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Jones v. SouthPeak Interactive Corp. of Delaware

United States District Court, E.D. Virginia, Richmond Division

November 19, 2013


For Andrea Gail Jones, Plaintiff: James Broome Thorsen, LEAD ATTORNEY, Marchant Thorsen Honey Baldwin & Meyer LLP, Richmond, VA.

For Southpeak Interactive Corporation of Delaware, Melanie J. Mroz, Terry M. Phillips, Defendants: Kevin D. Holden, LEAD ATTORNEY, Crystal Lynn Tyler, Jackson Lewis LLP (VA), Richmond, VA.

For Patrice Strachan, Movant: Daniel Madison Payne, LEAD ATTORNEY, Murphy & McGonigle PC, Glen Allen, VA; Thomas Joseph McGonigle, LEAD ATTORNEY, PRO HAC VICE, Murphy & McGonigle PC (DC-NA), Washington, DC.


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Robert E. Payne, Senior United States District Judge.

This matter is before the Court on the PLAINTIFF'S MOTION FOR PRE-JUDGMENT AND POST-JUDGMENT INTEREST ON AWARD OF BACK PAY AND FOR FRONT PAY IN LIEU OF REINSTATEMENT (ECF No. 147). The Plaintiff has submitted a Memorandum in Support of the Motion (" Memorandum," ECF No. 148), to which a Response in Opposition (" Opposition," ECF No. 153) has been filed. The Plaintiff has also filed a Reply to the Opposition (" Reply," ECF No. 155). For the reasons set forth herein, the motion will be denied in part.


This action arises out of Andrea Jones' (" Jones" ) tenure and termination as Chief Financial Officer (" CFO" ) of SouthPeak, a publisher of video games based in Midlothian, Virginia. Jones was named SouthPeak's Chief Financial Officer in October 2007. At all times relevant to this action, Terry M. Phillips (" Phillips" ) was Chairman of the Board of SouthPeak and Melanie J. Mroz (" Mroz" ) was the President, Chief Executive Officer, and a Director of SouthPeak.

In February 2009, Phillips and Mroz agreed that Philips would advance $307,400 of his personal funds to enable SouthPeak, which was otherwise financially unable to do so, to purchase for its inventory 50,400 units of a computer game from Nintendo. After SouthPeak received shipment of the Nintendo games, the Vice-President of Operations at SouthPeak, Patrice Strachan, after talking with Phillips, instructed: (a) that the inventory be reflected on the books of the company, but (b) that the advance made by Phillips not

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be listed on SouthPeak's books as a payable or a liability. Strachan also directed that no one discuss the advance with Jones.

As a result, SouthPeak's quarterly financial report to the Securities and Exchange Commission (" SEC" ) reflected the inventory, including some sales thereof, but did not reflect the cost of purchasing that inventory. At some point toward the end of May 2009, Jones became aware of this discrepancy. Based on her conversations with persons at the company, Jones concluded that the failure to report the advance was part of an attempt to inflate SouthPeak's reported profits.

Between June 2009 and August 2009, Jones made several reports about the financial irregularity to the Audit Committee of SouthPeak's Board of Directors and to the company's outside counsel, none of which led to any remedial action. On August 12, 2009, Jones filed a complaint with the Enforcement Division of the SEC. On August 14, 2009, Phillips and Mroz informed Jones that her employment was being terminated effective immediately.

On April 21, 2011, the SEC initiated cease-and-desist proceedings against SouthPeak and a SouthPeak officer who was not a defendant in this action.[1] The result of the SEC's investigation was a Consent Order, finding that SouthPeak and the named corporate officer violated Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities and Exchange Act, and ordering the responsible parties to cease-and-desist from future violations of the Act. The factual basis for the SEC's finding of securities law violations was the unreported payment by Phillips that had initially aroused Jones's concerns.

Believing that the termination of her employment violated the anti-retaliation provision of the Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, 116 Stat. 745 (2002) (hereinafter " SOX" or " Sarbanes-Oxley" ), Jones timely filed an administrative complaint with Occupational Safety and Health Administration (" OSHA" ) as required by SOX. See 18 U.S.C. § 1514A(b)(1)(A) and 29 C.F.R. § 1980.103. On July 23, 2010, Jones notified OSHA of her intention to pursue the matter in the district court as permitted by SOX, 18 U.S.C. § 1514A(b)(1)(B). On June 18, 2012, Jones filed this action against SouthPeak as well as Phillips and Mroz alleging that her employment had been terminated in retaliation for her report to the SEC and seeking relief as provided in SOX, codified at 18 U.S.C. § 1514A, and the Dodd-Frank Wall Street Reform Act of 2010, codified at 15 U.S.C. § 78u-6. After the Court dismissed Jones' claim for relief under the Dodd-Frank Act, Jones' claim for relief under SOX proceeded to trial.

Jones claimed that her employment was terminated in retaliation for her whistleblowing activity. All three Defendants were represented by the same lawyer. All three defended in large measure on the theory that Jones' employment was terminated because she was incompetent. Phillips and Mroz also defended on the additional theory that they had done nothing wrong and therefore were not liable even if the corporation was.

On July 18, 2013, after a four-day trial, the jury returned a finding that all three Defendants were liable to Jones. The jury awarded Jones $593,000 in back pay against SouthPeak, $178,500 in compensatory damages against Phillips, and $178,500 in compensatory damages against

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Mroz. Jones promptly filed the motion seeking pre-judgment and post-judgment interest on the back pay award, as well as front pay in lieu of reinstatement. The Court subsequently amended the judgment to reflect an award of $470,000 in back pay and $123,000 in compensatory damages against SouthPeak, and remitted the awards against Mroz and Phillips to $50,000 against ...

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