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Cerny v. SEC

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

SUMMARY ORDER

R ULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT

. C ITATION TO A SUMMARY

ORDER FILED ON OR AFTER J ANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY F EDERAL R ULE

OF A PPELLATE P ROCEDURE 32.1 AND THIS COURT ʹ S L OCAL R ULE 32.1.1. W HEN CITING A

SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT

, A PARTY MUST CITE EITHER THE

F EDERAL A PPENDIX OR AN ELECTRONIC DATABASE ( WITH THE NOTATION ʺ SUMMARY ORDER ʺ ). A

PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED

BY COUNSEL

.

At a stated term of the United States Court of Appeals for the Second

Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in

the City of New York, on the 7 th day of September, two thousand seventeen.

PRESENT: DENNY CHIN,

SUSAN L. CARNEY,

Circuit Judges. *

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CHARLES M. CERNY, CLIFF BUXBAUM,

Petitioners

,

16

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v.

U.S. SECURITIES AND EXCHANGE COMMISSION,

Respondent

.

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FOR PETITIONERS: CHARLES M. CERNY, pro se

, Brooklyn, New

York, and Cliff Buxbaum, pro se

, Thousand

Oaks, California.

* Because Judge Ralph K. Winter, originally assigned to this panel, recused himself

from this case, the remaining two judges issue this order in accordance with Second Circuit

Internal Operating Procedure E(b).2 FOR RESPONDENT: STEPHEN G. YODER, Senior Litigation

Counsel, Anne K. Small, General Counsel,

Sanket J. Bulsara, Deputy General Counsel,

Michael A. Conley, Solicitor, Catherine A.

Broderick, Securities and Exchange

Commission, Washington, D.C.

Appeal from a final order of the Securities and Exchange Commission.

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,

ADJUDGED, AND DECREED that the petition for review is DENIED

. 1

Petitioners Charles M. Cerny and Cliff Buxbaum, proceeding pro se

, seek

review of a March 14, 2016 final order of the Securities and Exchange Commission (the

ʺ Commission ʺ ) denying as untimely their claims for whistleblower awards. We assume

the parties ʹ familiarity with the underlying facts, procedural history, and issues on

appeal.

After discovering a notice on the Commission ʹ s website advising of the

case ʹ s resolution, a development that made them potentially eligible for whistleblower

awards based on securities fraud judgments obtained by the Commission, petitioners

filed claims with the Commission seeking such awards. The notice listed the deadline

to file a claim as June 3, 2012, and petitioners submitted separate claims in 2014. 2 The

Commission denied the claims, concluding that they were untimely and that petitioners

1 Petitioners ʹ motion to compel the Securities and Exchange Commission to

complete the administrative record, and the motions of non

‐ parties Denise Warren and Ahmed

Amr for leave to file pro se amicus briefs in support of petitioners are also denied.

2 Buxbaum filed his March 30, 2014 claim on behalf of himself and three other

individuals, including Cerny. Cerny, who had not signed Buxbaum ʹ s claim, subsequently

submitted his own claim on July 14, 2014.3 had not demonstrated extraordinary circumstances warranting relief from the time bar.

Petitioners timely petitioned for review.

We review the Commission ʹ s whistleblower award determinations ʺ in

accordance with section 706 of Title 5. ʺ 15 U.S.C. § 78u

‐ 6(f). Accordingly, we will set

aside an agency action only if it is ʺ arbitrary, capricious, an abuse of discretion, or

otherwise not in accordance with law, ʺ or if it is ʺ unsupported by substantial evidence. ʺ

5 U.S.C. § 706(2)(A), (E). A whistleblower who wishes to apply for an award must

submit an application within ninety days of the publication of a ʺ Notice of Covered

Action ʺ on the Commission ʹ s website, ʺ or the claim will be barred. ʺ 17 C.F.R. § 240.21F

‐

10(a). Nevertheless, ʺ the Commission may, in its sole discretion, waive any of the[]

procedures [described in § 240.21F

‐ 10] based upon a showing of extraordinary

circumstances. ʺ Id. § 240.21F

‐ 8(a).

Petitioners acknowledge that they failed to meet the deadline, but argue

that the quality of the information they provided to the Commission and the

Commission ʹ s alleged failure to properly catalogue petitioners ʹ submissions constituted

extraordinary circumstances warranting relief from the filing deadline. An agency ʹ s

interpretation of its regulations, ʺ regardless of the formality of the procedures used to

formulate it, is ʹ controlling unless plainly erroneous or inconsistent with the

regulation[s]. ʹʺ Encarnacion ex rel. George v. Astrue

, 568 F.3d 72, 78 (2d Cir. 2009)

(alteration in original) (quoting Auer v. Robbins

, 519 U.S. 452, 461 (1997)). The

Commission has consistently interpreted ʺ extraordinary circumstances ʺ to require that a4 claimant demonstrate ʺ that the reason for the failure to timely file was beyond the

claimant ʹ s control. ʺ Special App ʹ x at 3; see also Claim for Awards in Connection with

Redacted & Redacted

, Exchange Act Release No. 72,659, 2014 WL 3613224, at *3 (July 23,

2014); Claim for Awards in Connection with Redacted Notice of Covered Action Redacted

,

Exchange Act Release No. 72,178, 2014 WL 1998521, at *2 (May 16, 2014); cf. Application

of PennMont Secs.

, Exchange Act Release No. 61,967, 2010 WL 1638720, at *4

‐ 5 (Apr. 23,

2010) (comparing ʺ extraordinary circumstances ʺ in another Commission rule to the

doctrine of equitable tolling), pet. denied

, 414 F. App ʹ x 465 (3d Cir. 2011). Petitioners fail

to demonstrate how the Commission ʹ s interpretation is plainly erroneous or

inconsistent with the regulations. Accordingly, we conclude that the Commission ʹ s

interpretation is controlling, see Encarnacion

, 568 F.3d at 78, and, therefore, that the

Commission did not abuse its discretion by determining that petitioners had not

established extraordinary circumstances warranting relief from the claim filing

deadline.

Petitioners also argue that the untimeliness of their applications should

have been excused because they never received actual notice from the Commission of

their potential eligibility for a whistleblower award. Under the relevant regulation,

however, the Commission is not required to provide actual notice to potential

claimants. It provides simply: ʺ Whenever a Commission action results in monetary

sanctions totaling more than $1,000,000, the Office of the Whistleblower will cause to be

published on the Commission ʹ s Web site a ʹ Notice of Covered Action. ʹʺ 17 C.F.R.5 § 240.21F

‐ 10(a); see also Securities Whistleblower Incentives and Protections

, 76 Fed. Reg.

34,300, 34,342

‐ 43 (June 13, 2011) (rejecting commenters ʹ request that the Office of the

Whistleblower be ʺ required to contact whistleblowers directly to inform them [of] a

covered action ʺ ). Accordingly, the Commission did not abuse its discretion by

declining to excuse the untimeliness of petitioners ʹ claims based on their failure to

receive actual notice from the Commission. To the extent petitioners challenge the

notice rule itself as arbitrary or capricious, adopting such a rule is within the scope of

the Commission ʹ s discretion, 15 U.S.C. § 78u

‐ 6(j), and therefore lies beyond the scope of

our current review.

We have considered petitioners ʹ remaining arguments and conclude they

are without merit. Accordingly, we DENY the petition for review.

FOR THE COURT:

Catherine O ʹ Hagan Wolfe, Clerk