Appeals Court Asked to Unseal Opinion Tied to Block’s SEC Award

A federal appeals court has been asked by Bloomberg Law to reverse its highly unusual order to permanently seal its opinion that denied a whistleblower’s claim for half of a $14 million SEC award.

The US Court of Appeals for the Third Circuit provided no reasoning for sealing its March opinion in the case of Jamie Doe v. SEC, or for denying Doe’s claim. Doe filed an appeal last year alleging that that the Securities and Exchange Commission improperly denied his claim while giving activist investor Carson Block the full $14 million award in 2022.

The SEC whistleblower program provides anonymity for tipsters and allows all potentially identifying details to be kept from the public. But in this case, all the parties have identified themselves—and outlined all of their legal and factual arguments—in a series of related federal lawsuits.

Doe is actually investor Kevin Barnes, who alleged in this case and others that he and Block co-authored an online report that led to an SEC investigation and fine, and deserved a portion of the award. Even if Barnes hadn’t clearly identified himself as Doe in other court cases, attorneys for Bloomberg Law argued, the public’s right to judicial decisions is paramount.

“In light of the public’s presumptive common law right to access judicial records—which is even stronger when the case arises from government action—this Court should make its Opinion in this matter available to the public,” wrote attorney Eric J. Feder of Davis Wright Tremaine, representing Bloomberg Law, in the April 27th filing.

“In this case, the Court evidently disagreed with (Barnes’) arguments that the SEC’s denial of his whistleblower claim was ‘arbitrary and capricious.’ But without access to any written opinion, the public can only guess as to why.”

The case stems from a March 11, 2022, SEC decision to award the $14 million to Block even though the commission’s staff said he didn’t deserve the money. At the same time, it denied a claim by Barnes, who worked with Block on a 2011 report that outlined fraud and mismanagement at Focus Media, a Chinese advertising and marketing services company. The report led to an SEC investigation, and Focus later paid a $55.6 million fine, which ultimately led to the whistleblower payout.

The SEC’s decision sparked a series of lawsuits involving Barnes, Block, and the SEC.

The first came on April 8, 2022, when Barnes, under the pseudonym “Jamie Doe,” filed a heavily redacted appeal with the Third Circuit.

With his Jamie Doe suit against the SEC still pending, Barnes in August filed a federal lawsuit claiming Block improperly manipulated the SEC filing so that he alone would be able to claim any SEC bounty. Barnes’ attorneys cited a 2022 Bloomberg Law investigation that found the SEC’s emphasis on secrecy in the whistleblower program went far beyond its legal mandate and that the agency often ignored its own rules when making decisions on paying claims.

Block responded by filing a defamation lawsuit in federal court in Texas, arguing that Barnes’ public pronouncements that they were partners and that Block betrayed him hurt his reputation.

Both of those cases are pending.

Feder argued in his filing that the appeals court opinion should be released in full, adding that if redactions are made, they must be “narrowly tailored.”

“In light of the public’s common law right to access court proceedings and documents, which ‘disallows the routine and perfunctory closing of judicial records,’ Bloomberg Law respectfully requests that the Court make its Opinion available to the public,” Feder wrote.

The case is Doe v. SEC, 3d Cir., No. 22-1652, 4/27/23.