SEC v. Navellier & Assocs.

SEC v. Navellier & Assocs.

Opinion

AMENDED DISGORGEMENT FINDINGS OF FACT AND CONCLUSIONS OF LAW

I. The Court Has Broad Discretion to Order Disgorgement

1. In any action or proceeding brought or instituted by the Securities and Exchange Commission under any provision of the securities laws, the Commission may seek, and any Federal court may grant, any equitable relief that may be appropriate or necessary for the benefit of investors. Section 21(d)(5) of the Exchange Act, 15 U.S.C. 78u(d)(5).

2. A "disgorgement award that does not exceed a wrongdoer's net profits and is awarded for victims" is equitable relief permissible under [Section 21(d)(5)]." Liu v. SEC, 140 S. Ct. 1936, 1940, 207 L. Ed. 2d 401 (2020).

3. Disgorgement is a "profit-based measure [*2]  of unjust enrichment" that is measured by the defendant's "wrongful gain," and is ordered to reflect the "foundational principle" of equity that "it would be inequitable that a wrongdoer should make a profit out of his own wrong." Liu, 140 S. Ct. at 1943 (internal quotation marks omitted); SEC v. Sargent, 329 F.3d 34 (1st Cit. 2003) (disgorgement "is intended to deprive wrongdoers of profits they illegally obtained by violating the securities laws") (internal quotation omitted).

4. A wrongdoer can be required to give up unjust enrichment "without the need to show that the claimant has suffered a loss." Restatement (Third) of Restitution and Unjust Enrichment § 1, cmt. a; see generally, e.g., Magruder v. Drury, 235 U.S. 106, 118-20, 35 S. Ct. 77, 59 L. Ed. 151 (1914) (trustee liable for profits gained in breach of fiduciary duty, and "[i]t makes no difference that the estate was not a loser in the transaction, or that the commission was no more than the services were reasonably worth").

5. Because disgorgement is measured by a violator's "wrongful gains" as opposed to the victim's damages, Liu, 140 S. Ct. at 1944, disgorgement can be ordered in an amount that is different from, or even exceed the victim's loss. See Kansas v. Nebraska, 574 U.S. 445, 463, 135 S. Ct. 1042, 191 L. Ed. 2d 1 (2015) (ordering disgorgement that exceeded the victim's "actual damages"); SEC v. Huffman, 996 F.2d 800, 802 (5th Cir. 1993) ("[A] disgorgement order might be for an amount more or less than that required to make the victims whole.").

Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.