Second Circuit EFAA Ruling: One Harassment Claim Keeps the Entire Case Out of Arbitration

The Second Circuit held on Wednesday, September 30, 2026, that when the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act applies, the plaintiff can void a pre-dispute arbitration agreement for the entire lawsuit, not just the harassment claims. The Second Circuit EFAA ruling in Diaz-Roa v. Hermes Law, P.C., No. 24-3223-cv, 2026 WL 2931801, therefore keeps a former legal-tech executive's contract, wage, tortious interference and conversion claims in federal court in Manhattan alongside her sexual harassment claim. The Second Circuit joins the Sixth Circuit, so no federal appeals court has adopted the claim-by-claim reading employers have been urging.

The practical consequence is simple. In New York, Connecticut and Vermont federal courts, an employment complaint that includes a properly pleaded sexual harassment claim stays out of arbitration as a single unit at the plaintiff's election. An employer can no longer expect to send the overtime, bonus, equity or contract counts to the American Arbitration Association (AAA) or JAMS while only the harassment count stays in court. The ruling also arrives with no live split for the Supreme Court to resolve: the Court already declined to take up the same question from California in 2025.

What the Second Circuit decided in Diaz-Roa v. Hermes Law

The panel of Judges John M. Walker Jr., Joseph F. Bianco and Myrna Pérez answered one question: when a plaintiff makes the election the statute allows, does the Arbitration Agreement fall away for every claim in the lawsuit, or only for the sexual harassment and sexual assault claims? The court chose the first reading. When the EFAA applies, the plaintiff may invalidate the pre-dispute agreement "as to the entire lawsuit," as early practitioner summaries put it, rather than carving the complaint into a court half and an arbitration half.

The result leaves in place Judge Lewis J. Liman's November 21, 2024 opinion and order in the Southern District of New York (No. 1:24-cv-02105, Dkt. 58), which denied the defendants' Motion to Compel Arbitration as to all of the plaintiff's claims. Judge Liman had also rejected the plaintiff's argument that the defendants waived arbitration, and he declined to transfer the case to the Northern District of Texas. Because the Second Circuit affirmed on the scope question, the employer-side argument that won on waiver gained nothing on appeal.

The court rested its reading on the text of 9 U.S.C. § 402(a). That provision says that, at the election of the person alleging the conduct, "no predispute arbitration agreement or predispute 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 operative noun is "case," not "claim." The panel also rejected the employers' alternative, which would require a trial court to rule claim by claim on whether each count independently "relates to" the harassment. Commentators summarizing the opinion read the court as saying that this carve-up is inconsistent with the statute Congress wrote.

The dispute behind the Second Circuit EFAA ruling: stock options, a Texas lawsuit and an AAA demand

The underlying fight is as much a commercial dispute as a harassment case, which is why the scope question mattered so much here. Silvia Diaz-Roa joined Hermes Law, P.C., a Texas law firm, as an intern and rose to senior project manager and director of innovation. From 2021 she led ClaimDeck, a litigation-management product spun out of the firm and operated by Syzygy Legal Tech, Inc., serving as head of product and chief operating officer. Her complaint names the firm, Syzygy (d/b/a ClaimDeck), founder and CEO Dwayne Hermes and co-founder Andrea Hermes.

According to her pleadings, the defendants granted her options in December 2020 to buy 58,825 ClaimDeck shares, roughly 10% of the company. Three years later, with the options fully vested and allegedly worth more than $1 million, she told Dwayne Hermes and the company's accountants and lawyer that she planned to exercise them. She alleges she was fired without cause within weeks, to keep her from collecting that equity. The defendants say the option was forfeited on a termination for cause and that she did not try to exercise it until after she was terminated.

Her harassment allegations describe a different strand of conduct: superiors regularly encouraging her to flirt to attract clients, to use her appearance to win business and, on some occasions, to become romantically involved with people in the industry.

On February 2, 2018, she had signed a mutual arbitration agreement attached to the Hermes Law employee handbook. It covered all claims arising from her employment or its termination, except claims for unemployment compensation benefits and certain claims involving trade secrets or confidential information. The agreement looked like a standard employment Arbitration Clause, and its breadth is exactly why the case-versus-claim question decided the outcome.

Date	Event
Feb. 2, 2018	Diaz-Roa signs a mutual arbitration agreement attached to the Hermes Law handbook
Dec. 2020	Options on 58,825 ClaimDeck shares (about 10%) granted
Mar. 3, 2022	EFAA takes effect for disputes arising or claims accruing on or after this date
Mar. 2024	Hermes Law and ClaimDeck sue in the Northern District of Texas seeking a declaration that the termination was for cause
Mar. 20, 2024	Diaz-Roa files in the Southern District of New York, about a week later
May 13, 2024	Hermes Law and ClaimDeck file an AAA arbitration in Dallas
July 17, 2024	Defendants move to compel arbitration, dismiss or transfer
Nov. 21, 2024	Judge Liman denies arbitration as to all claims and denies transfer
July 7, 2025	NWLC, Public Justice, AAJ and NELA file an amicus brief supporting affirmance; the U.S. Chamber of Commerce appears as amicus for the employers
Sept. 30, 2026	Second Circuit rules that the EFAA reaches the entire case

The procedural history shows the employer's strategy. It filed first in its home forum, then filed a Demand for Arbitration with the AAA in Dallas, then moved in New York to compel, dismiss or transfer. All three moves aimed to put the equity dispute, the largest dollar item, before an arbitrator in Texas. The Second Circuit EFAA ruling closes that route.

Does the EFAA apply to the entire case or only to the sexual harassment claims?

It applies to the entire case. Under Diaz-Roa in the Second Circuit and Bruce v. Adams and Reese, LLP in the Sixth Circuit, a plaintiff who properly invokes the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act can keep every claim in the lawsuit in court, including claims that would be arbitrable standing alone.

Three textual points drive that answer, and both circuits rely on them:

• "Case" is a term of art. In federal procedure, a case is the whole civil proceeding. Congress used "claim" elsewhere in the same statute, in the effective-date provision covering "any dispute or claim that arises or accrues" after enactment, so the choice of "case" in § 402(a) is treated as deliberate.
• "Relates to" modifies the case. The statute asks whether the case relates to the sexual harassment dispute, not whether each claim does. A lawsuit containing a harassment claim relates to the harassment dispute by definition.
• The election belongs to the plaintiff. Section 402(a) makes the agreement unenforceable "at the election of" the person alleging the conduct. Section 402(b) adds that a court, not an arbitrator, decides whether the statute applies, "irrespective of whether the agreement purports to delegate such determinations to an arbitrator." A Delegation Clause therefore does not send the scope question to the AAA.

The employer-side counterargument, pressed in Diaz-Roa by the U.S. Chamber of Commerce, is that the EFAA is an exception to the Federal Arbitration Act (FAA) and should be read narrowly, so that "business-related" disputes stay arbitrable. The Chamber argued that Diaz-Roa's suit was mainly an equity and contract fight with a harassment count attached. The panel did not accept that framing.

Can an employer still compel arbitration of wage or contract claims?

Generally no, once a covered harassment claim is properly pleaded and the plaintiff elects court. In the Second Circuit, the employer cannot split off wage-and-hour, breach of contract or equity claims for arbitration while the harassment claim stays in court. That remains true even where, as in Diaz-Roa, the non-harassment claims carry most of the dollar value.

Two qualifications matter. First, the EFAA must actually apply: the dispute must have arisen, or the claim accrued, on or after March 3, 2022, and the harassment allegation must meet whatever pleading threshold the court uses (see below). Second, district courts have left open, in dicta, whether claims "far afield" from the harassment, or improperly joined, might still be arbitrable. That idea traces to a footnote in Johnson v. Everyrealm, Inc. (S.D.N.Y. 2023). Before Diaz-Roa, the most prominent S.D.N.Y. attempt to split claims was a magistrate judge's ruling in Mera v. SA Hospitality Group, LLC, which sent the plaintiff's FLSA and New York Labor Law overtime claims to arbitration. The district judge later rejected that split and held the entire case exempt. The Second Circuit has now settled the circuit-wide default in the plaintiff's favor.

Which appeals courts have held the EFAA covers the whole case?

Two federal circuits and California's intermediate appellate court now read "case" as the whole lawsuit. No federal circuit has adopted the claim-by-claim reading.

Court	Decision	Date	EFAA issue decided	Result
Second Circuit	Diaz-Roa v. Hermes Law, P.C., No. 24-3223	Sept. 30, 2026	Scope: case or claim	Entire case stays in court
Sixth Circuit	Bruce v. Adams and Reese, LLP, 168 F.4th 367	Feb. 25, 2026 (en banc rehearing denied Apr. 9)	Scope: case or claim	Entire case stays in court
Cal. Ct. App., 2d Dist.	Liu v. Miniso Depot CA, Inc., 105 Cal. App. 5th 791	2024 (cert denied, No. 24-1215)	Scope: case or claim	Entire case stays in court
Ninth Circuit	Combs v. Netflix, Inc., No. 25-3164	July 8, 2026	Timing: when a dispute "arises"	Arbitration compelled; pre-2022 dispute
Second Circuit	Olivieri v. Stifel, Nicolaus & Co., No. 23-658	Aug. 12, 2024	Timing: continuing hostile environment	EFAA applies to conduct continuing after Mar. 3, 2022
N.Y. App. Div., 2d Dep't	C.N. v. Sigma Delta Tau Society	Sept. 23, 2026	Reach: negligence claim against a non-perpetrator	EFAA applies; arbitration denied

In Bruce, a former Adams and Reese employee sued for disability discrimination, retaliation, sexual harassment and hostile work environment. The Sixth Circuit, the first federal appellate court to decide the question, held that the harassment claim carried the whole proceeding out of arbitration. On that reading the qualifying claim need not be the main claim or a strong one. It must be adequately pleaded. The firm sought rehearing en banc and was denied on April 9, 2026, and no certiorari petition appeared on the Supreme Court's docket before the July 8 deadline.

Is there a circuit split on the EFAA, and will the Supreme Court take it up?

Not on scope, and not soon. After the Second Circuit EFAA ruling, every appellate court to decide the case-versus-claim question has chosen the entire-case reading, so the usual trigger for certiorari, a split among the federal courts of appeals, does not exist. The Supreme Court has also already passed on the issue once. In Liu v. Miniso Depot CA, Inc., No. 24-1215, the employer asked the Court to decide whether a claim must relate to sexual harassment for the EFAA to void arbitration of that claim. The petition was denied in 2025, leaving the California Court of Appeal's entire-case holding in place.

Hermes Law can still seek rehearing en banc in the Second Circuit or file its own petition for certiorari. Unless a later circuit breaks the other way, a petition would arrive in the same posture the Court declined in Miniso. The live disagreements among lower courts are about timing and pleading, not scope.

What triggers the EFAA: timing, "relates to" and the pleading standard

Because the Second Circuit EFAA ruling lets the plaintiff's election carry the whole case, the threshold questions matter more than ever. Three gates determine whether the election is available.

Timing. The statute covers disputes or claims arising or accruing on or after March 3, 2022. In Olivieri, the Second Circuit held that a hostile work environment claim accrues anew with each act, so harassment that began before the effective date but continued after it is covered. In Combs, the Ninth Circuit held that a dispute "arises" when the employee registers disagreement, by internal complaint, external complaint or otherwise, and the employer expressly or constructively opposes that position. Combs's complaints ran from 2017 through her December 2021 firing, so her case went to arbitration.

What pleading standard must the harassment claim meet? Most federal district courts require the harassment allegations to satisfy the Twombly/Iqbal plausibility standard of Rule 12(b)(6) before the EFAA displaces an agreement. A minority ask only whether the plaintiff has made nonfrivolous allegations of conduct "alleged to constitute" sexual harassment, reading the statute's focus on allegations as a lower bar. Judge Liman found Diaz-Roa's harassment allegations sufficient. Early coverage of the Second Circuit opinion centers on scope, and this account does not treat the panel as having resolved the plausibility-versus-nonfrivolous divide. Practitioners should read the full opinion before relying on it for that point.

"Relates to." State appellate courts are reading this phrase broadly as well. On September 23, 2026, New York's Second Department held in C.N. v. Sigma Delta Tau Society that a negligence claim against a sorority that did not commit the alleged assault still relates to the assault dispute. Combined with the entire-case rule, that nexus reading lets one qualifying allegation pull every claim against every contracting defendant out of arbitration.

What the Second Circuit EFAA ruling means for employers, claimants' counsel and mass arbitration programs

For employers and drafters. An arbitration program can no longer count on keeping the high-value parts of a multi-claim employment dispute out of court whenever a harassment count is attached, at least in the Second and Sixth Circuits and in California state court. Several adjustments follow. Severability Clause language that purports to sever covered claims and arbitrate the rest will not change the result, because the statute voids the agreement "with respect to a case." Equity and incentive plans with their own dispute-resolution clauses deserve a second look, since in Diaz-Roa the equity claim followed the harassment claim into court. Defense strategy shifts toward the gates: contesting whether the dispute arose before March 3, 2022, whether the harassment allegations are plausibly pleaded, and whether a claim is so far afield or so improperly joined that it falls outside the case.

For claimants' counsel. The ruling raises the value of a well-pleaded harassment count and the risk of a thin one. A complaint that relies on the EFAA should plead specific, dated conduct after March 3, 2022, so the timing and plausibility gates are cleared on the face of the pleading. The election should be stated expressly. Counsel should expect defendants to test the harassment allegations hard. Courts and commentators have flagged the risk of the EFAA becoming a "get out of arbitration free" card for implausible claims, and a weak harassment count invites a Rule 12(b)(6) attack that, if it succeeds, sends everything else to arbitration.

For mass arbitration and aggregate practice. The EFAA also bars enforcement of a "predispute joint-action waiver," and § 402(a) extends the election to the named representative of a class or collective action alleging covered conduct. Where a workplace has systemic harassment allegations, the entire-case rule means a Class Action Waiver and an individual-arbitration mandate may both fall away for the whole case, wage and hour counts included. Employers that answer Mass Arbitration exposure with individual-arbitration programs should model which claimant groups can plead covered conduct. For those groups, the expected forum is federal or state court, not the AAA's mass-filing docket.

For plaintiffs' firms and funders. Cases that combine employment harassment with commercial claims, such as equity, commissions, deferred compensation or partnership interests, become more attractive in courts that follow Diaz-Roa and Bruce, because a public jury forum is available for the full damages picture. The trade-off is front-loaded motion practice on the threshold gates, which affects timing and budgets.

None of this is legal advice. The opinion's exact reasoning, including any limits the panel placed on claims "far afield" from the harassment, should be read in full before it is relied on in a particular matter.

Frequently asked questions

What did the Second Circuit decide in Diaz-Roa v. Hermes Law?

On September 30, 2026, the Second Circuit held that a plaintiff who invokes the EFAA can invalidate a pre-dispute arbitration agreement for the entire lawsuit. That left in place the district court's denial of arbitration for all of Silvia Diaz-Roa's claims against Hermes Law and ClaimDeck.

Does the EFAA apply to the entire case or only to the harassment claims?

The entire case, under both the Second Circuit (Diaz-Roa) and the Sixth Circuit (Bruce v. Adams and Reese). Section 402(a) voids the agreement "with respect to a case" that relates to the harassment dispute, and both courts read "case" as the whole civil proceeding.

Can an employer still arbitrate wage or contract claims if a sexual harassment claim is filed?

Not in the Second or Sixth Circuits once the EFAA applies and the plaintiff elects court. Employers can still contest whether the EFAA applies at all, on timing or pleading grounds, and argue that a claim is improperly joined or far afield.

Is there a circuit split on the EFAA's scope?

No. Every federal appeals court and state appellate court to decide the question has adopted the entire-case reading, and the Supreme Court denied certiorari on the issue in Liu v. Miniso Depot CA, Inc. in 2025.

What pleading standard must a harassment claim meet to trigger the EFAA?

Most federal courts require a plausibly pleaded harassment claim under Rule 12(b)(6). A minority accept nonfrivolous allegations. Plaintiffs should plead to the higher standard.

Does the EFAA apply to harassment that started before March 3, 2022?

It can. The Second Circuit held in Olivieri v. Stifel that a hostile work environment continuing after March 3, 2022 brings the claim within the EFAA. The Ninth Circuit held in Combs v. Netflix that a dispute which arose entirely before that date is not covered.