A Review Of Recent Whistleblower Developments - April 2015

Fourth Circuit Applies Two-Year Statute of Limitations to SOX Whistleblower Claim and Confirms Availability of Emotional Distress Damages SDNY Holds That SOX Protects Employee From Retaliation for Activity Engaged in After Being Terminated SEC Focuses on Restrictions Placed Upon Potential Whistleblowers SEC Makes First Whistleblower Award to a Former Corporate Officer Second Circuit Affirms SEC's Denial of Whistleblower Award Based on Information Reported Prior to Dodd-Frank's Enactment Fourth Circuit Applies Two-Year Statute of Limitations to SOX Whistleblower Claim and Confirms Availability of Emotional Distress Damages

In Jones v. SouthPeak Interactive Corp., 777 F.3d 658 (4th Cir. 2015), the plaintiff, the former chief financial officer of a video game publishing company, believed that the company's chief executive officer had used personal funds to pay for an order that the company placed with a supplier. Because the company had not recorded this transaction as a debt on its balance sheet or quarterly financial report, the plaintiff reported her concern to the chairman of the company's audit committee. The company's board later voted to terminate the plaintiff, who then filed a whistleblower complaint with the Occupational Safety and Health Administration (OSHA) against the company that also identified the company and three individuals as having violated the retaliation provisions of Sarbanes-Oxley Act of 2002 (SOX). When OSHA did not issue a final order within 180 days, the plaintiff withdrew her complaint. Nearly two years later, the plaintiff filed a SOX retaliation suit in federal court against the company and two individuals.

The case went to trial, and the jury found the company and two individuals liable. The jury found the company liable for $593,000 in back pay, and each individual defendant liable for $178,500 in compensatory damages. After post-trial motions, the court reduced the damages for which the company was responsible to $470,000 in back pay and $123,000 in compensatory damages. The court reduced the damage awards against the individual defendants to $50,000 each.

On appeal, the company argued that the suit was barred by the statute of limitations because it had been filed nearly three years after her termination. The company argued that the two-year statute of limitations found in 28 U.S.C. § 1658(b) applies, rather than the four-year limitations period in 28 U.S.C. § 1658(a). The Fourth Circuit rejected this argument, noting that the four-year limitations period applied to "a claim of fraud," while the plaintiff's claim involved retaliatory discharge that does not require any showing of actionable fraud. Thus, the four-year "catchall" provision for actions under federal statues applied. 777 F.3d at 668.

The appellants also challenged the district court's award of emotional distress damages, arguing that such damages are not available under SOX. The Fourth Circuit noted that § 1514A(c)(1) provides that a prevailing employee is entitled to "all relief necessary to make the employee whole." Id. at 670. In addition, the next subsection, § 1514A(c)(2), states that compensatory damages "shall include" several types of damages, although specifically enumerating emotional distress damages. Id. at 670-71. The court noted that the phrase "shall include" is not the equivalent of...