Legal Case Summary

The clear argument next in case 17, 10, 77, Lorenzo versus the Securities and Exchange Commission. Mr. Heim. Mr. Chief Justice, may I please the Court? In Janice Capitol, this Court held that only the maker of a mistatement can be held liable for that mistatement under Section 10B and Rule 10B5B. The Court below correctly held that petitioner Frank Lorenzo was not the maker of the statements that are an issue in the two emails in this case. However, the Court below aired when it held that Lorenzo could nevertheless be liable for those very same mistatements under a theory that by producing and sending those statements, he engaged in a deceptive act, artificially defraud or practice, for purposes of liability under Section 10B, Rule 10B5A and C in Section 17A1. For three reasons, Lorenzo's actions do not support liability. First, permitting liability under Rule 10B5A and C and 17A would allow plaintiffs to sidestep this Court's holding in Janice and the limitations that were placed on mistatement liability, and it would allow plaintiffs to creatively relabel their inadequate mistatement claims as claims for deceptive devices and acts. The result is contrary to Janice and would render Rule 10B5B anality. Second. Excuse me, Janice was a private cause of action, correct? Yes, Your Honor, was it? Under 10B5. Yes, Your Honor, under 10B5B. I understand what Janice said, but I don't know how it squares with 17A, and you swept 17A in. 10B5 uses the phrase to make any untrue statement. But 17A says to obtain money or property by means of any untrue statement of the material fact. That seems dramatically different to me. 17A is a government provision, meaning only the government can sue under 17A. Why should we be treating the two identically? I don't know that anywhere in you brief, you explain that. I know that we've had made general statements that the two inform each other. But certainly not on this critical point, because Janice was based explicitly on the making language of 10B5B. Yes, true, Your Honor. The subsection that you quoted is actually from section 17A, subsection 2, which is not, was not charged by the SEC in which Mr. Lorenzo was not accused of violating. And we agree that subsection 2 may be a better way for the SEC to proceed if they're going to try to hold petitioner liable as a primary violator, because it almost fits very closely here, because that's the equivalent of rule 10B5B

. But the same point can be made, Mr. Heim, with respect to 10B5A and C, and also with respect to 17A1 and 3, right? But the idea is, is, look, Janice was a decision, that it was a very textual decision. It's interpreted the word make. It's lots of examples from real life about who makes statements and who doesn't make statements. And neither A or C in 10B5 has the same language in it. Well, Justice Kagan, 10B5B only addresses misstatements. The other categories in 10B5A and 10B5C are really conduct-based language to get to acts and practices and courses of business. And our view is that A and C cover quite a different type of- So you think that A and C are sort of any, like, everything except misrepresentations or omissions. Is that your position? That's essentially our position. We don't dispute that there can be cases where you have both misstatements and deceptive conduct. But as Desai said in the Circuit Court of Appeals, is that the judiciary's always recognized a difference between deceptive conduct and deceptive statements? So take this case. Mr. Lorenzo here sent false financial information to potential investors. He was, when he did that, he was the head of the Investment Banking Division. And he sent this false financial information. And you can see it in your yellow brief. You can see it quite a few times that he did so with an intent to defraud. So he presses send and an email is sent that contains false financial information. And I'm looking, for example, I'm looking at the language of 10B5C. Do you think he has not engaged in an act which operates as a fraud? We do, Your Honor, for several reasons. One, for- We do not think that he engaged in any conduct that violated 10B5C. Because in order for 10B5B to have any meaning, it would be- But I guess I'm wondering, just take, I understand that argument. And it's, I think, a serious argument. But pretend that 10B5B was not in the statute for just a second

. And you're entitled to come back to it. But just pretend it wasn't in the statute. Is the behavior that was charged here and that you've conceded was done with an intent to deceive? Is that engaging in an act that would operate as a fraud? No, Your Honor, for a couple of different reasons. One, the Congress has set up a statutory scheme for what constitutes aiding and abetting liability. And one of the key distinguishing features between primary liability and abetting is the concept of substantial assistance to a primary violator. In this case, Mr. Lorenzo just sent an email at the direction of his boss with content that was provided by his boss. I think all the content that I believe in the email begins with a summary. It says the banking, investment banking division is summarizing key points of the debenture offer. And then there's the part that allegedly was cut and paced. But it starts out with a reference to what the investment banking division is doing. And it's signed by the head of that division. So it's not simply conveying what the boss told Lorenzo to send. The whole thing wasn't cut and paced. Just the portion of it, isn't that so? Well, just as Skinbird's, the court below found that there was sufficient attribution in this email to Greg Lorenzo because it does start off by saying that it's being sent at the request of Greg Lorenzo and the record and the DC Circuit after looking at the commission's findings found that Greg, Frank Lorenzo was not the maker of the statements in the email. And one of the reasons that for that finding was because it was attributed at the start of the email to Greg Lorenzo. But to me, Mr. Heimuth, I understand your position. It's irrespective of that fact. In other words, suppose that Mr. Lorenzo had made the email, had had come up with the email himself. If I understand your position, you would say, well, it's still not part of 10b5c because that's a misrepresentation. And misrepresentations can only be charged under 10b5b. Is that what you would say? I thought that that was what you just told me

. Well, no, that's slightly different than our hypothetical because the question is really whether rule 10b5b misstatements can be a part of other subsections. And in that particular instance, if Mr. Lorenzo had drafted the email, there's certain other conduct in our position is that in order to be held liable for 10b5a and c, Mr. Lorenzo would have to have engaged in something in addition to just mere misstatements. Did he make a misstatement? Did he personally make a misstatement? I think I thought your answer was no. He did not make a misstatement. No, he did it, and that was with the D.C. effect. So then why doesn't it fall within C? Why does your rule that if it's a misstatement, it can't fall within anything other than B help you when you argue that he didn't make a misstatement? He did something else, so why doesn't it fall within C? Because Mr. Lorenzo didn't engage in any additional deceptive conduct other than making, once he was deemed to be not the maker of the statement, our view is consistent with the majority of circuits that have considered this question, is that some other inherent deceptive conduct would have to be engaged in by Mr. Lorenzo. Well, just take the language of C. Why doesn't his conduct fall squarely within the language of C? Well, because C talks about conduct, it's a type of fraud that's categorically different than merely misstatements or omissions. You say C can't include any verbal conduct, has to be something else. I don't quite know how you're going to engage in a fraud without saying some words. No, Your Honor, that's not our position. There can be cases where there's both conduct and misstatements, which C would cover. Our position is when you have a case like this one when there's only misstatements and no deceptive conduct that in order to allow a plaintiff to repackage those claims as claims under A and C would render 105B meaningless. And also, the DC Circuit set the bar very low if sending an email that was prepared by somebody else constitutes enough of an action to constitute primary liability, it would really leave no room for any sort of aiding and abetting liability. It would convert anybody that perhaps gives some sort of substantial assistance to a primary violation. I don't see why you need to get into aiding and abetting. He's a principal under C. He did the act that is described in C

. It's not necessary to ask, all right, somebody, he didn't do the act that is described in C, but he aided and abetted somebody else who did the act. Well, there's an important distinction to be drawn there because the concept of primary liability really ties into an act of the statute and the regulation discusses concepts of using and employing, which implies a certain level of act of conduct. But here in this case, we have two emails that were sent moments apart and the content was essentially prepared by his boss, Greg Lorenzo. I'd like to go back to my question on that point. I'm looking at the Petitionist Appendix 107. It sets out on one of the two emails. And then there's a portion that's underlined. And I thought that that is what came from the boss, but the first part, it says say at the request of, but it says, the investment banking division of which Lorenzo is the head has summarized key points about the adventure of offering. No, Your Honor. The record in the holding below was that the email as a whole came from the boss, Greg Lorenzo, not from Petitioner, and that the Petitioner Frank Lorenzo was instructed by Greg Lorenzo to send the email out to two clients that were clients of his boss. I'm sorry. I'm having a problem from the beginning. Once you concede, which I think you did, that you're not challenging that your client acted with an intent to deceive or defrog, that you were in challenging the D.C. Circuit's conclusions to that effect. Is that correct? Yes, Your Honor. I don't understand once you concede that mental state, and he has the act of putting together the email and encouraging customers to call him with questions, not to call his boss with question. How could that standing alone give away your case? I mean, that makes him both a maker of an fault statement, whether his boss shared it or not, and I know the courts below thought differently, but it's also engaging in an act, practice, or course of conduct, which operates or would operate as a fraud or deceit upon any person, whether he was a maker or not. He was encouraging the customers to call him directly about buying or buying what was being offered. Justice Alimair, I think you're tying into what our position is with respect to. What more would be necessary to convert over Mr. Lorenzo into a primary violator, because if those customers had, in fact, called Frank Lorenzo, which they didn't, and he would then have repeated the statements, or he would have engaged in some other type of deceptive conduct, but merely producing and sending the emails is such a low bar that the D.C. Circuit said

. But, Mr. Heim, we've made very clear in Central Bank that this idea of primary and secondary, if your actions fit within the language of the particular provision of the statute that you're charged on, then you're a primary violator of that provision, right? And even if given some other language you wouldn't be, or given some more, you know, some other understanding of what it means, if you fit within the language and you violate that language, you're a primary violator. That's what we said in Central Bank. And I guess the import of these questions is he fit within that language. He engaged in an act that operated as a fraud. Well, Justice Kagan, our view is that you can't take that language in a vacuum. You have to consider it in context of the statutory framework that Congress has put into place for aiding an abetting liability, because if you were to find that Frank Lorenzo engaged in a primary violation here, it would undermine Congress's statutory intent for setting up in Section 20 of the Exchange Act, exactly who is an aide or a better, and the key distinction is somebody who provides substantial assistance, perhaps here the asses. Well, because that is useful, because there are some people who don't fall within the language of the statute, and nonetheless can be charged as an aide or an abetter under Section 20, if the SEC does it, if it's not a private action. But what we said in Central Bank is, look, if you do the thing that's, that is described in a particular subsection of this statute or of the, or of 10B5, the rule that implements it, then you are a primary violator as to that subsection. Our view is that Mr. Lorenzo did not engage in conduct sufficient to form a violation of 10B5C, for instance. When you look at the case law, it has a much higher standard for what constitutes violations of those provisions. So in order for Mr. Lorenzo to have become a primary violator, he would have had to engage in more activist conduct. If he, for instance, would have set up a phony purchase order to substantiate one of the points of the email, if he were to go on to the Internet and produce content under phony aliases, these are all. Well, those would have been bad too, but I guess I just don't get why the act that he did engage in is not an act that operates as a fraud. Well, for two reasons, Your Honor, one sending the email does not rise to the level of user or employing a fraudulent device under our view. And number two. Well, that's your quoting me, A, and I was using the language of C. Although, honestly, one could just as well use the language of A, because we've said that a fraudulent device is just a scheme to defraud. Well, Your Honor, it has a certain level of intentionality behind it in terms of Mr. Lorenzo. So, sending an email in and of itself would not, in our view, raise to rise to the level of employing or using a deceptive device. And, you know, an additional related point to that is that this Court's holdings in Central Bank, Santa Fe, and other cases confine Rule 10B5B to the boundaries of Section 10B

. So, in other words, Rule 10B5 cannot go beyond the boundaries of Section 10B in terms of prescribing fraudulent conduct. And that line of case is says, in order for conduct to be fraudulent, it has to be either deceptive or manipulative. And the Cheerella case stands for the proposition that unless there's a misstatement or no mission or some sort of manipulative trading, that those are essentially the three categories of fraud that are prescribed by Section 10B. I have to say, I think that that works against you, that principle, because you're right that all of 10B5 is coming off of 10B, which refers only to manipulative or deceptive devices or contrivances. But it's well understood that misrepresentations or omissions are manipulative or deceptive devices or contrivances, and just those misrepresentations alone. I mean, if some of your arguments were correct, if you took them to their logical extent, you would have to say that misrepresentations and omissions don't fall within that language of 10B. Well, Justice Kayyan, that's when you get into the importance of the Janice decision, because once Frank Lorenzo's determined not to be the maker of those misstatements, if in our view it takes him out of the category of misstatements. I understand, but your argument would also take out the makers of those misstatements. Not necessarily, because the makers of the misstatements would have primary liability, we're not contesting that here, and it's not one of the issues that's at issue. Our view is that once Mr. Lorenzo's deemed not to be the maker of the misstatement, the Court then would look to see, well, is there a mission which there isn't here? Is there a manipulative trade? Well, but I thought you said just a short while ago that simply sending an email is not enough. Yes, Mr. Chief Justice. So then your distinction depends solely on the content of the email. In other words, it gets down to the basic question of whether or not Frank Lorenzo was involved at all in the drafting. So for you, to prevail, we have to understand him as, I guess, he argued at one point, not even reading the email. No, Mr. Chief Justice, I don't think in order for us to prevail, you have to make that finding. Our position is that the Court should establish the test that Mr. Lorenzo's conduct has to be something that's inherently deceptive, and that would be sufficient to push him over the line from being somebody who was not the maker of the misstatement, but could still somehow be held liable under rules 10-5-A. So the law wasn't it? I mean, I thought he sent us an email around to people and said this company, which he knew was worthless from their filing, has $10 million in assets, which he knew wasn't true, and also had $43 million dollars out there to back it up, which he knew wasn't true. And his defense was, well, I only sent it because my boss told me, he was the other Lorenzo. And so, fine, then he's not the maker, but it seems pretty bad. I mean, he'd been working with this company for quite a long time, and he's investors, and so what is it that makes this just aiding and abetting? Maybe he didn't make the statement, but he was sure a big deal participant

. Yes, Justice Breyer. And to be clear, Mr. Lorenzo acknowledged in the record of the trial that he made a mistake, and under our position, Mr. Lorenzo would not get off Scott-free. There's very stringent remedies against aders and abetters, as well as reference before, Section 1782, which is not an issue here, would seem to perhaps fit much better because it's a subsection that deals with obtaining money or property under false statements, and that doesn't raise the same Janice issues, and that doesn't raise the distinction. That's what I'm having trouble with. Whether 1782 was charged or not is irrelevant, because the way 17A is structured, it's not controlled by Janice at all. Well, because it doesn't talk about making statements, it talks about obtaining money or property by statements. There's no reason why we should limit under Janice or otherwise limit three from, or 17A1 or three, from taking their natural meaning. If you make a materially false statement intentionally, which you've conceded he did, then he engaged in a transaction practice or course of business, which operated or would operate as a fraud. Well, just to be clear, our position as was the DC Circuit was that Mr. Lorenzo was not the maker of these things. It wasn't the maker, but he had to see enter. He had to see enter, but that's not disputing that. Correct. But that's not the test in terms of whether he would fall into one category or the other. And this Court in US versus in the taplain was addressing section 17A and its different subsections. And it said that each subsection prohibits a different type of conduct. And in order to give meaning to each of the different subsections, it just cannot be read in such a way to say that every claim, for instance, for misstatements could easily be brought under 17A1 or 17A3. Well, you're suggesting that because B refers specifically to misrepresentations that those misrepresentations do not fall within A or C. But I guess to understand that view of the act, which is everything prohibits something different, you would have to, for example, think that A and C are mutually exclusive. What's the difference between A and C? A and C, your Honor, are closer together. They both deal with fraud. They both deal with deceptive conduct

. The Court doesn't have to reach the issue as to whether or not there's a difference. Well, no, but we have to understand what the statute is about. You're presenting one view of the statute, which is that each of these or the rule, which is that each of these different sections is apart from each, is apart from the rest that each prohibits a different thing. From the, and I guess I'm suggesting a different view of the statute, which is, which A and C make pretty clear that these are very overlapping. One overlaps the other, overlaps the other. They're all meant to essentially address the same thing. This is a kind of built-in suspenders statute where it's like we're going to find every possible way to say this thing in order to make sure that fraudulent acts are covered. Well, just, King, we don't dispute that there could be some overlap between the different subsections, but here in order to sustain the D.C. Circuit, it would really be a wholesale elimination of one of the subsections, which is rule 10B5B, and that would be contrary to the holding of the Corley versus United States, where the Court is, the purpose is to find meaning for each of the different subsections and not read it in a way that would make one of them redundant. But then I'm going to ask you again, what's the difference in meaning between A and C? Well, they both deal with conduct, and I don't know if there is a real meaningful difference between A and C because they both have very similar language between the two. But I think the Court can, as the lower courts have, they can consider A and C as one type of fraud, which is conduct-based, because the language is very similar, the plain language of A and C, and the courts below the majority of opinions that we cite, do treat A and C is very similar on one hand, and then B is distinct, and the majority position is that plain of should not just be allowed to repackage inadequate 10B5B claims, which are just the mistatement claims, and say that those mistatements standing alone can somehow be enough to satisfy the language of A and C, which is a conduct-based fraud. And if the Court was to uphold that view, it would render 10B5B meaningless, and I think also by implication, Section 1782, which 10B5B was drawn on. So there's a lot of problems with sustaining the Court's opinion below with regards to that. And I ask you to do some basic questions. There's no doubt is there that at the time this email was sent, Lorenzo knew full well that the company was worthless. Well, we did not challenge the C-interfining, which was also conceivably, and as said out there, a recklessness finding. Ms. Lorenzo testified he did not see the disclosures in the earlier SEC filings, but we're not contesting C-inter, which could be recklessness. And then reckless and a little confusing. At one point, the ALJ says he didn't even look at the email. And at another point, he himself testified that he authored the emails. Well, the, well, there is inconsistencies in the record, but overall, the, the import of the testimony taken together was such that it was Greg Lorenzo, that was the creator of the email and the maker of the statements. And the SEC has not challenged that, that holding either on, in their case

. And I would like to reserve the rest of my time for Rebuttal. Thank you, Court. Thank you, Council. Mr. Michelle. Mr. Chief Justice, and may it please the Court. Petitioners' decision to send emails that grossly misrepresented the financial prospects of his client, and to give illusory promises designed to deceive investors into backing a business that he knew was failing constitute a quintessential securities fraud. His conduct falls within the plain text and the common sense meeting of Section 17a, the Securities Act, Section 10b of the Exchange Act, and Subsections A and C of Rule 10b5. It sounds like the argument your client made in Janice that was rejected by this Court. Well, Mr. Chief Justice, in Janice, the provisioned issue was 10b5b, and the government is no longer pressing a 10b5b charge in this case. The Janice opinion from start to finish is very clear that it is interpreting the term make in Rule 10b5. But the essential argument on the other side is that the argument you are now pressing is just an end run about Janice. It would render Janice essentially inconsequential. All you do is repackage what would have been a 10b charge under 17 or 10b5a and C. Well, you are on a couple of points in response to that. First of all, Janice will still have significant meaning, especially in private actions, because Janice limits the number, limits who can come within 10b5b. And the Janice opinion was careful to distinguish between aiders and a betters who are sort of background actors. The speechwriter example is the one that the Court gave preparatory actors who aren't themselves employing a device under A or engaging in an act under C, but are instead merely supporting that. So our contention is not that everyone who has some involvement in a statement will somehow become primarily liable under A and C and second 17a. As Justice Kagan said, Central Bank was very clear that the test for primary liability is simply that the defendant has to satisfy all the elements of the statute. And Central Bank says expressly that even if somebody is a secondary actor in some colloquial sense like a lawyer or an accountant, that person can still be primarily liable under the securities laws if that person satisfies all of the statutory requirements. As Petitioner did here, and as I don't take him to seriously contest

. His argument seems to be that subsection B of 10b5 has some sort of field preemptive effect in that it serves as the sole vehicle for bringing securities, fraud claims, all of the state. That's not how I understand the argument. As I understand the argument, it goes something like this that precedes in about five or six steps, I think. First, Central Bank says we've got to look at the statute, rules nice, but let's look at the statute. So we look at the statute and prohibits manipulative or deceptive devices, essentially. Well, no manipulation is alleged here, just a section. Are we on the same page so far? Yes, just a section. All right. Deception, I think, a full. Are you? Because there's another statute. Well, if I'm in the department, which is section 17. That's true. I took, I have Justice Gorsuch to be re-reported. I'm just talking about 10b5, to 10b at the moment. We get to 17a minute. All right, but so we're on the same page. And when we talk about deception of fraud, we have men's ray and actous rayas. You say I'm not contesting men's ray, just actous rayas. Okay, fine. When we get to actous rayas, no emission is alleged, just an action. You could have an actous rayas of fraud by act or omission, only acts charged here. And the only act seems to be this statement issued to potential investors. And we have a finding from the DC circuit that it wasn't made, that act wasn't made, that statement wasn't made by this defendant. Now we could maybe overturn that, I suppose, and you could argue that. But if you didn't make the act of fraud that's alleged, then doesn't that necessarily imply he substantially assisted to defend anything. I think that's the argument. So I think it was maybe a round step four that I disagreed with you. And that is, I think you said that he didn't make the act. But I do think it's important to distinguish it to your point on the text of the statute and the rule. What the DC circuit found was that he didn't make the statement, and therefore he didn't fall within the text of 10b5b. But the only act of fraud, you have to have an act that deceives someone else. And the only thing that deceived anybody allegedly here were these emails, right? And he didn't make them. Well, the ALJ found in the DC circuit affirmed that he did personally produce the statement. Are you challenging that? I understood the government to say we're not challenging the DC circuit's holding that he didn't make statements. We're not challenging the finding that he didn't make the statements. But the DC circuit also determined, I'll pull it in the ALJ, that he did do the act. And if you look at the language of C, rule 10b5c, he engaged in the act of sending the emails. And I do want to make clear that this is not simply retransmitting the statement. He sent the emails on behalf of the Investment Banking Division, which is exactly what his boss calculated would make the statement more misuse. I think where we're getting stuck, and then I'll stop by promise, is that the actous reas for fraud is the act of actually deceiving another person. And the only thing that could have done that here would have been the transmission of the emails to other persons. I agree, but I think we agree on that. Yes, but the transmission of the statement in the abstract, you know, doesn't, does nothing. It was the transmission of the email, which is an act. I think if you look at the ordinary meaning of act, it would include sending an email, or the ordinary meaning of the verb to the lawyer and 10b5c. The relevant act for fraud, again, is the act of deceiving another. And yes, and this email was extraordinarily deceptive, as was commented earlier, there were three gross mischaracterizations of the company under the representation that they would provide different layers of protection. S

. But if you didn't make the act of fraud that's alleged, then doesn't that necessarily imply he substantially assisted to defend anything. I think that's the argument. So I think it was maybe a round step four that I disagreed with you. And that is, I think you said that he didn't make the act. But I do think it's important to distinguish it to your point on the text of the statute and the rule. What the DC circuit found was that he didn't make the statement, and therefore he didn't fall within the text of 10b5b. But the only act of fraud, you have to have an act that deceives someone else. And the only thing that deceived anybody allegedly here were these emails, right? And he didn't make them. Well, the ALJ found in the DC circuit affirmed that he did personally produce the statement. Are you challenging that? I understood the government to say we're not challenging the DC circuit's holding that he didn't make statements. We're not challenging the finding that he didn't make the statements. But the DC circuit also determined, I'll pull it in the ALJ, that he did do the act. And if you look at the language of C, rule 10b5c, he engaged in the act of sending the emails. And I do want to make clear that this is not simply retransmitting the statement. He sent the emails on behalf of the Investment Banking Division, which is exactly what his boss calculated would make the statement more misuse. I think where we're getting stuck, and then I'll stop by promise, is that the actous reas for fraud is the act of actually deceiving another person. And the only thing that could have done that here would have been the transmission of the emails to other persons. I agree, but I think we agree on that. Yes, but the transmission of the statement in the abstract, you know, doesn't, does nothing. It was the transmission of the email, which is an act. I think if you look at the ordinary meaning of act, it would include sending an email, or the ordinary meaning of the verb to the lawyer and 10b5c. The relevant act for fraud, again, is the act of deceiving another. And yes, and this email was extraordinarily deceptive, as was commented earlier, there were three gross mischaracterizations of the company under the representation that they would provide different layers of protection. S. S. S. S. S. S. S. S. S. S. S. S. S. A. S.itt? S. Wend Berlin, interpreting in Janice. On that point, I do want to make clear that Janice was self-consciously a decision only about 10b5b. I think it was the second question in the oral argument in that case from Justice Sotomayor was why isn't there an A claim, a scheme claim in this case? And Petitioner's response was not that his clients wouldn't have been liable under that theory. It was that that simply had an arisen in the case. So Janice was clearly just deciding the meaning of B, which I do think goes to the real flaw in Petitioner's argument, which is again that subsection B somehow restricts the meaning of A and C in rule 10b5, and also somehow restricts the meaning of subsection A of a completely different statute, the Securities Act of 1933. And I do think it's a quite extraordinary argument to say that the commission could by adopting a rule in 1942 change the meaning of a statute that was enacted by the Congress and signed by the President in 1933. In fact, you know, this Court has repeatedly rejected that kind of field preemption or exclusive remedy argument in the securities laws, most prominently in the affiliated Ute case where the Court says quite literally, even though Petitioner is not, or the Security Seller in that case is not liable under B, he is liable under A and C because those provisions are not so restricted. Another good example is the Hermann and McLean case that we cite in our brief. There, Petitioner was the defendant, was found liable under Rule 10b5 for misstatements or omissions in a registration statement

. S. S. S. S. S. S. S. S. S. S. S. S. A. S.itt? S. Wend Berlin, interpreting in Janice. On that point, I do want to make clear that Janice was self-consciously a decision only about 10b5b. I think it was the second question in the oral argument in that case from Justice Sotomayor was why isn't there an A claim, a scheme claim in this case? And Petitioner's response was not that his clients wouldn't have been liable under that theory. It was that that simply had an arisen in the case. So Janice was clearly just deciding the meaning of B, which I do think goes to the real flaw in Petitioner's argument, which is again that subsection B somehow restricts the meaning of A and C in rule 10b5, and also somehow restricts the meaning of subsection A of a completely different statute, the Securities Act of 1933. And I do think it's a quite extraordinary argument to say that the commission could by adopting a rule in 1942 change the meaning of a statute that was enacted by the Congress and signed by the President in 1933. In fact, you know, this Court has repeatedly rejected that kind of field preemption or exclusive remedy argument in the securities laws, most prominently in the affiliated Ute case where the Court says quite literally, even though Petitioner is not, or the Security Seller in that case is not liable under B, he is liable under A and C because those provisions are not so restricted. Another good example is the Hermann and McLean case that we cite in our brief. There, Petitioner was the defendant, was found liable under Rule 10b5 for misstatements or omissions in a registration statement. Even though Section 11 of the Securities Act applies expressly to misstatements and registration statements in the Court, in a quite extended discussion said, well, we're not going to apply a theory of displacement, we're not going to apply a theory of exclusive remedies. In fact, both of the two statutes, the Securities Act and the Exchange Act, have clauses that say they're not the exclusive remedies for the security laws fraud, other than trying, doing something to create in the mind of the Heerer or recipient a false belief that is material. I think that's a good description. Well, that's black, to law addiction, all right? It's good enough. Fine. If that's what it is, if that's what it is, there could be two ways of doing it. One, you make the statement yourself. Two, you're part of a group where someone else makes the statement, but you play a pretty important role. Indeed, you might be the boss of the group, in which case you're not a native or a better. So, if you're not the maker, but you do, in fact, give rise to, perhaps as the boss, the false misrepresentation, wouldn't that be covered by ANC? Yes. Okay. I know that you're presenting. Yes. But I just wondered why this isn't fairly simple, because now what we did in Janice is we took a category of things which we thought the maker had made the false representation. And we thought, no, he wasn't the maker. But of still he might be the big boss of a group of people who, in fact, took actions or made statements to cause the false representation to arise in the mind of the listener. I thought perhaps you would agree. I do agree. I do agree, Justice. And that, it seemed to me, as your basic argument. That's correct. And, you know, we recognized there was a close decision in Janice, but I think Janice is ultimately a helpful decision for the commission. I was thinking about it that way, but I descended in Janice. So, I don't want to be, I don't want to be

. Even though Section 11 of the Securities Act applies expressly to misstatements and registration statements in the Court, in a quite extended discussion said, well, we're not going to apply a theory of displacement, we're not going to apply a theory of exclusive remedies. In fact, both of the two statutes, the Securities Act and the Exchange Act, have clauses that say they're not the exclusive remedies for the security laws fraud, other than trying, doing something to create in the mind of the Heerer or recipient a false belief that is material. I think that's a good description. Well, that's black, to law addiction, all right? It's good enough. Fine. If that's what it is, if that's what it is, there could be two ways of doing it. One, you make the statement yourself. Two, you're part of a group where someone else makes the statement, but you play a pretty important role. Indeed, you might be the boss of the group, in which case you're not a native or a better. So, if you're not the maker, but you do, in fact, give rise to, perhaps as the boss, the false misrepresentation, wouldn't that be covered by ANC? Yes. Okay. I know that you're presenting. Yes. But I just wondered why this isn't fairly simple, because now what we did in Janice is we took a category of things which we thought the maker had made the false representation. And we thought, no, he wasn't the maker. But of still he might be the big boss of a group of people who, in fact, took actions or made statements to cause the false representation to arise in the mind of the listener. I thought perhaps you would agree. I do agree. I do agree, Justice. And that, it seemed to me, as your basic argument. That's correct. And, you know, we recognized there was a close decision in Janice, but I think Janice is ultimately a helpful decision for the commission. I was thinking about it that way, but I descended in Janice. So, I don't want to be, I don't want to be. Well, I actually think, you know, I don't want it to be oversimplified by this. I think, you know, one quite simple explanation for Janice is the Court simply followed the tax to the rule. And that's precisely, and there was dispute about it, but everybody agreed that you were going to interpret the tax to the rule. And we believe, if you interpret the tax to the rule here, it is quite clear. And I think, Petitioner is almost conceding, I think, that his conduct falls within the meaning of A and C. It's only this argument that B somehow restricts or supersedes or preamps a charge under A and C of the intended. No, the argument is that if you read A and C the way you do, Janice is a dead letter, right? I mean, in the reply brief, the petitioner says, you never suggest any situation to which Janice would apply if you're reading of 10B5 prevails. Oh, Mr. Chief Justice, we disagree with that. I mean, if you had somebody- Well, as we didn't suggest it in our brief, but, you know, if you had somebody who was far back in the chain of drafting copy, you know, for example, a marketing director who drafted copy that it was sell- itself not deceptive, but that that person knew would then be used in a fraud, or you had a speechwriter who drafted something that was not wrong, but he knew was later going to be used in a fraud. That person in our view would be anater and a better. That would not be a primary violation for the important reason that rule 10B- that section 10B itself requires a deceptive act, and simply submitting material that you know is later going to be used fraudulently would give you the requisite mens rea for substantial assistance, but not for a violation of 10B5B itself. And Janice will be the critical case in those scenarios between primary liability and secondary liability. And that's, of course, essential in a private action because there is no cause of action after central bank for aiding and abetting in a private action. And Janice will be the difference between liability and no liability for people in that situation. Now, I do- I mean, the Chief Justice is thinking of someone who does prior to Janice would have made a statement. And now that seemed to be excluded in Janice. So, I mean, and now we have a way of making for that set of people Janice irrelevant because the aiding and abetting argument you just made would have existed pre Janice or anti Janice. One possible attitude is to say so much the better. But that perhaps would be the dissenters attitude. And so-so-so what is the answer to the Chief Justice's question, which was raised by your opponents, that it still has life and in fact makes a difference even for people who before and after maybe in the private context? What is-what is-let me try to be clear. Before Janice there would have been an argument that somebody far back in the chain of making a statement was a maker of the statement and was primarily liable under 10B5B. That means there could have been a private action against that defendant. After Janice, that argument is no longer available with respect to people far back in the chain who didn't commit one of the-who don't fall within A or C as primary violators

. Well, I actually think, you know, I don't want it to be oversimplified by this. I think, you know, one quite simple explanation for Janice is the Court simply followed the tax to the rule. And that's precisely, and there was dispute about it, but everybody agreed that you were going to interpret the tax to the rule. And we believe, if you interpret the tax to the rule here, it is quite clear. And I think, Petitioner is almost conceding, I think, that his conduct falls within the meaning of A and C. It's only this argument that B somehow restricts or supersedes or preamps a charge under A and C of the intended. No, the argument is that if you read A and C the way you do, Janice is a dead letter, right? I mean, in the reply brief, the petitioner says, you never suggest any situation to which Janice would apply if you're reading of 10B5 prevails. Oh, Mr. Chief Justice, we disagree with that. I mean, if you had somebody- Well, as we didn't suggest it in our brief, but, you know, if you had somebody who was far back in the chain of drafting copy, you know, for example, a marketing director who drafted copy that it was sell- itself not deceptive, but that that person knew would then be used in a fraud, or you had a speechwriter who drafted something that was not wrong, but he knew was later going to be used in a fraud. That person in our view would be anater and a better. That would not be a primary violation for the important reason that rule 10B- that section 10B itself requires a deceptive act, and simply submitting material that you know is later going to be used fraudulently would give you the requisite mens rea for substantial assistance, but not for a violation of 10B5B itself. And Janice will be the critical case in those scenarios between primary liability and secondary liability. And that's, of course, essential in a private action because there is no cause of action after central bank for aiding and abetting in a private action. And Janice will be the difference between liability and no liability for people in that situation. Now, I do- I mean, the Chief Justice is thinking of someone who does prior to Janice would have made a statement. And now that seemed to be excluded in Janice. So, I mean, and now we have a way of making for that set of people Janice irrelevant because the aiding and abetting argument you just made would have existed pre Janice or anti Janice. One possible attitude is to say so much the better. But that perhaps would be the dissenters attitude. And so-so-so what is the answer to the Chief Justice's question, which was raised by your opponents, that it still has life and in fact makes a difference even for people who before and after maybe in the private context? What is-what is-let me try to be clear. Before Janice there would have been an argument that somebody far back in the chain of making a statement was a maker of the statement and was primarily liable under 10B5B. That means there could have been a private action against that defendant. After Janice, that argument is no longer available with respect to people far back in the chain who didn't commit one of the-who don't fall within A or C as primary violators. Now we think that's not this case because the publisher does fall within A and C. So the SEC would argue that somebody that prepared one of these documents that contains fraudulent material or knew that it would be used in a fraud. In other words, you would say, oh, don't worry about that. That person is not a maker. He's not going to be liable because of Janice. Before Janice, we would have said he was a maker, but we accept Janice, and now we would say that that person is an A or a better, who could be pursued by the commission. That's the maloof decision that we've cited in-in our brief. Now I do want to make-the point that aiding and abetting liability will not always be available. And so it's tempting to say that that's always a fallback for the commission. First of all, of course, it's not available at all on a private right of action, which is one of the principal ways in which victims of fraud can recover money. But it's also not available even in a commission action unless there's a primary violation. You have to find the primary violator, and that distinguishes this from typical criminal aiding and abetting under 18 U.S. C. too. So you can easily hypothesize a situation in which somebody who makes the statement perhaps a high-up corporate executive or a board of directors lacks the C. Enter required for primary liability because they don't know what's going on with the details of the financial reports. They're trusting the lower-the-down people to do that. And the commission can't pursue them for a primary violation because they lack C. Enter. And then the commission can't pursue the A or a better because there's no primary violator. And that would-we submit, Taylor, a big loophole in securities fraud law. And that would be a very damaging result for the commission that I don't think Congress intended and that I don't think is within the ordinary meaning of the tax tier. My friend said a couple of times that tried to draw a distinction between conduct and statements

. Now we think that's not this case because the publisher does fall within A and C. So the SEC would argue that somebody that prepared one of these documents that contains fraudulent material or knew that it would be used in a fraud. In other words, you would say, oh, don't worry about that. That person is not a maker. He's not going to be liable because of Janice. Before Janice, we would have said he was a maker, but we accept Janice, and now we would say that that person is an A or a better, who could be pursued by the commission. That's the maloof decision that we've cited in-in our brief. Now I do want to make-the point that aiding and abetting liability will not always be available. And so it's tempting to say that that's always a fallback for the commission. First of all, of course, it's not available at all on a private right of action, which is one of the principal ways in which victims of fraud can recover money. But it's also not available even in a commission action unless there's a primary violation. You have to find the primary violator, and that distinguishes this from typical criminal aiding and abetting under 18 U.S. C. too. So you can easily hypothesize a situation in which somebody who makes the statement perhaps a high-up corporate executive or a board of directors lacks the C. Enter required for primary liability because they don't know what's going on with the details of the financial reports. They're trusting the lower-the-down people to do that. And the commission can't pursue them for a primary violation because they lack C. Enter. And then the commission can't pursue the A or a better because there's no primary violator. And that would-we submit, Taylor, a big loophole in securities fraud law. And that would be a very damaging result for the commission that I don't think Congress intended and that I don't think is within the ordinary meaning of the tax tier. My friend said a couple of times that tried to draw a distinction between conduct and statements. And as some of the questions suggest, I just don't think that holds up to start with the Stone Ridge opinion. It expressly says that the Pudishers' course of conduct included both oral and written statements. So this Court has made clear that conduct can't include statements. And in addition, Section 10B itself, which- I think he was saying something to the effect of if it's only statements, it can't be conduct. Yeah, I-I-I-I don't think that can work either. And I think it was you Justice Kagan who suggested this. As my friend said, everything in 10B5 has to-has to emanate from 10B. And the only two nouns that are at issue in 10B are devices and contrivances. Now, Section 10A includes devices, Rule 10B5A includes devices, which I take him to-to concede is conduct. So unless his position is that all statements are contrivances and covered by 10B for that reason, I think he's conceded that statements are devices under 10B. I think what I-what I heard at A-Ray-Man, we can- it's an interesting question what the argument is, but I had understood it that- all right, one can create a false impression in the mind of another through conduct or through statements. All right? Here, the only thing that was alleged to create a false impression in the mind of others was this statement. And that that's the problem you have. If the only false act, the only actous race, was a statement and he didn't make it. Then what? Well, I think he-he didn't make the statement with-the DC Circuit found, but he still employed the device to defraud or engage- You sure helped. I mean, there's no doubt about it. He did a lot to help, but he didn't engage in any independent conduct that created a false impression in the mind of the other, other than disseminate the false statement that did that. Well, I guess I might quibble with the last point that the other then is quite important. You know, he's sent you- You may or- Oh, for sure. And you've penalized him heavily and are going to be able to on anybody's account, but we're trying to draw a line here between primary and secondary. And that's-that's where I'm stuck. Well, on the facts of this case, Your Honor, there's no secondary liability charge. So if the court were to reverse, he would not be punished. We're not worried about Justice K

. And as some of the questions suggest, I just don't think that holds up to start with the Stone Ridge opinion. It expressly says that the Pudishers' course of conduct included both oral and written statements. So this Court has made clear that conduct can't include statements. And in addition, Section 10B itself, which- I think he was saying something to the effect of if it's only statements, it can't be conduct. Yeah, I-I-I-I don't think that can work either. And I think it was you Justice Kagan who suggested this. As my friend said, everything in 10B5 has to-has to emanate from 10B. And the only two nouns that are at issue in 10B are devices and contrivances. Now, Section 10A includes devices, Rule 10B5A includes devices, which I take him to-to concede is conduct. So unless his position is that all statements are contrivances and covered by 10B for that reason, I think he's conceded that statements are devices under 10B. I think what I-what I heard at A-Ray-Man, we can- it's an interesting question what the argument is, but I had understood it that- all right, one can create a false impression in the mind of another through conduct or through statements. All right? Here, the only thing that was alleged to create a false impression in the mind of others was this statement. And that that's the problem you have. If the only false act, the only actous race, was a statement and he didn't make it. Then what? Well, I think he-he didn't make the statement with-the DC Circuit found, but he still employed the device to defraud or engage- You sure helped. I mean, there's no doubt about it. He did a lot to help, but he didn't engage in any independent conduct that created a false impression in the mind of the other, other than disseminate the false statement that did that. Well, I guess I might quibble with the last point that the other then is quite important. You know, he's sent you- You may or- Oh, for sure. And you've penalized him heavily and are going to be able to on anybody's account, but we're trying to draw a line here between primary and secondary. And that's-that's where I'm stuck. Well, on the facts of this case, Your Honor, there's no secondary liability charge. So if the court were to reverse, he would not be punished. We're not worried about Justice K. So we counsel. I did want to make that one point. You've made the point, but you can see we got a bigger fish to fry than that. Right? I agree with that, and I do think you'll see sort of higher stakes in more sophisticated frauds, but I don't think you're likely to see a sort of more egregious fraud than this, where, yet petitioner, in addition to transmitting the statement that was made by Greg Lorenzo, sent it as the head of the Investment Banking Division. He asked- he offered to follow up with questions. He signed it under his own name. You got lots of men's rea. I grant you, okay? Those are acts. Well, those are acts. They are indeed acts. But if the act that created the deception in the mind of another wasn't any conduct, it was a statement, then what is the question? I suppose the answer to that is that sending an email is conduct. Yeah, it took acts to get to those minds, right? Absolutely. And the act it took in particular was sending the email, sending the two emails, without which these investors never would have been deceived. I do very strongly think that the act was what led to the deception. It helped the deception, but the deceptive, the thing that caused the deception in mind of the other to get back to Justice Breyer's quotation from Blacks, was the statement in the email, the erroneous facts transmitted to investors in the email, right? That's it. No, it can't cause the deception unless it gets to those readers. I agree with that. I suppose another way to think of it is if petitioner had called up the investors on the phone and said, you know, I hope you just got the email that I sent. This is not my statement. You know, I didn't make it. Greg Lorenzo made it. But, boy, you really want to look at it because it's a great investment opportunity. And if you have any questions, let me know. The Investment Banking Division

. So we counsel. I did want to make that one point. You've made the point, but you can see we got a bigger fish to fry than that. Right? I agree with that, and I do think you'll see sort of higher stakes in more sophisticated frauds, but I don't think you're likely to see a sort of more egregious fraud than this, where, yet petitioner, in addition to transmitting the statement that was made by Greg Lorenzo, sent it as the head of the Investment Banking Division. He asked- he offered to follow up with questions. He signed it under his own name. You got lots of men's rea. I grant you, okay? Those are acts. Well, those are acts. They are indeed acts. But if the act that created the deception in the mind of another wasn't any conduct, it was a statement, then what is the question? I suppose the answer to that is that sending an email is conduct. Yeah, it took acts to get to those minds, right? Absolutely. And the act it took in particular was sending the email, sending the two emails, without which these investors never would have been deceived. I do very strongly think that the act was what led to the deception. It helped the deception, but the deceptive, the thing that caused the deception in mind of the other to get back to Justice Breyer's quotation from Blacks, was the statement in the email, the erroneous facts transmitted to investors in the email, right? That's it. No, it can't cause the deception unless it gets to those readers. I agree with that. I suppose another way to think of it is if petitioner had called up the investors on the phone and said, you know, I hope you just got the email that I sent. This is not my statement. You know, I didn't make it. Greg Lorenzo made it. But, boy, you really want to look at it because it's a great investment opportunity. And if you have any questions, let me know. The Investment Banking Division. When you said, when you said, just to clarify, when you said, I agree with that. Were you agreeing with Justice Gorsuch or Justice Kagan? I think it was Justice Kagan. Is there a distinction between conduct and statement? Oh. Okay. No. Would she speak? Yes. You know, I mean, don't we make statements all the time through conduct? Yes, of course. Thank you. Since it was a favorable question, I thought. I mean, and I think it runs in both directions. Look, the Court has said, you know, in criminal law cases, the Court has said that not every crime that, you know, involves some sort of speech, you know, necessarily raises the First Amendment concern. I think it's a well-rounded principle that conduct does include statements. I suppose the final point is we're sort of searching for meaning for B. I do think the Court has reiterated on many occasions that even a provision that seems redundant or that doesn't add anything to the substantive scope of the law can still serve a valuable purpose by clarifying or by marking out what the heartland of the, of the violence is. And here, if you look at the history of the securities laws, Rule 10B5 came about nine years after the Securities Act, which had changed the common law rule and brought disclosure and statements to the four as a, as a responsibility for those issuing and trading and securities. So it makes sense that Rule 10B5B would mark out statements as a particular area of concern. And would say, if you can show that somebody made a statement, then you've shown liability under 10B5. But I don't think that that in any way forecloses liability under ANC. And as I said earlier, the affiliated Ute case, I think, is squarely on point and says somebody can be liable under ANC, even if they're not liable under B. Justice Alito's opinion, which we cited at page 36 of our brief in the lead case from the Third Circuit, I think has helped form this point too. In that case, there was a statute that covered both crimes of deceit on the one hand and tax evasion on the other hand. And Justice Alito's opinion explained that a tax crime that was not evasion, but still involved deceit would be covered by that statute because the enumeration of tax evasion didn't preempt the field or didn't serve as the exclusive vehicle for all tax-related claims. And I think the same analysis applies here. The statement, the enumeration of statements in Rule 10B5B does not preempt for close acts of conduct that fall within the tax of the statute

. When you said, when you said, just to clarify, when you said, I agree with that. Were you agreeing with Justice Gorsuch or Justice Kagan? I think it was Justice Kagan. Is there a distinction between conduct and statement? Oh. Okay. No. Would she speak? Yes. You know, I mean, don't we make statements all the time through conduct? Yes, of course. Thank you. Since it was a favorable question, I thought. I mean, and I think it runs in both directions. Look, the Court has said, you know, in criminal law cases, the Court has said that not every crime that, you know, involves some sort of speech, you know, necessarily raises the First Amendment concern. I think it's a well-rounded principle that conduct does include statements. I suppose the final point is we're sort of searching for meaning for B. I do think the Court has reiterated on many occasions that even a provision that seems redundant or that doesn't add anything to the substantive scope of the law can still serve a valuable purpose by clarifying or by marking out what the heartland of the, of the violence is. And here, if you look at the history of the securities laws, Rule 10B5 came about nine years after the Securities Act, which had changed the common law rule and brought disclosure and statements to the four as a, as a responsibility for those issuing and trading and securities. So it makes sense that Rule 10B5B would mark out statements as a particular area of concern. And would say, if you can show that somebody made a statement, then you've shown liability under 10B5. But I don't think that that in any way forecloses liability under ANC. And as I said earlier, the affiliated Ute case, I think, is squarely on point and says somebody can be liable under ANC, even if they're not liable under B. Justice Alito's opinion, which we cited at page 36 of our brief in the lead case from the Third Circuit, I think has helped form this point too. In that case, there was a statute that covered both crimes of deceit on the one hand and tax evasion on the other hand. And Justice Alito's opinion explained that a tax crime that was not evasion, but still involved deceit would be covered by that statute because the enumeration of tax evasion didn't preempt the field or didn't serve as the exclusive vehicle for all tax-related claims. And I think the same analysis applies here. The statement, the enumeration of statements in Rule 10B5B does not preempt for close acts of conduct that fall within the tax of the statute. If there are no further questions, we'd ask the Court to affirm. Thank you, Council. Four minutes, Mr. Heim. Thank you. My friend argues that their plain language of the rule in the statute covers Mr. Lorenzo's conduct, yet in the briefs that the SEC has submitted, they haven't cited any cases that cover simply sending an email out on behalf of another would qualify for primary liability. Secondly, the loophole hypothetical that was discussed as well, and the concerns about hindering the SEC's enforcement program are really unfounded here because the SEC in addition to having a betting liability also has 1782, which covers specifically a situation where a person uses a false statement to obtain one of your property. So that, the 1782, it's our position, covers the concerns of the Court raised in situations where perhaps there's a big boss that's- You're saying 1782 covers this case. Are you saying that Lorenzo used this statement to obtain money or property? No, I think if that had been charged, Mr. Lorenzo would have arguments and defenses to 1782, but the charge would have been a closer fit to what the conduct is here, and it would not have raised the serious issues with regards to undermining Congress's statutory framework with regards to hitting a betting and the requirement to have substantial assistance because, as Justice Gorsuch noted, Mr. Lorenzo did not engage in inherently deceptive act. Sending an email is not inherently deceptive. In our position, consistent with the Circuit Court majority, is that the act in order to take Mr. Lorenzo out of the category of misstatements and into the category of A&C has to be something that's inherently deceptive, and otherwise it's just a matter. It's a very low bar. Why is it inherently deceptive to tell a succession of untruths? The act is the sending of the email, and the conduct that occurred here with Gregor Renzo is the actual maker of the statement. So, Franklin Renzo is essentially a conduit to somebody that's transmitting statements with Cienter in this case on behalf of another, but at the same time, simply sending an email is not enough to transform Franklin Renzo into a primary violator from perhaps somebody who gave substantial assistance. And furthermore, the language of the statute and the rules have the clear distinction between statements and conduct. And here, in order to transition Mr. Lorenzo out of that subsection B realm and into A&C and even into 17 A1, there has to be some inherently deceptive conduct, such as creating a phony purchase order or a phony contract with Charles Vista to raise capital. Those are the sorts of serious conduct that Congress had in mind when they established the distinctions between primary and secondary liability. And if there are no further questions. Thank you, Council

. The case is submitted