Four-Year Limit Applies to SOX Act Claim, 4th Circuit Rules, Affirming $693,000 Award

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By Kevin McGowan

Jan. 27 — A federal catch-all limitations period of four years applies to a fired employee's Sarbanes-Oxley Act retaliatory discharge claim, not a two-year limitations period for claims a company committed fraud in violation of federal securities law, the U.S. Court of Appeals for the Fourth Circuit ruled Jan. 26 (Jones v. SouthPeak Interactive Corp. of Del., 2015 BL 17021, 4th Cir., No. 13-2399, 1/26/15).

Affirming a $693,000 judgment for Andrea Gail Jones, former chief financial officer of SouthPeak Interactive Corp., the court rejected SouthPeak's argument that a two-year limitations period for private actions that involve “a claim of fraud” in violation of federal securities laws applies to and bars Jones's SOX Act lawsuit, which she filed almost three years after her August 2009 termination.

Instead, the court said Jones didn't lodge a “claim of fraud” within the meaning of the shorter statute of limitations, but rather alleged she was fired in retaliation for expressing doubts about the veracity of SouthPeak's quarterly financial report and later refusing to sign off on a company amendment denying any “intentional fraud” or “misstatement” in its previous filing.

Jones's SOX Act retaliation claim “can succeed without ‘discovery of the facts constituting' securities fraud,” the court said, quoting from 28 U.S.C. § 1658(b)(1). “It stands to reason, then, that § 1658(b)(1), which hinges on the discovery of such facts, does not apply.” Section 1658(a), the catch-all limitations period, “controls,” and because Jones “brought her suit within that section's four-year window, her claim is not barred,” the court said.

Emotional Distress Damages Available 

The court also rejected the argument that emotional distress damages aren't available on successful SOX Act retaliation claims. Instead, the statute expressly entitles a prevailing fired employee to “all relief necessary to make [her] whole,” the court said, citing 18 U.S.C. § 1514A(c)(1).

Nor was the amount awarded to Jones—$223,000 in compensatory damages against SouthPeak and its top two executives—excessive as a matter of law, the court said.

SouthPeak and the two individual defendants, company chairman Terry Phillips and chief executive officer Melanie Mroz, argued the SOX Act's remedies provision limits successful plaintiffs to reinstatement, back pay with interest and “compensation for any special damages sustained as a result of the discrimination, including litigation costs, expert witness fees and reasonable attorney fees.”

But the Fourth Circuit said that reading of the SOX Act ignores an additional provision, codified as Section 1514A(c)(1), that states, “An employee prevailing in any [enforcement] action under [the act] shall be entitled to all relief necessary to make the plaintiff whole.”

Two federal circuit courts previously have considered whether SOX Act plaintiffs may recover emotional distress damages under Section 1514A and both have ruled such damages are available, the court said, citing Halliburton, Inc. v. Administrative Review Board, 771 F.3d 254, 39 IER Cases 529 (5th Cir. 2014), and Lockheed Martin Corp. v. ARB, 717 F.3d 1121, 35 IER Cases 1516 (10th Cir. 2013).

SouthPeak and the individual defendants cited only a few district court rulings that analogize the SOX Act to Title VII of the 1964 Civil Rights Act, as that law existed before the 1991 Civil Rights Act, which added compensatory and punitive damages for cases of intentional discrimination, the Fourth Circuit noted.

But the pre-1991 Title VII differed significantly from the SOX Act, because it included no reference to “all relief necessary to make the plaintiff whole” and specifically limited discrimination victims to “equitable” relief, making no mention of compensatory damages as the SOX Act does, Judge Stephanie D. Thacker wrote for the Fourth Circuit.

Instead, the court endorsed the Fifth Circuit's view in Halliburton that the SOX Act's provision “more strongly resembles” the remedies for retaliation in the False Claims Act, which federal courts uniformly have interpreted to include emotional distress damages.

Deference Due to Labor Department 

Although Jones's retaliation claim involves termination, the “Sarbanes-Oxley Act whistleblower protections proscribe a wide range of retaliatory actions, including threats and harassment,” the Fourth Circuit said. “There will be times when the primary harm will be noneconomic.”

The Labor Department, which supported Jones as an amicus, contends the SOX Act permits emotional distress awards and the department's Administrative Review Board “has a history of upholding non-pecuniary compensatory damages” in SOX Act whistle-blower cases, the court said.

Since Congress “explicitly empowered” the DOL to enforce Section 1514A by “formal adjudication,” the department's interpretation is entitled to deference, the court said.

“We therefore join the department, and the Fifth and Tenth Circuits, in concluding that emotional distress damages are available under § 1514A(c),” Thacker wrote.

‘Sound Approach' on Damages 

The district court also didn't abuse its discretion in assessing $123,000 in compensatory damages for emotional distress against SouthPeak and ordering Phillips and Mozr to pay $50,000 each in emotional distress damages, the Fourth Circuit said.

The jury's final verdict had found Mroz and Phillips liable for $178,500 apiece, all for emotional distress, but the trial judge ordered a remittitur to $50,000 in compensatory damages apiece, which Jones accepted.

On appeal, SouthPeak and the individual defendants argued the reduced award of $223,000 for emotional distress still was excessive. “To the contrary, the district court's opinion offers a meticulous and well-reasoned explanation for the reduced award the court selected,” Thacker wrote.

The trial judge properly took note of testimony from Jones and her husband about the emotional toll of her firing, particularly because she was the family's “bread winner” and it took 23 months for her to secure a new full-time job, the court said. The district court also properly compared the jury's damages assessment to awards in comparable cases, just as the Fourth Circuit has done in reviewing emotional distress awards, the court said.

“This was a sound approach,” Thacker wrote. “We see no reason to disturb the court's judgment.”

Exhaustion of Remedies 

The district court also properly rejected the argument that Jones had failed to exhaust her administrative remedies regarding Mroz and Phillips, the Fourth Circuit said.

The individual defendants contended Jones didn't clearly identify Mroz and Phillips as respondents in the SOX Act complaint she filed with the DOL. But analogizing to Title VII cases, the Fourth Circuit said an administrative complaint “does not strictly limit” the ensuing lawsuit if an investigation of certain claims or defendants could be “reasonably expected” to grow out of the complaint.

In this case, the DOL complaint identified Mroz and Phillips as “person[s] who are alleged to have violated the Act (who the complaint is being filed against),” the court said.

“Nothing more precise is required,” the Fourth Circuit said. Even if the DOL didn't investigate Mroz and Phillips individually, they had sufficient notice Jones had identified them, as well as SouthPeak, as alleged SOX Act violators, the court said.

There also “can be no doubt” the two executives were “well aware” of Jones's allegations as the DOL letter notifying SouthPeak of Jones's complaint listed Phillips as the company's contact person and the company's counsel discussed the administrative complaint with both Phillips and Mroz, the court said.

“It should not have been all that surprising, then, when [Jones] named the two executives in the instant civil action,” the court said.

Judges William B. Traxler and Barbara Milano Keenan joined in the decision.

James B. Thorsen of Marchant Thorsen Honey Baldwin & Meyer LLP in Richmond, Va., represented Jones. Kevin D. Holden of Jackson Lewis PC in Richmond represented SouthPeak, Phillips and Mroz. Mary J. Reiser of the Labor Department in Washington argued on appeal as an amicus for Jones.

To contact the reporter on this story: Kevin McGowan in Washington at

To contact the editor responsible for this story: Susan J. McGolrick at

Text of the opinion is available at