Image of Sarbanes-Oxley Authorizes Damages for Reputational Harm

Sarbanes-Oxley Authorizes Damages for Reputational Harm

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Sarbanes-Oxley Whistleblower Damages and Remedies

In a Sarbanes-Oxley whistleblower retaliation lawsuit brought against a bank, Judge Sweet held that the great weight of authority permits SOX whistleblowers to recover damages for reputational harm, harm to career, and emotional distress:

“With respect to damages for emotional distress, every circuit court to address the issue holds that such damages may be recoverable pursuant to SOX’s language stating that a prevailing employee `shall be entitled to all relief necessary to make the employee whole.'” Feldman-Boland v. Stanley, No. 15 Civ. 6698, 2016 WL 3826285, at *6 (S.D.N.Y. July 13, 2016) (citing the statutory language). Consistent with the reasoning in Feldman-Boland, other Courts have found that reputational injury is also compensable under SOX. “When reputational injury caused by an employer’s unlawful discrimination diminishes a plaintiff’s future earnings capacity, [she] cannot be made whole without compensation for the lost future earnings [she] would have received absent the employer’s unlawful activity.” Mahony v. KeySpan Corp., No. 04 CV 554 (SJ), 2007 WL 805813, at *7 (S.D.N.Y. March 12, 2007).

Recently a SOX whistleblower was awarded  $2.7M in front pay in part because “his prospects for future employment are unpromising in part due to Defendant’s violations of his rights.”  The whistleblower in that case was featured in an article in Corporate Counsel magazine entitled How to Help a Whistleblower.

Whistleblowers have obtained substantial recoveries in SOX whistleblower cases:

See our tips to maximize your recovery in your whistleblower retaliation case.

SOX Whistleblowers Can Recover Front Pay

A prevailing SOX whistleblower can recover “all relief necessary to make the employee whole,” including reinstatement, back pay, attorney’s fees, and costs. 18 U.S.C. § 1514A(c). “Special damages” include damages for impairment of reputation, personal humiliation, mental anguish and suffering, and other noneconomic harm resulting from retaliation. See Kalkunte v. DVI Fin. Servs., Inc., ARB Case Nos. 05-139, 05-140, at 11 (ARB Feb. 27, 2009). Although reinstatement is the preferred and presumptive remedy to make an employee whole, some ALJs have awarded front pay in lieu of reinstatement. See, e.g., Hagman v. Washington Mutual Bank, Inc., ALJ Case No. 2005-SOX-00073, at 26–30 (ARB Dec. 19, 2006), appeal dismissed, ARB Case No. 07-039 (ARB May 23, 2007) (awarding $640,000 in front pay to a banker whose supervisor became verbally and physically threatening when the banker disclosed concerns about the short funding of construction loans). But, until recently, there was some ambiguity as to whether district courts would award front pay.

In October 2013, Judge Robert Payne held that front pay is an appropriate remedy in lieu of reinstatement in SOX actions. See Jones v. SouthPeak Interactive Corp., 986 F. Supp. 2d 680 (E.D. Va. 2013), aff’d, 777 F.3d 658 (4th Cir. 2015). Andrea Jones worked at SouthPeak Interactive Corp. (“SouthPeak”) as its chief financial officer, and SouthPeak terminated her employment two days after she disclosed accounting irregularities to the SEC. Following a four-day trial, a jury found for Jones and awarded nearly $700,000 in damages. Jones then filed a motion seeking front pay in lieu of reinstatement and in addition to compensatory damages. Judge Payne’s decision to award front pay under SOX was based on DOL regulations implementing SOX, which authorize the award of front pay in lieu of reinstatement, and on Fourth Circuit precedent affirming awards of front pay in lieu of reinstatement under similar remedial statutes, such as the ADEA and FMLA.

SouthPeak appealed Judge Payne’s decision. The DOL filed an amicus curiae brief arguing that front pay is an appropriate remedy under SOX, and the Fourth Circuit affirmed. See 777 F.3d at 663. Following Jones, other circuits will likely hold that SOX authorizes front pay in lieu of reinstatement. Large awards of front pay to highly compensated employees, such as corporate officers, could result in very large recoveries under SOX.

Experienced and Effective SOX Whistleblower Attorneys

The top-rated SOX whistleblower lawyers at Zuckerman Law have substantial experience litigating Sarbanes Oxley whistleblower retaliation claims and have achieved substantial recoveries for officers, executives, accountants, auditors, and other senior professionals.  To learn more about corporate whistleblower protections, see our Sarbanes-Oxley Whistleblower Protection FAQ.

Click here to read client testimonials about the firm’s work in SOX whistleblower matters and other employment-related litigation.

Described by the National Law Journal as a “leading whistleblower attorney,” founding Principal Jason Zuckerman has established precedent under a wide range of whistleblower protection laws and obtained substantial compensation for his clients and recoveries for the government in whistleblower rewards and whistleblower retaliation cases.  Three of the matters he has worked on are featured in Tom Mueller’s seminal book about whistleblowing Crisis of Conscience: Whistleblowing in an Age of Fraud and Dan Maldea’s Corruption in U.S. Higher Education: The Stories of Whistleblowers.  False Claims Act qui tam cases he has worked on in conjunction with other attorneys have resulted in recoveries in excess of $100 million, and he has secured settlements in eight SOX whistleblower retaliation matters above $1 million.

Drawing on our substantial experience representing corporate whistleblowers, we have published a guide to SOX titled Sarbanes-Oxley Whistleblower Protection: Robust Protection for Corporate Whistleblowers.

To schedule a free preliminary consultation, click here or call us at 202-262-8959.

SOX Whistleblower Retaliation

 

Leading whistleblower law firm Zuckerman Law has written extensively about whistleblower protections and is quoted frequently in the media on this topic. A sample of those blog posts and articles appears below:

Categories: Corporate Whistleblower, Sarbanes-Oxley Whistleblower, Sarbanes-Oxley whistleblower protection, whistleblower lawyer, Whistleblower Protection Law

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About the author

Avatar of Jason Zuckerman

Jason Zuckerman, Principal of Zuckerman Law, litigates whistleblower retaliation, qui tam, wrongful discharge, and other employment-related claims. He is rated 10 out of 10 by Avvo, was recognized by Washingtonian magazine as a “Top Whistleblower Lawyer” in 2015 and selected by his peers to be included in The Best Lawyers in America® and in SuperLawyers.