JANE DOE v. SECURITIES AND EXCHANGE COMMISSION
No. 21-1097
Unitеd States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued January 31, 2022 Decided March 25, 2022
Consolidated with 21-1098
On Petitions for Review of an Order of the Securities and Exchange Commission
Max Maccoby argued the cause and filed the briefs for petitioner.
Brooke Wagner, Senior Counsel, Securities and Exchange Commission, argued the cause for respondent. With her on the brief were Michael A. Conley, Solicitor, and Stephen G. Yoder, Senior Litigation Counsel.
Before: HENDERSON and TATEL, Circuit Judges, and GINSBURG, Senior
Opinion for the Court filed PER CURIAM.
Opinion concurring in the judgment filed by Circuit Judge HENDERSON.
The petitioners seek review of a Securities and Exchange Commission (SEC or Commission) order denying their applications for whistleblower awards resulting from a successful SEC enforcemеnt action. They contend that the SEC adopted an unreasonably narrow interpretation of its regulation governing the whistleblower program and that their circumstances satisfy the requirements for award eligibility under a proper reading of the regulation. See
We disagree. The SEC properly denied their award applications under its reasonable and longstanding interpretation of the relevant regulation, which sets forth three scenarios allowing for the issuance of a whistleblower award—none of which encompasses the additional scenario proposed by the petitioners. Their additional arguments arе either forfeited or meritless. Accordingly, we deny the petitions.
I.
In January 2012, the SEC opened an investigation into alleged violations of the Foreign Corrupt Practices Act of 1977 (FCPA),
In the order settling the administrative proceedings with Novartis, the SEC noted that “Novartis instituted an expansive review of its relationships in China with travel and event planning vendors” and subsequently took remedial steps “[i]n connection with the SEC Staff‘s investigation and in response to mediа reports concerning a competitor.” Joint Appendix (J.A.) 5-6. The Commission imposed approximately $25 million in sanctions, ordering Novartis to pay disgorgement of $21,579,217, prejudgment interest of $1,470,887 and a civil penalty of $2,000,000, all of which has been collected in full.
Following the successful enforcement action, the SEC Office of the Whistleblower published a Notice of Covered Action regarding the Novartis proceeding and twelve individuals, including the two petitioners here, filed applications for an award. The SEC‘s Claims Review Staff (CRS) reviewed the award claims and determined that only two of the twelve applicants, identified as Claimant 1 аnd Claimant 2, merited an award because the SEC had opened the investigation based on information provided by those two claimants—not based on information provided by any of the remaining ten. The SEC ordered that Claimant 1 and Claimant 2 receive a joint award. This award has not been challenged.
The petition here involves the award claims of Claimant 11 and Claimant 12.1 Each worked for a competitor of Novartis in China; each had informed the SEC of illegal behavior by her employer; and each had subsequently informed American media about that behavior. Media outlets then ran stories about these allegations. Each claimant argued she was entitled to a whistleblower award because, in each claimant‘s view, the media reports had caused Novartis to review its practices and ultimately settle with the SEC.
The CRS issued a preliminary denial of their claims because the information they provided did not “[lead] to” the successful enforcement action against Novartis as defined in Exchange Act Rule 21F-4(c). See
The petitioners then challenged the CRS‘s preliminary determination. They argued that the CRS incorrectly concluded that the three fact patterns described in Rule 21F-4(c) were the exclusive routes to satisfy the Rule and that it should have considered “alternative circumstances not specified in” the Rule in analyzing their claims. Notably, they did not contest the CRS‘s determination that their circumstances failed to meet the requirements of any of the three fact patterns set forth in Rule 21F-4(c).
Taking up the petitioners’ challenge, the SEC first noted that they “appear to concede that they have not satisfied the three fact patterns set forth in Rule 21F-4(c).” J.A. 293. It then rejected thе argument that there are “alternative circumstances not specified in Rule 21F-4(c) in which a claimant can satisfy” the Rule‘s “led to” requirement. The Commission reiterated that it had rejected this argument in a previous order and that it had interpreted the Rule‘s three fact patterns as exclusive since the Rule‘s adoption. See In the Matter of the Claim for Award in Connection with Redacted, Rel. No. 89551, 2020 WL 4720539, at *4 (Aug. 13, 2020) (citing 76 Fed. Reg. 34300, 34357 (June 13, 2011)). It added that expanding the Rule beyond the three prescribed fact patterns would introduce unnecessary speculation and complexity into the analysis and make the Rule too difficult and impracticablе to administer. Accordingly, the petitioners’ award applications were denied.
II.
We have jurisdiction of the petitions under
III.
A.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010) (codified at
Following Dodd-Frank‘s enactment and a notice-and-comment period, the SEC accordingly adopted final rules to implement the whistleblower program. Securities Whistleblower Incentives and Protections, 76 Fed. Reg. 34,300 (June 13, 2011) (Adopting Release). The promulgated rules—in particular, Rule 21F-4(c)—set forth the circumstаnces under which information provided by whistleblowers will be considered to have “led to” the successful enforcement of a covered action, as the statute requires for award eligibility. See
Rule 21F-4(с) identifies “any of the following circumstances” as scenarios in which whistleblower information will be deemed to have “led to” a successful enforcement action: (1) the whistleblower‘s “original information” caused the SEC “to commence an examination, open an investigation, [or] reopen an investigation” and the successful action was “based in whole or in part” on that information; (2) the “original information” involves “conduct that was already under examination or investigation by” the SEC or other federal or state agencies and the information “significantly contributed to the success of the action“; and (3) the “original information” was reported “through an entity‘s internal whistleblower ... procedures,” the entity either gave the information to the SEC or “provided results of an audit or investigation initiated in whole or in part in response” to this information and the information the entity submitted to the SEC satisfies either of the other two scenarios.
B.
The question before us is whether Rule 21F-4(c)‘s three fact patterns under which a whistleblower‘s information “led to” a successful enforcement action are exhaustive, as the Commission interpreted the regulation in its denial of the petitioners’ award applications. We conclude that the regulation is ambiguous and defer to the Commission‘s interpretation in accordance with the United States Supreme Court‘s holding in Kisor v. Wilkie, 139 S. Ct. 2400 (2019).
An agency merits deference if it reasonably interprets its own “genuinely ambiguous” regulation. Nat‘l Lifeline Ass‘n, 983 F.3d at 507 (quoting Kisor, 139 S. Ct. at 2414). Genuine ambiguity can arise, as the Supreme Court explained, in a variety of circumstances, as when a regulation “may prove susceptible to more than one reasonable reading.” Kisor, 139 S. Ct. at 2410.
“Ambiguity, however, is necessary but not sufficient for us to afford deference. The court must аlso ask ‘whether the character and context of the agency interpretation entitles it to controlling weight.‘” Nat‘l Lifeline Ass‘n, 983 F.3d at 507 (quoting Kisor, 139 S. Ct. at 2416). The Supreme Court provided three guiding principles for courts to apply in determining whether an agency‘s interpretation of its own genuinely ambiguous regulation warrants deference. First, the interpretation “must be one actually made by the agency.” Kisor, 139 S. Ct. at 2416. In other words, “it must be the agency‘s ‘authoritative’ or ‘official position,’ rather than any more ad hoc statement not reflecting the agency‘s views.” Id. (citation omitted). Second, “the agency‘s interpretation must in some way implicate its substantive expertise.” Id. at 2417. And third, “an аgency‘s reading of a rule must reflect ‘fair and considered judgment’ to receive ... deference.” Id. (citation omitted).
We first consider whether Rule 21F-4(c) is genuinely ambiguous. Both the petitioners and the SEC contend that the regulation is unambiguous—in the petitioners’ view, the regulation unambiguously allows for scenarios other than the three enumerated in the Rule to satisfy the “led to” standard; according to the SEC, however, the list of three fact patterns is unambiguously exhaustive. We disagree and find Rule 21F-4(c) ambiguous.
Rule 21F-4(c) does indeed “prove susceptible to more than one reasonable reading.” Kisor, 139 S. Ct. at 2410. In the petitioners’ favor is the fact that the regulation‘s prefatory language, which states that whistleblowers will satisfy the “led to” standard “in any of the following circumstances,” does not expressly limit the standard to the three enumerated fact patterns, as the SEC has acknowledged in the past.
On the other hand, there is no clear textual signal that fact patterns other than the three explicitly enumerated provide alternatives for a whistleblower to establish that the “led to” standard has been met. Notably missing from the regulations are words or phrases indicating that the three listed fact patterns are merely illustrative—for example, “among others,” “including,” “not limited to” or “such as.” Nor did the Commission reserve to itself any residual or catch-all authority to issue awаrds in other circumstances.
And, finally, a word about expressio unius est exclusio alterius, the maxim upon which the petitioners rely. Petitioners’ Reply Br. 6. As courts and commentators have noted, this canon (if it can be called a canon) is entirely dependent upon context. See Chevron U.S.A. Inc. v. Echazabal, 536 U.S. 73, 81 (2002) (”expression unius properly applies only when in the natural association of ideas in the mind of the reader that which is expressed is so set over by way of strong contrast to that which is omitted that the contrast enforces the affirmative inference.“); Reed Dickerson, The Interpretation and Application of Statutes 234-35 (1975). When context indicates a list is meant to be exclusive, the “canon” applies; when context does not so indicate, the “canon” does not apply. There is thus much truth to the observation that “this maxim is at best a description, after the fact, of what the court has discovered from context.” Dickerson, supra, at 235. Here, there are no clues pointing one way or the other. The level of detail in the three fact patterns could plausibly be interpreted as the manifestation of an intent to be exhaustive but it could just as plausibly be interpreted as merely setting forth a template for the required degree of causality one must establish to satisfy the “led to” standard. Unfortunately, even after applying the “‘traditional tools’ of construction,” Kisor, 139 S. Ct. at 2415, this regulation remains “impenetrable.” Id. Rule 21F-4(c), then, can be read in more than one way—limiting the “led to” standard to the three enumerated fact patterns and/or allowing the SEC to consider others.
Because we find the regulation genuinely ambiguous, we next consider whether the Commission‘s interpretation warrants deference. Although our inquiry cannot be “reduce[d] to any exhaustive test,” we follow the guideposts set forth by the Supreme Court in Kisor and conclude that it does. 139 S. Ct. at 2416.
First, the SEC‘s interpretation reflects its “authoritative” and “official position.” See id. (citation omitted). The petitioners do not dispute this, nor can they because the Commission‘s reading “emanate[s] from those actors ... understood to make authoritative poliсy,” was pronounced in the SEC‘s Adopting Release and has been reaffirmed in public adjudicative orders. Nat‘l Lifeline Ass‘n, 983 F.3d at 511 (citation omitted) (analyzing Kisor‘s first interpretive guidepost); see Adopting Release, 76 Fed. Reg. at 34,357 n.438 (“[A] whistleblower is only entitled to an award if one of [the] three general standards is satisfied.“); In the Matter of the Claim for Award in Connection with Redacted, Rel. No. 89551, 2020 WL 4720539, at *4 (“If ...
Second, the interpretation “implicate[s] [the Commission‘s] substantive expertise” in implementing the whistleblower program. Kisor, 139 S. Ct. at 2417. Granted, the “basis for deference ebbs” under this factor “when ‘[t]he subject matter [in dispute] is distan[t] from the agency‘s ordinary’ duties or ‘fall[s] within the scope of another agency‘s authority.‘” Id. (alterations in original) (quoting City of Arlington v. FCC, 569 U.S. 290, 309 (2013) (Breyer, J., concurring in part and concurring in judgment)). But the subject matter in dispute here—the Commission‘s process for determining whistleblower award eligibility—is part and parcel of the SEC‘s statutorily assigned duties. Indeed, “Congress has explicitly entrusted the Commission with implementation and oversight of the program.” Nat‘l Lifeline Ass‘n, 983 F.3d at 511; see
The petitioners рrotest that determining a whistleblower‘s eligibility for an award is not “rocket science” and therefore cannot lie within the Commission‘s substantive expertise. Agencies can and frequently do, as the SEC does here, possess expertise in fields of varying complexity, including in those less convoluted than “rocket science.” The SEC‘s interpretation of its whistleblower award program regulations undoubtedly implicates its “policy expertise.” Kisor, 139 S. Ct. at 2417.
Third and finally, the SEC‘s reading “reflect[s] [its] ‘fair and considered judgment.‘” Id. The Commission has consistently justified its interpretation “from both a policy and an interpretive standpoint.” Nat‘l Lifeline, 983 F.3d at 512; see In the Matter of the Claim for Award in Connectiоn with Redacted, Rel. No. 89551, 2020 WL 4720539, at *4 (more lax “led to” standard “would risk introducing speculative and complex causal chains that would be difficult and impracticable ... to investigate and evaluate,” while limiting to three circumstances “sends a clear signal to all potential whistleblowers of what is expected of them“); In the Matter of the Claim for Award in Connection with Redacted, Rel. No. 82897, 2018 WL 1378788, at *4 (standard “was considered and commented on at length during the adoption of the whistleblower rules” and “was carefully tailored ... to provide a uniform standard that would apply to all claimants“). And there is no indication that the Commission‘s interpretation is merely a “convenient litigating position or post hoc rationalizatio[n] advanced to defend past agency action against attack.” Kisor, 139 S. Ct. at 2417 (alteration in original) (internal
In sum, given that the text of Rule 21F-4(c) is genuinely ambiguous, the SEC‘s interpretation is entitled to deference pursuant to the interpretive guideposts announced by the Supreme Court in Kisor. Accordingly, the petitioners’ claim that the Commission‘s reading does not fall within the bounds of reasonable interpretation fails.
C.
Before this court, the petitioners now assert that the Commission erred in denying their award applications because they have satisfied the “led to” standard‘s second fact pattern under Rule 21F-4(c)(2). This argument is forfeit because they did not raise it before the SEC and offer no reasonable explanation for failing to do so. See
The petitioners maintain that they preserved this argument in their challenges to the CRS‘s preliminary determination by asserting in footnotes that they “incorporate[] ... all information and arguments” made in their award applications and “do[] not waive any argument or position.” J.A. 273 n.21, 282 n.20. But they fail to provide any citation to the portion of their original award applications where they made this argument. Indeed, an examination of their memoranda in support of their application reveals that they did not explain how they have satisfied the second—or any of the three fact patterns in Rule 21F-4(c). They merely assert that they “clearly satisf[y] Congress’ ‘led to’ standard.” J.A. 20, 102 (emphasis omitted). For this reason, the SEC never addressed this argument in its review of the petitioners’ challenge to the CRS‘s preliminary determination—the petitioners’ counsel‘s protestations to the contrary at oral argument notwithstanding. See J.A. 293 (petitioners “appear to concede that they have not satisfied the three fact patterns set forth in Rule 21F-4(c)“).
Merely disclaiming the “waive[r] [of] any argument or position” does not preserve an argument that was never made before the Commission. See Schneider v. Kissinger, 412 F.3d 190, 200 n.1 (D.C. Cir. 2005) (“It is not enough merely to mention a possible argument in thе most skeletal way, leaving the court to do counsel‘s work.“). If a generic disclaimer sufficed for preservation, litigants would never risk forfeiting or waiving an argument and could raise arguments on appeal that neither a district court nor an administrative agency had an opportunity to consider nor the opposing party the chance to rebut. “As an appellate court, ‘we are a court of review, not of first view.‘” Capitol Servs. Mgmt., Inc. v. Vesta Corp., 933 F.3d 784, 789 (D.C. Cir. 2019) (quoting Cutter v. Wilkinson, 544 U.S. 709, 718 n.7 (2005)).3
For the foregoing reasons, the petitions for review are denied.
So ordered.
KAREN LECRAFT HENDERSON, Circuit Judge, concurring in the
“[B]efore concluding that a rule is genuinely ambiguous, a court must exhaust all the ‘traditional tools’ of construction.” Id. at 2415 (quoting Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 843 n.9 (1984)). “That means a court cannot waive the ambiguity flag just because it found the regulation impenetrable on first read.” Id.; see also Raymond M. Kethledge, Ambiguities and Agency Cases: Reflections After (Almost) Ten Years on the Bench, 70 VAND. L. REV. EN BANC 315, 319 (2017) (“It matters very much ... that judges work very hard to identify the objective meaning of the text before giving up and declaring it ambiguous.“). With a little extra effort, I am left with no doubt that Rule 21F-4(c) is unambiguous.
To begin, I again agree with my colleagues that Rule 21F-4(c) contains no “clear textual signal that fact patterns other than the three explicitly enumerated provide alternatives for a whistleblower to establish that the ‘led to’ standard has been met.” Per Curiam Op. at 11. They rightly highlight the absence of any language indicating that the three fact patterns are merely illustrative, as well as any reservation of residual or catch-all authority for the SEC to consider other scenarios in determining award eligibility. Id. at 11-12. So far, so good.
In my viеw, however, they place too much significance on the omission of the word “only” from the Rule‘s prefatory text. Id. at 11; see
But there is more than one way to skin a cat and, with a language as versatile as ours, “only” is not the sole way to connote exclusivity. The Rule makes clear that the “led to” standard is met in “any of the following circumstances,” giving no hint that it might consider other (undefined) circumstances.
There‘s more. Also applicable here is the interpretive canon expressio unius est exclusio alterius,2 which means “expressing one item of [an] associated group or series excludes another left unmentioned.” Chevron U.S.A. Inc. v. Echazabal, 536 U.S. 73, 80 (2002) (alteration in original) (quoting United States v. Vonn, 535 U.S. 55, 65 (2002)). Applied to Rule 21F-4(c), the canon means that the Commission expressly enumerated three fact patterns that result in award eligibility and thereby excluded from consideration others left unmentioned.
Granted, we have cautioned that the expressio unius canon is a “feeble helper in an administrative setting,” Adirondack Med. Ctr. v. Sebelius, 740 F.3d 692, 697 (D.C. Cir. 2014) (quoting Cheney R.R. Co. v. ICC, 902 F.2d 66, 69 (D.C. Cir. 1990)), and that it “applies only when ‘circumstances support[] a sensible inference that the term left out must have been meant to be excluded,‘” NLRB v. SW Gen., Inc., 137 S. Ct. 929, 940 (2017) (quoting Echazabal, 536 U.S. at 81). Those circumstances exist here. The text alone provides more than enough to sensibly infer that the list is exhaustive because a close examination reveals that the Commission crafted detailed, specific, multidimensional and exceedingly flexible fact patterns that can be satisfied in multiple ways. See, e.g.,