On March 22, 2021, the Seventh Circuit affirmed a decision by the ARB dismissing a whistleblower retaliation complaint under SOX for failure to file within the 180-day statutory deadline.  Xanthopoulos v. U.S. Department of Labor, No. 20-2604.  The court rejected the plaintiff’s equitable tolling arguments.

Background

Plaintiff was an employee of an investment company, and his employment was terminated on October 3, 2017.  Prior to and after his discharge, Plaintiff filed several reports on the SEC’s whistleblower website by submitting a “tips, complaints, and referrals” electronic form (“TCR Form”).  The TCR Forms focused on allegations that Plaintiff’s employer was engaged in securities fraud by manipulating investment portfolio ratings and disseminating those ratings to clients.

On September 18, 2018, Plaintiff filed a complaint under SOX with OSHA.  Plaintiff renewed his securities fraud claims and alleged that his employer violated SOX’s anti-retaliation provision by terminating him.  OSHA dismissed the complaint as untimely because Plaintiff filed 350 days after his termination, which was outside SOX’s 180-day statute of limitations.  Plaintiff appealed the decision, arguing that the statute of limitations should be equitably tolled because the TCR Forms he submitted to the SEC constituted SOX claims mistakenly filed in the wrong forum.  The ARB dismissed his claims and Plaintiff appealed.  (We previously covered the ARB’s decision here.)

Ruling

On review, the Seventh Circuit held that equitable tolling due to a mistakenly filed claim was warranted only if a plaintiff could demonstrate that he had “raised the precise statutory claim in issue but done so in the wrong forum.”  If, instead, the earlier, timely-filed claim has remedies that are “separate, distinct, and independent” from those of the untimely claim, the two claims are distinguishable, and the statute of limitations is not tolled.

The Seventh Circuit agreed with the ARB that Plaintiff did not seek employee-based remedies available under SOX in his TCR Forms, such as reinstatement, back pay, or other damages associated with his termination.  Instead, Plaintiff repeatedly referenced Dodd-Frank and sought a whistleblower award, which is only available under Dodd-Frank, not SOX.  The Seventh Circuit found that Plaintiff sought not to “vindicate his right to be free from retaliation under Sarbanes-Oxley … but rather to prosecute [his employer’s] securities fraud, a separate and independent remedy.”  The court concluded that Plaintiff’s filings did not constitute the “precise statutory claim” mistakenly filed in the wrong forum, and thus, equitable tolling of SOX’s 180-day statute of limitations was not warranted.

Implications

The Seventh Circuit’s decision highlights notable distinctions between SOX and Dodd-Frank.  Though both statutes contain anti-retaliation provisions, the two differ in important respects.  For example, Dodd-Frank authorizes an aggrieved employee to file directly in federal court, while SOX requires a claim to be filed first with OSHA.  In addition, SOX provides standard employment-based remedies, such as reinstatement, backpay, and other damages.  Dodd-Frank goes further and permits the SEC to provide a whistleblower award of up to 30% of the total monetary sanctions resulting from the whistleblower’s complaint.  As this decision illustrates, a plaintiff who seeks to recover under Dodd-Frank by submitting TCR Forms may not later assert that he or she was actually making a SOX claim all along.

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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.

Photo of Scott Tan Scott Tan

Scott Tan is an associate in the Labor & Employment Law Department.  Scott represents employers in a variety of matters in federal and state court, arbitrations and state and local administrative proceedings.  His practice encompasses a wide range of labor and employment matters…

Scott Tan is an associate in the Labor & Employment Law Department.  Scott represents employers in a variety of matters in federal and state court, arbitrations and state and local administrative proceedings.  His practice encompasses a wide range of labor and employment matters, including employment discrimination, retaliation, breach of contract, whistleblower claims, restrictive covenants, and wage & hour claims.  Scott also counsels clients on a diverse array of employment matters, including accommodations requests, reductions-in-force, pay equity, wage and hour issues, and compliance with federal, state, and local laws.  Scott’s recent work has involved advising and representing clients across industries such as financial services, sports, news and media, healthcare, legal services, and real estate, in matters ranging from single and multi-plaintiff lawsuits to class and collective actions.

Scott has an active pro bono practice and advises non-profit organizations on employee separations and other employment issues.  He recently secured a favorable judgment in New York state court on behalf of a charitable foundation.  Scott also co-leads Proskauer’s Moot Court Program, where he introduces local high school students to appellate advocacy and coaches them to participate in an annual competition against other New York City high schools.

Scott received his J.D. from UCLA School of Law, where he served on the Moot Court Honors Board and worked as a research assistant for Professor Jennifer Mnookin and Professor Hiroshi Motomura.