NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

____________

No. 16-2881

____________

DAVID DANON,

 Appellant

v.

VANGUARD GROUP, INC.

On Appeal from the United States District Court 

for the Eastern District of Pennsylvania

(D. C. Civil Action No. 2-15-cv-06864)

District Judge: Honorable C. Darnell Jones, II 

 

Submitted under Third Circuit LAR 34.1(a)

on January 26, 2017

Before: CHAGARES, RESTREPO and ROTH, Circuit Judges

(Opinion filed: April 12, 2017)

________________

OPINION*

________________

ROTH, Circuit Judge

 

* This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not 

constitute binding precedent.
2

David Danon used to work as a tax lawyer for The Vanguard Group, Inc., an 

investment services firm. He came to believe that Vanguard was violating certain tax and 

corporate laws, and he informed various senior employees of Vanguard of this belief. 

Vanguard’s officers disagreed with Danon’s assessment of the law, but Danon continued 

to inform Vanguard employees of his legal conclusions. Three years later, Vanguard 

terminated his employment. He then sued Vanguard in New York state court, specifying 

numerous causes of action, one of which was retaliation. However, his case was 

dismissed because, as relevant here, it did not adequately plead facts relating to 

Vanguard’s knowledge of Danon’s activities. He has now sued Vanguard for retaliation 

under several different statutes in federal court, but his case was dismissed again—this 

time because, among other reasons, he was precluded from asserting that Vanguard knew 

about his activities. He has now appealed that dismissal, arguing that he is not precluded. 

For the reasons that follow, we agree. However, because he has not appealed with 

respect to any other issue, and because the District Court provided sufficient alternative 

grounds for dismissing all of Danon’s claims except the Dodd-Frank claim, we will 

vacate only the dismissal of the Dodd-Frank claim.

I. Background

In 2010, Danon, while working as a tax lawyer for Vanguard, came to the 

conclusion that Vanguard was engaged in illegal tax and corporate practices. He alleges 

that, beginning at that time and continuing throughout the remainder of his employment 

with Vanguard, he advised various senior corporate employees and members of 

Vanguard’s tax department of his conclusion. However, these individuals rejected his 
3

conclusion. He alleges that Vanguard’s senior employees told him to stop attempting to 

notify individuals at Vanguard of his conclusion and not to put this conclusion in writing. 

In addition, he alleges that, around this time, a Vanguard employee requested that Danon 

perform certain duties (which he does not specify) that Danon refused to perform because 

he believed they were in violation of the law. On or around January 3, 2013, Vanguard 

informed Danon that it was going to terminate his employment soon and that he should 

seek other employment. Vanguard ultimately terminated his employment in June 2013.

Shortly before his termination, on May 8, 2013, Danon filed an action against 

Vanguard with the Supreme Court of New York in New York County. Among other 

causes of action, he suggested that Vanguard retaliated against him by firing him for his 

efforts to stop Vanguard’s illegal activities, and that this retaliation violated the New 

York False Claims Act. Upon Vanguard’s motion, his complaint was dismissed. The 

court held that the complaint failed to allege a claim for retaliation under the statute 

because it did not “contain any allegations that [Vanguard] knew in January 2013[] that 

Danon was involved in protected conduct.” While he repeatedly stressed that Vanguard 

knew about his conduct, he did “not indicate the dates when he expressed his concerns to 

Vanguard’s employees and, in particular, whether he did so before he was informed of 

his termination in January 2013.”1 Because knowledge was a necessary element of 

Danon’s claim, failing to plead knowledge adequately was sufficient to warrant 

dismissal.

 

1 App. 174.
4

While Danon was appealing that dismissal, he filed this suit against Vanguard in 

the United States District Court for the Eastern District of Pennsylvania. He claimed that 

his termination was retaliation in violation of the whistleblower protections of the 

Sarbanes-Oxley Act,2the Dodd-Frank Wall Street Reform and Consumer Protection 

Act,3and the Pennsylvania Whistleblower Law.4 Vanguard moved to dismiss on the 

basis of, among other things, issue preclusion and failure to provide sufficient factual 

allegations to support the claim for retaliation.5 The District Court held that issue 

preclusion applied and defeated Danon’s claims.

6

 The District Court also held that the 

Pennsylvania Whistleblower Law claim was time-barred because Danon did not bring his 

claim within 180 days after occurrence of the alleged violation, as required by the statute, 

and the Sarbanes-Oxley claim was barred because it was not administratively exhausted 

with the Occupational Safety and Health Administration, as required by the statute.7

This appeal followed.

 

2 18 U.S.C. § 1514A.

3 15 U.S.C. § 78u-6(h)(1).

4 43 P.S. § 1423.

5 Because the District Court did not decide whether the complaint provided sufficient 

factual allegations to support the claim, we do not decide that issue here either.

6 Danon v. Vanguard Grp., Inc., No. 15-6864, 2016 WL 2988987, at *3-*4 (E.D. Pa. 

May 23, 2016).

7

Id. at *6. Danon has not appealed these determinations.
5

II. Discussion8

The District Court held that Danon was precluded “from relitigating whether there 

was a causal connection between his firing and his activities, even if such activities are 

protected. As a causal connection is a component of the prima facie case for retaliation 

claims under SOX, Dodd-Frank, and the Pennsylvania Whistleblower Law, Plaintiff’s 

Complaint must be dismissed.”

The District Court held that a New York state court case gave rise to preclusion 

here. “[A] federal court must give to a state-court judgment the same preclusive effect as 

would be given that judgment under the law of the State in which the judgment was 

rendered.”9 Hence, we look to New York law to determine whether Danon would be 

precluded in this suit. Under New York law, issue preclusion prevents a party from 

relitigating an issue that was decided in an earlier proceeding.10 For preclusion to apply, 

“[t]here must be an identity of issue which has necessarily been decided in the prior 

action and is decisive of the present action, and, second, there must have been a full and 

fair opportunity to contest the decision now said to be controlling.”11

The issue that was decided in the New York case was whether Danon’s complaint 

adequately alleged facts regarding Vanguard’s knowledge of Danon’s whistleblowing 

 

8 The District Court had jurisdiction under 28 U.S.C. § 1331. We have jurisdiction under 

28 U.S.C. § 1291. Our review over a District Court’s grant of a motion to dismiss on the 

basis of issue preclusion is generally plenary. Jean Alexander Cosmetics, Inc. v. L’Oreal 

USA, Inc., 458 F.3d 244, 248 (3d Cir. 2006).

9 Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. 75, 81 (1984). 

10 Atl. Mut. Ins. Co. v. Lauria, 739 N.Y.S.2d 394, 396 (N.Y. App. Div. 2002).

11 Schwartz v. Pub. Adm’r of Bronx Cty., 246 N.E.2d 725, 729 (N.Y. 1969). See also

PenneCom B.V. v. Merrill Lynch & Co., 372 F.3d 488, 491 (2d Cir. 2004) (quoting 

Schwartz to describe New York issue preclusion).
6

activities. The court did not decide whether, in fact, Vanguard knew about Danon’s 

activities.12 Hence, Danon is not precluded from asserting that Vanguard knew about 

Danon’s activities in this case; that factual issue was not decided. More generally, the 

New York decision can give rise to issue preclusion only insofar as Danon’s complaint 

suffers from the same defects as the New York complaint did.

13

 The federal complaint 

does allege knowledge, so it does not suffer from the same defect.14 For this reason, we 

will vacate the issue preclusion portion of the District Court’s opinion.

III. Conclusion

For the foregoing reasons, we will vacate the portion of the District Court’s 

opinion dismissing the Dodd-Frank claim and remand for further proceedings consistent 

with this opinion.15 

 

12 App. 173-75.

13 175 E. 74th Corp. v. Hartford Acc. & Indem. Co., 416 N.E.2d 584, 586 n.1 (N.Y. 1980)

(“A dismissal [for failure to state a cause of action] has preclusive effect only as to a new 

complaint for the same cause of action which fails to correct the defect or supply the 

omission determined to exist in the earlier complaint.”).

14 In determining that the federal complaint alleges knowledge, we are not deciding 

whether those allegations are appropriate or sufficient. We leave that determination to 

the District Court.

15 The parties raised additional arguments regarding the Dodd-Frank claim before this 

Court. The District Court, however, is better situated to rule on these claims in the first 

instance. Thus, we will not resolve them here.