Case: 23-60216 Document: 140-1 Page: 1 Date Filed: 08/30/2024
United States Court of Appeals
for the Fifth Circuit
____________ United States Court of Appeals
Fifth Circuit
FILED
No. 23-60216
August 30, 2024
____________
Lyle W. Cayce
John M. Barr; John McPherson, Clerk
Petitioners,
versus
Securities and Exchange Commission,
Respondent.
______________________________
Petition of Review of an Order from the
Securities and Exchange Commission
Agency No. 2023-42
______________________________
Before Smith, Engelhardt, and Ramirez, Circuit Judges.
Irma Carrillo Ramirez, Circuit Judge:
Two whistleblowers challenge the Securities and Exchange
Commission’s calculation of award amounts under the Dodd–Frank Wall
Street Reform and Consumer Protection Act. The petitions for review are
DENIED.
I
A
This case concerns the extensive securities fraud perpetrated from
1999 to 2013 by Life Partners Holdings, Inc. (Life Partners). See SEC v. Life
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No. 23-60216
Partners Holdings, Inc., 854 F.3d 765, 773 (5th Cir. 2017). Because this Court
has previously considered the details of the fraudulent scheme, see, e.g.,
id. at
772–74; Jacobs v. Cowley (In re Life Partners Holdings, Inc.),
926 F.3d 103, 112–
14 (5th Cir. 2019), only immediately relevant facts are recounted here.
In 2012, the Securities and Exchange Commission (the SEC) “filed a
civil action in federal district court charging [Life Partners] and three of its
officers with violations of the anti-fraud provisions of the federal securities
laws.” In late 2014, following a jury trial, the district court entered final
judgment against Life Partners, in which it was ordered to pay $38.7 million
in disgorgement and civil penalties. See SEC v. Life Partners Holdings, Inc., 71
F. Supp. 3d 615, 626 (W.D. Tex. 2014).
Before the district court entered final judgment on January 16, 2015,
the SEC filed an emergency motion to appoint a receiver “to maintain the
status quo, prevent further dissipation of assets from [Life Partners], and
protect [Life Partners’s] investors and creditors.” Four days after entry of
final judgment, Life Partners filed a voluntary petition for Chapter 11
bankruptcy. The district court had not yet ruled on the SEC’s motion to
appoint a receiver when Life Partners filed for bankruptcy, and Life Partners
openly admitted that it filed for bankruptcy “to ‘avoid the appointment’” of
a receiver. On February 5, 2015, the district court denied without prejudice
the motion to appoint a receiver, finding, “[b]ased on [its] review of the
motions and pleadings filed in [the bankruptcy] court,” that “the SEC will
be able to effectively seek from the [b]ankruptcy [c]ourt the relief
sought . . . in the receivership motion.”
In its capacity as an unsecured judgment creditor, the SEC filed a
motion requesting that the bankruptcy court appoint a Chapter 11 trustee.
The U.S. Trustee filed a similar motion. The bankruptcy court granted the
SEC’s motion, finding that Life Partners’s gross mismanagement
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constituted cause for appointment of a trustee and the appointment would be
in the best interests of Life Partners’s creditors and investors.
In June 2016, the Chapter 11 trustee proposed a plan that was
ultimately confirmed. Among other things, the plan proposed the creation of
a “‘Creditors’ Trust,’ whose beneficiaries generally comprised unsecured
creditors.” The plan listed the SEC’s claim for the enforcement-action
judgment as “its own creditor class,” “allocated a Creditor’s Trust interest”
to the SEC for the judgment’s full amount, and “estimated the
corresponding recovery as ‘Unknown.’” As part of the plan, the SEC
“agreed to reallocate any distributions with respect to its Creditors’ Trust
interest to . . . the life-settlement investors . . . in return for [Life Partners’s]
agreement to voluntarily dismiss its appeal then pending” before this Court.
See Order, SEC v. Life Partners Holdings, Inc., No. 14-51353 (5th Cir. Dec. 22,
2016). The bankruptcy court confirmed the plan in November 2016. Notably,
“[u]ndisputed evidence in the administrative record reflects that, as of
November 2020, there had been no collections or distributions with respect
to the [SEC]’s Creditors’ Trust interest.”
B
On April 1, 2015, the SEC posted a Notice of Covered Action, inviting
individuals to apply for whistleblower awards in connection with the Life
Partners enforcement action. John Barr and John McPherson (Petitioners)
timely submitted their respective applications.
On September 28, 2020, the SEC’s Claims Review Staff (CRS) issued
Preliminary Determinations, advising Petitioners of the intent to recommend
that Barr be denied an award and that McPherson be granted an award of
“23% of the monetary sanctions collected, or to be collected.” The
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Preliminary Determination sent to McPherson 1 explained that: (1) the SEC
“shall pay an award to a whistleblower who provides original information that
leads to the successful enforcement of the covered judicial or administrative
action, or related action,” (2) “[a] bankruptcy proceeding is neither brought
by the [SEC] nor does it arise under the securities laws,” (3) “a bankruptcy
proceeding is not a related action, which must be ‘brought by’ a qualifying
entity ‘based on’ the same original information that led to the successful
enforcement of the covered action,” and (4) the bankruptcy case “was not
brought by a qualifying entity but rather was initiated by a voluntary petition
under Chapter 11 filed by Life Partners.”
C
Petitioners timely filed their respective written responses to the
Preliminary Determinations. Barr primarily argued that CRS’s
determination to deny him an award was “based on inaccurate and
incomplete information.” After pointing out alleged factual inaccuracies in a
declaration CRS relied on and listing out his contributions to the SEC’s work
relating to Life Partners, Barr urged reconsideration and for the SEC to grant
him an award. McPherson advanced two main arguments: (1) the
whistleblower-award calculation should be based on what the SEC is “able to
collect,” and (2) his whistleblower efforts warranted exercise of the SEC’s
statutorily delegated discretion to pay him a larger award.
On March 27, 2023, the SEC issued the final order regarding the
whistleblower awards. It revised the ultimate recommendations in the
Preliminary Determinations and granted Barr 5% and McPherson 20% of “the
_____________________
1
When the SEC transmits a document to a putative whistleblower, the SEC redacts
information related to other whistleblowers. Here, this meant that CRS’s explanation to
McPherson was not provided to Barr.
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amounts collected or to be collected in connection with” the SEC’s
enforcement action. The SEC disagreed with McPherson’s objections.
Among other legal conclusions, the SEC stated: (1) it did not “walk away
from a collection of $38.7 million” by voluntarily subordinating its interest in
the Creditors’ Trust “because it would only have been able to collect a de
minimis amount, and any such collections would have been dependent upon
the [SEC] winning on appeal”; (2) the whistleblower-award calculation
cannot be based on what the SEC “may have been able to but did not collect”
because “the statutory maximum whistleblower award is based on the
amount actually collected”; and (3) calculating the award “based on what the
[SEC] hypothetically ‘was able to collect,’ but did not, would introduce
uncertainty, inconsistency, and could delay the processing of award claims.”
Barr petitioned this Court for review of the SEC’s final order on April
24, 2023, and McPherson petitioned the United States Court of Appeals for
the D.C. Circuit for review on April 25, 2023. The D.C. Circuit subsequently
transferred McPherson’s petition to this Court under 28 U.S.C.
§ 2112(a)(5), where it was consolidated with Barr’s petition.
II
Congress commits whistleblower-award determinations to the SEC’s
discretion. 15 U.S.C. § 78u-6(f). These determinations are reviewed “in
accordance with section 706 of Title 5,” id., so they may be set aside if
“found to be ‘arbitrary, capricious, an abuse of discretion, or otherwise not
in accordance with law,’” Healthy Gulf v. U.S. Army Corps of Eng’rs, 81 F.4th
510, 520 (5th Cir. 2023) (quoting
5 U.S.C. § 706(2)(A)).
An agency order is “arbitrary and capricious ‘if the agency has relied
on factors which Congress has not intended it to consider, entirely failed to
consider an important aspect of the problem, offered an explanation for its
decision that runs counter to the evidence before the agency, or is so
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implausible that it could not be ascribed to a difference in view or the product
of agency expertise.’” Tex. Oil & Gas Ass’n v. EPA, 161 F.3d 923, 933 (5th
Cir. 1998) (quoting Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins.
Co.,
463 U.S. 29, 43 (1983)). But this review is “neither sweeping nor
intrusive. Instead, we ‘ask whether the agency considered the relevant facts
and articulated a satisfactory explanation for its decision; we cannot
substitute our judgment for the agency’s.’” Fort Bend County v. U.S. Army
Corps of Eng’rs,
59 F.4th 180, 194 (5th Cir. 2023) (quoting Amin v. Mayorkas,
24 F.4th 383, 393 (5th Cir. 2022)). Pure questions of law are reviewed de novo.
Tex. Clinical Labs, Inc. v. Sebelius,
612 F.3d 771, 775 (5th Cir. 2010) (quoting
Alwan v. Ashcroft,
388 F.3d 507, 510 (5th Cir. 2004)); see Loper Bright Enters.
v. Raimondo,
144 S. Ct. 2244, 2273 (2024). Agency decisions are
“presumptively valid; the [petitioner] bears the burden of showing
otherwise.” Tex. Tech Physicians Assocs. v. U.S. Dep’t of Health & Hum.
Servs.,
917 F.3d 837, 844 (5th Cir. 2019).
III
A
In the Dodd–Frank Wall Street Reform and Consumer Protection
Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010), Congress “established ‘a
new, robust whistleblower program designed to motivate people who know
of securities law violations to tell the SEC.’” Digit. Realty Tr., Inc. v. Somers,
583 U.S. 149, 155 (2018) (quoting S. Rep. No. 111-176, at 38 (2010)). The
program’s statutory framework is located in 15 U.S.C. § 78u-6.
The statute outlines the circumstances in which the SEC must pay out
whistleblower awards:
In any covered judicial or administrative action, or related
action, the [SEC], under regulations prescribed by the [SEC]
and subject to subsection (c), shall pay an award or awards to 1
or more whistleblowers who voluntarily provided original
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information to the [SEC] that led to the successful
enforcement of the covered judicial or administrative action, or
related action, in an aggregate amount equal to—
(A) not less than 10 percent, in total, of what has been
collected of the monetary sanctions imposed in the
action or related actions; and
(B) not more than 30 percent, in total, of what has been
collected of the monetary sanctions imposed in the
action or related actions.
Id. § 78u-6(b)(1)(A)–(B).
The SEC is required to pay a whistleblower award in a “covered
judicial or administrative action, or related action.” See id. § 78u-6(b)(1).
“[C]overed judicial or administrative action” and “related action” are
defined terms. A covered judicial or administrative action refers to “any
judicial or administrative action brought by the [SEC] under the securities
laws that results in monetary sanctions exceeding $1,000,000.” Id. § 78u-
6(a)(1). A related action, “when used with respect to any judicial or
administrative action brought by the [SEC] under the securities laws,” refers
to “any judicial or administrative action brought by [the Attorney General of
the United States, an appropriate regulatory authority, a self-regulatory
organization, or a State attorney general in connection with any criminal
investigation] that is based upon the original information provided by a
whistleblower pursuant to subsection (a) that led to the successful
enforcement of the [SEC] action.” Id. § 78u-6(a)(5); see id. § 78u-
6(h)(2)(D)(i)(I)–(IV) (identifying the entities that may bring a related
action). Whistleblowers are only entitled to awards under § 78u-6(b)(1)
resulting from these qualifying actions.
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B
The SEC contends Petitioners forfeited their argument that the SEC’s
actions in the bankruptcy case initiated a new “covered” action. Petitioners
disagree.
Arguments are forfeited if raised “for the first time on appeal.” Rollins
v. Home Depot USA, 8 F.4th 393, 397 (5th Cir. 2021). An exception to this rule
is that “an issue might be addressed for the first time on appeal if ʻit is a purely
legal matter and failure to consider the issue will result in a miscarriage of
justice.’” Shambaugh & Son, L.P. v. Steadfast Ins. Co.,
91 F.4th 364, 372 (5th
Cir. 2024) (quoting Rollins,
8 F.4th at 398). While there is “no certain
answer” as to when this exception should apply, Essinger v. Liberty Mut. Fire
Ins. Co.,
534 F.3d 450, 453 (5th Cir. 2008), we must identify a “principled
basis” to invoke it, Rollins,
8 F.4th at 398.
As noted above, when the SEC transmitted its Preliminary
Determination to Barr, the document was redacted in great part, revealing
information relevant only to Barr’s award application. The SEC’s explanation
as to why it would recommend denying Barr an award rested on a single
basis—that the information Barr provided “did not lead to the successful
enforcement” of the SEC’s enforcement action. Unlike with the Preliminary
Determination McPherson received, the materials the SEC sent to Barr
provided no indication of the SEC’s interpretation of law now at issue before
us.
The argument the SEC claims is forfeited is a purely legal one, and
Barr had no notice or opportunity to contest the SEC’s argument in the
agency proceedings. See Bunker v. Dow Chem. Co., --- F.4th ----, No. 24-
20046, 2024 WL 3680804, at *4 n.3 (5th Cir. Aug. 7, 2024) (“Our decision
not to address Bunker’s newly raised arguments does not result in a
miscarriage of justice. Bunker had every opportunity to present these
arguments below.”). We find that a miscarriage of justice would result if we
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did not consider this purely legal argument since Barr was unaware of the
SEC’s legal position and had no opportunity to challenge it in the agency
proceedings. 2
C
Petitioners contend the bankruptcy case is a “covered judicial or
administrative action” because, among other things, it is an action the SEC
brought. They also contend the bankruptcy case is a “related action”
because, among other things, it is an action the SEC or the Attorney General 3
brought. The SEC disagrees.
1
The statutory provisions defining qualifying actions are not identical,
but they do share a phrase—“action brought.” See 15 U.S.C. § 78u-6(a)(1),
(5). The parties dispute its meaning.
When interpreting acts of Congress, courts seek the ordinary meaning
of the enacted language. Nat’l Ass’n of Priv. Fund Managers v. SEC, 103 F.4th
1097, 1110 (5th Cir. 2024). The statutory text is invariably the first and
primary consideration, see Parada v. Garland,
48 F.4th 374, 377 (5th Cir.
2022) (per curiam), and “the words of a statute” are normally given “their
‘ordinary, contemporary, common meaning,’ absent an indication Congress
intended them to bear some different import,” Williams v. Taylor,
529 U.S.
_____________________
2
Given our ultimate conclusion, we assume without deciding that McPherson did
not forfeit this argument either.
3
Sections 78u-6(a)(5) and 78u-6(h)(2)(D)(i)(I) establish that the Attorney General
may bring a related action. “The Attorney General is the head of the Department of
Justice.” 28 U.S.C. § 503. The U.S. Trustees fall within the Department of Justice and
operate under the Attorney General. See
id. §§ 581, 586. Petitioners contend that under
this structure, the U.S. Trustee qualifies as the Attorney General for purposes of 15 U.S.C.
§ 78u-6(a)(5).
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420, 431 (2000) (quoting Walters v. Metro. Educ. Enters., Inc., 519 U.S. 202,
207 (1997)). If a statute’s text is clear and unambiguous, the interpretive
inquiry ends. Christiana Tr. v. Riddle,
911 F.3d 799, 806 (5th Cir. 2018)
(quoting BMC Software, Inc. v. Comm’r,
780 F.3d 669, 674 (5th Cir. 2015)).
Section 78u-6 does not define the word “action” or the phrase
“action brought,” so they take their “ordinary meaning.” See HollyFrontier
Cheyenne Refin., LLC v. Renewable Fuels Ass’n, 594 U.S. 382, 388 (2021)
(quoting FDIC v. Meyer,
510 U.S. 471, 476 (1994)); see also Belt v. EmCare,
Inc.,
444 F.3d 403, 412 (5th Cir. 2006) (“[W]e routinely consult dictionaries
as a principal source of ordinary meaning . . . .”). An “action” is a “civil or
criminal judicial proceeding.” Action, Black’s Law Dictionary (12th
ed. 2024). Precedent confirms this understanding of “action.” See Brown v.
Megg,
857 F.3d 287, 290 (5th Cir. 2017) (“The ordinary meaning of ‘action’
is the entire lawsuit.”); Tejero v. Portfolio Recovery Assocs., L.L.C.,
993 F.3d
393, 396 (5th Cir. 2021) (synonymizing an “action” with “a ‘lawsuit’”); see
also Brownback v. King,
592 U.S. 209, 220 (2021) (Sotomayor, J., concurring)
(“An ‘action’ refers to the whole of the lawsuit.”); Corley v. Long-Lewis, Inc.,
965 F.3d 1222, 1236 (11th Cir. 2020) (Pryor, C.J., concurring) (“‘[A]n
action[]’ . . . refers to ‘the whole case.’” (citation omitted)).
As for “action brought,” “[t]he dictionary defines to ‘bring an action’
as to ‘sue’ or ‘institute legal proceedings.’” Serna v. L. Off. of Joseph
Onwuteaka, P.C., 732 F.3d 440, 451 (5th Cir. 2013) (Smith, J., dissenting)
(quoting Bring an Action, Black’s Law Dictionary 219 (9th ed.
2009)); see Dynamic CRM Recruiting Sols., L.L.C. v. UMA Educ., Inc.,
31
F.4th 914, 919–23 (5th Cir. 2022) (conducting similar analysis of “brought
before”); see also Action, Merriam-Webster Online Dictionary,
https://www.merriam-webster.com/dictionary/action (last visited August
30, 2024) (“the initiating of a proceeding in a court of justice by which one
demands or enforces one’s right”). And because “[t]o ‘sue’ is ‘to institute a
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lawsuit against (another party),’ and to ‘institute’ is, in turn ‘to begin or
start; commence,’” Serna, 732 F.3d at 451 (Smith, J., dissenting) (original
alterations and citations omitted); see
id. (“[M]any federal statutes use ‘file’
and ‘bring’ interchangeably . . . .”), bringing an action refers to the act of
filing a lawsuit or beginning legal proceedings. See Goldenberg v. Murphy,
108
U.S. 162, 163 (1883) (“A suit is brought when in law it is commenced, and
we see no significance in the fact that in the legislation of congress on the
subject of limitations the word ‘commenced’ is sometimes used, and at other
times the word ‘brought.’ In this connection the two words evidently mean
the same thing, and are used interchangeably.”). Federal courts agree on this
understanding. See, e.g., Hong v. SEC,
41 F.4th 83, 95 (2d Cir. 2022)
(“[C]ourts commonly refer to a party as having ‘brought an action,’ meaning
that the party filed a lawsuit or formally initiated an administrative
proceeding.”); United States ex rel. Chovanec v. Apria Healthcare Grp. Inc.,
606 F.3d 361, 362 (7th Cir. 2010) (“One ‘brings’ an action by commencing
suit.”); Chandler v. D.C. Dep’t of Corr.,
145 F.3d 1355, 1359 (D.C. Cir. 1998)
(“[T]he phrase ‘bring a civil action’ means to initiate a suit.”).
2
Petitioners contend the SEC’s motion to appoint a Chapter 11 trustee
constituted bringing a qualifying action under § 78u-6(a). 4 They maintain
that once the bankruptcy court granted the SEC’s motion, the U.S. Trustee
_____________________
4
The question addressed here is narrow: is a motion to appoint a Chapter 11 trustee
an “action brought” under § 78u-6(a)(1) or § 78u-6(a)(5)? Because the motion to appoint
a Chapter 11 trustee is the only act Petitioners point to that may constitute bringing an
action under § 78u-6(a), the answer to this question must be yes for Petitioners to prevail.
Accordingly, we do not address whether other filings or procedures in the bankruptcy
context qualify as an “action brought” in this statutory context.
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appointed a Chapter 11 trustee, “who then initiated the full bankruptcy
proceedings.”
Key aspects of filing a motion to appoint a Chapter 11 trustee are
incongruent with the plain meaning of bringing an action. First, bankruptcy
cases are “commenced by the filing with the bankruptcy court of a petition,”
not the filing of a motion to appoint a trustee. 11 U.S.C. § 301(a); see Fed.
R. Bankr. P. 1002. Second, a motion to appoint a Chapter 11 trustee may
not be brought until a bankruptcy case has already commenced. See
11 U.S.C.
§ 1104(a). Third, and more generally, a motion “is—and long has been—
commonly understood to denote a request filed within the context of a
preexisting judicial proceeding.” In re Wild,
994 F.3d 1244, 1257 (11th Cir.
2021) (en banc) (emphasis added); see, e.g., Motion, Black’s Law
Dictionary (12th ed. 2024) (“Frequently, in the progress of litigation, it is
desired to have the court take some action which is incidental to the main
proceeding . . . . Such action is invoked by an application usually less formal
than the pleadings, and called a motion.” (emphasis added) (quoting John
C. Townes, Studies in American Elementary Law 621
(1911))); see also Motion in Court, A Modern Dictionary of the
English Language 446 (2d ed. 1911) (“[A]n application to a court . . . to
have a rule or order made which is necessary to the progress of an action.”
(emphasis added)). Taken together, these points run contrary to the notion
that filing a motion to appoint a Chapter 11 trustee constitutes bringing an
action for purposes of § 78u-6(a).
Nevertheless, Petitioners argue that even though the bankruptcy case
was not filed by a qualifying entity, bankruptcy actions are “an umbrella for
a series of ‘cases within a case,’” and filing the motion to appoint a trustee
in Life Partners’s bankruptcy case qualifies as an “action brought” by a
qualifying entity.
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Petitioners are generally correct that “bankruptcy case[s] embrace[]
‘an aggregation of individual controversies.’” 5 Ritzen Grp., Inc. v. Jackson
Masonry, LLC, 589 U.S. 35, 37 (2020) (citation omitted). But they provide
no authority to connect this general principle to the facts before us.
It is axiomatic that “statutory terms are generally interpreted in
accordance with their ordinary meaning.” BP Am. Prod. Co. v. Burton, 549
U.S. 84, 91 (2006). As explained above, the ordinary meaning of “action
brought” does not readily encompass a motion to appoint a Chapter 11
trustee, and Petitioners provide no authority explaining why the meaning of
“action brought” should be understood as something other than its ordinary
meaning. They merely point to the various ways in which the SEC and the
U.S. Trustee were involved in the bankruptcy case. But it is not clear how or
why these contentions demonstrate that the filing of the motion to appoint a
Chapter 11 trustee constitutes bringing an action for purposes of § 78u-6. See
15 U.S.C. § 78u-6(a)(1), (5), (b)(1); see also United Servs. Auto. Ass’n v. Perry,
102 F.3d 144, 146 (5th Cir. 1996) (“A statute is ambiguous if it is susceptible
of more than one accepted meaning.” (emphasis added)).
Additionally, there are key problems with Petitioners’ argument
regarding the meaning of “action brought” and the focus on the word
“proceeding.” They appear to argue that “action” and “proceeding” are
synonyms, and therefore any “proceeding” within a bankruptcy case is an
“action” for § 78u-6’s purposes. While that might be the case in some
instances, “proceeding” ordinarily refers to aspects of an already
_____________________
5
This understanding of bankruptcy cases comes from the application of the
final-judgment rule in the bankruptcy context. See generally 16 Charles Alan Wright
et al., Federal Practice and Procedure § 3926.2 (3d ed.) (June 2024 Update).
Petitioners do not provide authority supporting the notion that the way bankruptcy
proceedings are treated for final-judgment purposes translates to the context of qualifying
actions under § 78u-6(a).
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commenced “action.” See Proceeding, Black’s Law Dictionary (12th
ed. 2024) (“The regular and orderly progression of a lawsuit, including all
acts and events between the time of commencement and the entry of
judgment. . . . An act or step that is part of a larger action.”). This is
specifically the case in the bankruptcy context, in which a “proceeding” is
“a particular dispute or matter arising within a pending case — as opposed
to the case as a whole.” Id. Moreover, Petitioners’ argument that the “action
brought” consists of all proceedings from the filing of the motion to appoint
a trustee “up to and including the . . . court-ordered reorganization plan”
demonstrates the extent to which they attempt to stretch the statutory
language. This argument seemingly turns the ordinary meaning of “action
brought” on its head. Petitioners do not provide authority explaining why the
understanding they articulate is proper. See Deal v. United States, 508 U.S.
129, 131–32 (1993) (“[A]ll but one of the meanings [of a word] is ordinarily
eliminated by context.”), superseded by statute on other grounds, First Step Act
of 2018,
Pub. L. No. 115-391, 132 Stat. 5194.
Given the lack of fit between the plain language of “action brought”
and the filing of a motion to appoint a Chapter 11 trustee, we find that filing
a motion to appoint a Chapter 11 trustee does not qualify as bringing a
“covered judicial or administrative action” or a “related action.” See 15
U.S.C. § 78u-6(a)(1), (5).
3
Petitioners assert two additional arguments.
First, in a variation on their main argument, Petitioners contend that
the SEC’s involvement in the bankruptcy case constitutes a “covered judicial
or administrative action” because the bankruptcy case was simply a
“continu[ation]” of the SEC’s “single enforcement strategy” that began
with the enforcement action in the United States District Court for the
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Western District of Texas. But Petitioners do not grapple with the ordinary
meaning of “action brought” in § 78u-6(a). Their “continuation” argument
does not comport with the ordinary meaning of “bringing an action,” i.e.,
initiating a lawsuit or legal proceedings. See Harris v. Garner, 216 F.3d 970,
974 (11th Cir. 2000) (en banc) (“‘[B]rought’ and ‘bring’ refer to the filing or
commencement of a lawsuit, not to its continuation.”). Petitioners’ reading
would do away with the commencement aspect of “bringing an action.” See
FCC v. AT&T Inc.,
562 U.S. 397, 407 (2011) (declining to adopt a party’s
reading of a statutory term where the party did not provide a “sound reason
in the statutory text or context to disregard” the term’s “ordinary
meaning”); see also
17 C.F.R. § 240.21F-4(d) (“An action generally means a
single captioned judicial or administrative proceeding brought by the [SEC].”
(emphasis added)).
Second, Petitioners argue that the SEC’s interpretation of 15 U.S.C.
§ 78u-6 is contrary to the purpose of the whistleblower statute and will
damage the design and efficacy of the whistleblower program. These
contentions go to policy concerns underlying the statute, which are
appropriate for Congress’s consideration, not ours. See BP P.L.C. v. Mayor of
Balt., 141 S. Ct. 1532, 1542 (2021) (“‘[E]ven the most formidable’ policy
arguments cannot ‘overcome’ a clear statutory directive.” (quoting
Kloeckner v. Solis,
568 U.S. 41, 55 n.4 (2012))). “Laws are the product of
‘compromise,’ and no law ‘pursues its purposes at all costs.’” Luna Perez v.
Sturgis Pub. Schs.,
598 U.S. 142, 150 (2023) (brackets and ellipsis omitted)
(quoting Henson v. Santander Consumer USA Inc.,
582 U.S. 79, 89 (2017)).
While Petitioners’ policy concerns are well-taken, courts “do not generally
expect statutes to fulfill 100% of all of their goals.” Cyan, Inc. v. Beaver Cnty.
Emps.’ Ret. Fund,
583 U.S. 416, 433 (2018). “[T]he best guide to what
Congress intends” in a statute is “what Congress says in [the] statute’s
text,” United States v. Koutsostamatis,
956 F.3d 301, 310 (5th Cir. 2020), and
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“a statute’s purpose may not override its plain language,” United States v.
Rainey, 757 F.3d 234, 245 (5th Cir. 2014). See Richards v. United States,
369
U.S. 1, 9 (1962) (“[L]egislative purpose is expressed by the ordinary meaning
of the words used.”). Because § 78u-6’s text is plain and unambiguous, we
must give effect to the text as enacted by Congress without considering
statutory purpose. See Asadi v. G.E. Energy (USA), L.L.C.,
720 F.3d 620, 622
(5th Cir. 2013).
…
Because the motion to appoint a trustee in the bankruptcy case was
not an “action brought by” a qualifying entity, it does not meet the definition
of a “covered judicial or administrative action” under § 78u-6(a)(1) or a
“related action” under § 78u-6(a)(5). In the absence of an action identified
by the statute, § 78u-6(b)(1) does not require the SEC to pay whistleblower
awards to Barr and McPherson predicated on the bankruptcy case. 6
D
Seeking a larger award amount than the SEC originally allotted,
McPherson requests that we “clarify the extent of the [SEC]’s exemptive
authority” and remand for further consideration by the SEC. The authority
McPherson refers to comes from 15 U.S.C. § 78mm(a)(1), which allows the
SEC to “conditionally or unconditionally exempt any person, security, or
transaction, or any class or classes of persons, securities, or transactions,
from any provision or provisions of this chapter or of any rule or regulation
thereunder, to the extent that such exemption is necessary or appropriate in
_____________________
6
Given this conclusion, Petitioners’ remaining arguments on the merits, with the
exception of the matter examined in Section III.D infra, need not be considered. See PDK
Labs. Inc. v. DEA, 362 F.3d 786, 799 (D.C. Cir. 2004) (Roberts, J., concurring in part and
concurring in the judgment) (“[I]f it is not necessary to decide more, it is necessary not to
decide more . . . .”).
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the public interest, and is consistent with the protection of investors.”
McPherson supports his request with two contentions: (1) there is no
limitation in § 78mm(a)(1)’s text proscribing the SEC’s use of its exemptive
authority as to the award amount, and (2) the SEC has previously exempted
whistleblowers from pertinent statutory requirements.
First, the SEC’s final order does not indicate any disagreement as to
§ 78mm(a)(1)’s meaning. The SEC stated:
We have used this discretionary authority to exempt
whistleblowers from certain of the program’s rules under
limited circumstances. However, the limitation on the amount
of the award to be issued in connection with any Covered
Action was set by statute, and we have never used our
discretion under Section 36(a)(1) of the Exchange Act to
exempt a whistleblower from a statutory requirement or to
approve an award amount above the statutory limit. The text
of the statute reflects a clear congressional design to grant
awards of no more than 30 percent of the amounts collected.
Congress established the same framework for awards to be paid
to whistleblowers in cases brought by the Commodity Futures
Trading Commission and under the Anti-Money Laundering
Act. Given the clarity and consistency of the statutory design
for whistleblower awards, the [SEC] does not believe it would
be appropriate to use its exemptive authority to award an
amount above the statutory limit even in cases such as this one,
where a higher award amount might otherwise be warranted.
It did not take the position that it was statutorily precluded from exercising
its exemptive authority as to McPherson.
Second, though McPherson claims the SEC has previously exempted
whistleblowers from pertinent statutory requirements, he cites two
supporting examples—only one actually involved the use of the exemptive
authority, but there the SEC exempted the whistleblower from a regulatory,
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not statutory, requirement. See Order Determining Whistleblower Award
Claim, Release No. 72727, 2014 WL 3749705, at *1 (July 31, 2014) (“[W]e
therefore believe it appropriate in the public interest and consistent with the
protection of investors to waive the ‘voluntary’ requirement of Rule 21F-4(a)
on the unique facts of this award claim and to make an award to Claimant.”
(emphasis added)).
To the extent McPherson’s request is simply for the SEC to
reconsider its exemptive-authority decision, McPherson must demonstrate
that the SEC abused its discretion in declining to exempt McPherson from
the statutory limits. See 5 U.S.C. § 706(2)(A). But merely disagreeing with
the SEC’s decision does not show that the agency abused its discretion.
IV
The petitions for review are DENIED.
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