On January 26, 2015, in an issue of first impression at the appellate level, the United States Court of Appeals for the Fourth Circuit held that a federal catch-all four year statute of limitations applies to whistleblower retaliation claims filed in federal court under Section 806 of the Sarbanes-Oxley Act (SOX), rather than a two-year statute of limitations applicable to cases alleging fraud under the securities laws.  In addition, the Fourth Circuit joined the Fifth and Tenth Circuits in holding that emotional distress damages are available to successful plaintiffs as part of the “make whole” remedy under Section 806. The case, Jones v. SouthPeak Interactive Corp. of Delaware [pdf] affirmed various challenges to a jury verdict in favor of the former CFO of a publicly-traded company who alleged that she was terminated shortly after raising concerns to the company’s audit committee about information in the company’s quarterly financial report.  The decision represents another example of broad rather than narrow interpretation of the statute, in ways favorable to whistleblowers who claim retaliation.

Under Section 806 of SOX, a whistleblower who seeks to assert a claim of retaliation has 180 days to file an administrative charge with OSHA.  If the Secretary of Labor has not issued a final decision within 180 days of that charge (and it rarely does), the complainant has the right to file the claim anew in federal court.  SOX is silent, however, with respect to how long the claimant can wait before filing in federal court.

There is a four year “catch-all” statute of limitations for federal statutes that create a cause of action but are silent with respect to time limits on filing. 28 U.S.C. § 1658(a). With the passage of the SOX, however, Congress added a separate statute of limitations for private causes of action alleging “fraud, deceit, manipulation or contrivance in contravention of a regulatory requirement concerning the securities laws” of two years after the discovery of the relevant facts constituting the violation, or five years after the violation (i.e., a statute of “repose”). 28 U.S.C. § 1658(b). Jones waited almost two years after notifying OSHA of her desire to terminate the administrative process before she filed her federal lawsuit, which was almost three years after her termination.

The Court held that her claim was timely filed, holding that because her federal lawsuit did not directly assert and require her to prove securities fraud, but rather, that she was wrongfully discharged in retaliation for allegedly reporting securities fraud, the four-year statute applied.  Only two district court cases had considered the issue previously, one applying the two-year and the other applying the four-year statute.

The Court also held, among other things, that emotional distress damages are available under Section 806.  The statute provides that compensatory damages for violations of the Act include 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.”  18 U.S.C. § 1514A(c)(2).  Rejecting the employer’s argument that the word “including” limited the specific types of special damages to the three mentioned in the statute, the Court held that “including” was not intended to be exclusive: it “sets a floor, not a ceiling.” The Court also noted that the statute defines retaliation to include actions in which the primary harm would be noneconomic, such as threats and harassment.  Thus, “non-pecuniary compensatory relief, such as emotional distress damages, may be the only remedy that would make the complainant whole.”  In so holding, the Court agreed with the Fifth and Tenth Circuits, as well as the Department of Labor itself, in interpreting Section 806 to permit damage awards for emotional distress.