Playboy Enterprises is suing its former defense counsel Sheppard Mullin after being hit with a $6 million jury verdict in a SOX whistleblower case, the highest jury award in a SOX case to date. In Zulfer v. Playboy Enterprises, Inc., Playboy’s former Controller Catherine Zulfer claimed her employment was terminated in part because she objected to an improper instruction by Playboy’s CFO to accrue $1 million in discretionary bonuses for executives when those bonuses had not been approved by Playboy’s Board. A jury agreed and found that Playboy unlawfully retaliated against Zulfer by firing her for her protected reports under SOX and also terminated her employment in violation of public policy under California law. The jury awarded $6 million in unspecified damages with no allocation between the SOX claim and the California wrongful termination claim.
In a case of first impression regarding the “internal affairs doctrine”, the California Court of Appeal examined whether California or Delaware law governed the wrongful termination claim brought by an officer of a Delaware company headquartered in California. Lidow v. Superior Court, B239042, 2012 WL 1861372 (Cal.Ct.App. May 23, 2012). Complaint and Appeal
The internal affairs doctrine is a conflict of laws principle that only one state should have the authority to regulate a corporation’s internal affairs, i.e., matters peculiar to the relationships among or between the corporation and its current officers, directors, and shareholders. Edgar v. MITE Corp., 457 U.S. 624, 645 (1982). Courts generally find that the law of the state of incorporation applies to corporate governance matters. Vaughn v. LJ Int’l., Inc., 174 Cal.App.4th 213, 223 (2009). But the law of the state of incorporation does not apply “where, with respect to the particular issue, some other state has a more significant relationship … to the parties and the transaction.” Rest. 2d Conf. of Laws, § 309, p. 332. READ MORE