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On September 30, 2026, on the heels of its decision in Newton v. LVMH Moët Hennessy Louis Vuitton Inc. (discussed in our prior client alert here), the Second Circuit once again addressed the Ending Forced Arbitration Act (“EFAA”) in Silvia Diaz-Roa v. Hermes Law, P.C., Syzygy Legal Tech, Inc. In a blow to employers, the Second Circuit joined the Sixth and Ninth Circuits in broadly construing the word “case,” as used in the EFAA’s operative language, to mean an entire lawsuit as opposed to a single claim. In effect, the ruling allows plaintiffs bringing multiple claims along with their sexual harassment or sexual assault claims to have all claims bypass arbitration despite an existing pre-dispute arbitration agreement.

Background

Silvia Diaz-Roa began working for Hermes Law, P.C. as an intern in 2017. Shortly after her hire, Diaz-Roa signed an arbitration agreement, agreeing to arbitrate any claims against Hermes Law. Over the ensuing years, Hermes Law promoted Diaz-Roa several times, eventually to the position of Director of Innovation. In 2019, Diaz-Roa and Dwayne Hermes, founder and owner of Hermes Law, worked together to create a computerized litigation management company called ClaimDeck.

Thereafter, Diaz-Roa performed work for both Hermes Law and ClaimDeck under Hermes’ supervision. During her tenure at ClaimDeck, Diaz-Roa received positive performance reviews and advanced to the roles of Head of Product and Chief Operating Officer. As a reward for her contributions, ClaimDeck granted Diaz-Roa stock options equivalent to approximately 10% of the company’s shares, subject to a three-year vesting schedule. During this same period, Diaz-Roa alleged that she was subjected to persistent sexual harassment, particularly by Hermes. Specifically, Diaz-Roa alleged that Hermes and his wife directed her to flirt with prospective clients to help generate business and encouraged her to pursue romantic relationships with individuals in the industry, along with other unwanted solicitations and advances.

By August 2023, Diaz-Roa’s ClaimDeck stock options had fully vested and were worth more than $1 million. In late 2023 and early 2024, Diaz-Roa made two unsuccessful attempts to exercise the options. Shortly thereafter, in February 2024, Hermes Law and ClaimDeck terminated her employment, purportedly for cause.

 Procedural Posture

After Diaz-Roa’s employment was terminated, the parties commenced competing proceedings in federal court in March 2024. Hermes Law and ClaimDeck filed a declaratory judgment action in the Northern District of Texas seeking a determination that Diaz-Roa had been separated for cause, thereby automatically terminating her stock options. Diaz-Roa filed suit shortly thereafter in the Southern District of New York asserting sexual harassment claims and related employment and compensation claims. The defendants moved to compel arbitration, dismiss the complaint, or transfer the action to Texas.

The district court denied defendants’ motion to compel arbitration and their motion to transfer the case. The Court also dismissed all claims against defendants on the merits except for the claims for sexual harassment under NYCHRL and NYSHRL and a claim for conversion. The district court denied the motion to compel because it held that where EFAA applied and was properly invoked, the pre-arbitration agreement signed by Diaz-Roa was invalid and unenforceable with respect to the entire case. The defendants appealed the denial of their motion to compel arbitration to the Second Circuit.

Second Circuit Holding

On appeal, the Second Circuit affirmed the district court’s ruling, holding that when a plaintiff alleges conduct constituting sexual harassment or sexual assault, the EFAA permits that plaintiff to elect to invalidate a pre-dispute arbitration agreement and litigate the entire action in court.

The Court looked to the plain language of the EFAA, which mandates that “no pre-dispute arbitration agreement or pre-dispute joint-action waiver shall be valid or enforceable with respect to a case which is filed under Federal, Tribal, or State law and relates to the sexual assault dispute or the sexual harassment dispute.” The EFAA further defines “sexual harassment dispute” as “a dispute relating to conduct that is alleged to constitute sexual harassment under applicable … law.”

Defendants argued that the term “case,” as used in Section 402 of the EFAA, should not encompass all the claims in lawsuit, but rather only the claims relating to the harassment claim, rendering the remaining unrelated claims arbitrable. The Second Circuit disagreed, finding that when a plaintiff successfully invokes the EFAA to invalidate a pre-dispute arbitration agreement, the EFAA allows for the invalidation of an arbitration clause as to all claims in that lawsuit, including the non-harassment claims. The Court relied on the EFAA’s plain language, reasoning that the most natural reading of the term “case” refers to the lawsuit as a whole. In reaching that conclusion, the Court emphasized the term’s “long familiarity” in the law, noting that it often operates as a “commonplace descriptor for a judicial proceeding as a whole.” By contrast, the Court found the word “claim” denotes something narrower, reasoning that courts “frequently use the term ‘case’ to refer to a lawsuit as a whole, and the term ‘claim’ to refer to a specific cause of action within that lawsuit.”

Defendants further argued that broadly defining “case” to encompass all claims would render the EFAA’s “relates to” language superfluous. According to the defendants, broadly defining case simply requires courts to determine whether a sexual harassment dispute is present without performing the requisite relatedness analysis. Again, the Court was unpersuaded, holding principally that its definition of “case” was naturally limited by the rules governing joinder of claims. Namely, federal joinder rules ensure that a case refers to a “coherent, legally cognizable judicial proceeding comprised of related claims and parties—not an aggregation of unrelated disputes.” Moreover, the Court reasoned that the phrase “relates to” is expansive, suggesting Congress intended to sweep broadly in enacting the EFAA.

The Court bolstered its plain language interpretation by invoking the meaningful-variation canon, observing that Congress used the word “claim” instead of “case” elsewhere in the EFAA. According to the Court, Congress’ use of different terms within the same statutory text “strongly suggests that different meanings were intended.” In plain terms, the Court reasoned that if Congress intended a more limited result, it would have employed narrower language, by using “claim” instead of “case.”

Accordingly, the Court concluded that Diaz-Roa could invalidate the arbitration agreement she signed and bring her non-harassment claims as part of the same lawsuit in federal court. The holding in Diaz-Roa further expands the scope of the EFAA and serves as a reminder to employers that arbitration agreements may prove less enforceable than anticipated where a lawsuit includes allegations sexual harassment or sexual assault.

EFAA Developments in New York State Court: C.N. v. Sigma Delta Tau Society

New York courts have also recently addressed the scope of the EFAA. In C.N. v. Sigma Delta Tau Society, an Appellate Court held that the EFAA may preclude the arbitration of an action sounding in negligence against a third-party where a logical nexus exists between the action and the harassment or sexual assault claims. There, the plaintiff asserted sexual assault claims arising from an off-campus fraternity event as well as a negligence claim against her sorority based on its alleged failure to supervise the event. The trial court granted Sigma Delta Tau’s motion to compel arbitration of the negligence claim based on an arbitration provision contained in the plaintiff’s sorority membership agreement. The Appellate Court reversed, finding the negligence claim was sufficiently related to the alleged sexual assault to fall within the EFAA’s purview. In reaching that conclusion, the court relied on the statute’s “relates to” language and emphasized that the phrase should be interpreted broadly.

The holding in Sigma Delta Tau suggests courts may apply the EFAA to claims against actors other than the direct perpetrators of the alleged sexual misconduct where those claims are logically connected to the underlying sexual harassment or sexual assault dispute.

Key Takeaways for Employers

Together, Diaz-Roa and Sigma Delta Tau signal that courts are reading the EFAA expansively. Under Diaz-Roa, an employee who pleads a sexual harassment or sexual assault claim may keep the entire lawsuit in court, including wage, compensation, equity, and other claims that would otherwise be arbitrable. Under Sigma Delta Tau, the EFAA’s “relates to” language may also reach claims against third parties whose alleged conduct is logically connected to the underlying misconduct. In light of these decisions, employers should consider reassessing the value and enforceability of their pre-dispute arbitration agreements and joint-action waivers, anticipating that harassment allegations may be paired with other employment or compensation claims to avoid arbitration, and ensuring that anti-harassment policies, training, and complaint and investigation procedures are current and consistently followed.

If you have questions about these decisions or would like assistance reviewing your arbitration agreements or workplace policies, please contact the authors or any member of Wiggin and Dana’s Labor and Employment Practice Group.