On November 12, 2013, a Georgia district court ruled that Dodd-Frank whistleblowers are not entitled to a jury trial or punitive damages.  Pruett v. BlueLinx Holdings, Inc., No. 13-cv-02607 (N.D. Ga., Nov. 12, 2013).  This is a first-impression decision that is likely to impact the valuation of Dodd-Frank whistleblower claims.

Background

Plaintiff was an internal compliance manager for BlueLinx (the “Company”) who filed suit claiming that he was discharged in retaliation for disclosing information to the Public Company Accounting Oversight Board and the Security and Exchange Commission.  Plaintiff’s prayer for relief in his federal complaint included a request for punitive damages and a demand for a jury trial.  The Company filed a partial motion to dismiss, contending that neither punitive damages nor a jury trial are available under the Dodd-Frank whistleblower protections.

Holding

Because Plaintiff conceded that punitive damages are not available under Dodd-Frank, the court readily granted that portion of the Company’s motion.  The court then noted that although Dodd-Frank amended Section 806 of SOX to explicitly entitle whistleblowers to a jury trial, Dodd-Frank’s whistleblower provision is silent on the issue.  The court therefore proceeded to analyze whether Dodd-Frank whistleblowers are entitled to a jury trial under the Seventh Amendment by employing a two part inquiry: (i) comparing the nature of the issues to be resolved to eighteenth century actions brought in the courts of England prior to the merger of the courts of law and equity; and (ii) assessing whether the remedy sought is legal or equitable.  The court acknowledged that the nature of the remedy sought “is the more important inquiry.”

The Court found that the first factor favored a right to a jury trial because a Dodd-Frank whistleblower claim is analogous to the common law tort of wrongful discharge, which existed prior to the merging of courts of law and equity.   Turning to the second part of the inquiry, the court held that the principal relief available under Dodd-Frank (i.e., reinstatement and back pay) “are generally considered equitable remedies,” which are not determined by juries.  The court further concluded that the automatic doubling of backpay available to Dodd-Frank whistleblowers “is a calculation that lacks the discretion generally associated with monetary damages awarded by a jury” because in contrast to other statutory doubling provisions (e.g., the ADEA), “there is no requirement that a determination be made that a defendant’s actions were ‘willful’ in order to be entitled to ‘double’ back pay.”

Additionally, the court noted that Congress did not intend to make a jury trial available to Dodd-Frank whistleblowers because at the time Congress enacted the law, it was “aware of the legal controversy surrounding whether a jury trial was available under Sarbanes-Oxley and amend[ed] that legislation to specify a right for a jury trial.”  Accordingly, the Court concluded that Congress affirmatively chose not to make a jury trial available to Dodd-Frank whistleblowers.

Implications

Pruett is a case of first impression upon which employers will capitalize in the litigation and settlement contexts, as it eliminates the inherent risks attendant to a jury trial.  The ruling  is noteworthy because Dodd-Frank whistleblower claims recently have become a preferred option, likely because they present the specter of double backpay and an unusually long statute of limitations.

Photo of Steven J. Pearlman Steven J. Pearlman

Steven J. Pearlman is a partner in the Labor & Employment Law Department and Co-Head of the Whistleblowing & Retaliation Group and the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Steven’s practice covers the full spectrum of employment law, with a particular…

Steven J. Pearlman is a partner in the Labor & Employment Law Department and Co-Head of the Whistleblowing & Retaliation Group and the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Steven’s practice covers the full spectrum of employment law, with a particular focus on defending companies against claims of employment discrimination, retaliation and harassment; whistleblower retaliation; restrictive covenant violations; theft of trade secrets; and wage-and-hour violations. He has successfully tried cases in multiple jurisdictions, and defended one of the largest Illinois-only class actions in the history of the U.S. District Court for the Northern District of Illinois. He also secured one of only a few ex parte seizures orders that have been issued under the Defend Trade Secrets Act, and obtained a world-wide injunction in federal litigation against a high-level executive who jumped ship to a competitor.

Reporting to boards of directors, their audit committees, CEOs and in-house counsel, Steven conducts sensitive investigations and has testified in federal court. His investigations have involved complaints of sexual harassment involving C-suite officers; systemic violations of employment laws and company policies; and fraud, compliance failures and unethical conduct.

Steven was recognized as Lawyer of the Year for Chicago Labor & Employment Litigation in the 2023 edition of The Best Lawyers in America. He is a Fellow of the College of Labor and Employment Lawyers.  Chambers describes Steven as an “outstanding lawyer” who is “very sharp and very responsive,” a “strong advocate,” and an “expert in his field.” Steven was 1 of 12 individuals selected by Compliance Week as a “Top Mind.” Earlier in his career, he was 1 of 5 U.S. lawyers selected by Law360 as a “Rising Star Under 40” in the area of employment law and 1 of “40 Illinois Attorneys Under Forty to Watch” selected by Law Bulletin Publishing Company. Steven is a Burton Award Winner (U.S. Library of Congress) for “Distinguished Legal Writing.”

Steven has served on Law360’s Employment Editorial Advisory Board and is a Contributor to Forbes.com. He has appeared on Bloomberg News (television and radio) and Yahoo! Finance, and is regularly quoted in leading publications such as The Wall Street Journal.

The U.S. Chamber of Commerce has engaged Steven to serve as lead counsel on amicus briefs to the U.S. Supreme Court and federal circuit courts of appeal. He was appointed to serve as a Special Assistant Attorney General for the State of Illinois in employment litigation matters. He has presented with the Solicitor of the DOL, the Acting Chair of the EEOC, an EEOC Commissioner, Legal Counsel to the EEOC and heads of the SEC, CFTC and OSHA whistleblower programs. He is also a member of the Sedona Conference, focusing on trade secret matters.