By Joshua P. Bussen

On Monday, January 26, in the civil case of Jones v. Southpeak Interactive Corporation, a published opinion, the Fourth Circuit established that in a claim for retaliatory firing under 18 U.S.C. § 1514A, part of the Sarbanes-Oxley Act of 2002 (“SOX”), evidence of an administrative complaint that was not answered within 180 days is sufficient to exhaust a plaintiff’s administrative remedies, that such claims under SOX are subject to a four-year statute of limitations, and finally, that under SOX emotional distress damages are available to plaintiffs.

Plaintiff Whistle-Blows on Video Game Developer

In 2009, Andrea Jones (“Jones”), the plaintiff in this case, was serving as the chief financial officer of Southpeak Interactive, the defendant. In February of that year, the company placed an order for over 50,000 video games from Nintendo. Southpeak, however, was in a predicament. It needed the games “as soon as possible” but did not have the funds to cover the cost up front. To avoid a potentially problematic delay, the chairman of Southpeak’s board, Terry Phillips, wired Nintendo $307,400 from his personal account. In May of that year Southpeak had not recorded the debt properly on its balance sheet or its quarterly financial report, which was filed with the Securities Exchange Commission (“SEC”).

When Jones became aware of the improper filing, she reported to Southpeak’s audit committee that she suspected the company was engaged in fraud. In response, Southpeak sought to rectify the improper filing with the SEC by submitting an amendment. In the proposed amendment, Southpeak denied any intentional fraud. Jones was asked to sign the report, and refused. On August 13, 2009, Jones sent a letter to Southpeak’s outside counsel stating that: “I do not know how a conclusion of no intentional wrongdoing or fraud can be reached.” The board of Southpeak convened a special meeting that very same day and fired Jones. This claim for retaliatory discharge under 18 U.S.C. § 1514A(a) ensued.  18 U.S.C. § 1514A(a) states that it is illegal for publicly traded companies to retaliate against employees who report potentially unlawful conduct.

OSHA Filing Was Sufficient to “Exhaust” Administrative Options

On October 5, 2009, Jones filed a complaint with the Occupational Safety and Health Administration (“OSHA”)—claiming her discharge was a retaliation to her reporting the company’s fraud. After 180 days of no action from OSHA, Jones informed the administration that she was electing to file a federal lawsuit pursuant to 18 U.S.C. § 1514A(b)(1)(B) of SOX and 29 C.F.R.§ 1980.114(b).  Her actions were satisfactory to the Fourth Circuit to fulfill her claim for administrative remedies, which were required to be exhausted under the statute.

Retaliatory Discharge Claims Fall Under SOX’s Four-Year Statute of Limitations

Southpeak also sought to have Jones’s claim dismissed for having lapsed the applicable statute of limitations. The Fourth Circuit easily dismissed this argument. Under 28 U.S.C. 1658(a), the section of the law that Jones brought her claim under, a plaintiff has a four-year window to file a claim for retaliatory discharge.

Emotional Distress Damages are Available to Plaintiffs Under SOX

Southpeak, additionally, attempted to have the award of emotional distress damages overturned.  The defendant claimed that this award was improper under SOX, however, the Fourth Circuit found 18 U.S.C. § 1514A(c)(1) instructive. Under that provision of SOX, in a successful claim for a retaliatory firing, a plaintiff may be entitled to “all relief necessary to make [her] whole.” The court read that provision broadly enough to mean that emotional distress damages were to be included.

Was the “Final” Verdict Really Final?

Southpeak, finally, attempted to have the verdict overturned because it claimed the jury was “confused” in its verdict. This argument held little merit to the circuit judges, as the jury was polled by a clerk at the conclusion of the trial—with each juror confirming the verdict—and the decision was not “clearly against the weight of the evidence.” Therefore, the court dismissed the argument.

District Court for the Eastern District of Virginia’s Decision Affirmed

Because the District Court for the Eastern District of Virginia found that the administrative remedy had been exhausted, the claim was not barred by any statute of limitations, that emotional damages were available to Ms. Jones, and that there was no evidence of jury “confusion,” the Fourth Circuit affirmed.