On November 12, 2013, a Georgia district court ruled that Dodd-Frank whistleblowers are not entitled to a jury trial or punitive damages.  Pruett v. BlueLinx Holdings, Inc., No. 13-cv-02607 (N.D. Ga., Nov. 12, 2013).  This is a first-impression decision that is likely to impact the valuation of Dodd-Frank whistleblower claims.

Background

Plaintiff was an internal compliance manager for BlueLinx (the “Company”) who filed suit claiming that he was discharged in retaliation for disclosing information to the Public Company Accounting Oversight Board and the Security and Exchange Commission.  Plaintiff’s prayer for relief in his federal complaint included a request for punitive damages and a demand for a jury trial.  The Company filed a partial motion to dismiss, contending that neither punitive damages nor a jury trial are available under the Dodd-Frank whistleblower protections.

Holding

Because Plaintiff conceded that punitive damages are not available under Dodd-Frank, the court readily granted that portion of the Company’s motion.  The court then noted that although Dodd-Frank amended Section 806 of SOX to explicitly entitle whistleblowers to a jury trial, Dodd-Frank’s whistleblower provision is silent on the issue.  The court therefore proceeded to analyze whether Dodd-Frank whistleblowers are entitled to a jury trial under the Seventh Amendment by employing a two part inquiry: (i) comparing the nature of the issues to be resolved to eighteenth century actions brought in the courts of England prior to the merger of the courts of law and equity; and (ii) assessing whether the remedy sought is legal or equitable.  The court acknowledged that the nature of the remedy sought “is the more important inquiry.”

The Court found that the first factor favored a right to a jury trial because a Dodd-Frank whistleblower claim is analogous to the common law tort of wrongful discharge, which existed prior to the merging of courts of law and equity.   Turning to the second part of the inquiry, the court held that the principal relief available under Dodd-Frank (i.e., reinstatement and back pay) “are generally considered equitable remedies,” which are not determined by juries.  The court further concluded that the automatic doubling of backpay available to Dodd-Frank whistleblowers “is a calculation that lacks the discretion generally associated with monetary damages awarded by a jury” because in contrast to other statutory doubling provisions (e.g., the ADEA), “there is no requirement that a determination be made that a defendant’s actions were ‘willful’ in order to be entitled to ‘double’ back pay.”

Additionally, the court noted that Congress did not intend to make a jury trial available to Dodd-Frank whistleblowers because at the time Congress enacted the law, it was “aware of the legal controversy surrounding whether a jury trial was available under Sarbanes-Oxley and amend[ed] that legislation to specify a right for a jury trial.”  Accordingly, the Court concluded that Congress affirmatively chose not to make a jury trial available to Dodd-Frank whistleblowers.

Implications

Pruett is a case of first impression upon which employers will capitalize in the litigation and settlement contexts, as it eliminates the inherent risks attendant to a jury trial.  The ruling  is noteworthy because Dodd-Frank whistleblower claims recently have become a preferred option, likely because they present the specter of double backpay and an unusually long statute of limitations.