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Jones v. Southpeak Interactive Corp.

United States Court of Appeals, Fourth Circuit

January 26, 2015

ANDREA GAIL JONES, Plaintiff - Appellee,
v.
SOUTHPEAK INTERACTIVE CORPORATION OF DELAWARE; TERRY M. PHILLIPS; MELANIE J. MROZ, Defendants - Appellants. THOMAS E. PEREZ, Secretary of the United States Department of Labor, Amicus Supporting Appellee

Argued December 10, 2014.

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Appeals from the United States District Court for the Eastern District of Virginia, at Richmond. (3:12-cv-00443-REP-DJN). Robert E. Payne, Senior District Judge.

ARGUED:

Kevin D. Holden, JACKSON LEWIS PC, Richmond, Virginia, for Appellants. James B. Thorsen, MARCHANT, THORSEN, HONEY, BALDWIN & MEYER, LLP, Richmond, Virginia, for Appellee.

Mary J. Rieser, UNITED STATES DEPARTMENT OF LABOR, Washington, D.C., for Amicus Curiae.

ON BRIEF:

M. Patricia Smith, Solicitor of Labor, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C.; Jennifer S. Brand, Associate Solicitor, William C. Lesser, Deputy Associate Solicitor, Megan E. Guenther, Counsel for Whistleblower Programs, Office of the Solicitor, UNITED STATES DEPARTMENT OF LABOR, Washington, D.C., for Amicus Curiae.

Before TRAXLER, Chief Judge, and KEENAN and THACKER, Circuit Judges. Judge Thacker wrote the opinion, in which Chief Judge Traxler and Judge Keenan joined.

OPINION

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THACKER, Circuit Judge:

The Sarbanes-Oxley Act of 2002 makes it illegal for publicly traded companies to retaliate against employees who report potentially unlawful conduct. See 18 U.S.C. § 1514A(a). In this case, a video game publishing company, SouthPeak Interactive Corp. (" SouthPeak" ), [1] fired its chief financial officer after she raised concerns about a misstatement on one of the company's filings with the Securities and Exchange Commission (" SEC" ). A jury found that the company and two of its top officers violated the Sarbanes-Oxley Act, and the district court awarded the chief financial officer more than half a million dollars in back pay and emotional distress damages.

The ensuing appeal raises a number of questions about employees' rights under the Sarbanes-Oxley Act. The case requires us to consider such issues as when a whistleblower may file suit, what she needs to

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do to exhaust her administrative remedies, and what types of remedies are available under the statute. We affirm the district court's rulings on each of these issues. In doing so, we hold that Sarbanes-Oxley Act retaliatory discharge claims are subject to the four-year statute of limitations under 28 U.S.C. § 1658(a), and not the two-year limitations period set forth in § 1658(b)(1). We further hold that the administrative complaint in this case satisfies the exhaustion requirement, and that emotional distress damages are available under the statute.

The case also requires us to address the handling of apparent inconsistencies in a jury verdict and the steps a court must take in calculating attorneys' fees. On these issues, too, we affirm the district court.

I.

SouthPeak is a Virginia-based company that designs, develops, and distributes video games for PlayStation, Xbox, Wii, and other gaming systems. In June 2007, the company hired Andrea Gail Jones (" Appellee" ) to work as an accountant. It later promoted Appellee to chief financial officer.

A.

In February 2009, SouthPeak sought to place an order with Nintendo for 50,400 units of a video game called My Baby Girl. SouthPeak's chief executive officer, Melanie Mroz (" Mroz" ), and its chairman, Terry Phillips (" Phillips" ), hoped to place the order " as soon as possible," but the company lacked the funds it would need to pay Nintendo in advance. J.A. 332.[2] To avoid delay, Phillips directed his assistant to send Nintendo a wire transfer of $307,400 from Phillips's personal account. However, the company did not properly record this debt on its balance sheet or in its quarterly financial report, which was filed with the SEC on May 15, 2009.

When informed of the omission, Appellee became " very concerned." J.A. 1178. She asked Phillips for an explanation. His response, she said, " did not seem, I guess, to make sense or seem credible to me." Id. at 1226. About a week later, Appellee called the chairman of SouthPeak's audit committee to report her suspicion that the company was engaging in a fraud.

On August 3, 2009, SouthPeak's outside counsel asked Appellee to review and approve draft language for an amendment to the company's erroneous quarterly report. The proposed amendment denied any intentional fraud or misstatement in the earlier filing. Appellee refused to sign the amended report. In an August 13, 2009 letter to the outside counsel, she explained, " I do not know how a conclusion of no intentional wrongdoing or fraud can be reached." J.A. 1274. That same day, SouthPeak's six-member board of directors held a special meeting in which it voted to terminate Appellee's employment. Mroz notified Appellee of the board's decision the next day.

B.

Appellee, through counsel, filed a complaint with the Occupational Safety and Health Administration (" OSHA" ) on October 5, 2009. The complaint states, " On August 14, 2009, in a clear violation of the

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[Securities Exchange] Act, SouthPeak terminated Jones' employment, apparently in retaliation for Ms. Jones [sic] attempts to correct statements in periodic reports filed, and proposed to be filed, by SouthPeak . . . ." J.A. 643. In the second numbered paragraph, the complaint further provides:

The names and addresses of the company(s) and person(s) who are alleged to have violated the Act (who the complaint is being filed against):

SouthPeak Interactive Corporation

2900 Polo Parkway.
Midlothian, VA 23113
804-378-5100
Terry Phillips, Chairman of the Board
Patrice Strachan, [VP] of Operations
Melanie Mroz, Chief Executive Officer

Id. at 645.

On October 16, 2009, OSHA sent SouthPeak a letter notifying the company of Appellee's complaint, along with a copy of the complaint itself. The letter was addressed exclusively to SouthPeak, without any reference to Mroz or Phillips.

More than 180 days passed without a final order from OSHA; consequently, on July 23, 2010, Appellee sent OSHA a letter explaining that she was electing to file a federal lawsuit pursuant to the Sarbanes-Oxley Act and 29 C.F.R. § 1980.114(b). See 18 U.S.C. § 1514A(b)(1)(B) (authorizing suits at law or equity in federal court if the Secretary of Labor " has not issued a final decision within 180 days of the filing of [an OSHA] complaint" ). Appellee sent a copy of the letter to a lawyer identified as " Counsel for SouthPeak Interactive Corp." She did not send a copy to Mroz or Phillips.

C.

Appellee waited nearly two years to file suit. Her June 18, 2012 complaint named SouthPeak, Mroz, and Phillips (collectively, " Appellants" ) as defendants. The claims included one count of retaliation pursuant to the Sarbanes-Oxley Act, 18 U.S.C. § 1514A, and one count of retaliation pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (" Dodd-Frank" ), 15 U.S.C. § 78u-6(h)(1)(A).[3] The district court granted Appellants' motion to dismiss the Dodd-Frank claims on retroactivity grounds. The court, however, denied Appellants' motion to dismiss the Sarbanes-Oxley Act claims, rejecting Appellants' arguments that the statute of limitations barred those claims and that Appellee failed to exhaust her administrative remedies.

A jury trial began on July 15, 2013. At the conclusion of the trial, the jury was provided a verdict form naming each of the three defendants. The form addressed each defendant separately. If the jury found a defendant liable, it could place a check mark next to a statement to that effect. The form also provided blank spaces for any back pay or compensatory damages the jury wished to assess against that defendant.

The jury returned a verdict (the " First Verdict" ) finding each of the three defendants was liable. With regard to SouthPeak, the jury assessed $593,000 in back pay and $357,000 in compensatory damages. However, the jury did not assess any damages against Mroz or Phillips. In a sidebar conference with counsel, the court expressed some confusion over whether the jury might be " trying to ac

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count for no duplication of damages. And I think I need to ask them if that's what they're doing or if they think that there were no damages caused." J.A. 1935. Turning to the jury, the court advised:

Ladies and gentlemen, I notice that in one place you articulate a sum to be assessed as damages for compensatory and backpay. In two other places, you find the respective defendants liable but express no damage figure at all. It is unclear to us whether you are finding that that particular defendant caused no damage or you are simply trying to avoid awarding more than you awarded, more damage than you found that Ms. Jones had suffered. . . .
. . .
So I'm going to let you go back and take your verdict form, and if you mean it, with those instructions, you can return it, or you can amend it, or you can do such else, or send a question, or do whatever you need to do.

Id. at 1936-37.

Before the jury could return to the jury room, the court agreed to a second sidebar conference with counsel. During this discussion, Appellants' attorney told the court, " I just want to make sure the jury doesn't take it from your instruction that they can go back and change it to have damage against each of them. . . . I thought that maybe you were suggesting that that's what they were supposed to do." J.A. ...


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