In a recent memorandum opinion, the Eastern District of Virginia found that plaintiffs raising retaliation claims under the Sarbanes-Oxley Act (“SOX”) are entitled to front pay, provided they present enough data to calculate a reasonably certain front pay award. This issue was a matter of first impression for the district court, and it is unclear whether the Fourth Circuit will agree with the district court’s interpretation. More after the break.
Plaintiff Andrea Jones served as SouthPeak Interactive Corporation’s (“SouthPeak”) Chief Financial Officer from October 2007 until her termination in August 2009. In February 2009, one of SouthPeak’s corporate officers agreed to advance the corporation $307,400 of his own funds to purchase a large quantity of inventory. The officers involved agreed to list the new inventory on the company books, but not the capital advance. They further agreed to keep Jones in the dark about the entire scheme. After she discovered the deception, Jones filed a complaint with the SEC against SouthPeak for intentional misrepresentations made in its financial reports to the Commission. In response, SouthPeak fired Jones.
Jones pursued a retaliation claim against SouthPeak for terminating her for whistleblowing under SOX’s anti-retaliation provisions. Jones ultimately was awarded $603,000 in back pay and compensatory damages. Jones then filed a motion for front pay in addition to the award. SouthPeak argued that Jones was not entitled to any such award under SOX, because it was not listed as an available remedy under the statute, nor could the parties or the Court find a precedent where such an award was provided.
Ultimately, the Eastern District determined that front pay was a viable remedy under a SOX retaliation claim. The Court extrapolated its holding from several pieces of legal authority. First, 18 U.S.C. § 1514A(c)(1) states that employees who prevail under a SOX retaliation claim are entitled to “all relief necessary to make the employee whole.” While SOX does not explicitly state that employees can receive front pay, front pay is not excluded either, so the Eastern District determined that is a potentially viable remedy. Second, the Department of Labor’s Interim Final Rule on SOX Retaliation Complaints states that front pay is a viable remedy, and the Final Rule cited two administrative precedents in support. Finally, the Fourth Circuit Court of Appeals has not removed front pay from the list of viable remedies, and it has permitted front pay as a viable alternative to reinstatement in ADEA and FMLA cases. Based upon this combined authority, the Eastern District determined that front pay is a viable remedy in SOX retaliation cases, so long as the plaintiff can provide data supporting a reasonable front pay calculation.
Unfortunately for Jones, she could not provide adequate data since SouthPeak closed its business several months after her termination. The fact that Jones would have been laid off when the company closed months later created an untenable level of speculation in the damage calculation. While an appeal is unlikely, this decision does open the door for a Fourth Circuit ruling on this issue if other courts (or the Eastern District) do award front pay in future SOX retaliation cases.