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Securities and Exchange Commission v. Sabrdaran

United States District Court, N.D. California

May 15, 2017

SECURITIES AND EXCHANGE COMMISSION, Plaintiff,
v.
SASAN SABRDARAN, et al., Defendants.

          ORDER RE POST-TRIAL AND REMEDY MOTIONS Re: Dkt. Nos. 170, 175

          JACQUELINE SCOTT CORLEY United States Magistrate Judge

         Plaintiff Securities and Exchange Commission (“SEC”) charge that Defendants Sasan Sabrdaran and Farhang Afsarpour engaged in insider trading in violation of the antifraud provisions of the Securities Exchange Act of 1934. Following a three-week trial, the jury returned a verdict in the SEC's favor. Now pending before the Court are Defendants' joint motion for judgment as a matter of law, or in the alternative, a new trial and the SEC's post-trial remedies motion. (Dkt. Nos. 170, 175.[1]) Having had the benefit of oral argument on March 23, 2017, and having carefully considered the parties' written submissions, including their post-oral argument submissions, the Court DENIES Defendants' motion and GRANTS IN PART the SEC's remedies motion as set forth below.

         BACKGROUND

         The SEC alleged that Defendants engaged in insider trading when Dr. Sabrdaran, an employee of pharmaceutical company InterMune, Inc., tipped his long-time friend Afsarpour to material, non-public information about the progress through the European regulatory approval process of Esbriet, one of InterMune's products, and Afsarpour then acted on that tip by engaging in transactions in connection with InterMune securities. After receiving the nonpublic information about Esbriet's EU approval on the eve of the public announcement in December 2010, Afsarpour-who lives in the UK-placed certain online financial bets on the price changes in InterMune stock and options; specifically, he placed spread bets through a London-based company called IG Index and also bought InterMune stock via his stockbroker in New York. Afsarpour urged others to invest in InterMune as well, some of whom did.

         Dr. Sabrdaran served on the InterMune team seeking marketing approval for Esbriet from the European Medicines Agency. Afsarpour is a close personal friend of Dr. Sabrdaran, and they communicated by phone, email, Facebook and other means frequently to discuss developments in their lives, philosophy, and other personal issues. They also tried to visit each other when one of them was present in the other's country. Afsarpour contended that he started placing spread bets on InterMune stock in November 2010 based on his own research about the company. He insisted that, based on publicly available information, he believed that InterMune would receive approval from the European Medicines Agency during the first quarter of 2011 to market and sell Esbriet in the European Union, and that this approval would be announced during the first quarter of 2011. He maintained that he did not receive any material nonpublic information from Dr. Sabrdaran or anyone else regarding InterMune.

         Early in the case, the Court granted in part and denied in part Defendants' motions to dismiss and denied their motion to strike portions of the initial complaint. (Dkt. No. 36.) Defendants argued, among other things, that the transactions at issue involve spread bets, which are not “securities” for the purposes of a Section 10(b) and Rule 10(b)-5 violation. The Court concluded that the SEC, with minimal amendment, could plausibly allege that Afsarpour's spread bets were “in connection with” securities by alleging that IG Index had hedged his spread bets, which the SEC amended to do. After discovery, the Court denied the SEC's motion for partial summary judgment on the same issue, holding that to establish a securities violation under Section 10(b) and Rule 10(b)-5, the SEC need not necessarily prove that Afsarpour subjectively knew that his fraudulent activity was “in connection with” the purchase or sale of a security, but that a reasonable trier of fact might not find that Afsarpour's spread bets necessarily met that test.

         Trial began on October 17, 2016. The parties agreed that Defendants shared a very close friendship; beyond that, the SEC and Defendants presented very different accounts. The SEC elicited testimony and proffered documentary evidence connecting the confidential and public announcements about Esbriet, communications between Defendants, and Afsarpour's trading activity. For example, there was testimony that Dr. Sabrdaran communicated with Afsarpour shortly after receiving a confidential, internal InterMune email stating that the European Medicines Agency had given the green light for Esbriet-the “As Good As It Gets” email. There was testimony that Afsarpour executed very few trades on InterMune until mid-December 2010, the eve of Esbriet's imminent approval announcement; that the days leading up to the announcement he encouraged friends to invest heavily in InterMune; and that the day before the public announcement he invested more heavily than ever before, in more highly leveraged transactions than ever before, using credit cards to fund his bets, which he had never done before. The SEC entered emails into the record in which, the day before the public announcement, Afsarpour wrote to friends telling them to get their money in that day before it was too late.

         In the SEC's case-in-chief, the jury heard from Dan Welch, InterMune's CEO, who described the company's business and confidentiality policies generally. Steven Porter and Marianne Porter, doctors and InterMune executives, repeated InterMune's confidentiality policies, explained the process of regulatory review before the European Medicines Agency generally and for Esbriet in particular, described Dr. Sabrdaran's role in the group that worked on Esbriet's drug safety, and discussed who knew about its approval before the news became public. Dr. Spencer Hudson, another doctor on the Esbriet team, also testified about what he and the other members of the team knew as they shepherded the drug through the approval process. They testified that InterMune learned on December 10, 2010 that the European Medicines Agency would announce Esbriet's approval on December 17, 2010.

         Apart from InterMune employees, two employees from IG Index testified. Bridget Messer, a financial services attorney who is the company's chief commercial officer, discussed the “spread bets” that IG Index offers, explaining how the company often hedges its customers' spread bets, how the contracts each customer-including Afsarpour-signs in advance of placing any spread bets inform them that IG Index might hedge, and how IG Index's internal compliance department investigated trades in InterMune in December 2010 and froze Afsarpour's account.

         The company's chief information officer, Jonathan Noble, also testified, further explaining how spread bets work. He also described Afsarpour's IG Index spread bets and identified instances where IG Index hedged his bets, which he stated it did for a majority of his transactions. He noted that, prior to December 10, 2010, Afsarpour placed only three InterMune orders that were actually executed, whereas between then and December 17, 2010, he placed many more executed trades; and testified that Afsarpour made much riskier InterMune investments after December 10, 2010. As of the close of business on December 15, 2010, Afsarpour had approximately £145, 000 on InterMune in his IG Index account. Of that amount, £20, 000 pounds were deposited through credit cards that day. In contrast, Afsarpour made no credit card transactions from October 11 through December 9, 2010. Noble testified that an IG Index employee had telephone conversations with Afsarpour on December 13 and 14, 2010, and the jury heard recordings of those phone calls. As to hedging, Noble testified that IG Index did not itself purchase InterMune stock to hedge Afsarpour's bets. Instead, for some of the spread bets IG Index entered into contracts for difference (“CFDs”) with a French brokerage in London called Cheuvreux and instructed that company to trade in the underlying stock; Noble did not know if Cheuvreux actually purchased the underlying stock on a U.S. market. He testified that IG Index hedged other spread bets through similar transactions with a brokerage called Macquarie.

         Stockbroker Michael Burkoff testified that Afsarpour purchased 75 shares of InterMune stock through him on December 16, 2010, that the purchase was Afsarpour's idea, and that Afsarpour had called him months earlier to discuss InterMune for the first time.

         SEC investigative attorney Drew Panahi testified extensively about the agency's investigation into Afsarpour's InterMune trades. Through Panahi, the jury was shown charts of Afsarpour's trades and his phone calls with Dr. Sabrdaran, which coincided, and his emails with the SEC where he denied knowing anyone at InterMune. Panahi told the jury that Afsarpour's profits from spread bets placed between December 10 and December 17, 2010 totaled $877, 510.53. According to Panahi, Afsarpour said he knew IG Index would hedge his spread bets. An SEC economist, Dr. Carmen Taveras, also testified as an expert on the SEC's behalf. The jury was shown charts she prepared showing Afsarpour's daily payments into his IG Index account and how the percentage of his IG Index accounts dedicated to InterMune changed over time, largely after December 10, 2010.

         The jury also heard from a number of Afsarpour's friends-either live or via videotaped deposition-who testified to what Afsarpour told them about InterMune and how they responded: by giving Afsarpour money to invest or opening their own brokerage accounts to do so. One invested $60, 000 in InterMune on December 16, 2010-her first and last time betting on stocks.

         At the close of the SEC's case, both parties moved for judgment as a matter of law. The Court denied the SEC's motion for judgment as a matter of law that Afsarpour's spread bets were “in connection with” securities for the purposes of liability based on evidence that IG Index hedged the spread bets. Defendants moved on two separate grounds. First, Defendants argued that there was no evidence that Afsarpour knew or had reason to know that Dr. Sabrdaran breached a duty of confidentiality or trust as required to show a tip for the purposes of a Section 10(b) and Rule 10b-5 violation. The Court denied the motion, concluding that there was sufficient circumstantial evidence that there was a tip. Second, Defendants moved for judgment as a matter of law on the claims based on Afsarpour's spread bets, contending that (1) there was no evidence that Afsarpour knew his spread bets would be hedged; and (2) objecting to the chart the SEC used to show IG Index's hedging activity, without which, they argued, there was no evidence that IG Index ever hedged the spread bets. The Court denied the motion.

         In Defendants' cases-in-chief, the jury heard from expert witness Torben Voetmann, a financial consultant, who opined that Afsarpour's betting behavior was consistent with publicly available information-i.e., that Afsarpour traded on InterMune based on following signals from the market and publicly available information about the European Medicines Agency-and did not change before and after the December 10, 2010 phone call with Dr. Sabrdaran.

         The jury also heard extensive testimony from Defendants themselves. Both testified that they communicate regularly about all sorts of topics, but not work. Afsarpour testified that he did not know Dr. Sabrdaran worked at InterMune when he made the investments and that he came across InterMune by accident when his daughter's boyfriend, Tom Rogerson, asked him to look up a stock under the ticker symbol “ITNM, ” and he mistakenly entered “ITMN”-InterMune's symbol. Rogerson testified at trial that he did not remember any such request.

         In any event, Afsarpour testified that he has long engaged in day trading, making daily investments based on following the markets and engaging in technical analysis to determine the performance of a stock. He further testified that Dr. Sabrdaran never disclosed any non-public information about Esbriet's approval process to him, that he instead made InterMune investments based on his own research, and that it never came up in conversation that Afsarpour was placing spread bets on InterMune until after it happened. According to Afsarpour, Dr. Sabrdaran became very angry and upset with him once he learned that Afsarpour had invested in InterMune. During its investigation Afsarpour initially told the SEC he did not know anyone who worked at InterMune and removed Dr. Sabrdaran from his list of friends on Facebook before turning that list over to the SEC.

         Dr. Sabrdaran testified that he always took seriously InterMune's confidentiality policies and that he never discussed InterMune, let alone Esbriet's regulatory approval process, with Afsarpour. He offered explanations for the phone calls with Afsarpour that had nothing to do with InterMune or Esbriet. On cross-examination, Dr. Sabrdaran acknowledged that he erased the hard drive from his laptop and deleted certain Facebook messages from Afsarpour before turning his messages over to the SEC, but contended that he did so to protect his privacy, not to hide anything from the Commission. Dr. Sabrdaran explained that he had since been fired from InterMune and had not found work as a physician or drug safety executive in the pharmaceutical industry.

         The parties renewed their motions for judgment as a matter of law at the close of evidence; the Court again denied the motions and sent the case to the jury.

         The jury deliberated for one day then returned a verdict in favor of the SEC, answering all five questions on the verdict form in the affirmative. (Dkt. No. 165; see also Dkt. Nos. 161-1, 163-1.) Specifically, the jury found that (1) Dr. Sabrdaran breached a duty of trust and confidence to InterMune by intentionally disclosing material, non-public information concerning InterMune to Afsarpour; (2) Afsarpour knew, or should have known, that Dr. Sabrdaran disclosed material, non-public information to him in violation of Dr. Sabrdaran's duty to maintain confidentiality; (3) Dr. Sabrdaran personally benefitted from the disclosure to Afsarpour; (4) Afsarpour knew, or should have known, that Dr. Sabrdaran disclosed the material, non-public information to him for Dr. Sabrdaran's personal benefit; and (5) Afsarpour used the material, non-public information Dr. Sabrdaran disclosed to him to engage in transactions that were in connection with a purchase or sale of a security. (Id.)

         Defendants' joint motion for judgment as a matter of law or, in the alternative, a new trial followed. (Dkt. No. 170.) The SEC thereafter filed its motion for remedies and final judgments to be imposed against Defendants. (Dkt. No. 175.) The Court agreed to hear the motions together. After oral argument, the SEC submitted notices of supplemental authority notifying the Court of insider trading cases where a court ordered joint and several disgorgement against a tipper who received no direct portion of the ill-gotten profits. (Dkt. Nos. 183, 187.) In addition, at the Court's invitation, Defendants submitted a supplemental brief addressing, in part, the revised arguments and calculations that the SEC raised for the first time in its reply brief in support of its remedies motion. (Dkt. No. 188.)

         DISCUSSION

         I. Motion for Judgment as a Matter of Law, or in the Alternative, a New Trial

         Defendants move for a new trial under Rules 50(b) and 59 on the grounds that the jury's verdict was contrary to the weight of the evidence and that the Court erroneously instructed the jury on the “personal benefit” and “in connection with” requirements.

         A. Legal Standard

         A Rule 50(b) motion is appropriate when the evidence permits only one reasonable conclusion, and that conclusion is contrary to that of the jury. Martin v. Cal. Dep't of Veterans Affairs, 560 F.3d 1042, 1046 (9th Cir. 2009). The court must view the evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in that party's favor, EEOC v. Go Daddy Software, Inc., 581 F.3d 951, 961 (9th Cir. 2009), and the court “may not make credibility determinations or weigh the evidence.” Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000). A “jury's verdict must be upheld if it is supported by substantial evidence, which is evidence adequate to support the jury's conclusion, even if it is possible to draw a contrary conclusion.” Pavao v. Pagay, 307 F.3d 915, 918 (9th Cir. 2007).

         Under Rule 59, a court has the discretion to grant a new trial “for any reason for which a new trial has heretofore been granted in an action at law in federal court.” Fed.R.Civ.P. 59(a)(1)(A). The grounds for a new trial include: (1) a verdict that is contrary to the weight of the evidence; (2) a verdict that is based on false or perjurious evidence; or (3) to prevent a miscarriage of justice. Molski v. M.J. Cable, Inc., 481 F.3d 724, 729 (9th Cir. 2007) (quotation marks and citation omitted). Erroneous evidentiary rulings and errors in jury instructions are also grounds for a new trial. See Ruvalcaba v. City of Los Angeles, 64 F.3d 1323, 1328 (9th Cir. 1995).

         When a Rule 59 motion for a new trial is based on insufficiency of the evidence, the court may weigh the evidence and assess the credibility of witnesses and need not view the evidence from the perspective most favorable to the prevailing party. See Landes Constr. Co. v. Royal Bank of Canada, 833 F.2d 1365, 1371 (9th Cir. 1987). The decision to grant a new trial motion lies within the court's discretion. See Merrick v. Paul Revere Life Ins. Co., 500 F.3d 1007, 1013 (9th Cir. 2007). But “the court is not justified in granting a new trial merely because it might have come to a different result from that reached by the jury.” Roy v. Volkswagen of Am., Inc., 896 F.2d 1174, 1176 (9th Cir. 1990) (internal quotation marks and citation omitted). Rather, a new trial should be granted where, after “giv[ing] full respect to the jury's findings, the judge on the entire evidence is left with the definite and firm conviction that a mistake has been committed” by the jury. Landes Contr. Co., 833 F.2d at 1365.

         B. Analysis

         1. The Jury's Verdict that Dr. Sabrdaran Intentionally or Recklessly Disclosed Material, Non-Public Information to Afsarpour was not Contrary to the Weight of the Evidence

         Defendants first contend that the Court should order a new trial because the jury's finding that Dr. Sabrdaran tipped Afsarpour is contrary to the weight of the evidence. Defendants urge that the SEC presented no direct evidence of a tip and the circumstantial evidence was weak, and thus that the verdict rested only on “strained inferences and speculation” of a tip.

         Relevant here, Section 10(b) and Rule 10b-5 are violated under the “misappropriation theory” of insider trading when “an individual misappropriates confidential information for securities trading purposes, in breach of a duty owed to the source of the information.” O'Hagan, 521 U.S. 642, 652 (1997). Among other elements, to establish that a defendant is liable for insider trading under this theory, the SEC must prove that the tipper defendant-here, Dr. Sabrdaran- breached a duty of confidentiality in sharing information with the tippee-Afsarpour. Aaron v. SEC, 446 U.S. 680, 691 (1980). Defendants challenge the jury's finding that the SEC proved this latter element.

         While Defendants first fault the SEC for failing to present any direct evidence that Dr. Sabrdaran shared a tip, direct evidence is not necessary. See SEC v. Truong, 98 F.Supp.2d 1096, 1097-98 (N.D. Cal. 2000); see also SEC v. Horn, No. 10-cv-955, 2010 WL 5370988, at *4 (N.D. Ill.Dec. 16, 2010) (“Direct evidence of insider trading is, indeed, rare; and the SEC is entitled to prove its case through circumstantial evidence.”) (collecting cases). But it “may not base insider trading actions on strained inferences and speculation.” Id. (citation omitted). In meeting its burden, the SEC must identify the facts that the tippee allegedly possessed. Truong, 98 F.Supp.2d at 1098.

         The SEC has met its burden. The timing of Defendants' phone calls, Afsarpour's trading activity, Afsarpour's communications with other friends that emphasized the deadline to invest was right before the imminent public announcement, as well as evidence that Afsarpour was so sure that the price of InterMune stock would rise that he convinced a number of friends who had never invested in the stock market before to invest large sums of money, support a reasonable inference that Dr. Sabrdaran told Afsarpour that InterMune was about to obtain regulatory approval for Esbriet. While Dr. Sabrdaran himself told the jury that he never disclosed insider information to Afsarpour, the jury was not required to believe him. The jury heard evidence that Dr. Sabrdaran had lied to his InterMune boss about a ski trip in Switzerland. The jury also may have found it less than credible that Dr. Sabrdaran never discussed his job with his close friend. Similarly, Afsarpour's story that he simply happened upon InterMune while entering the ticker symbol for another company on Rogerson's request was unlikely and not corroborated by Rogerson, which gave the jury grounds to discount Afsarpour's credibility, as well. It was not against the weight of the evidence for the jury to conclude that Dr. Sabrdaran tipped Afsarpour about Esbriet's imminent approval.

         Defendants also argue that the SEC “made the jury and the defense guess as to when the alleged tip actually occurred” and “waited until its . . . rebuttal closing argument . . . to reveal that if an actionable tip occurred in this case, it occurred on December 10, 2010.” (Dkt. No. 170 at 9-10 (record citation omitted).) Not so. The SEC's theory from the beginning was that Dr. Sabrdaran shared information with Afsarpour during their phone calls in the week leading up to the public Esbriet approval announcement. Indeed, the SEC's expert witness, Dr. Taveras, testified that she reached her opinion that Afsarpour must have traded on inside information based on the assumption that the tip occurred on December 10, 2010.

         Defendants identify evidence that supports their position that Afsarpour traded not on the basis of material, non-public information, but based on his own technical analysis of InterMune stock and publicly available information about the timing of regulatory approval announcements in the European Medicines Agency. A reasonable factfinder could infer that there was no insider trading based on this evidence. But, taken in the context of the entire trial, and in particular given Defendants' credibility problems and the weight of the circumstantial evidence, it does not leave the Court with the “definite and firm conviction” that the jury made a mistake in finding that there was insider trading. See Landes Constr. Co., 833 F.2d at 1371.

         2. The “Personal Benefit” Requirement

         Defendants next argue that the Court's instruction about the “personal benefit” requirement was improper and, in any event, the jury's finding that Dr. Sabrdaran tipped Afsarpour for a personal benefit was contrary to the weight of the evidence.

         a. The Court's Instruction was Proper

         The Court instructed the jury that to find that Defendants engaged in insider trading the SEC must prove by a preponderance of the evidence that they used a device, scheme or artifice to defraud in connection with the purchase or sale of a security and that they “acted intentionally.” (Dkt. No. 160 at 88; see also Dkt. No. 154 at 22 (Court's Second Proposed Jury Instructions).) Explaining tipper and tippee liability, the Court instructed that “[a]s to Dr. Sabrdaran, the SEC must establish: . . . [t]hat Dr. Sabrdaran breached his duty of trust and confidence to InterMune by disclosing material, non-public information to Mr. Afsarpour in exchange for a personal benefit.” (Dkt. No. 160 at 90-91 (emphasis added); see also Dkt. No. 154 at 27.) The Court also instructed the jury that “[a]s to Mr. Afsarpour, the SEC must establish: . . . [t]hat Mr. Afsarpour knew or should have known that Dr. Sabrdaran had breached his duty of trust and confidence for Dr. Sabrdaran's personal benefit.” (Dkt. No. 160 at 92; see also Dkt. No. 154 at 30.)

         The Court defined “personal benefit” for the jury as follows:

A personal benefit for these purposes includes anything of value, including money or friendship, and may be inferred when an insider makes a gift of nonpublic information to a friend. Personal benefit includes not only monetary gain, such as a cut of the take or a gratuity from the tippee, but also a reputational benefit or the benefit one would obtain from simply making a gift of confidential information to a trading relative or friend. The benefit does not need to be financial or tangible in nature; it could include, for example, maintaining a useful networking contact, improving the tipper's reputation, obtaining future financial benefits, or making a gift of confidential information to a trading relative or friend.

(Dkt. No. 160 at 91-92; see also Dkt. No. 154 at 29.) The Court also gave instructions on the level of intentional conduct required to prove insider trading, explaining that:

To establish that Dr. Sabrdaran and Mr. Afsarpour acted with intent to deceive, manipulate, or defraud, the SEC must prove that Dr. Sabrdaran and Mr. Afsarpour acted knowingly or recklessly and did not act inadvertently, carelessly, or by mistake. “Reckless” means highly unreasonable conduct that is an extreme departure from ordinary care, which is either known to the defendant or is so obvious that the defendant must have been aware of it.

(Dkt. No. 160 at 93-94; see also Dkt. No. 154 at 33.)

         While Defendants disputed the personal benefit instruction and offered their own, they conceded in their pre-trial submission that the SEC's proposed instruction-which the Court adopted in relevant part-“is consistent with the Ninth Circuit's decision in United States v. Salman, 792 F.3d 1087 (9th Cir. 2015).” (Dkt. No. 94 at 7 n.1.) Defendants instead offered an instruction based on the Second Circuit's decision in United States v. Newman, 773 F.3d 438 (2d Cir. 2014), in which that court held that to prove receipt of a personal benefit sufficient to establish Section 10(b) and Rule 10b-5 insider trading liability, the SEC must prove that the tipper gained something of actual pecuniary value from the tip, or that the tipper and tippee had a meaningfully close relationship that generated an exchange that was objective, consequential, and represented at least a potential gain of a pecuniary or similar nature. Newman, 773 F.3d at 452-53. Defendants made clear that they offered the Newman-based instruction with the hope that the Supreme Court would accept that approach and reject the Ninth Circuit's approach.

         Shortly after trial, the Supreme Court decided United States v. Salman, 137 S.Ct. 420 (2016). The Court reaffirmed its earlier holding in Dirks v. SEC, 462 U.S. 646 (1983), that a tipper breaches his fiduciary duty, and thus exposes himself to liability, when he “personally will benefit, directly or indirectly, from his disclosure” of inside information. Salman, 137 S.Ct. at 427 (quoting Dirks, 462 U.S. at 664). The Supreme Court explained that “[t]his personal benefit can ‘often' be inferred ‘from objective facts and circumstances, ' . . . such as ‘a relationship between the insider and the recipient that suggests a quid pro quo from the latter, or an intention to benefit the particular recipient.” Salman, 137 S.Ct. at 427 (quoting Dirks, 462 U.S. at 664). The Court held that in particular, “‘[t]he elements of fiduciary duty and exploitation of nonpublic information also exist when an insider makes a gift of confidential information to a trading relative or friend.'” Salman, 137 S.Ct. at 427 (emphasis in original) (quoting Dirks, 462 U.S. at 664). In Salman, as in Dirks, the Supreme Court reasoned that such conduct exposed the tipper to liability the same as if he had traded on the inside information and then provided the proceeds as a gift to the close friend or relative. 137 S.Ct. at 427-28; Dirks, 462 U.S. at 667. Salman expressly rejected the Second Circuit's more narrow interpretation of the personal benefit requirement, 137 S.Ct. at 428-the interpretation Defendants advanced in their proposed jury instruction-and affirmed the Ninth Circuit's decision in Salman, 792 F.3d 1087 (9th Cir. 2015), the case to which Defendants conceded the jury instruction conformed.

         Now, for the first time, Defendants focus on the absence of an instruction that the tipper intended to benefit the tippee. Defendants insist that Dirks and Salman establish two separate standards: one for a “direct” personal benefit and one for an “indirect” personal benefit. The “gift-giving principle” that Dirks and Salman recognized is an example of “indirect” personal benefit and, according to Defendants, it requires the SEC to establish the tipper's intent to benefit the tippee. (Dkt. No. 170 at 14-19). Defendants thus argue that the “jury instructions erroneously suggested that an intent to benefit the recipient was not required to satisfy the personal benefit requirement in any way.” (Dkt. No. 170 at 13.) They then combine intent to benefit the tippee with the tipper's personal benefit, contending that “the jury was improperly instructed that if Dr. Sabrdaran tipped [ ] Afsarpour without intending to benefit [ ] Afsarpour and in exchange for nothing but friendship itself, the jury could find that the personal benefit requirement was satisfied” and “[t]hat is not the law.” (Id. at 20.)

         Defendants' jury instruction challenge fails for several reasons. First, neither Dirks nor Salman requires an instruction about intent to benefit the recipient. To the contrary, the Supreme Court explained that the required personal benefit for the tipper can be inferred from various “objective facts and circumstances, ” “‘such as a relationship between the insider and the recipient that suggests a quid pro quo from the latter, or an intention to benefit the particular recipient.'” 137 S.Ct. at 427 (quoting Dirks, 463 U.S. at 664) (second emphasis added). The personal benefit requirement is also satisfied “when an insider makes a gift of confidential information to a trading relative or friend.” 137 S.Ct. at 427 (quoting Dirks, 463 U.S. at 664). Thus, a showing of a tipper's intent to benefit the recipient may be sufficient to show a personal benefit, but it is not required.

         Second, Defendants never objected to the personal benefit instruction on this ground before or during the trial; the only objection they raised was that the tipper's personal benefit had to be financial or tangible, as in Newman. (See Dkt. No. 94 at 6-8 & n.1.) They never offered a proposed instruction that addressed their current position that Dirks requires instructing the jury that the tipper intended to benefit the tippee. Thus, Defendants waived the argument, see Fed. R. Civ. P. 51(c), and may only object to the instruction on the grounds that it constituted plain error. See Fed. R. Civ. P. 51(d)(2). It is not, for the reasons explained above.

         Defendants' reliance on SEC v. Yun, 327 F.3d 1263, 1281 (11th Cir. 2003), is unpersuasive. There, the court instructed the jury that to find liability the SEC must establish that the tipper breached a fiduciary duty by disclosing material nonpublic information intentionally or severely recklessly and declined to include the defendants' proposed instruction about personal benefit. Id. at 1281. The SEC relied heavily on the “severely reckless” instruction in its closing argument and the defendants' attorneys were foreclosed from arguing lack of personal benefit because of the denied instruction. The Eleventh Circuit held the instructions were clearly erroneous and the defendants were entitled to a new trial. Id. at 1282. Unlike Yun, Defendants here do not challenge the Court's instruction about the level of intent-which the Ninth Circuit has defined to include recklessness-and the Court did not fail to instruct the jury about the personal benefit requirement. Moreover, the Yun opinion does not provide a detailed description of the complete set of jury instructions, thus leaving the Court little to work with in comparing the instructions in this case. Thus, while the SEC's statements based on erroneous jury instructions in Yun warranted a new trial, the SEC's statements throughout closing argument that relied on the Court's proper jury instructions here do not. Moreover, Yun focused on whether the instructions adequately recited the requirement that the tipper disclosed information with the intent to personally benefit himself, not whether the court sufficiently instructed the jury that it had to find the tipper did so intending to benefit the tippee, the belated argument Defendants make here.

         Finally, in their supplemental brief, Defendants cite the district court's jury instructions in SEC v. Gowrish, No. C 09-5883 SI, Dkt. No. 143 at 6 (N.D. Cal. Feb. 14, 2011). Gowrish does not suggest that the personal benefit instruction here was plain error as the SEC's personal benefit theory there was different: the tipper was not a close personal friend or relative of the tippee, as here. See SEC v. Gowrish, No. C 09-05883 SI, 2011 WL 2790482, at *1-2 (N.D. Cal. July 14, 2011), aff'd, 510 F. App'x 588 (9th Cir. 2013). Thus, the Supreme Court's pronouncement in Dirks, as recently reaffirmed in Salman, that “the elements of fiduciary duty and exploitation of nonpublic information also exist when an insider makes a gift of confidential information to a trading relative or friend, ” Salman, 137 S.Ct. at 427 (emphasis in original; internal quotation marks and citation omitted), did not apply.

         b. The Jury's Verdict was not Contrary to the Weight of the Evidence

         Defendants maintain that even if the jury instruction was proper, the jury's finding that the SEC satisfied the personal benefit requirement was contrary to the weight of the evidence. Not so. The jury heard myriad evidence about Defendants' extremely close friendship. Defendants talked to each other regularly about many subjects, recommended self-help books and seminars to each other, gave each other advice, and made travel plans together. This was enough for the jury to conclude that Dr. Sabrdaran likely gave Afsarpour a gift of insider information to nurture their close relationship.

         Defendants argue that the record “belies the notion [that] Dr. Sabrdaran disclosed anything with intent to benefit Mr. Afsarpour” during the December 10, 2010 phone call. (Dkt. No. 170 at 22.) Defendants highlight: (1) Dr. Sabrdaran's testimony that he did not know that Afsarpour was trading in InterMune stocks at that time and Afsarpour's testimony that he did not tell Dr. Sabrdaran that he was trading until December 17, 2010 (Dkt. No. 170 at 22; Dkt. Nos. 170-1 at 59, 71-72); (2) Defendants' testimony that when Dr. Sabrdaran learned for the first time on December 17, 2010 that Afsarpour was trading in InterMune stocks he reacted with shock and dismay (Dkt. No. 170 at 22; Dkt. No. 170-1 at 50-54, 71-74); and (3) Afsarpour's December 19, 2010 Facebook message telling Dr. Sabrdaran to “call me say a couple of bad words[, ]” which Afsarpour explained means to air the negative feelings Dr. Sabrdaran harbored against him after learning that he had been trading in InterMune stock. (Dkt. No. 170 at 22-23; Dkt. No. 170-1 at 55-59, 117.) Defendants contend that this testimony reflects that Afsarpour apologized to Dr. Sabrdaran, and “co-conspirators don't apologize for what they were doing all along.” (Dkt. No. 170-1 at 86.) Again, in the face of the circumstantial evidence, the jury reasonably discredited Defendants' accounts. And the significant evidence about Defendants' longstanding friendship is enough to reasonably infer that Dr. Sabrdaran's motivation to tip was to nurture that relationship.

         At bottom, all Defendants do is highlight evidence that conflicts with the jury's verdict. Based on that evidence alone, Defendants insist that “loose talk between friends” is not enough to support the personal benefit required for insider trading liability. A reasonable factfinder might have concluded that Dr. Sabrdaran was merely negligent in disclosing information about Esbriet's imminent approval and, thus, that his “loose talk” with Afsarpour led to Afsarpour's trades. But the evidence at trial supported both conclusions and, given the weight of the circumstantial evidence, Defendants' innocent explanation is not the likelier story. When the jury is presented with competing evidence, it is not the Court's role to substitute its own view for the conclusions the jury reached after hearing all the competing evidence. See Roy, 896 F.2d at 1176. This is especially true when the fact question is particularly nuanced as the Supreme Court has noted the personal benefit requirement is. See Salman, 137 S.Ct. at 429 (“[D]etermining whether an insider personally benefits from a particular disclosure, a question of fact, will not always be easy for the [factfinder].”) (citing Dirks, 463 U.S. at 664). Rather, even if it were a close call whether Dr. Sabrdaran tipped for a personal benefit, “it is not quite clear that the jury has reached a seriously erroneous result” given the evidence presented at trial. Carrethers v. Bay Area Rapid Transit, No. 09-1101, 2012 WL 1004847, at *2 (N.D. Cal. Mar. 26, 2012) (internal quotation marks omitted) (citing EEOC v. Pape Lift, Inc., 115 F.3d 676, 690 (9th Cir. 1997)).

         c. The Court Declines to Grant Judgment as a Matter of Law Regarding Personal Benefit

         Lastly, Defendants argue that because there is no evidence that Dr. Sabrdaran tipped for a personal benefit, it follows that there is not substantial evidence that Afsarpour knew or had reason to know that Dr. Sabrdaran had done so. (Dkt. No. 170 at 23.) As discussed above, the jury's finding that Dr. Sabrdaran tipped Afsarpour for a personal benefit-i.e., to nurture their friendship-was not contrary to the weight of the evidence because the jury heard significant testimony about the closeness of Defendants' relationship and there is significant circumstantial evidence that a tip occurred. This combination is enough for a reasonable factfinder to conclude that Dr. Sabrdaran tipped for his personal benefit; indeed, the jury reasonably concluded as much.

         Because the “personal benefit” jury instructions were proper, the verdict was not contrary to the weight of the evidence, and because there was substantial evidence to support the jury's finding that Dr. Sabrdaran tipped Afsarpour for a personal benefit, the Court declines to grant a new trial or enter judgment as a matter of law in Defendants' favor on this ground.

         3. The “In Connection With” Requirement

         Trying a different tack, Defendants next argue that the jury instruction and evidence about whether Afsarpour's transactions were “in connection with” the sale or purchase of securities warrants a new trial or judgment as a matter of law. The trial record reflects that Afsarpour engaged in three types of transactions: he purchased InterMune stock, made spread bets on InterMune stock, and placed spread bets on InterMune options.[2] Notably, Defendants concede that Afsarpour's stock purchases meet the “in connection with” requirement, since he purchased InterMune stock on a U.S. stock exchange through his New York-based stockbroker. They nevertheless maintain that the Court's jury instruction about the “in connection with” requirement was improper and, even if it was correct, the verdict must be set aside because there is insufficient evidence that Afsarpour's spread bets were “in connection with” U.S. securities.

         a. The Court's Instruction Was Proper

         The Court instructed the jury that “in connection with” the purchase or sale of a security

means that there was some nexus or relationship between the allegedly fraudulent conduct and the sale or purchase of securities in the United States securities market. A defendant's conduct may be in connection with a purchase or sale of a security even if the ...

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