February 3, 2017

In a Sarbanes-Oxley whistleblower retaliation lawsuit headed to trial, Judge Sweet denied J.P. Morgan Chase & Co.’s (JPMC) motion in limine to prohibit SOX whistleblower Jennifer Sharkey from introducing evidence regarding reputational damage, harm to career, and emotional distress.

JPMC asserted that the whistleblower protection provision of SOX does not cover damages for loss of reputation and emotional distress.  Judge Sweet, however, held in his order that the “majority of authority in this area” permits SOX whistleblowers to recover damages for reputational injury:

    More recently, the Honorable William H. Pauley III held that “With respect to damages for emotional distress, every circuit court to address the issue holds that such damages may be recoverable pursuant to SOX’s language stating that a prevailing employee `shall be entitled to all relief necessary to make the employee whole.'” Feldman-Boland v. Stanley, No. 15 Civ. 6698, 2016 WL 3826285, at *6 (S.D.N.Y. July 13, 2016) (citing the statutory language). Consistent with the reasoning in Feldman-Boland, other Courts have found that reputational injury is also compensable under SOX. “When reputational injury caused by an employer’s unlawful discrimination diminishes a plaintiff’s future earnings capacity, [she] cannot be made whole without compensation for the lost future earnings [she] would have received absent the employer’s unlawful activity.” Mahony v. KeySpan Corp., No. 04 CV 554 (SJ), 2007 WL 805813, at *7 (S.D.N.Y. March 12, 2007).

The ability of a SOX whistleblower to offer evidence of reputational injury is critical because retaliation can derail a whistleblower’s career and force the whistleblower to suffer substantial damages for lost future earnings.  Recently a SOX whistleblower was awarded  $2.7M in front pay in part because “his prospects for future employment are unpromising in part due to Defendant’s violations of his rights.”  The whistleblower in that case was featured in an article in Corporate Counsel magazine entitled How to Help a Whistleblower.

[The National Law Review]