April 22, 2019

April 22, 2019

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April 19, 2019

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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.

© 2019 Proskauer Rose LLP.

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About this Author

Steven J Pearlman, Labor Employment Law Firm, Proskauer Law firm
Partner

Steven Pearlman is a partner in the Labor & Employment Law Department and co-head of the firm's Whistleblowing & Retaliation Group, resident in the Chicago office. Steven’s practice focuses on defending complex employment litigation involving claims of discrimination and harassment, wage-and-hour laws and breaches of restrictive covenants (e.g., non-competition agreements). He has successfully tried cases to verdict before judges and juries in Illinois, Florida and California, and defended what is reported to be the largest Illinois-only class action in the history of the U.S....

312-962-3545
Alex Weinstein, Labor Attorney, Proskauer Law Firm
Associate

Alex Weinstein is an associate in the Labor & Employment Law Department. He represents employers in all aspects of employment litigation and counseling.

Alex’s practice focuses on defending companies in both federal and state courts in various industries, including manufacturing, retail, government contracting, utilities, service companies, distribution companies and security. His litigation practice has included class actions and collective actions, general labor and employment, executive disputes, whistleblower claims, government contractor compliance, employee mobility disputes, and wage and hour litigation. He also advises clients on all aspects of employment law, including wage and hour practices, whistleblowers, leave policies, reductions in force, labor relations, flu vaccination policies, and FMLA and ADA compliance and administration.

202-416-5875