AgFeed Industries, Inc.’s accounting irregularities culminated in a March 2014 enforcement action brought against AgFeed by the SEC. The enforcement action yielded an $18 million disgorgement penalty, referred to as the AgFeed Sanction. After AgFeed sought protection in the Bankruptcy Court, the AgFeed Sanction was disbursed through the company’s court-approved reorganization plan.
Plaintiff James Regnante claimed that pursuant to the Dodd-Frank Act, the AgFeed Sanction should have been deposited into the SEC Investor Protection Fund (the “Fund”), rather than distributed in connection with the bankruptcy proceeding. More importantly, the plaintiff claimed that because of information that he provided to the SEC regarding AgFeed, he was entitled to an award under the whistleblower program established by Dodd-Frank. Plaintiff then brought an action against the SEC.
The United States District Court for the Southern District of New York dismissed the plaintiff’s claim. One reason is the statute which creates the Fund does not create a private cause of action related to administering the Fund. There is no specific language creating a private cause of action and no intent to create a private cause of action in the absence of specific language.
The case was also dismissed because the court lacked subject matter jurisdiction over plaintiff’s claim of an entitlement to a whistleblower award. Whether to grant an award is within the discretion of the SEC. Dodd-Frank generally vests the relevant United States Court of Appeals with exclusive jurisdiction to review any claim related to a whistleblower award.
ABOUT STINSON LEONARD STREET
Stinson Leonard Street LLP provides sophisticated transactional and litigation legal services to clients ranging from individuals and privately held enterprises to national and international public companies. As one of the 100 largest firms in the U.S., Stinson Leonard Street has offices in 14 cities, including Minneapolis, Mankato and St. Cloud, Minn.; Kansas City, St. Louis and Jefferson City, Mo.; Phoenix, Ariz.; Denver, Colo.; Washington, D.C.; Decatur, Ill.; Wichita and Overland Park, Kan.; Omaha, Neb.; and Bismarck, N.D.
The views expressed herein are the views of the blogger and not those of Stinson Leonard Street or any client.