SEC Whistleblowers May Not Receive Jury Trial in Retaliation Cases

 

A recent decision in a Georgia federal court presents serious implications for SEC whistleblowers subject to retaliatory employment actions.  In an apparent case of first impression, on Nov. 12, U.S. District Judge J. Owen Forrester of the United States District Court for the Northern District of Georgia rendered a decision holding an SEC whistleblower is not entitled to a jury trial in a retaliation action.  The whistleblower in the matter was a former compliance manager for BlueLinx Holdings, Inc. who brought his concerns that the company violated securities laws to the SEC and the company’s internal ethics committee.

The Dodd-Frank Wall Street Reform and Consumer Protection Act enacted a series of sweeping regulatory reforms, designed to prevent the abuses and risky Wall Street behavior, which in large part led to our nation’s latest economic calamity, dubbed the “Great Recession.”  In addition to financial reforms, Dodd-Frank mandated the creation of the Securities and Exchange Commission’s Office of the Whistleblower.  This office is tasked with processing and overseeing complaints of securities violations brought forth by knowledgeable whistleblowers.

Critically important to the program’s success, Dodd-Frank also created significant anti-retaliation protections for whistleblowers, which mirror those of the False Claims Act.  Pursuant to Dodd-Frank, it is unlawful for an employer to take retaliatory actions, including but not limited to termination, against employees attempting to report securities violations.  Dodd-Frank expressly grants whistleblowers, subject to retaliatory action, the right to file a civil lawsuit in federal court, seeking doubled back-pay, reinstatement, and attorney fees and costs.

In his decision, Judge Forester determined that these individuals are not entitled to a jury trial, as required by the Seventh Amendment to the U.S. Constitution.  Judge Forester determined that the remedies available to SEC whistleblowers in retaliation actions are inherently equitable in nature.  Plaintiff’s seeking equitable remedies, such as injunctive relief, are not entitled to a jury trial.  The Court was not persuaded by the plaintiff’s argument that the statutory relief of double back-pay was akin to compensatory or punitive damages, prayers for relief which generally entitle a litigant to a jury trial.  Finally, the Court found legislative silence on the issue favored the defendant’s position.

While the implications of this case outside the Northern District of Georgia are not yet known, if the rationale employed by Judge Forester is widely adopted the ramifications for SEC whistleblowers could be significant.  Generally speaking, a jury trial in an action claiming that a whistleblower was subject to retaliation is certainly preferable to a bench trial.  Many trial lawyers will attest that the juries are more receptive than judges to the emotional drama presented by the facts of such cases.

The case is Pruett v. BlueLinx Holdings, Inc., case number 1:13-cv-02607, in the U.S. District Court for the Northern District of Georgia.

McEldrew Young is a nationwide leader in whistleblower representation and has successfully represented numerous clients in some of the nation’s largest qui tam cases for over a decade.  For a free confidential consultation with one of our SEC whistleblower attorneys concerning whistleblower protections from retaliation, please call Eric L. Young, Esquire at (800) 590-4116 or complete the online form here.