United States: A Review Of Recent Whistleblower Developments - 18 April 2017

Whistleblower Developments is a periodic report covering significant cases, decisions, proposals, and legislation related to whistleblower statutes and how they may impact your business. Recent developments include:

  • Third Circuit Permits Former In-House Attorney to Pursue Dodd-Frank Act Claims
  • Ninth Circuit Rules that Dodd-Frank Act Protects Non-SEC Whistleblowers
  • Supreme Court Passes on Opportunity to Review Attempted Whistleblower's Petition
  • Fifth Circuit Receives Amicus Brief From Advocacy Group in False Claims Act Appeal
  • Former UBS Executive Claims Company Fired him for FINRA Testimony

Third Circuit Permits Former In-House Attorney to Pursue Dodd-Frank Act Claims

The Third Circuit recently held that the trial court should not have dismissed an ex-Vanguard Group, Inc. in-house attorney's wrongful termination lawsuit. In his lawsuit, the ex-employee, David Danon, claimed that he was terminated after attempting to blow the whistle on the company's alleged violations of corporate and tax laws, in violation of the Dodd-Frank Act, the False Claims Act, the Sarbanes-Oxley Act, and Pennsylvania's whistleblower protection law. However, in May of 2016, the trial court dismissed Danon's lawsuit on the basis that Danon was barred from re-litigating claims that he previously filed in a similar New York False Claims Act lawsuit.

Danon appealed that decision to the Third Circuit, arguing that his Dodd-Frank Act claim should be permitted to proceed based on recent precedent holding that the Dodd-Frank Act's anti-retaliation protections extend beyond allegations that a whistleblower makes directly to the United States Securities and Exchange Commission (SEC). Danon further argued that his lawsuit was not barred because the state court had not fully ruled on the matter. The SEC provided support to Danon's arguments on appeal, arguing in separate amicus briefs that individuals are entitled to anti-retaliation protections if they make any of the disclosures identified in Section 21F of the Securities Exchange Act (covering parts of the SEC's whistleblower program), regardless of whether they separately report to the SEC.

Ultimately, the Third Circuit agreed that Danon's Dodd-Frank Act-based claim should be permitted to proceed at the trial court level. The Third Circuit based its decision on the fact that the issue of whether Danon adequately pleaded a violation had not been fully ruled upon in the previous state court action, so Danon was not prevented from bringing a new lawsuit on that basis. The Third Circuit, however, agreed that the remainder of Danon's claims were properly dismissed.

The case is David Danon v. Vanguard Group, Inc., case number 16-2881, 2017 U.S. App. LEXIS 6260 (3d Cir. April 12, 2017).

Ninth Circuit Rules that Dodd-Frank Act Protects Non-SEC Whistleblowers

On March 8, 2017, a divided panel of the Ninth Circuit Court of Appeals held that the Dodd-Frank Act's anti-retaliation protections extend to whistleblowers who have not reported to the SEC. By way of background, the Ninth Circuit's decision affirmed the trial court's denial of Digital Realty Trust's motion to dismiss its former Vice President of Portfolio Management, Paul Somers's claims that the company discriminated against him based on his sexual orientation, and then fired him in retaliation for complaining about his supervisor's actions. The trial court also certified the issue of whether Somers qualified as a whistleblower under the Dodd-Frank Act for interlocutory appeal to the Ninth Circuit.

In its decision, the Ninth Circuit acknowledged that the Dodd-Frank Act defines a "whistleblower" as "any individual who provides, or two or more individuals acting jointly who provide, information relating to a violation of the securities laws to the commission, in a manner established, by rule or regulation, by the commission." (emphasis added). The Ninth Circuit then considered that definition against the language of the Dodd-Frank Act's anti-retaliation provision, which appears later in the statute. The anti-retaliation provision prohibits retaliation against individuals who make disclosures that are required or protected under the Sarbanes-Oxley Act. In reviewing the statute, the Ninth Circuit agreed with the reasoning of the Second Circuit that reading the Dodd-Frank Act's definition of "whistleblower" into its anti-retaliation provision would create too narrow a scope of protection. The Ninth Circuit further reasoned that reading the statute in that way would only protect whistleblowers who report both internally and to the SEC.

Judge Mary M. Schroeder, writing for the panel, summed up the court's reasoning as follows: "[The Dodd-Frank Act's] anti-retaliation provision unambiguously and expressly protects from retaliation all those who report to the SEC and who report internally. Its terms should be enforced." Judge John B. Owens, in a brief dissenting opinion, stated that he would agree with the Fifth Circuit's reasoning on this issue. The Fifth Circuit previously held that the anti-retaliation provisions of the Dodd-Frank Act should be read using the same definition of "whistleblower" as stated earlier in the statute.

This decision from the Ninth Circuit widens the circuit split between the Fifth Circuit, which held in 2013 that only those who report to the SEC qualify as whistleblowers, and the Second Circuit, which held in 2015 that the anti-retaliation provision was ambiguous and that courts must defer to SEC guidance. The Sixth Circuit was faced with the issue in an appeal brought by a former Morgan Stanley employee, but avoided ruling on it because the underlying claims were too vague to qualify for whistleblower protection. The Third Circuit is currently considering the issue in an appeal brought by a former in-house tax attorney for Vanguard Group, Inc.

The case is Paul Somers v. Digital Realty Trust, Inc., case number 15-17352, 850 F.3d 1045 (9th Cir. 2017).

Supreme Court Passes on Opportunity to Review Attempted Whistleblower's Petition

On March 20, 2017, the U.S. Supreme Court declined the invitation to review a former Morgan Stanley employee's claims that he is entitled to whistleblower protection, despite his failure to report his complaints to the SEC. This decision follows the Sixth Circuit's ruling that the plaintiff's allegations that he worked with the FBI to investigate his claims were too vague to be actionable under the Dodd-Frank Act.

John S. Verble, the would-be whistleblower, submitted his petition for writ of certiorari to the Supreme Court in February, which sought guidance on whether the Dodd-Frank Act's whistleblower protections extend to any employee that reports alleged wrongdoing. The trial court that originally dismissed Verble's complaint had interpreted the Dodd-Frank Act's whistleblower protections as inapplicable to employees who do not report to the SEC. In affirming the dismissal of Verble's claims, the Sixth Circuit determined that it did not need to decide the question of whether Verble qualified as a whistleblower under the Dodd-Frank Act because Verble's allegations did not state a cause of action. Consistent with its custom, the Supreme Court's denial of the petition for writ of certiorari did not provide any information as to why it did not accept the case for further review.

The case is John S. Verble v. Morgan Stanley Smith Barney, LLC, case number 16-946, 2017 U.S. LEXIS 1909 (Mar. 20, 2017).

Fifth Circuit Receives Amicus Brief From Advocacy Group in False Claims Act Appeal

Taxpayers Against Fraud (TAF), an advocacy group whose stated mission is to combat fraud perpetrated against the government, submitted an amicus brief for the Fifth Circuit's consideration in a would-be whistleblower's pending appeal before that court. TAF's amicus brief argues in support of the Fifth Circuit reversing and remanding a decision by a Texas district court that granted summary judgment to Northrop Grumman Systems Corp. and Lockheed Martin Corp., two federal government contractors. That summary judgment dismissed claims by a former Northrop Grumman employee alleging that both government contractors violated the False Claims Act by mismanaging the budgets for the F-35 Joint Strike Fighter program to hide cost overruns, thus resulting in false financial reporting.

In granting the contractors' motion for summary judgment, the Texas district court deemed the former employee, Paul J. Solomon, a government employee for purposes of the False Claims Act. Government employees who are obligated to disclose fraudulent financial reporting as part of their job duties are generally barred from bringing claims under the False Claims Act based on those disclosures. In his own appellate briefing, Solomon argued that the False Claims Act's voluntary disclosure requirement does not apply to him as he was neither (1) a government employee paid to detect fraud, nor was he (2) a private employee who made a disclosure only after being questioned or investigated by the federal government. Both kinds of whistleblowers are disqualified as False Claims Act whistleblowers (which are called "relators").

TAF's amicus brief urges the Fifth Circuit to hold that an employee of a government contractor who voluntarily reports fraud to the federal government, despite the fact that the contractor is under a contractual duty to self-disclose such misconduct to the government, should qualify as a False Claims Act relator. If the Fifth Circuit agrees with Solomon and TAF, Solomon would be permitted to continue pursuing his claims in the trial court. Successful False Claims Act relators stand to recover a share of any financial recovery they obtain for the government on their claims.

Former UBS Executive Claims Company Fired him for FINRA Testimony

UBS Financial Services, Inc. has been served with a whistleblower lawsuit by former employee Craig D. Price, who was a Florida-based wealth adviser. Price alleges that UBS gave him a false reason for his termination, which occurred after he testified to the Financial Industry Regulatory Authority (FINRA) that a coworker facilitated the misuse of an elderly client's funds. Price claims that, after his testimony to FINRA about that colleague's alleged misdeeds, his superiors at UBS actively sabotaged his projects to manufacture a justification for firing him.

Price worked for UBS for over a decade. At the time of his firing, Price was a senior vice president of investments and also worked as a private wealth adviser out of the company's Stuart, Florida offices. After Price discovered his colleague's facilitation of the misuse of an elderly client's funds, he alleges that he told his superiors at UBS, who conducted an internal investigation that resulted in that colleague's termination in 2013. UBS never reported the matter to the U.S. Department of the Treasury's Financial Crimes Enforcement Network, nor did UBS amend its FINRA disclosure regarding the terminated employee to reflect the misuse of the client's funds.

Soon thereafter, in 2014, FINRA began its own investigation regarding Price's former colleague's conduct. In doing so, FINRA took extensive testimony from Price about the matter. In early 2016, Price claims UBS fired him for "various policy violations" related to a stock purchase that he handled for a client, even though the company denied the client's complaints about the incident and stated Price and UBS committed no wrongdoing. Price's lawsuit claims that UBS's actions in terminating him violate the Dodd-Frank Act and the Florida Whistleblower Act. His lawsuit seeks double back pay, compensatory damages, and attorney's fees and costs

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.