A federal district court recently held that employees bringing whistleblower suits under the Dodd-Frank Wall Street Reform and Consumer Protection Act are not entitled to a trial by jury. The decision in Pruett v. BlueLinx Holdings, Inc., if followed by other courts, is likely to benefit companies facing whistleblower suits, who no longer need be concerned about the risks of a jury trial.
The district court based its decision on two main points: (1) the district court conducted an analysis under the Seventh Amendment, noting in particular that the remedy sought was more equitable than legal in nature and (2) the court employed principles of statutory construction and focused on the fact that Congress had failed to specifically grant a right to jury trials in the Dodd-Frank statute, while it had done so in the related Sarbanes-Oxley Act.
First, under the Seventh Amendment, the court was required to determine if the action was more legal or equitable in nature, as the Constitution guarantees jury trials only to actions at law. For the court, this involved two primary questions. As an initial matter, the court examined whether the issues present in a whistleblower action were more similar to an 18th century action at law or equity. The parties did not dispute that a whistleblower action was most similar to a common law action for wrongful discharge. This factor thus suggested that the plaintiff should have a right to a jury trial. Additionally the court noted that the more important consideration was the type of remedy the action sought and whether that remedy was more of a legal or equitable remedy. Dodd-Frank provides for three remedies for a successful whistleblower claim: reinstatement at the seniority the employee would have had if not discharged or disciplined; double back pay with interest; and compensation for costs, expert fees and attorneys’ fees. The court determined that these remedies were intended to make the employee whole and so were equitable in nature. Plaintiff argued that the fact that Dodd-Frank provided for doubling back pay made the remedy more like legal damages and less an attempt to make the plaintiff whole, but the court rejected this argument because doubling was automatic and did not require any complicated calculation of damages that might be appropriate for a jury.
Second, although the court was considering whether the plaintiff had a constitutional right to a jury trial, and therefore the intent of Congress should not have affected the analysis, the court’s decision was also grounded in statutory construction principles, namely the fact that Dodd-Frank differed from Sarbanes-Oxley in not expressly providing for jury trials. The court stated that Sarbanes-Oxley initially was silent on whether a jury trial was available and, similar to its own analysis of Dodd-Frank, many courts concluded that there was no such a right under the Constitution because the Sarbanes-Oxley remedies were equitable. Congress subsequently amended Sarbanes-Oxley to provide a right to a jury trial, but did not do so in Dodd-Frank despite the fact that the bill was being considered at the same time as the Sarbanes-Oxley amendment. The court reasoned that Congress must have known of the controversy surrounding jury trials at the time it enacted Dodd-Frank, and by its silence must have been choosing not to grant a jury trial right.
The court’s decision will be beneficial to companies facing Dodd-Frank whistleblower claims. Most companies are likely to prefer a bench trial in front of a judge to a jury trial for three reasons. First, juries are thought to be more likely to be sympathetic to a whistleblower who has lost his or her job or been disciplined. Second, to the extent that the case involves highly technical issues of accounting or corporate governance, companies may feel more comfortable that the judge has the necessary sophistication to understand the issues, as compared to a jury. Third, a defendant is likely to have some sense of how best to present its case to the judge by the time trial occurs, whereas the members of a jury are randomly selected and their thinking unpredictable. It remains to be seen whether other courts will follow the BlueLinx decision and hold that there is no jury trial right, but the decision, which is apparently the first to address the issue, provides defendants with a persuasive argument against granting a jury trial. Defendants will likely want to use the decision to argue against granting a jury trial in Dodd-Frank whistleblower cases.