On April 12, 2017, the Third Circuit partially revived a former in-house attorney’s whistleblower retaliation lawsuit against his previous employer.  Danon v. Vanguard Group, Inc., No. 16-cv-2881.

Plaintiff, a former in-house tax lawyer, previously raised retaliation claims against the Company in New York State Court under the New York False Claims Act, alleging he was discharged in retaliation for informing senior employees of his belief that the Company was violating certain tax and corporate laws.  The state court dismissed the case based on the plaintiff’s failure to demonstrate that the Company knew he was involved in any protected conduct at the time of his termination.  Plaintiff then filed suit against the Company in the District Court for the Eastern District of Pennsylvania alleging whistleblower retaliation in violation of SOX, Dodd-Frank, and the Pennsylvania Whistleblower Law.  His claims again were dismissed because the court determined he was precluded from asserting the Company’s knowledge of his allegedly protected conduct (we previously wrote about the SEC’s amicus brief to the district court in support of the plaintiff’s arguments here).

Plaintiff appealed the dismissal of his Dodd-Frank claim to the Third Circuit.  The Third Circuit reversed, concluding that while the state court had considered whether he had adequately pled his whistleblower claim, it had not actually determined whether, in fact, the Company knew about his allegedly protected activities.  Further, the Court noted that Plaintiff’s federal complaint alleged Company knowledge, and thus did not suffer from the safe defects as his state court complaint.  The court vacated the dismissal of the Dodd-Frank claim, and remanded for further proceedings.

The Third Circuit court has yet to address the critical underlying issue, raised by the Company in October of 2016, of whether an employee who complains internally but neglects to raise complaints with the SEC is protected from retaliation under Dodd-Frank.  Now that the district court must consider the merits of the claim on remand, the Third Circuit will likely confront the issue.

As noted, this case involves an attorney whistleblower—a dynamic that carries its own set of risks.  Links to our prior posts about the complexities of litigation brought by attorney whistleblowers can be accessed here.