Danon v. Vanguard Grp., Inc.
| Decision Date | 02 November 2018 |
| Docket Number | CIVIL ACTION No.: 15-cv-6864 |
| Parties | DAVID DANON, Plaintiff, v. VANGUARD GROUP, INC., Defendant. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
SITARSKI, M.J.
Pending before the Court is Plaintiff's Motion for Leave to Amend (ECF No. 32), and Defendant's Brief in Response thereto (ECF No. 37).1 For the following reasons, Plaintiff's Motion will be GRANTED.
On December 31, 2015, David Danon ("Plaintiff") initiated the instant action against Vanguard Group, Inc. ("Defendant"), alleging that he was wrongfully terminated in violation of the whistleblower protections of the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the Pennsylvania Whistleblower Law. (Compl. ¶¶ 11, 13, ECF No. 1). Specifically, Plaintiff averred that beginning in 2010, he informed corporate employees and members of his department that Defendant was engaged in illegal practices. Plaintiff was advised to "cease and desist in his attempts to notify the defendant," and "in retaliation" he was wrongly terminated "on about January 3-4, 2013." (Id. ¶¶ 7-8, 10).
On March 7, 2016, Defendant filed a Motion to Dismiss the Complaint, arguing, amongother things, that Plaintiff was collaterally estopped from proceeding with this action because he filed a similar retaliation claim that was dismissed by the New York Supreme Court,2 and that Plaintiff failed to meet the necessary statutory prerequisites. (Mot. to Dismiss, ECF No. 6; Mem. of Law in Support of Mot. to Dismiss 7, ECF No. 6-2). On May 23, 2016, Judge Jones granted Defendant's Motion, and dismissed Plaintiff's Complaint with prejudice. (Mem. 14, ECF No. 20). Judge Jones found the collateral estoppel argument dispositive of Plaintiff's claims, that Plaintiff's Pennsylvania Whistleblower Law claim was time-barred, and that Plaintiff failed to administratively exhaust his Sarbanes-Oxley Act claim. (Id. at 4, 13-14). Plaintiff appealed, and on May 11, 2017, the Third Circuit issued an opinion "vacating the portion of the District Court's opinion dismissing the Dodd-Frank claim," and remanding for further proceedings so the District Court could address the parties' additional arguments regarding the Dodd-Frank claim.3 (Not. of App., ECF No. 23); Danon, 686 F. App'x at 104, 104 n.15.
On remand, the parties entered a Stipulation and Order to stay the case, which Judge Jones signed on May 10, 2017. (Stipulation and Order, ECF No. 27). The parties stipulated that, "Plaintiff reported alleged concerns to the SEC only after learning his employment would be terminated." (Id. ¶ J). The Stipulation further provided, in relevant part, that Defendant wished to renew its Motion to Dismiss regarding the Dodd-Frank claim "so that Court may address Defendant's arguments," including Defendant's argument that "the anti-retaliationprovisions of the [Dodd-Frank Act] only protects individuals who report to the [Securities Exchange Commission ("SEC")], but does not protect individuals who report internally without also reporting to the SEC ('Internal Reporting Issue')." (Id. ¶¶ J-L). The parties requested a stay of the proceedings "pending the United States Supreme Court's resolution of Digital Realty Inc.'s petition for writ of certiorari (filed on April 25, 2017) in the case of Somers v. Digital Realty, Inc., 850 F.3d 1045 (9th Cir. 2017)," in which "the Ninth Circuit directly addressed the Internal Reporting Issue and held that internal report is sufficient." (Id. ¶ O). The parties agreed that Plaintiff could amend his complaint within 21 days from a denial of the Somers petition or "a decision on the merits by the Supreme Court if such decision is not dispositive of Plaintiff's claims." (Id. ¶ 2).
On February 21, 2018, the Supreme Court issued a decision in Digital Realty, holding that the anti-retaliation provision of Dodd-Frank does not extend to an individual who has not reported a violation of the securities laws to the SEC and therefore falls outside the Act's definition of "whistleblower." Digital Realty Trust, Inc. v. Somers, ___ U.S. ___, 138 S. Ct. 767, 772 (2018). Rather, "[t]o sue under Dodd-Frank's anti-retaliation provision, a person must first 'provid[e] . . . information relating to a violation of the securities laws to the Commission.'" Id. (quoting 15 U.S.C. § 78u-6(a)(6)). Thus, the Supreme Court found that because Somers did not provide information to the SEC before his termination, he did not qualify as a whistleblower at the time of the alleged retaliation and was ineligible for relief. Id. at 778.
Following the Digital Realty decision, on March 12, 2018, Plaintiff filed an Amended Complaint. (Am. Compl., ECF No. 28). Plaintiff averred, inter alia, that beginning in 2008, he informed corporate employees and members of his department that Defendant was engaged in illegal practices; "[i]n retaliation for Plaintiff's attempts to correct the Defendant's violations, inJanuary 2013 Plaintiff was notified of Vanguard's intention to terminate him at the end of an unspecified period of time;" Plaintiff remained a full-time employee from January 2013 until June 10, 2013, during which time Defendant "engaged in additional retaliation conduct against Plaintiff and made it impossible for him to continue his employment;" in May 2013, Plaintiff reported his opinions and prior disclosures to Vanguard to the SEC; and Plaintiff was terminated on June 10, 2013. (Id. ¶¶ 7, 15-21).
On April 9, 2018, Defendant filed a Motion to Dismiss Plaintiff's Amended Complaint.4 (Mot. to Dismiss Pl.'s Am. Compl., ECF No. 29). Plaintiff filed an Answer and Brief in Response thereto (Pl.'s Answer to Def.'s Mot. to Dismiss, ECF No. 35; Br. in Response to Mot. to Dismiss, ECF No. 38), and Defendant filed a Reply (Def.'s Reply Br. in Support of Mot. to Dismiss, ECF No. 47). Defendant has also requested oral argument. (Def.'s Request for Oral Arg., ECF No. 41). Defendant's Motion to Dismiss remains pending.
On April 19, 2018, Plaintiff filed the instant Motion for Leave to Amend. (Mot. for Leave to Am., ECF No. 32). Plaintiff seeks leave to file a Second Amended Complaint to more specifically state facts in response to Defendant's Motion to Dismiss, and because he founddocuments "which disclose that [he] was not terminated before he reported to the SEC in May 2013." (Id. ¶¶ 3-4; Pl.'s Mem. of Law 2, ECF No. 32-2). The proposed Second Amended Complaint avers, inter alia, that "[o]n or about January 3-4, 2013, Plaintiff received another review that suggested areas for improvement," that he reported his tax opinions to the SEC in May 2013 while still employed at Vanguard, and that he was terminated in June 2013. (Second Am. Compl. ¶¶ 15, 20, 22, 23-24, ECF No. 32-3). Defendant opposes amendment, arguing Plaintiff's Motion should be denied "on the basis of bad faith, undue delay, prejudice and futility." (Br. in Resp. 16, ECF No. 37).
Federal Rule of Civil Procedure 15(a)(2) sets out the standard for granting leave to amend a complaint when, as is the case here, a responsive pleading had been served; "a party may amend its pleading only with the opposing party's written consent or the court's leave." Fed. R. Civ. P. 15(a). "The court should freely give leave when justice so requires," and the Third Circuit has held that "motions to amend pleadings should be liberally granted." Fed. R. Civ. P. 15(a)(2); Long v. Wilson, 393 F.3d 390, 400 (3d Cir. 2004). The fundamental purpose of Rule 15 is to allow a plaintiff an opportunity to test his claim on the merits. United States ex rel Customs Fraud Investigations, LLC v. Victaulic Co., 839 F.3d 242, 249 (3d Cir. 2016). The Supreme Court has cautioned that although "the grant or denial of an opportunity to amend is within the discretion of the District Court, ... outright refusal to grant the leave without any justifying reason appearing for the denial is not an exercise of that discretion, it is merely an abuse of that discretion and inconsistent with the spirit of the Federal Rules." In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1434 (3d Cir. 1997) (citing Foman v. Davis, 371 U.S.178, 182 (1962)).
However, leave to amend under Rule 15 may be denied in cases of: (1) undue delay; (2) bad faith or dilatory motive; (3) undue prejudice; or (4) futility of amendment. Cureton v. Nat'l Collegiate Athletic Ass'n, 252 F.3d 267, 273 (3d Cir. 2001) (citing Foman, 371 U.S. at 182). Given the liberal standard of Rule 15(a), the party opposing amendment bears the burden of showing undue delay, bad faith, prejudice, or futility. Id. The decision to grant or deny a motion for leave to amend is within the sound discretion of the district court. Id. at 272.
Plaintiff seeks leave to file a second amended complaint to more specifically plead facts in response to Defendant's Motion to Dismiss, and because he found documents "which disclose that [he] was not terminated before he reported to the SEC in May 2013." (Mot. for Leave to Am. ¶¶ 3-4, ECF No. 32; Pl.'s Mem. of Law 2, ECF No. 32-2). Defendant opposes amendment, and argues Plaintiff's Motion should be denied "on the basis of bad faith, undue delay, prejudice and futility." (Br. in Resp. 16, ECF No. 37). As explained in more detail below, the Court does not find that Plaintiff acted with bad faith or caused undue delay; that Defendant will suffer prejudice; or that amendment of the complaint will be futile. Thus, the Court grants Plaintiff leave to file a second amended complaint.
Defendant argues that Plaintiff acted in "bad faith" by seeking leave to file a second amended complaint and that such filing "demonstrates gamesmanship and wait-and-see tactics in spades." (Br. in Resp. 17, ECF No. 37); Kovach v. Serv. Personnel & Emps. of the Dairy Indus., 58 F. Supp. 3d 469, 487 (W.D. Pa. 2014).
Plaintiffs routinely amend complaints to correct factual inadequacies in response to a motion to dismiss. West...
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