On September 28, 2023, the U.S. District Court for the Southern District of California issued two separate orders in a long-running SOX whistleblower lawsuit.  Following a jury trial, the court upheld the jury’s $1.5 million damages award and awarded the plaintiff $2.4 million in attorneys’ fees.  Erhart v. BofI, No. 15-cv-2287.

Background

As we previously reported, Charles Erhart, a former Bank of Internet Holding, Inc. (BofI) internal auditor, sued his former employer in the United States District Court for the Southern District of California, alleging that BofI retaliated against him for reporting wrongdoing to his supervisors and the government. 

After years of litigation, which included the court’s denial in 2017 of BofI’s motion to dismiss and the denial in 2019 of BofI’s motion for judgment on the pleadings, a three-week jury trial was held in 2022.  After a full day of deliberation, the jury found that BofI violated SOX’s anti-retaliation provision and awarded Erhart $1.5 million in damages.

Rulings

Following the jury verdict, BofI moved for judgment as a matter of law or a new trial.  The court denied the motion in its entirety.  In support of its request for judgment as a matter of law on Erhart’s SOX whistleblower claim, BofI argued that no reasonable jury could conclude that Erhart reasonably believed that BofI violated any law covered by SOX’s anti-retaliation provision.  The court rejected this argument, holding that the jury had sufficient evidence to conclude that Erhart had shown that he had a reasonable belief that BofI had violated SOX based on his relatively limited experience as a junior bank auditor.  The court explained that “[i]f courts … are going to subject employees like Erhart to the same standard as attorneys … then Sarbanes-Oxley’s anti-retaliation provision will be gutted.”

The court also granted in part Erhart’s motion for attorneys’ fees and, after applying the lodestar method to calculate a reasonable fee, awarded him $2.4 million in fees and $170,000 in prejudgment interest.

Outlook

Bofl has not indicated whether it plans to appeal.  We will continue to monitor this case.

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Photo of Lloyd B. Chinn Lloyd B. Chinn

Lloyd B. Chinn is a partner in the Labor & Employment Law Department and co-head of the Whistleblowing & Retaliation Group. He litigates employment disputes of all types before federal and state courts, arbitration tribunals (e.g., FINRA, JAMS and AAA), and before administrative…

Lloyd B. Chinn is a partner in the Labor & Employment Law Department and co-head of the Whistleblowing & Retaliation Group. He litigates employment disputes of all types before federal and state courts, arbitration tribunals (e.g., FINRA, JAMS and AAA), and before administrative agencies in New York and across the country. Lloyd’s practice ranges from litigating compensation disputes to defending whistleblower, discrimination and sexual harassment claims. Although he represents employers in a wide range of industries, including law, insurance, health care, consulting, media, education and technology, he focuses a substantial portion of his practice on the financial services sector. He has tried to final verdict or arbitration award substantial disputes in this area.

Due to Lloyd’s litigation experience, clients regularly turn to him for advice regarding the full range of employment matters, including terminations, whistleblower policy and procedure, reductions in force, employment agreements, and employment policies. For example, in the wake of the financial crisis, he has counseled a number of firms through reductions in force and related bonus and deferred compensation disputes. Lloyd has also been retained to conduct internal investigations of allegations of workplace misconduct, including claims leveled against senior executives.

Lloyd has represented global businesses in matters involving Sarbanes-Oxley and Dodd-Frank whistleblower claims. He has taken an active role in the American Bar Association on these issues, currently serving as Co-Chair of the Whistleblower subcommittee of the ABA Employee Rights and Responsibilities Committee. Lloyd has spoken on whistleblowing topics before a numerous organizations, including the American Bar Association, ALI-ABA, Association of the Bar of the City of New York, and New York University School of Law. He has testified twice before Congressional subcommittees regarding whistleblower legislation and has also published blog postings, articles and client alerts on a variety of topics in this area, including the Dodd-Frank Act’s whistleblower provisions. Lloyd is a co-editor of Proskauer’s Whistleblower Defense Blog, and he has been widely quoted by on whistleblower topics by a number of publications, including the New York Times, the Wall Street Journal, the National Law Journal and Law 360.

Lloyd has also become active in the International Bar Association, presenting on a variety of subjects, including: the #MeToo movement, the COVID-19 pandemic and employment law, and cross-border harmonization of employment provisions in transactions. Lloyd also hosts a quarterly roundtable discussion among financial services industry in-house employment lawyers. He has also published articles and given speeches on a variety of other employment-law topics, including non-solicitation provisions, FINRA arbitration rules, cross-border discovery, e-discovery, and the use of experts.

Photo of Pinchos Goldberg Pinchos Goldberg

Pinny Goldberg is a senior counsel in the Labor & Employment Law Department. Pinny represents employers in a broad array of matters before federal and state courts, FINRA and other arbitration panels, and administrative agencies, including the EEOC and its state equivalents, and…

Pinny Goldberg is a senior counsel in the Labor & Employment Law Department. Pinny represents employers in a broad array of matters before federal and state courts, FINRA and other arbitration panels, and administrative agencies, including the EEOC and its state equivalents, and in pre-litigation negotiations. Matters he works on include discrimination and harassment, wage and hour, wrongful discharge, whistleblowing and retaliation, covenants not to compete, breaches of fiduciary duty, unjust enrichment, and tort and contract claims.

In addition to handling litigation and dispute resolution, Pinny regularly advises clients on a wide variety of employment issues, including drafting, reviewing and revising handbooks and workplace policies. He also addresses questions and concerns related to hiring, wage and hour issues, employee leave, performance problems, terminations of employment, and separation agreements and releases.