Opinion ID: 4458470
Heading Depth: 2
Heading Rank: 2

Heading: On the Basis of Instruction

Text: Turning next to Kanodia's claims of error regarding the rejection of his preferred instructions, Kanodia asserts that the district court improperly instructed the jury on the definition of trading on the basis of material, nonpublic information. See O'Hagan, 521 U.S. at 652–53. We review de novo whether the district court's instruction correctly stated the law. United States v. McDonough, 727 F.3d 143, 156 (1st Cir. 2013). Nevertheless, we will not disturb a verdict, notwithstanding a legally incorrect instruction, if the instructional error was harmless. See United States v. Sasso, 695 F.3d 25, 29 (1st Cir. 2012). Our inquiry is not whether there was enough to support the result but whether the error itself had substantial influence on the jury's verdict. Kotteakos v. United States, 328 U.S. 750, 765 (1946).3 This case presents no need for us to fully blindness instruction as the jury mistakenly convicting the defendant on a negligence theory). 3Kanodia's reply brief characterizes his objection to this instruction as relating to due process. Appellants suffering a constitutional error, as opposed to a trial error, are entitled to reversal unless the court can declare a belief that [the error] was harmless beyond a reasonable doubt. Chapman v. California, 386 U.S. 18, 24 (1967). Even though Kanodia's reply brief suggests that the instruction violates the Fifth Amendment by creating a mandatory presumption, his initial brief argues that the instruction erroneously interprets Section 10(b) of the Exchange Act. We thus apply Kotteakos's standard here. See Pignons S.A. de Mecanique v. Polaroid Corp., 701 F.2d 1, 3 (1st Cir. 1983) (holding that claims not raised in the appellant's initial brief are waived). - 18 - resolve how to determine whether a trade is on the basis of material, nonpublic information, however, for even if the government must show that the tippee used the information to convict a tipper, Kanodia's conviction would stand.
The district court instructed the jury that, to show that a trade was on the basis of material, nonpublic information, [a]ll that is required is that [Ahmed and Watson] were in possession of the material non-public information at the time that they traded. Kanodia disputed that Ahmed and Watson's mere possession of confidential information sufficed; he insisted that the government must prove that they actually used the tips to trade. Specifically, Kanodia requested the jury be instructed that the government needed to prove beyond a reasonable doubt that Ahmed or Watson: placed trades in Cooper securities on the basis of material, non-public information received from Mr. Kanodia in violation of Mr. Kanodia's fiduciary or confidentiality duties owed to Ms. Basu. For trades to be on the basis of material, non-public information, you must find that Mr. Watson and/or Mr. Ahmed were in possession of confidential material, non-public information and used that information in consummating their transactions. . . . The district court denied Kanodia's request, and Kanodia objected to the district court's failure to instruct the jury that the - 19 - material non-public information needed to have been both possessed and used to support conviction.4
The government introduced more than enough evidence as to use to sustain Kanodia's conviction. Watson testified that he relied on Kanodia's tips to trade. Kanodia sometimes placed phone calls to both men shortly before they traded. Ahmed and Watson invested heavily in Cooper as Kanodia continued to feed them information. Moreover, they bought options that would have proven worthless if Cooper's share price did not jump quickly. And both transferred a combined sum of $242,500 to the LCF account controlled by Kanodia after profiting handsomely on their trades. Although the government opposed Kanodia's requested instruction, it refrained from suggesting that Ahmed and Watson's mere possession of Kanodia's tips sufficed to show Kanodia's culpability. Accordingly, any instructional error did not have a substantial influence on the jury's verdict. 4 Kanodia renews this objection on appeal, but we bypass it. The government argues that the district court instruction was properly based upon the SEC's interpretation of Section 10(b) in Rule 10b5-1 (which the government argues deserves Chevron deference). See Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 842-43 (1984). We need not address this issue, because any error was harmless. - 20 -