Sarbanes-Oxley Whistleblower Obtains $2.7M in Front Pay

Will The House Now Try To Undo SOX?
Will The House Now Try To Undo SOX?

Approximately one year ago, a federal jury awarded $1.6 million in compensatory damages to Julio Perez in a Sarbanes-Oxley whistleblowerretaliation lawsuit.  Following extensive post-trial briefing, Judge Loretta Preska issued a decision on August 30, 2016 awarding Dr. Perez $2,706,585.00 in front pay and denying defendant Progenics Pharmaceutical’s motion for a new trial.

Front Pay Can Be Awarded Until Retirement Age

Prevailing SOX whistleblowers are entitled to reinstatement.  But where reinstatement is not feasible, a court can order the employer to pay front pay in lieu of reinstatement. The court found that it was not feasible for Dr. Perez to return to work because there was “manifest hostility” between Dr. Perez and Progenics.  Indeed, at trial, Progenics’ CEO was “condescending, contemptuous, and patronizing” to Dr. Perez.

Dr. Perez asserted that his front pay should consist of earnings from his age at the time of the verdict, 58 years and 2 months, until a reasonable retirement age of 66 years and 6 months.  Progenics, however, contended that Dr. Perez’s calculation of front pay was speculative.

The court credited Dr. Perez’s testimony that he made a good-faith effort to find comparable work for over seven years and that “his prospects for future employment are unpromising in part due to Defendant’s violations of his rights.”  Accordingly, the court adopted Dr. Perez’s calculation of front pay in the amount of $2,706,585.00.  Judge Preska cited the Second Circuit’s decision in Whittlesey v. Union Carbide Corp., 742 F.2d 724, 729 (2d Cir.1984), an age discrimination case holding that when calculating front pay, the Court should “assume, absent evidence to the contrary, that the illegally discharged employee would have continued working for the employer until he or she reached normal retirement age.”

Judge Preska’s decision to award front pay through retirement age soundly reflects the reality that corporate whistleblowers often encounter substantial challenges finding comparable work and suffer significant reputational harm.

SOX Whistleblower Damages

Though the whistleblower protection provision of SOX does not authorize an award of punitive damages, a 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.  In contrast to Title VII of the Civil Rights Act, there is no cap on an award of special damages or non-economic damages under SOX.

A recent verdict demonstrates that SOX special damages can be substantial.  In March 2014, a California jury awarded $6 million to Catherine Zulfer in her SOX whistleblower retaliation case against Playboy, Inc. (“Playboy”).  Zulfer, a former accounting executive, alleged that Playboy had terminated her in retaliation for raising concerns about executive bonuses to Playboy’s chief financial officer (“CFO”) and chief compliance officer (“CCO”). She contended that she had been instructed by Playboy’s CFO to set aside $1 million for executive bonuses that had not been approved by the board of directors.  Zulfer refused to carry out this instruction, warning Playboy’s General Counsel that the bonuses were contrary to Playboy’s internal controls over financial reporting.  Shortly after Zulfer’s disclosure, the CFO retaliated by ostracizing Zulfer, excluding her from meetings, forcing her to take on additional duties, and eventually terminating her employment. At trial, a jury awarded Zulfer $6 million in compensatory damages.

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