(Slip Opinion) OCTOBER TERM, 2019 1 Syllabus NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337. SUPREME COURT OF THE UNITED STATES Syllabus LIU ET AL. v. SECURITIES AND EXCHANGE COMMISSION CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT No. 18–1501. Argued March 3, 2020—Decided June 22, 2020 To punish securities fraud, the Securities and Exchange Commission is authorized to seek “equitable relief” in civil proceedings, 15 U. S. C. §78u(d)(5). In Kokesh v. SEC, 581 U. S. ___, this Court held that a disgorgement order in a Securities and Exchange Commission (SEC) enforcement action constitutes a “penalty” for purposes of the applica- ble statute of limitations. The Court did not, however, address whether disgorgement can qualify as “equitable relief” under §78u(d)(5), given that equity historically excludes punitive sanctions. Petitioners Charles Liu and Xin Wang solicited foreign nationals to invest in the construction of a cancer-treatment center, but, an SEC investigation revealed, misappropriated much of the funds in violation of the terms of a private offering memorandum. The SEC brought a civil action against petitioners, seeking, as relevant here, disgorge- ment equal to the full amount petitioners had raised from investors. Petitioners argued that the disgorgement remedy failed to account for their legitimate business expenses, but the District Court disagreed and ordered petitioners jointly and severally liable for the full amount. The Ninth Circuit affirmed. Held: A disgorgement award that does not exceed a wrongdoer’s net prof- its and is awarded for victims is equitable relief permissible under §78u(d)(5). Pp. 5–20. (a) In interpreting statutes that provide for “equitable relief,” this Court analyzes whether a particular remedy falls into “those catego- ries of relief that were typically available in equity.” Mertens v. Hewitt Associates, 508 U. S. 248, 256. Relevant here are two principles of eq- uity jurisprudence. Equity practice has long authorized courts to strip wrongdoers of their ill-gotten gains. And to avoid transforming that 2 LIU v. SEC Syllabus remedy into a punitive sanction, courts restricted it to an individual wrongdoer’s net profits to be awarded for victims. Pp. 5–14. (1) Whether it is called restitution, an accounting, or disgorge- ment, the equitable remedy that deprives wrongdoers of their net prof- its from unlawful activity reflects both the foundational principle that “it would be inequitable that [a wrongdoer] should make a profit out of his own wrong,” Root v. Railway Co., 105 U. S. 189, 207, and the coun- tervailing equitable principle that the wrongdoer should not be pun- ished by “pay[ing] more than a fair compensation to the person wronged,” Tilghman v. Proctor, 125 U. S. 136, 145–146. The remedy has been a mainstay of ...
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