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Court cuts jury’s award to SOX whistleblower

WA Richmond federal court cut a whistleblower’s jury award of nearly $1 million by reducing compensatory damage awards of $178,500 against each of two corporate officers to $50,000 each.

Plaintiff Andrea Gail Jones notified the court on Nov. 7 that she would accept the reduced award totaling $693,000, including $593,000 in back pay and compensatory damages against the company, for her former employer’s violation of the federal Sarbanes-Oxley Act.

After a four-day trial in July, a jury returned a $950,000 verdict for Jones, a former chief financial officer for Midlothian-based SouthPeak Interactive, a video game developer and publisher. Jones alleged she was fired after she reported misconduct by company employees for failing to report a personal loan to the company by its chairman, Terry M. Phillips, used to beef up its game inventory.

When the company allegedly failed to remedy the omission in its filings with the Securities and Exchange Commission and fired Jones, she filed a complaint with the Occupational and Health Safety Administration, as required by SOX. She also filed a federal lawsuit against SouthPeak, Phillips and CEO Melanie J. Mroz, alleging retaliation in violation of SOX. Her complaint triggered an investigation by the agency that resulted in an SEC cease-and-desist order in April 2011 and a $50,000 payment by SouthPeak.

Although the jury deliberated only two hours, it was no small task to come up with the original $950,000 award, according to the trial court’s account of taking the verdict. The jury retired three separate times to deliberate, as Senior U.S. District Judge Robert E. Payne worked to clarify what the jury wanted to do.

The verdict form approved by counsel separately identified each defendant – the SouthPeak corporation, Phillips and Mroz – and directed the jury to “please check one” of two choices. For each defendant, the first choice was to “find in favor of Jones” and against the defendant, with blanks to fill in amounts of back pay and compensatory damage awards. The second choice for each defendant was to “find in favor of” the named defendant.

In the first round, the jury returned a verdict form showing check marks for liability against all three defendants, but it did not assess any amount of the $950,000 against the individual defendants, Phillips and Mroz.

After consulting with counsel, Payne told the jurors it was unclear whether they were finding that a particular defendant caused no damages or were simply trying to avoid awarding more damages than the plaintiff had suffered. Payne observed that Jones would “only get one damage,” and allowed the jury to retire with additional instructions.

Shortly after it returned to the jury room, the jury passed a note to the judge saying: “From SouthPeak we want a total of 593,000 back pay 357,000 compensatory. We do not find that Terry Phillips or Melanie Mroz are individually responsible for that amount.”

Another round of consultation with counsel, another summons to the jury. When the court inquired whether the jury had amended its verdict form, the foreperson responded, “We left it the same with the zero.”

“And you find there are no damages – that she didn’t have a claim against them; is that right?,” asked Payne.  “Right,” said the foreperson. In that case, the judge instructed, the jury needed to amend its verdict form to “eliminate the checkmarks” in the boxes finding liability against the individual defendants.

Payne inquired whether the jury needed to retire in order to amend their verdict. One juror signaled that they needed to retire.

Out they went again, returning for a third time with an amended verdict form that showed an award of $593,000 in back pay against SouthPeak, with no compensatory damages, and findings of liability against Phillips and Mroz, with a compensatory damage award of $178,500 assessed against each defendant.

Defense counsel Kevin Holden, of Richmond, asked for a mistrial, but Payne entered judgment for Jones in the amount of $950,000.

The defendants moved for a new trial based on the discrepancy between the initial and amended verdicts.

Verdicts that involve discrepancies between findings of liability and damage awards “are not commonplace, but they are not a rarity either,” and they are not necessarily fatal, Payne said in his Oct. 29 opinion (VLW 013-3-549).

“As the ensuing events disclosed, the initial verdict did not represent a view upon which there was unanimous agreement. Upon further reflection, the jury reached a result that was unanimous…. The amended verdict therefore best reflects the findings of the unanimous jury and was properly accepted as its true verdict,” Payne said.

On agreement by counsel, the court reduced the back pay award to $470,000, but found the additional $123,000 was meant to compensate Jones for exhausting her savings and retirement accounts and racking up $85,000 in credit card debt after she lost her job. Payne amended the verdict to reflect a back pay award of $470,000 and compensatory damage award of $123,000.

Faith and family for emotional support

Jones failed to put on evidence of damage to her reputation, but she did present evidence of emotional distress, including her husband’s account of her sleepless nights, chronic crying and praying with her father.

She also testified about the stress of having lost her job as the family’s primary breadwinner and the difficulty she had explaining her job loss to her four children, her neighbors and prospective employers during her 23-month job search.

As Jones had lost her job and benefits, she could not be faulted for foregoing the expense of professional psychiatric or psychological counseling. Payne said that before the advent of professional counseling, “it was not unusual for people to seek aid and comfort from faith and family when coping with emotional distress.”

Payne compared Jones’ case to Weihua Huang v. Rector & Visitors of U.Va., [VLW 013-3-111], in which a remittitur was ordered for a fired academic and breadwinner who suffered emotional distress. Payne decided a $100,000 damage award was sufficient to compensate Jones for her emotional distress, and that award should be split between the two defendant corporate officers.

Richmond lawyer James B. Thorsen represented Jones. Neither Thorsen nor Holden responded to requests for comment.

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