that Pompliano was a sophisticated party that could understand what he was signing.

Related Resources:

• Blackberry Sues Snap Over Messaging Technology (FindLaw's Technologist)
• Does Snapchat Really Get Sued So Much? (FindLaw's Technologist)
• Will Snapchat Trigger More Tech IPOs? (FindLaw's Technologist)