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What Damages Are Available Under SOX

May 15, 2013

Our paper also discusses what types of damages are available in SOX retaliation cases.

Courts Hold SOX Does Not Provide For Mental Anguish Damages

An employee prevailing on a claim brought under Section 1514A shall be entitled to “all relief necessary to make the employee whole.” 18 U.S.C. § 1514A(c)(1). Compensatory damages under Section 1514A include “(A) reinstatement with the same seniority status that the employee would have had, but for the discrimination; (B) the amount of back pay, with interest; and (C) compensation for any special damages sustained as a result of the discrimination, including litigation costs, expert witness fees, and reasonable attorney fees.” § 1514A(c)(2).

Courts have consistently held that Section 1514A does not provide for any type of non-pecuniary damages, including mental anguish and punitive damages. See Murray v. TXU Corp., No. Civ.A.3:03–CV–0888–P, 2005 WL 1356444, at **3–4 (N.D. Tex. June 7, 2005) (noting the original draft of the remedies provision of section 1514A provided explicitly for punitive damages, but subsequent drafts removed the language, providing force that such terms no longer applied); see also Walton v. Nova Info. Sys., 514 F. Supp. 2d 1031, 1035 (E.D. Tenn. 2007) (“Notably, the provision of [Section 1514A] makes no mention of any type of damages considered non-pecuniary, damages such as injury to reputation, mental and physical distress or punitive damages.”). In Hemphill v. Celanese Corp., NO. CIV.A.3:08CV2131-B, 2009 WL 2949759, at *5 (N.D. Tex. Sept. 14, 2009), the district court dismissed the SOX plaintiff’s claims for “mental anguish damages, future earnings and benefits, and exemplary and punitive damages,” holding that they were not available under SOX as a matter of law.

Courts have also held that generally non-pecuniary damages for reputational injuries are not available, as they would be akin to damages for emotional distress, and allowance for such damages would expand the scope of remedies articulated in and intended by SOX. See Jones v. Home Federal Bank, NO. CV09-336-CWD, 2010 WL 255856 at *6 (D. Idaho Jan. 14, 2010); Hanna v. WCI Communities, Inc., 348 F. Supp. 2d 1332, 1334 (S.D. Fla. 2004). However, those same courts have held that reputational injury damages may be available where they are specifically for reputational injuries that caused a decrease in the plaintiff’s future earning capacity, as granting such relief could be consistent with SOX’s goal of making the plaintiff whole. See Jones, 2010 WL 255856 at *6; Hanna, 348 F. Supp. 2d at 1334.

The ARB Disagrees, And Holds That SOX Permits The Award Of Mental Anguish Damages

Contrary to the court decisions addressing the issue, the ARB takes the position that compensatory damages for mental distress are available under SOX. In Kalkunte v. DVI Financial Services, Inc., Nos. 05-139, 05-140, 2009 WL 564738, at *13 (ARB Feb. 27, 2009), the ARB affirmed the ALJ’s award of $22,000 to a prevailing claimant in a SOX case for “pain, suffering, mental anguish, the effect on her credit [because of her loss of employment] and the humiliation that she suffered.” Following Kalkunte, Administrative Law Judges have also granted prevailing SOX claimants damages for mental anguish and emotional distress. See, e.g., Brown v. Lockheed Martin Corp., 2008-SOX-00049, 2010 WL 2054426, at *59 (ALJ Jan. 15, 2010) (awarding prevailing SOX claimant $75,000.00 for “emotional pain and suffering, mental anguish, embarrassment, and humiliation”), aff’d, No. 10-050, 2011 WL 729644 (ARB Feb. 28, 2011).

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