On Behalf of Entrepreneur Mark Cuban, Brown Rudnick Influences Supreme Court Ruling to Limit SEC Disgorgement
PUBLISHED ON: 06/06/2017
NEW YORK, June 6, 2017 – Yesterday, the United States Supreme Court held unanimously that disgorgement actions by the U.S. Securities and Exchange Commission are subject to a five year statute of limitations because disgorgement is a penalty if it is sought and obtained by the SEC in an enforcement action.
The SEC sought disgorgement of approximately $35 million from the petitioner in that case, Charles Kokesh. As a result of yesterday’s ruling, Kokesh cannot be ordered to disgorge more than $5 million. The unanimous judgement in Kokesh v Securities and Exchange Commission reversed a prior decision by the Tenth Circuit.
International law firm Brown Rudnick filed an amicus curiae brief in support of Kokesh’s appeal to the Supreme Court on behalf of its client, the well-known entrepreneur, Mark Cuban. On Mr. Cuban’s behalf, a team of Brown Rudnick lawyers, led by partners Stephen Best, Alex Lipman, Justin Weddle and Ashley Baynham argued that the SEC overstepped its authority in its pursuit of disgorgement in its enforcement cases.
The Supreme Court has now agreed that the SEC has, in fact, exceeded its authority.
Picking up on what Brown Rudnick argued on behalf of Mr. Cuban, the Supreme Court also expressed puzzlement about the source of SEC’s power to seek disgorgement in the first place. However, it left for another day a robust analysis of the question of the source of that power.
Mr. Cuban’s interest in the case is grounded in prior accusations by the SEC of insider trading, which he defeated with counsel from Steve Best in 2013. Mr. Best describes Mr. Cuban as "a first-hand witness to and victim of SEC overreach."
"The SEC has a history of acting in the personal interest of its management at the expense of the interests of those it is mandated to protect," said Mr. Cuban. "In this case, as with many others, the SEC once again demonstrated it has no problem using the tool or weapon of disgorgement as part of its overall litigation strategy to limit or destroy any chance the accused parties have to defend themselves. That is wrong in every way. I will continue to challenge the SEC until it recognizes that protecting investors is more important than platforming future million dollar salaries in private practice."
"We’re very happy to see that the Court has acknowledged and addressed what we and our client recognize as a longstanding overreach by the SEC," said Mr. Best, lead counsel for Mr. Cuban. "The SEC has to be honest; it has to call its remedies by their proper names. If it looks like a penalty, and it walks like a penalty, then it is a penalty. That, in essence, is what the Supreme Court said yesterday."
Brown Rudnick represents Mr. Cuban in several ongoing matters and has filed several amici curiae opposing SEC overreach in the recent years.
About Brown Rudnick LLP
Brown Rudnick, an international law firm with offices in the United States and Europe, represents clients from around the world in high-stakes litigation, international arbitration and complex business transactions. Clients include public and private corporations, multinational Fortune 100 businesses and start-up enterprises. The Firm also represents investors, as well as official and ad hoc creditors’ committees in today’s largest corporate restructurings, both domestically and abroad. Founded more than 60 years ago, Brown Rudnick has more than 240 lawyers providing advice and services across key areas of the law. Beyond the United States, the Firm regularly serves clients in Europe, the Middle East, North Africa, the Caribbean and Latin America. With its Brown Rudnick Center for the Public Interest, the Firm has created an innovative model combining its pro bono, charitable giving and community volunteer efforts.