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Showing 5 posts from January 2015.

Fourth Circuit Upholds Jury’s Sarbanes-Oxley Award of Emotional Distress Damages to Fired CFO

The Sarbanes-Oxley Act’s whistleblower protection provision, 18 U.S.C. § 1514A, allows a wrongfully terminated whistleblower to recover “all relief necessary to make [her] whole.”  18 U.S.C. § 1514A(c)(1).  The statute then goes on to say that compensatory damages include reinstatement, back pay, and “special damages,” including expert fees and reasonable attorneys fees.  In an opinion issued this week, the Fourth Circuit held that Sarbanes-Oxley damages don’t just include these enumerated damages.  Rather, an employee can obtain other compensation for harm, including emotional distress damages.  Jones v. SouthPeak Interactive Corp. of Delaware, Nos. 13-2399, 14-1765 (4th Cir. Jan. 26, 2015).

The plaintiff in the case, Andrea Gail Jones, was the former chief financial officer of SouthPeak, a video game manufacturer.  According to the opinion, in 2009, SouthPeak wanted to buy copies of a video game for distribution, but didn’t have the cash to buy the games up front.  Instead, SouthPeak’s chairman, Terry Phillips, personally fronted Nintendo over $300,000.  When SouthPeak didn’t record this debt, Jones raised a stink, eventually telling the company’s outside counsel that the company was committing fraud.  The same day, the company’s board fired her.  Read More ›

Supreme Court Holds That TSA Whistleblower’s Disclosure Wasn’t “Prohibited by Law”

Last November, we covered the Supreme Court oral argument in the case of Department of Homeland Security v. MacLean.  As a refresher, MacLean was an air marshal who was fired by the Transportation Security Administration (TSA) after he blew the whistle to MSNBC on the agency’s plan to cancel marshal missions to Las Vegas.  After the argument, Prof. Steve Vladeck of American University predicted that the TSA would lose the case.

He was right.  On Wednesday, the Supreme Court issued its opinion, in which it held in favor of MacLean.  The TSA argued that it could fire MacLean because his disclosures were “specifically prohibited by law” in two ways: first, it had adopted regulations on sensitive security information, which applied to the information MacLean disclosed; second, a provision of the U.S. Code had authorized TSA to adopt those regulations.  Chief Justice Roberts, writing for the Court, rejected both arguments. 

As to the regulations, he wrote, Congress could have said that whistleblowers were not protected if their disclosures were “specifically prohibited by law, rule, or regulation,” but did not.  Thus, its choice to only use the word “law” appeared to be deliberate.  Further, interpreting the word “law” broadly “could defeat the purpose of the whistleblower statute,” because an agency could insulate itself from liability by promulgating a regulation that prohibited whistleblowing.  And as to the argument that Congress-passed “law” prohibited the disclosure, Chief Justice Roberts wrote that the statute in question did not prohibit MacLean’s disclosures.  Instead, it was the agency’s exercise of discretion, not the statute, that determined what disclosures were prohibited.  Read More ›

Individual Liability of Officers and Directors for a Corporate Data Breach

The hacking of Sony’s private data has been one of the biggest stories in the country over the past couple of months.  It won’t surprise anyone to learn that lawsuits have been filed over the breach.  Indeed, the plaintiffs in several class action lawsuits are seeking to consolidate their cases  into one massive Sony Data Breach Litigation case.

So far, the plaintiffs in those cases haven’t alleged claims against individual Sony officers or directors.  This begs a couple of questions: is that something that plaintiffs do?  And what kinds of allegations can they bring?

The answer is that a number of plaintiffs have brought claims against officers and directors who worked at companies that suffered data breaches.  Typically, they allege that the defendants did not properly manage the company’s cyber risks.

For example, in February 2014, Kevin LaCroix of D&O Diary brought to our attention lawsuits that Target shareholders filed against the company’s officers and directors, arising from the massive theft of Target’s private customer information.  The shareholders alleged that the company’s executives and board knew how important the security of private customer information was, and failed to take reasonable steps to put controls in order to detect and prevent a breach.  Further, they alleged, the defendants exacerbated the damage by publicly minimizing the breach. Read More ›

2015 Brings Significant Changes to Maryland’s Campaign Finance Laws

As an executive, there is a strong likelihood that at some point in your career, you will be asked to make a campaign contribution—especially if you work in an area with a close affiliation with government. The rules are complex, and there is wide variation among federal and state rules. In addition, those differing rules are constantly in flux. For instance, the Maryland General Assembly has made several changes to Maryland campaign finance law that took effect on January 1, 2015, the start of the State’s new four-year election cycle.

First, the Maryland legislature raised the individual contribution limit from $4,000 to $6,000. (The legislature also raised the so-called “aggregate limit” on all contributions from $10,000 to $24,000. But as a result of the Supreme Court’s intervening decision in McCutcheon v. FEC, Maryland’s aggregate contribution limit was unconstitutional and therefore unenforceable even before the change took effect.)

Second, the legislature addressed a peculiar aspect of pre-2015 Maryland campaign finance law. Under Maryland law, unlike federal law, corporations may make campaign contributions. But if a corporation is a wholly-owned subsidiary of another corporation, contributions from these entities are considered to be made by a single contributor. Likewise, if multiple corporations are owned by the same stockholder, they are deemed to be a single contributor. We’ll call this the corporate attribution rule. Read More ›

Five Issues in Executive Disputes to Watch in 2015

In our last post, we counted down our most popular posts of 2014, from A-Rod to Walgreen.  Now it’s time to take a look at the issues in executive disputes that are likely to draw plenty of attention in 2015.

1.            Dodd-Frank Bounties and Whistleblower Litigation on the Rise

In November 2014, the SEC released its annual report on its Dodd-Frank whistleblower award program.  The theme of the report is that Dodd-Frank is paying off – both for the SEC and for whistleblowing employees.  The SEC reported that it issued whistleblower awards to more people in its 2014 fiscal year than in all previous years combined, including a $30 million bounty to one whistleblower in a foreign country.  The number of whistleblower tips received continues to increase, and we expect news of more substantial awards in 2015.  Meanwhile, litigation over various Dodd-Frank issues, such as whether a whistleblower claim is subject to arbitration, whether the shield against whistleblower retaliation applies overseas, and whether a whistleblower must report to the SEC in order to bring a retaliation claim, will continue to percolate in the federal courts.

2.            The Supreme Court Weighs in on Employment Issues

A couple of key Supreme Court cases will address employee rights that apply across the board, from the C-suite to the assembly line.  In Young v. United Parcel Service, the Court will decide whether, and in what circumstances, the Pregnancy Discrimination Act requires an employer that accommodates non-pregnant employees with work limitations to accommodate pregnant employees who have similar limitations.  And in EEOC v. Abercrombie & Fitch Stores, Inc., the Court will address whether an employer can be liable under the Civil Rights Act for refusing to hire an employee based on religion only if the employer actually knew that a religious accommodation was required based on knowledge received directly from the job applicant. Read More ›