Labor & Employment Law Daily Wrap Up, WHISTLEBLOWERS—D.C. Cir.: Multiple-whistleblower result not arbitrary or capricious, (Jun 3, 2025)

By Anne Sherry, J.D.

A concurring judge pushed back against the majority for finding the petition untimely, but said they came to the right result.

A whistleblower will have to share a bounty with three other claimants, as the D.C. Circuit found the SEC did not act arbitrarily or capriciously in determining that the others were eligible for an award. The SEC reasonably determined that the other three claimants, in their joint submission, provided original information from their independent knowledge and analysis. Some of the information was not public, showing that their submission was not based entirely on the individual whistleblower’s research report (Nelson v. SEC, No. 22-1316 (D.C. Cir. May 30, 2025)).

CRS determination. The petitioner here contested a Claims Review Staff preliminary determination that the joint claimants presented original information based on their independent knowledge and independent analysis and that they were not ineligible under the auditor exclusion of the Dodd-Frank whistleblower regime. The petitioner argued that he was the sole eligible whistleblower and that the joint claimants merely repackaged information that he had previously submitted in a research publication.

Procedural hiccup. The SEC adopted the CRS recommendation, and the petitioner filed a petition with the D.C. Circuit Court of Appeals. The petitioner acted pro se and did not discover until it was too late that he was required to file on paper. The majority found that his petition was untimely, but proceeded by assuming without deciding that the statutory deadline could be equitably tolled.

Merits of petition. Even if equitable tolling applied, the petitioner would not prevail because the SEC did not act arbitrarily or capriciously.

The Commission adequately explained that the joint claimants provided new information that caused the staff to look into new conduct and substantially assisted the staff in its investigation, including by providing additional information and participating in interviews.

The SEC also reasonably addressed in its final order the petitioner’s argument that the joint claimants rehashed his research report. The agency determined that the joint submission contained certain nonpublic, internal information that was not included in the research publication and that aided in the Commission investigation. The record supported this finding by showing that the joint claimants helped close a gap by providing the information needed to quantify certain losses.

The petitioner’s final argument, that the joint claimants were subject to the auditor exclusion, was forfeit because he had not raised it before the Commission. While appearing pro se before the appeals court granted him some latitude, he had been represented by counsel before the SEC. “Accordingly,” the appeals court wrote, “we do not find it appropriate to extend solicitude to construing the content of [the petitioner’s] filings in the proceeding before the Commission, where he had counsel to guide him.”

Concurrence. One of the panel judges concurred in the majority’s having reached the right result, but “only after three wrong turns.”

First, the court should have found the petition to have been timely because the petitioner took every possible step to submit the filing only to have it rejected for form. The federal procedure and appellate rules provide that a clerk must not refuse to file a document because it is not in the proper form. The petitioner attempted to register to file electronically, but the ECF system rejected him. “It elevates form over substance—precisely what the Appellate Rules prohibit—to say that he never ‘presented’ his filing to the ECF system simply because he was barred from proceeding at the registration rather than the submission stage,” Judge Henderson wrote.

Second, if the petition was indeed untimely, no extraordinary circumstances warranted applying equitable tolling. In the majority’s view, the petitioner’s late filing was due to his own misunderstanding of federal and local rules, or classic excusable neglect.

Third, the petitioner did not forfeit his auditor-exclusion argument by failing to raise it before the SEC. In his award application, the petitioner argued that the joint claimants were ineligible for an award because their information was obtained through the performance of an audit engagement and did not qualify for any pertinent exceptions. While the petitioner did not raise this in his request for reconsideration, the plain text of the whistleblower statute imposed no requirement that he do so, in contrast to the strict administrative-exhaustion requirements of, for example, statutes administered by the FERC.

The case is No. 22-1316.

Judge: Childs, J.

Attorneys: Casey H. Nelson, pro se. John Robert Rady for the SEC.

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