Chicago Federal Court Rejects Retaliatory Discharge Claim Due To Existence Of SOX Whistleblower Claim
On April 23, 2018, the U.S. District Court for the Northern District of Illinois ruled that a plaintiff’s SOX claim precluded his claim for common law retaliatory discharge. Cohen v. Power Solutions International, Inc., No. 17-cv-4385.
Plaintiff, a COO, claimed that in early 2016, he became suspicious of the Company’s financial dealings and believed the Company “had engaged in sham transactions, channel-stuffing, and other financial and accounting misconduct.” Plaintiff reported his purported concerns to senior executives, employees at the Company and the Board of Directors and Audit Committee. Shortly after his report to the Board, the CEO issued Plaintiff an “Action Plan,” dated the day before Plaintiff’s report to the Board and Audit Committee. The Action Plan outlined areas of concern with Plaintiff’s performance and action items. Plaintiff responded to the Action Plan in writing a few days later and again raised concerns regarding financial misconduct. Plaintiff’s employment was terminated a few weeks later.
Plaintiff then filed suit claiming retaliation under SOX and Illinois common law. The Company filed a motion for judgment on the pleadings pursuant to Rule 12(c), arguing that the Plaintiff’s “SOX claim provides an adequate alternative remedy, and so Illinois law precludes a common law retaliatory discharge claim for the same act of retaliation.” The court agreed, finding that “Illinois courts do not permit common law claims for retaliatory discharge where there is an adequate alternative remedy available that renders the common law remedy superfluous.” The court noted that where the act of retaliation violates a statutory right – such as SOX – “common law retaliatory discharge claims cannot stand.”
This case precludes Illinois plaintiffs from adding common law retaliation claims to SOX claims in hopes of raising the specter of punitive damages that SOX does not provide.