Martin Shkreli v. Federal Trade Commission, et al.

In Liu v. SEC, 140 S. Ct. 1936 (2020), this Court held that a federal court’s congressionally granted power to issue “equitable relief” in an SEC action includes the power to order the “disgorgement” of a wrongdoer’s unlawful profits—subject to the condition that the relief conforms with the established limitations of traditional equity practice. Among various “incarnations” of disgorgement that this Court described as being “in considerable tension with equity practices,” id. at 1946, was the practice of seeking “disgorgement liability on a wrongdoer for benefits that accrue to his affiliates.” Id. at 1949 (citing SEC v. Contorinis, 743 F. 3d 296, 302 (2d Cir. 2014)); see also id. at 1946, n.3. The Fifth and Eleventh Circuits limit a defendant’s disgorgement liability in equity to his or her personal gain from unlawful activity. Conversely, the Second Circuit continues to permit district courts to impose disgorgement liability on a defendant for profits that accrued solely to his or her affiliates. The question presented is: Does a district court’s exercise of its federal equity jurisdiction, as defined and cabined by traditional equity practice, include the power to order a defendant to disgorge unlawful gains that he or she did not personally receive, possess, or control, but that instead accrued exclusively to his or her codefendants?