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2 

LIU v. SEC 

Syllabus 

remedy into a punitive sanction, courts restricted it to an individual 
wrongdoer’s net profits to be awarded for victims.  Pp. 5–14. 

(1) Whether  it  is  called  restitution,  an  accounting,  or  disgorge-
ment, the equitable remedy that deprives wrongdoers of their net prof-
its from unlawful activity reflects both the foundational principle that 
“it would be inequitable that [a wrongdoer] should make a profit out of
his own wrong,” Root v. Railway Co., 105 U. S. 189, 207, and the coun-
tervailing equitable principle that the wrongdoer should not be pun-
ished  by  “pay[ing]  more  than  a  fair  compensation  to  the  person 
wronged,” Tilghman v. Proctor, 125 U. S. 136, 145–146.  The remedy
has been a mainstay of equity courts, and is not limited to cases in-
volving a breach of trust or fiduciary duty, see Root, 105 U. S., at 214. 
Pp. 6–9.

(2) To  avoid  transforming  a profits  award  into  a  penalty,  equity 
courts restricted the remedy in various ways.  A constructive trust was 
often imposed on wrongful gains for wronged victims.  See, e.g., Bur-
dell v. Denig, 92 U. S. 716, 720.  Courts also generally awarded profits-
based remedies against individuals or partners engaged in concerted 
wrongdoing,  not  against  multiple  wrongdoers  under  a  joint-and-sev-
eral liability theory.  See, e.g., Ambler v. Whipple, 20 Wall. 546, 559. 
Finally, courts limited awards to the net profits from wrongdoing after 
deducting  legitimate  expenses.    See,  e.g.,  Rubber  Co.  v.  Goodyear,  9 
Wall. 788, 804.  Pp. 9–12.

(3) Congress incorporated these longstanding equitable principles 
into §78u(d)(5), but courts have occasionally awarded disgorgement in 
ways  that  test  the  bounds  of  equity  practice.    Petitioners  claim  that 
disgorgement  is  necessarily  a  penalty  under  Kokesh,  and  thus  not 
available at equity.  But Kokesh expressly declined to reach that ques-
tion.  The  Government  contends  that  the  SEC’s  interpretation  has 
Congress’ tacit support.  But Congress does not enlarge the breadth of 
an equitable, profit-based remedy simply by using the term “disgorge-
ment” in various statutes.  Pp. 12–14. 

(b) Petitioners briefly claim that their disgorgement award crosses 
the bounds of traditional equity practice by failing to return funds to
victims,  imposing  joint-and-several  liability,  and  declining  to  deduct 
business expenses from the award.  Because the parties did not fully 
brief these narrower questions, the Court does not decide them here. 
But certain principles may guide the lower courts’ assessment of these 
arguments on remand.  Pp. 14–20. 

(1) Section 78u(d)(5) provides limited guidance as to whether the 
practice of depositing a defendant’s gains with the Treasury satisfies
its command that any remedy be “appropriate or necessary for the ben-
efit of investors,” and the equitable nature of the profits remedy gen-