United States Fourth Circuit

In a securities fraud action, district court's order of disgorgement of appellants' profits from the sales of a stock tip, imposition of civil penalties, and injunction against future violations of section 10(b) of the Securities Exchange Act and Rule 10b-5 is affirmed where: 1) the district court correctly found that appellants' conduct constituted a violation of Section 10(b) and thus, appellants cannot avoid application of the statute by invoking constitutional concerns because the text and purpose of the section admit of no exception for disinterested publishers; 2) appellants' First Amendment claim fails as punishing fraud, whether it be common law fraud or securities fraud, simply does not violate the First Amendment; and 3) the injunction does not constitute an unlawful prior restraint because it only enjoins appellants from engaging in securities fraud which is unprotected speech.

Appellate Information

• Argued 12/02/2008
• Decided 09/15/2009
• Published 09/15/2009

Judges

• Before WILLIAMS, Chief Judge, and NIEMEYER and MOTZ, Circuit Judges.

Court

• United States Fourth Circuit

Counsel

• For Appellees:
  
• ARGUED:Bruce D. Brown, Baker & Hostetler, L.L.P., Washington, D.C., for Appellants. Michael Conley, United States Securities & Exchange Commission, Washington, D.C., for Appellee. ON BRIEF:Bruce W. Sanford, Lee T. Ellis, Jr., Laurie A. Babinski, Baker & Hostetler, LLP., Washington, DC; Matthew J. Turner, Baltimore, Maryland, for Appellants. Brian G. Cartwright, General Counsel, Andrew N. Vollmer, Deputy General Counsel, Jacob H. Stillman, Solicitor, Mark Pennington, Assistant General Counsel, Rada L. Potts, Senior Litigation Counsel, Securities & Exchange Commission, Washington, D.C., for Appellee. Walter Dellinger, Mark S. Davies, Allison Orr Larsen, O'Melveny & Myers, LLP., Washington, D.C.; Kai Falkenberg, Editorial Counsel, Forbes, L.L.C., New York, New York; Eve Burton, Jonathan Donnellan, The Hearst Corporation, New York, New York; David S. Bralow, Assistant General Counsel, Tribune Company, East Coast Publishing, New York, New York; Lucy A. Dalglish, Gregg P. Leslie, The Reporters Committee for Freedom of the Press, Arlington, Virginia; Kevin M. Goldberg, American Society of Newspaper Editors, Arlington, Virginia; Kathleen A. Kirby, The Radio-Television News Directors Association, Washington, D.C.; Robert M. O'Neil, Josh Wheeler, The Thomas Jefferson Center for the Protection of Free Expression, Charlottesville, Virginia, for Amici Supporting Appellants.