without ties ation and for that reason district courts typically do make five factual findings of some causal link between the violation and the prophets is that they were going to scorched is there any way to read what the district court said as that implicitly hitting that causal connection commenting on the i don't believe there is your honor where the district court i did he i was not to make a factual finding of causation but rather to draw on a series of inapplicable presumptions from cases that were not addressing the threshold issue of whether whether there was a causal link between the violation of just the statements that the court makes and draws on reflect exactly that presumption for example the presumption that all profits from a tainted transaction approximate unjust enrichment or in adopting the theory that the as you see urged below and continues to urge on appeal which is that all profits that are gained during a period of violation constitute ill gotten gains and   judge we continue simply stated that she could not speculate how disclosure that is the correction of a violation not even the violation itself would have affected the market for musicland stock or the  and observe that several scenarios were possible including that nothing could have happened and she then went on to reject the idea that the tender offer was an intervening event on the ground that in the court's view the tender offer was a quote market correction the t o anticipated when we thought he considered to be undervalued shares that is the sum of the district court's findings supporting the fifty million dollar judgment here ok i think we've got on that market price courts must address the threshold question question of whether there was any unjust enrichment at all and the third question that was presented by this court is what is the causal connection here between the seventeen point four million and prejudgment interest award of forty point six million so in essence that there's fifty million dollars that is tied to this causation question and there are four critical undisputed facts first what actually caused the profits here the rising stock price was the tender offer that was announced by best buy into december of two thousand that was approximately two and a half years after the stratego allegedly and every under reporting his ownership of music lands could not be so that looking at the poison pill provision of rock at above seventeen point five percent he was eight it cannot the poison pill here was not a cap it was not a bar on continuing to make purchases and just on the record is is is also clear on that indeed it's true it could have been force and maybe it would have been forced maybe it would have been forced the question is since he mr geo didn't disclose and apparently quite deliberately didn't disclose and was hiding his hand in this regard is it appropriate under existing precedent to say well we don't we don't have to to to delve deeply into the causal link it's enough for us to recognize the disclosure violation and say say because i'm probably going to poor job of describing that c c s position that i take that to be their point which is he did a wrong thing in fact plead guilty to doing a wrong thing and the and the  benefits he got of stock appreciation ought to be attributed to the wrong thing what's wrong with that request for us your honor the of course it was not a catch so we're talking about the violation and for there to be some link between the failure to make a disclosure and the profits is not a question that can turn on hypotheticals about what might have been what could have happened it turns on actual market events and every case that has addressed the question of of discouragement has looked to what actually happened in the first city financial that was artificially low but still stick to this case what is it that actually happened here the problem is to say a discourse of the theory can't properly lie it just can't exist with these because the the only  here your honor are that what caused the rise in market price was the best buy tender offer that mr cio had no involvement whatsoever in pursuing that that tender offer and in fact wasn't even aware of the negotiations until they were in stages of his did his efforts to shop the company or try to take it private can they be viewed this in any way two meetings and as they describe the nature of those meetings with various firms it was not even about diet i think the company private simply exploring different options to maximize shareholder value in december two thousand it cannot be your honour's that the hypothetical of what might have happened is that it is a sufficient basis for a finding of causation to a word of discouragement there are limits to the court's equitable power and that requires that there be actual causation there can be no dispute on this record that there is one actual but for cause of the rise in market price and that was the best buy tender offer and the theory that the yes you see is put forward and and that is it has been adopted by the district court this idea that while you are engaged in other wrongdoing while you are in violation of of the law for failure to disclose that any gains during that time are ill gotten gains also can't be the law that that is a theory of a strict liability it is taking the disclosure provisions of thirteen b which are numerous example a requirement of disclosure of the citizenship and background identity the seats ok committed fraud this is not simply a case of failing to make proper files is also case of fraudulent securities transactions and secondly the district court did not abuse its discretion requiring discordant from fraudulent transactions as a form of equitable really ok well that that's that's really the question we're trying to get out with the letter and and so maybe you could start by responding in this crisis argument that there has to be as a matter of law a causal link between the disclosure violation and the bill and the suppose legal gotten gains in order for there to be discourse in that absent the causal link discourse and can't lie because and you're no longer talking about an equitable remedy you're talking about punitive measures and that's not what discourse is about i understand that to be their argument i'm very interested in your response well it's important that it's not just a disclosure violation on  frozen flow from fraudulent transactions call call it you can hang whatever label you want on it the question of this there have to be a causal link between what he's alleged to have done and the money he got yes if the if the from that transaction yes there is no says as he sees position that there could be there could never be an independently if somebody walked in off the street and said i'm going to give you a hundred times the face value of the current trading value that stock has nothing to do with you i just love this company that that because of fraud that might have been committed by that person that's all subject to discouragement  let me give you three answers the first answer is just yes outright it's a prohibited transaction what's the what is the prohibited transaction accept an offer from a third party who knows nothing or has nothing if it is if you are off the shares or preferred by fraud any subsequent increase in market value has to be discoursed the second though point that i would make is that at the dischord found the best offer constituted the kind of market correction that you want to speed when you last deal with your first point yes what is your authority for the position we're not talking about insider trading here right which is very much akin to insider trading you know we're not talking about insider trading we're part of thirteen the correct ten b is a ten b violation on a jury found a ten b violation it's not just a failure to after the fraud game and what the accountant did what our expert accountant did was use a five four method it's assumed that as he made sales after the fraud the first sales were the ones that were lawfully acquired shares but as those shares  dissipated because it's a smaller amount he buys far more after the fraud after the fraud he then sells he buys the shares based on fraud and then sells them he sells them in the market there's a large block that holds the market that he profits from it no one says that decision so that's a clear a limit on that and the causal link well the causal link between shares acquired by far he doesn't get to keep any of the profit shares acquired by fraud is unlawful transaction so the bottom line for this you see is that the assertion that there has to be a causal link is false that if it doesn't matter it doesn't it makes no difference what the the source of profits but for the violation here because the transactions themselves are profitable unlawful but for the transactions you can have any of those profits furthermore you honor the word shifting still plus the second because i think we maybe say the same thing i'm not sure but i want to make sure i understand right i understand you to be saying it doesn't matter how the money comes in as to those shares because he got it in a wrongful way he's got to give a for profit from it and there's there doesn't have to be any causation associated with the price going up your assertion of causation you could call it that is he got the shares wrongly and that's what causes him to get a profit therefore it's all subject to being forfeited without right yes around h but i would add that there's still this burden shifting analysis the f c c showing can be rebutted by the defense the defense can show that in any event of proper transactions without fraud or with proper disclosure the defense can make a showing and say well no this is what happened with the price or this would have been the price but that didn't happen here for two reasons first that he'll never disclose and second this the other side never offered an expert they never offered an event study they never tried to swindle what happened in the i don't need to speculate about where the money came from here the insider trading rules and that's what the district judge cited was insider trading cases said i don't have to get it that the law permits me to just say the price went up  and and it's going to be discoursed that i read her opinion incorrectly the district court mentions the fact that it's impossibly speculative and the fact that it's a balance burden below when there is a post trial proceedings on this courtroom and to try to rebut this they have to request never densher hearing proffer an expert do any of those things that did not happen where that does not happen the initial assumption presumption that   don't understand them to be gauging you on the field of this is these were obtained by fraud therefore everything goes out the window i understand them to be are trying to engage on the field  we had nothing to do with best buy those guys came in and offered a lot of money we sold their shares that's not subject to this so this is a case where just we have two parties talking past each other it's that opponents are applying the wrong standard this is not about the impact on price the precise impact on illegal trading on the market price is not relevant that is from i c c versus for say this is about gains it's not about what would happen in the market which isn't a question of injury it's a question of proximate causation that's not in pretty there is an equitable remedy based  on principles that the wrong was not permitted to retain gains from his wrongdoing to deter securities violations and to restore the status quo that existed before the violations however even to the extent that it does matter you have a case such as those aren't those aryan says i'm going to i have a real tender offer i'm playing the company and play other people come in and bid up the price he's looking for someone a white knight to come in and offer him more he doesn't care who the white knight is just the steel doesn't care who comes in and buys the company he shops at around  three other places he's trying to profit in his own testimony by changing corporate control and to not show his hand and then profit massive profits that come from the premium and corporate control that's exactly what happened here so this fraud there stripped there's no reason these conversations that he had about or interest you had going private in his conversations about the the board how do we know that that's what the jury was looking at how how do we know when you say oh it's because which is even there was a little further from it let's assume that those other pieces were out of the picture and the one undisputed piece was the only thing we were looking at yet this disclosure ye this your theory that crater because you don't have the right rely on it's not it's not just a disclosure he intentionally lost to the market about the extent of his ownership now that's important to investors but hold on because so you tell him i only thirty violation is per se a fraud violation if it if if because the the market doesn't know about it absolutely not the jury found fraud ten matters the reason why is that even if the intent is not a prerequisite to thirteen d or discordant the court can consider intent as an equitable factor and it does in first city because it's a matter of attorneys who want to turn talk to me about the thirteen the violation which you say is the one that's under speed and let's assume that that's what the jury was looking at that was the that the the ten be a violation that is based in violation only ok if that's the only thing in the mix is it under existing law correct to say intent matters even if it's not part of the violation once you get to the remedies phase for the equitable remedy of this court and the second answer is that the whole burden shifting analysis would apply and the thirteen the violation by itself is not  courts can use as a proxy as an assumption that all profits from tainted transactions must be discourse and it's not about whether there's fraud or not any quote taint any transaction tainted by thirteen the disclosure violation is inadvertently without any intent to violate thirteen dina's no scheme there's no ten b in those circumstances a court could consider the intent but the court could also as a matter of deterring even unintentional violations what would be my what would be the causal link because i don't understand you to be saying there doesn't have to be a causal link on the contrary i understood you to be saying there has to be but for causation yes so assume it's a thirteen to violation and it's a no win one  was he doesn't want to show his hand so we think he's in the market out about is his influence for you plus what's the causal link between not telling the market about that and the best buys coming in and offering a sum of money what's the causal link the causal link because this area is very difficult to explain what would have happened if just in terms of disclosure disclosure had made what the courts do is say this is a hard area but the uncertainty of that falls on the wrongdoer what's what's hard about this every there's no evidence in the record that best buy offer the sum of money it is there based on anything that mr tito did or didn't disclose about the trust is there a shred of evidence that mr teoh's thirteen the violation drove the best buy offer had any effect on price it's the ses position that's just the wrong question and that's what i'm trying to get to the answer yet how is that the wrong question if we're focused on the thirteen the violation not the ten beast if it's a pure thirteen d we would still just do the burden shifting yes he would say share the profits on to transactions transactions that were made in the invasion while not telling the marketplace including from the musically and c e o and others that hey mr p o didn't have not had nothing to do with the best buy stuff that's in the record and i don't know of anything that talk about it there's there's fraud going on here fraud on the market that has to be taken into account and if you take that into account everything that happens after he gets the shares by fraud or wrongly that's the but for cos what's wrong with that argument your honor even if we assume that the find here was ten b there's not a question with the district courts have equitable power where there is causation the problem is whether it's ten b or thirteen there is no causal link here even a situation involving for example insider trading at which they say is perfectly analogous well that the courts have been clear that with insider trading for example in as you see versus mcdonald donovan versus here with another second circuit case that seven fifty four if second attempt fifty seven there still is only disgorgement of those profits that are attributable to the securities violation it's not simply the purchasing of shares and any profits that arise thereafter there has to be a link between for example the inside information that was the basis for the purchase and that transaction being the thing that is generated the profits we just forged where that's not say as plain as a human being can speak if you got those shares wrongly it's quote a tainted transaction then everything that flows after that is caused is causally linked to that and is subject to discourse on your own and there of a violation it knew perfectly how to do that and they did exactly that for example in section sixty need with short swing profits from those who have more than ten percent of beneficial and should have a company if their purchases are sales or sales and purchases within a six month period there's an automatic discouragement they didn't do that in the penalty provision here they provided for punishment in the form of specific tears of civil penalties and as a result where there's going to be discouraging award it turns on the exercise of equitable power for that there can't be punishment to stay remedial there's got to be some connection to you to the to the actual violation why don't you talk for me for just a few moments if you could with the four seconds ago about the assertion that that the jury found fraud here and how do we and how do we know quite what the jury did under the circumstances well that's something you folks call the question we we don't your honor there was not although there was a request for special verdicts below there there wasn't so it's a general verdict and  at as it comes back to this issue of discourse in your honor again whether it is a ten b or thirteen the i it doesn't change the fact that there needs to be actual causation that and that makes perfect sense when you look at what the williams act is about as providing information to shareholders who are considering a cash tender offer so they know the qualifications the intentions of the party making that offer all right thank you