Opinion ID: 734939
Heading Depth: 2
Heading Rank: 1

Heading: Evidence of an Improper Disclosure

Text: 14 The SEC appeals the district court's summary judgment order that was based on insufficient evidence of improper disclosure or tip by Goldinger to the other defendants. The SEC contends that it provided ample evidence from which a factfinder could draw a reasonable inference that Goldinger also made a direct disclosure of the upcoming merger agreement, which could be an illegal tip. The SEC relies heavily on the evidence of massive and well-timed trading in Thrifty stock and options as well as the incriminating statements made by various defendants acknowledging Goldinger as the source of their attention to Thrifty. 15 The evidence is insufficient to avoid summary judgment because it cannot show that Goldinger actually disclosed to Cohen any material, non-public information about Thrifty. 2 The concrete evidence offered is that Goldinger asked Cohen about Thrifty, that Goldinger told Cohen that Thrifty put options were overpriced, and that Goldinger's comments started the others to think about buying Thrifty stock. Goldinger's question to Cohen about Thrifty is clearly not an illegal tip, because it did not reveal any material non-public information. The SEC would have us conclude that the circumstantial evidence creates a reasonable inference that a more direct tipping took place about the merger. 16 Circumstantial evidence can be sufficient to prove insider trading. Herman & MacLean v. Huddleston, 459 U.S. 375, 390-91 n. 30 (1983); Hopkins v. Andaya, 958 F.2d 881, 888 (9th Cir.1992) ([C]ircumstantial evidence can speak clearly and often unequivocally; properly construed, it is as objective and reliable as any other evidence.) Nonetheless, the district court determined that the SEC failed to offer sufficient evidence of any direct disclosure by Goldinger, noting there is a vast difference between circumstantial evidence and pure speculation. 17 We agree with the district court. The SEC evidence is weak and speculative. As the district court noted, the evidence is consistent with the innocent explanation offered by Defendants. The SEC has not produced sufficient evidence for a jury to find by a preponderance of the evidence that illegal tipping occurred. See Triton Energy, 68 F.3d at 1222 (affirming summary judgment where quality of expert evidence was not sufficient to justify jury trial on central issue). Furthermore, the inference of more direct tipping is unreasonable because it involves too many inferred steps and amounts to no more than conjecture. Therefore, summary judgment is justified. 18 Although reasonable inferences must be drawn in the SEC's favor, the SEC cannot merely provide circumstantial evidence to show the possibility of illegal trading. The SEC's evidence and reasonable inferences from that evidence must be sufficient to allow a reasonable jury could find it met its burden of persuasion at trial. This it failed to do. 19 Defendants offer several alternative bases for summary judgment. They state that the SEC failed to state a cause of action because misappropriation theory is no longer a viable theory after the Supreme Court's decision in Central Bank v. First Interstate Bank, 511 U.S. 164, 114 S.Ct. 1439 (1994). Because it granted summary judgment on other grounds, the district court declined to address Defendants' challenge to the viability of the misappropriation theory. We decline to address this contention for the same reason. We also decline to address Defendants' other alternative grounds to affirm the summary judgment relating to the public nature of the information and to the requirement that any misappropriation be in connection with a securities transaction. 20 II. The SEC's Motion for Partial Summary Judgment as to Non-Public Nature of Information Allegedly Disclosed 21 The SEC's appeal of the district court's denial of its motion for partial summary judgment about the public nature of the information is moot because we affirm the district court's summary judgment in favor of Defendants.