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 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 Rule.  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 whistleblowers 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.

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Photo of Steven J. Pearlman Steven J. Pearlman

Steven J. Pearlman is a partner in the Labor & Employment Law Department, where he is Head of the Restrictive Covenants, Trade Secrets & Unfair Competition Group and Co-Head of the Whistleblowing & Retaliation Group.

Employment, Whistleblower, Restrictive Covenant and Trade Secret Practice.

Steven J. Pearlman is a partner in the Labor & Employment Law Department, where he is Head of the Restrictive Covenants, Trade Secrets & Unfair Competition Group and Co-Head of the Whistleblowing & Retaliation Group.

Employment, Whistleblower, Restrictive Covenant and Trade Secret Practice. Steven’s national practice focuses on defending companies in federal and state courts and arbitration against claims of: discrimination, retaliation and harassment, including claims brought by high-level executives; whistleblower retaliation; restrictive covenant violations; theft of trade secrets; and wage-and-hour violations (including class, collective and PAGA actions).

Illustrating his versatility, Steven has successfully handled bench and jury trials in multiple jurisdictions (e.g., Illinois, California, Florida and Texas); defended one of the largest Illinois-only class actions in the history of the federal courts in Chicago; and prevailed following his oral arguments before the Seventh Circuit and state appellate courts. Steven brings his litigation experience to bear in counseling clients to minimize risk and avoid or prepare for success in litigation.

Investigations. Reporting to boards of directors, their audit committees, CEOs and in-house counsel, Steven conducts sensitive investigations and has testified in federal court. His investigations have involved complaints of sexual harassment involving C-suite officers; systemic violations of employment laws and company policies; and fraud, compliance failures and unethical conduct.

Thought Leadership and Accolades. Steven was named Lawyer of the Year for Chicago Labor & Employment Litigation in the 2023 edition of The Best Lawyers in America. He was also named as One of the Top 10 Impactful Labor & Employment Lawyers in Illinois for 2023 by Business Today. He is a Fellow of the College of Labor and Employment Lawyers. Chambers describes Steven as an “outstanding lawyer” who is “very sharp and very responsive,” a “strong advocate,” and an “expert in his field.” Chambers also reports that “He is someone who can navigate the twists and turns of litigation without difficulty. Steven is great with brief-writing, crafting arguments, and making sure the client is always happy.”

Steven was 1 of 12 individuals selected by Compliance Week as a “Top Mind.” Earlier in his career, he was 1 of 5 U.S. lawyers selected by Law360 as a “Rising Star Under 40” in the area of employment law and 1 of “40 Illinois Attorneys Under Forty to Watch” selected by Law Bulletin Publishing Company. Steven is a Burton Award Winner (U.S. Library of Congress) for “Distinguished Legal Writing.”

Steven was appointed to Law360’s Employment Editorial Advisory Board and selected as a Contributor to Forbes.com. He has appeared on Bloomberg News (television and radio) and Yahoo! Finance, and is often quoted in leading publications such as The Wall Street Journal.

The U.S. Chamber of Commerce has engaged Steven to serve as lead counsel on amicus briefs to the U.S. Supreme Court and federal circuit courts of appeal. He was appointed to serve as a Special Assistant Attorney General for the State of Illinois in employment litigation matters. He has presented with the Solicitor of the DOL, the Acting Chair of the EEOC, an EEOC Commissioner, Legal Counsel to the EEOC, and heads of the SEC, CFTC and OSHA whistleblower programs. He is also a member of the Sedona Conference, focusing on trade secret matters.

In 2024, Steven received the Excellence in Pro Bono Service Award from the United States District Court for the Northern District of Illinois and the Chicago Chapter of the Federal Bar Association.