In May of 2013, lawyer David Danon brought a whistleblower award (qui tam) case against his then-employer, Vanguard, suing on behalf of New York State regarding taxes that Danon believed Vanguard owed the state. As Nancy Moore & I discussed here, a New York trial court dismissed Danon’s qui tam case in November 2015 because it found that he violated New York’s confidentiality standard for lawyers.
In that lawsuit, Danon also claimed that Vanguard illegally retaliated against him because of his internal whistleblowing activity, but the New York court dismissed that claim as well, finding that Danon did not plead that his internal whistleblowing occurred prior to Vanguard’s decision to terminate him; and that even if Danon’s internal whistleblowing did precede Vanguard’s termination decision, Vanguard was free to fire him for that internal whistleblowing because “as a tax lawyer for Vanguard, Danon's job duties included ensuring that [Vanguard] complied with federal and state tax laws.” (The existence of a “job duties” exception to whistleblower protection is a continuing theme in whistleblower cases, and was key to the Supreme Court’s 2006 decision addressing the First Amendment rights of a lawyer-whistleblower in Garcetti v. Ceballos.)
In addition to Danon’s New York state court suit against Vanguard, he also sued Vanguard in federal district court in Philadelphia, claiming protection under two federal statutes, the Dodd-Frank Wall Street Reform and Consumer Protection Act, 15 U.S.C. § 78u-6(h)(1), Sarbanes-Oxley, 18 U.S.C. § 1514A, and Pennsylvania’s Whistleblower Law. 43 P.S. § 1421 et seq. Danon’s case teed up two important issues: (1) whether whistleblower protection standards apply differently to lawyers in light of their legal ethics obligations and (2) whether Dodd-Frank’s protections apply to an employee’s internal whistleblowing, as the SEC argued in an amicus brief filed in the case.
On May 25, Federal District Court Judge C. Darnell Jones ruled against Danon, but did not reach either of these issues or the merits of the case. Instead, the court relied on collateral estoppel, finding that Danon could not re-litigate the causal connection between his internal whistleblowing and Vanguard’s decision to terminate because he already had an opportunity to litigate that before the New York state court and lost on that issue. In addition, the court ruled that Danon’s Sarbanes-Oxley claim was barred because he had not shown that he filed an administrative complaint with the Occupational Safety and Health Administration, as required by that statute. It also ruled that Danon’s Pennsylvania Whistleblower Law claim was barred because he missed the 180-day statute of limitations under that statute.
David Danon’s saga illustrates the significant procedural hurdles that whistleblowers face in litigating their whistleblower protection claims.