Three Circuits, One Message: The EFAA Takes the Whole Case Out of Arbitration

The Second Circuit has now joined the Sixth and Ninth Circuits on an important EFAA question: when the statute applies, it takes the entire case out of predispute arbitration—not merely the sexual harassment or sexual assault claims.  

The EFAA Means the Whole Case: Second Circuit Joins a Growing Appellate Consensus

The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act has now produced a remarkably consistent answer to one of its most important practical questions.

What happens when a lawsuit contains both a sexual harassment claim covered by the EFAA and other claims that, standing alone, would ordinarily be subject to a valid arbitration agreement?

Does only the harassment claim stay in court while the remaining claims go to arbitration?

Or does the EFAA allow the entire lawsuit to proceed in court?

Three federal courts of appeals have now answered that question in 2026. All three reached the same conclusion.

The whole case stays in court.

The latest decision is Diaz-Roa v. Hermes Law, P.C., No. 24-3223-cv (2d Cir. Sept. 30, 2026). The Second Circuit held that when a plaintiff properly invokes the EFAA, a predispute arbitration agreement becomes unenforceable as to the entire lawsuit, including claims that do not themselves allege sexual harassment or sexual assault.

The Second Circuit follows the Sixth Circuit’s decision earlier this year in Bruce v. Adams & Reese, LLP, 168 F.4th 367 (6th Cir. 2026), and the Ninth Circuit’s decision in Ding v. Structure Therapeutics, Inc., No. 25-1532, 2026 WL 2420555 (9th Cir. Aug. 19, 2026).

For employers, employees, and attorneys drafting or evaluating arbitration agreements, that emerging consensus matters.

The Dispute Was About More Than Harassment

Silvia Diaz-Roa began working for Hermes Law in 2017 and later became involved in developing ClaimDeck, a legal technology company. Over time, she received stock options representing approximately 10% of the company. According to her complaint, those options had fully vested by August 2023 and were worth more than $1 million.

She alleged that after notifying the defendants that she intended to exercise the options, she was terminated in February 2024.

Diaz-Roa also alleged that she had been subjected to sexual harassment during her employment. Her allegations included comments about her appearance, instructions to flirt with prospective clients to attract business, encouragement to pursue relationships with industry colleagues for the employers’ benefit, and other allegedly inappropriate conduct.  

Her lawsuit therefore contained two very different sets of allegations.

Some claims involved sexual harassment. Others involved the stock options and her allegedly wrongful termination.

That distinction created the arbitration issue.

Diaz-Roa had signed a broad arbitration agreement in 2018 requiring arbitration of most claims involving her employment or its termination. The defendants argued that even if the EFAA permitted her sexual harassment claims to remain in court, claims unrelated to the alleged harassment should still be arbitrated.

The Second Circuit disagreed.

Congress Used the Word “Case”

The decision turned principally on one word in the EFAA.

“Case.”

Section 402(a) provides that, at the election of a person alleging conduct constituting a sexual harassment or sexual assault dispute, a predispute arbitration agreement is not valid or enforceable “with respect to a case” filed under federal, tribal, or state law that relates to the sexual harassment or sexual assault dispute.

The defendants essentially asked the court to read “case” as “claim.”

The Second Circuit declined to do that.

A “case,” the court reasoned, ordinarily means the lawsuit as a whole. A “claim” means one particular demand for relief within that lawsuit. Congress knew how to use both words and, in fact, used the word “claim” elsewhere in the EFAA.

That choice mattered.

Had Congress intended courts to separate harassment claims from non-harassment claims and compel arbitration of the latter, it could have written the statute that way.

It did not.

The court therefore concluded that once the EFAA applies to a “case,” the arbitration agreement is unenforceable as to all claims comprising that case—even claims that would otherwise fall comfortably within the parties’ arbitration agreement.  

No Claim-by-Claim Parsing

The defendants argued for what might initially seem like an intuitive approach: examine each cause of action separately.

The harassment claims would remain in court. The stock-option or other contractual claims would go to arbitration unless they independently “related to” the harassment.

But the Second Circuit concluded that the statute does not instruct courts to conduct that claim-by-claim analysis.

The EFAA says the “case” must relate to the sexual harassment or sexual assault dispute. It does not say that every individual claim must separately relate to that dispute.

That distinction may have substantial practical consequences.

Consider an employment lawsuit containing claims for sexual harassment, retaliation, wrongful termination, unpaid compensation, breach of contract, and a dispute over equity compensation. Before the EFAA, a broad employment arbitration agreement might send all of those claims to arbitration.

After Diaz-Roa, if the EFAA is properly triggered, an employer within the Second Circuit cannot simply isolate the sexual harassment counts and compel arbitration of everything else.

The case remains intact.

Three Circuits, One Answer

Perhaps the most significant feature of Diaz-Roa is that the Second Circuit is not writing on a blank slate.

It is now the third federal appellate court this year to reach the same conclusion.

In Bruce v. Adams & Reese, LLP, the Sixth Circuit held that when a plaintiff brings multiple claims in one lawsuit and one properly alleges a sexual assault or sexual harassment dispute, the EFAA renders the arbitration agreement unenforceable as to each claim comprising the case.

Then, in August, the Ninth Circuit reached the same conclusion in Ding v. Structure Therapeutics, Inc., reasoning that Congress chose the phrase “with respect to a case,” rather than “claim.”

Now the Second Circuit has expressly aligned itself with both courts.  

That developing unanimity is important.

There is always some uncertainty when a new federal statute begins generating appellate decisions. Different courts may interpret the same language differently, producing circuit splits that take years to resolve.

So far, that is not happening here.

On this issue, the appellate trend is becoming increasingly clear: properly invoking the EFAA can prevent enforcement of a predispute arbitration agreement as to the plaintiff’s entire case.

That Does Not Mean Every Claim Survives

There is an equally important limitation.

The EFAA determines whether the arbitration agreement can be enforced. It does not determine whether every claim in the complaint is legally sufficient.

That distinction played out in Diaz-Roa.

The plaintiff originally asserted six causes of action, including sexual harassment, breach of contract, violation of New York labor law, tortious interference, and conversion.

The district court dismissed several of those claims under Rule 12(b)(6). By the time the case reached the Second Circuit, the significant non-harassment claim remaining was conversion.

The EFAA kept that conversion claim out of arbitration because it was part of the same case. It did not immunize the plaintiff’s other claims from ordinary dismissal standards.

That is an important practical distinction for both sides.

The EFAA can determine the forum.

It does not determine the merits.

Some EFAA Questions Remain Open

The Second Circuit also left several issues unresolved.

One is the pleading standard required to trigger the EFAA. Some courts have held that a plaintiff need only assert a nonfrivolous sexual harassment or sexual assault claim. Others require the allegations to satisfy the familiar Twombly/Iqbal plausibility standard.

The Second Circuit did not resolve that disagreement because the defendants did not challenge the issue on appeal and, in any event, Diaz-Roa's allegations satisfied the more demanding plausibility standard.  

The court also did not decide how its rule would operate in more complicated cases involving multiple plaintiffs, class claims, or collective actions where only one plaintiff alleges sexual harassment or sexual assault.  

Those questions will undoubtedly generate additional litigation.

But the central issue in Diaz-Roa is becoming much less uncertain.

The Practical Impact on Arbitration Agreements

The decision does not make employment arbitration agreements obsolete.

Far from it.

For the many employment disputes that do not involve sexual harassment or sexual assault, otherwise enforceable arbitration agreements remain subject to the ordinary rules of the Federal Arbitration Act.

But the EFAA creates an important statutory exception to the FAA’s enforcement mandate.

And the significance of that exception is broader than simply removing sexual harassment claims from arbitration.

That is the point employers and counsel should take from the growing appellate consensus.

A sexual harassment dispute can affect the forum for claims involving compensation, contracts, termination, equity interests, or other employment-related rights if those claims are properly joined in the same case.

As a result, the practical exposure created by the EFAA cannot be evaluated simply by identifying which particular causes of action allege harassment.

Counsel needs to look at the lawsuit as a whole.

Congress Chose the Case, Not Just the Claim

The EFAA represented a deliberate congressional decision to carve certain disputes out of the FAA’s general policy of enforcing arbitration agreements.

The Second Circuit emphasized that the FAA's policy favoring arbitration does not justify narrowing that congressional choice. A federal policy favoring arbitration cannot override a contrary command Congress placed directly into the FAA itself.  

That may be the most important lesson from Diaz-Roa, Bruce, and Ding.

Congress could have said that sexual harassment and sexual assault “claims” are exempt from predispute arbitration.

Instead, Congress said the arbitration agreement is unenforceable “with respect to a case” relating to such a dispute.

Three federal appellate courts have now taken Congress at its word.

For counsel evaluating an employment dispute subject to an arbitration agreement, the question therefore cannot end with: “Which claims are arbitrable?”

Where the EFAA may apply, the more important question may be:

“What happens to the entire case?”

Increasingly, the federal appellate courts are giving the same answer.

The entire case stays in court.

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