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Virginia District Court Opens Door To Front Pay For SOX Whistleblowers




by:
Jon Dueltgen
Harris Michael Mufson
Proskauer Rose LLP - New York Office

Steven J. Pearlman
Proskauer Rose LLP - Chicago Office

 
December 5, 2013

Previously published on December 2, 2013

In a SOX whistleblower case of first impression, the U.S. District Court for the Eastern District of Virginia ruled that front pay may be ordered in lieu of reinstatement.  However, the court ultimately determined that front pay was not warranted under the facts of this case. 

Background

Plaintiff Andrea Jones (Plaintiff) was the CFO of Southpeak Interactive (Company), a videogame publisher in Midlothian, Virginia.  The Company terminated her employment on August 14, 2009, two days after she informed the SEC of alleged discrepancies in the accounting of the inventory and costs, which she previously raised with the Board of Directors and outside counsel.  Plaintiff filed suit under Section 806 of SOX, alleging that she was discharged in retaliation for reporting the alleged discrepancies to the SEC.

Ruling

A jury found in Plaintiff’s favor, awarding her $593,000 in back pay against the Company and $178,500 each in compensatory damages against two other individual defendants.  Plaintiff agreed to the Judge’s remittitur of “$470,000 in back pay and $123,000 in compensatory damages against [the Company],” and . . . awards of $50,000 against each of two individual defendants.  The court then focused on Plaintiffs’ motion for front pay in lieu of reinstatement, seeking the “difference in total compensation between Jones’ current job and her former job with [the Company].”

The court found support for a front pay award under Section 806 of SOX from the U.S. Department of Labor’s November 3, 2011 Interim Final.  However, the court closely analyzed whether front pay was appropriate in this case, as the Company was no longer operational and Plaintiff would not have been employed at the Company beyond 2011.  Although Plaintiff offered evidence that she had nine interviews for similar CFO positions, the record contained “no information about the compensation levels for those position,” nor any “proof that the hypothetical, laid-off plaintiff would have been more successful in obtaining those positions than the actual, unlawfully terminated plaintiff.”  Indeed, the court recognized, even in the absence of the purported retaliation, Plaintiff would have been laid off in 2011 “in the midst of a struggling job market” and searching for “a high-ranking position with limited openings.”   Thus, the court ultimately declined to award Plaintiff front pay.

Implications

Though the court found that front pay can be available to SOX under certain conditions, this decision is nevertheless favorable to employers to the extent that the court took a rather strict approach to determining the conditions under which it should be awarded.



 

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.
 

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