On April 23, 2018, the U.S. District Court for the Northern District of Illinois ruled that a plaintiff’s SOX claim precluded his claim for common law retaliatory discharge.  Cohen v. Power Solutions International, Inc., No. 17-cv-4385.

Plaintiff, a COO, claimed that in early 2016, he became suspicious of the Company’s financial dealings and believed the Company “had engaged in sham transactions, channel-stuffing, and other financial and accounting misconduct.”  Plaintiff reported his purported concerns to senior executives, employees at the Company and the Board of Directors and Audit Committee.  Shortly after his report to the Board, the CEO issued Plaintiff an “Action Plan,” dated the day before Plaintiff’s report to the Board and Audit Committee.  The Action Plan outlined areas of concern with Plaintiff’s performance and action items.  Plaintiff responded to the Action Plan in writing a few days later and again raised concerns regarding financial misconduct.  Plaintiff’s employment was terminated a few weeks later.

Plaintiff then filed suit claiming retaliation under SOX and Illinois common law.  The Company filed a motion for judgment on the pleadings pursuant to Rule 12(c), arguing that the Plaintiff’s “SOX claim provides an adequate alternative remedy, and so Illinois law precludes a common law retaliatory discharge claim for the same act of retaliation.”  The court agreed, finding that “Illinois courts do not permit common law claims for retaliatory discharge where there is an adequate alternative remedy available that renders the common law remedy superfluous.”  The court noted that where the act of retaliation violates a statutory right – such as SOX – “common law retaliatory discharge claims cannot stand.”

This case precludes Illinois plaintiffs from adding common law retaliation claims to SOX claims in hopes of raising the specter of punitive damages that SOX does not provide.

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Photo of Steven J. Pearlman Steven J. Pearlman

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

Steven’s practice covers the full spectrum of employment law, with a particular…

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

Steven’s practice covers the full spectrum of employment law, with a particular focus on defending companies against claims of employment discrimination, retaliation and harassment; whistleblower retaliation; restrictive covenant violations; theft of trade secrets; and wage-and-hour violations. He has successfully tried cases in multiple jurisdictions, and defended one of the largest Illinois-only class actions in the history of the U.S. District Court for the Northern District of Illinois. He also secured one of only a few ex parte seizures orders that have been issued under the Defend Trade Secrets Act, and obtained a world-wide injunction in federal litigation against a high-level executive who jumped ship to a competitor.

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.

Steven was recognized as Lawyer of the Year for Chicago Labor & Employment Litigation in the 2023 edition of The Best Lawyers in America. 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.” 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 has served on Law360’s Employment Editorial Advisory Board and is a Contributor to Forbes.com. He has appeared on Bloomberg News (television and radio) and Yahoo! Finance, and is regularly 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.