Court Unseals Opinion in Carson Block SEC Whistleblower Case

A federal appeals court has granted Bloomberg Industry Group’s motion to unseal its opinion in an SEC whistleblower dispute involving activist investor Carson Block and one of his former researchers.

Friday’s order from the US Court of Appeals for the Third Circuit reverses the court’s highly unusual decision to place its March 23 opinion “under permanent seal.” The court denied an attempt by Kevin Barnes, filing under the alias Jamie Doe, to gain a share of a $14 million Securities and Exchange Commission award granted to Block, but had kept its legal reasoning secret. Friday’s order was issued without comment.

While SEC whistleblowers are entitled to remain anonymous, Block and Barnes had identified themselves in a series of lawsuits and counterclaims in separate state and federal courts, a fact pointed out in a petition by Bloomberg’s attorney, Eric J. Feder of Davis Wright Tremaine. And courts routinely publish opinions involving the SEC whistleblower program without identifying the participants by name.

The opinion released Friday never mentions Block or Barnes by name, calling them instead “Claimant 1" and “Doe.”

“Doe has failed to show that the SEC acted arbitrarily or capriciously in concluding that his award application failed to meet the foregoing whistleblower criteria,” the court wrote.

Barnes 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.

Block filed for, and ultimately won, an award of $14 million from the SEC, roughly 25% of the fine. Barnes said he was entitled to half of the money, a claim Block strongly disputed.

The SEC rebuffed Barnes’ claims for a number of reasons, including that only Block submitted their investigative findings to the SEC, and that Barnes had not directly submitted any information to the agency. The Third Circuit agreed with the agency’s findings and reasoning.

“None of Doe’s complaints about the disparate outcome resolve or eliminate the clear procedural deficiencies in his application,” the court wrote. “In staking his claim so heavily on the notion that he is entitled to an award because Claimant 1 received one, Doe fails to explain why he is entitled to it on the merits of his own case.”

The court granted Bloomberg’s motion without explaining why it ordered the opinion sealed, or why it decided to make it public. Several attorneys had called the sealing order virtually unprecedented.

The case is DOE v. SEC, 3d Cir., No. 22-1652, opinion unsealed 5/19/23.