On Jan. 14, 2011, plaintiff Catherine Zulfer, Senior Vice President and Corporate Controller for Playboy Enterprises Inc., got into a disagreement with her boss, Chief Financial Officer Christopher Pachler, after being asked to accrue $1.1 million in executive bonuses on the general ledger. Zulfer had previously worked for Playboy Enterprises for over 30 years, as she originally was hired in 1978 as an accounting manager. In 2010, Playboy laid-off its Corporate Controller, leaving two divisional controllers — Zulfer for the Entertainment Division and another employee for the Publishing and Licensing Division. In October 2010, Zulfer was promoted to SVP and Corporate Controller. When Pachler asked Zulfer to accrue $1.1 million in executive bonuses on the general ledger in January 2011, Zulfer refused, stating she needed the board of directors to approve the bonuses before she could accrue them. Pachler replied that board approval was needed for payment, but not an accrual. According to Zulfer, Pachler pressured her to make the accrual in violation of the company’s internal accounting controls and generally accepted accounting principles (GAAP). However, Pachler claimed that this was a routine discussion about an accounting issue (which internal controls encouraged) and that GAAP required the accrual. Thereafter, on the evening of Jan. 14, 2011, Zulfer called Playboy’s Chief Compliance Officer and General Counsel, Howard Shapiro. Zulfer claimed she reported that Pachler demanded that she make the accrual, which violated internal controls and GAAP, while Shapiro claimed that Zulfer was looking for “cover” in a disagreement with her boss and that nothing Zulfer reported rose to the level of Sarbanes-Oxley/internal control concern or constituted a whistleblower complaint. On Jan. 23, 2011, the board of directors approved the bonuses and Zulfer subsequently accrued them. On Feb. 11, 2011, Zulfer attended a meeting of the board’s audit committee, where an Ernst & Young partner asked if management was aware of any allegations of fraud or whistleblowing. Shapiro replied “no,” and Zulfer did not say otherwise. In August 2011, Pachler claimed he decided to eliminate Zulfer’s position and to promote Playboy’s Publishing and Licensing Division Controller to the restructured Corporate Controller position. After her lay-off, Playboy paid Zulfer $272,000 in severance benefits. Zulfer sued Playboy Enterprises Inc. Zulfer alleged that the company’s actions constituted retaliation and wrongful termination under the Sarbanes-Oxley Act of 2002. She also alleged that Playboy’s actions constituted age discrimination in violation of the California Fair Employment and Housing Act, but voluntarily dismissed this claim prior to trial. In a Federal Rule of Civil Procedure 12(b)(6) motion hearing, defense counsel asserted that Zulfer’s underlying legal theory — that a report of an attempted violation of internal controls — could not qualify as a protected activity under the Sarbanes-Oxley Act as a legal matter. No federal appellate decision has ever approved such a claim and there was no authority in the Ninth Circuit on this issue. However, at the 12(b)(6) motion hearing, Judge Margaret Morrow agreed that a report of an attempted violation of internal controls could give rise to a protected activity under the Sarbanes-Oxley Act, becoming only the second district court in the country to have approved precisely such a claim — the other being Bishop v. PCS Admin., No. 05 C 5683, 2006 WL 1460032 (N.D. Ill. May 23, 2006). At trial, Zulfer contended that Pachler’s repeated requests that she accrue the bonuses without approval from the board of directors violated the company’s internal controls and that she was terminated for disclosing to Pachler and Shapiro that the accrual of the bonuses would violate GAAP and the company’s internal controls in violation of the Sarbanes-Oxley Act. Zulfer further contended that after she spoke with Shapiro, he took no action in response to their discussion, in that he did not report it to the audit committee or initiate any type of investigation into the matter. Pachler denied the January 2011 dispute with Zulfer had anything to do with the decision to eliminate her position. He claimed that, rather, he selected the Publishing and Licensing Division Controller to be promoted because Zulfer’s corporate controller public accounting duties were no longer needed once Playboy went back to being a privately held company; because Zulfer’s entertainment accounting duties were no longer needed once Playboy sold its Entertainment Division in August 2011; and because the majority of the remaining accounting duties related to publishing and licensing, which the Publishing and Licensing Division Controller had handled for 20-plus years. Playboy ultimately alleged that no internal control required board approval for accrual of the bonuses (as opposed to payment), that GAAP required making the accruals and that Zulfer never made a whistleblower report or complaint of any kind., Zulfer claimed that since her termination, she has worked short-term assignments in production accounting for two different feature films, but that she has not been able to find employment at another executive level position. She also claimed she suffers emotional distress as a result of her experience, but that she did not seek psychological treatment. Thus, Zulfer sought recovery of economic damages, consisting of back and front pay, ranging from $1 million at the lower end scenarios to $2.75 million at the highest end scenario. She further sought recovery of damages for her emotional distress, as well as recovery of punitive damages for Playboy Enterprises’ alleged malice, fraud and oppression. Defense counsel contended that Zulfer’s economic damages were offset by a $272,000 severance she was paid upon her departure. Counsel also contended that Zulfer failed to mitigate her damages, as she did not adequately look for comparable work. In addition, defense counsel contended that Zulfer did not suffer significant emotional distress.