Apparent Support for a Narrow Affirmance.Following the discussion of the government’s effort to expand the Dirks gift standard beyond relatives and friends, Justice Kagan suggested that the Court not address the issue. She stated, “And things might look different if we had a case that was not a relative or friend. And why not separate out that strange, unusual, hardly-ever-prosecuted situation and say we’re not dealing with that here? We have nothing to say about it.” To which, the government’s counsel responded, “I’m fine with that.” Then, in response to Justice Sotomayor’s question about whether there was a difference between a friend and an acquaintance, government counsel stated:
[T]his case clearly doesn’t … implicate that at all….It’s one brother to another brother….The Court doesn’t have to deal with further outlier cases, and it doesn’t have to reconceptualize Dirks, or even interpret it in the way that I have synthesized its analysis….If the Court feels more comfortable given the facts of this case of reaffirming Dirks and saying that was the law in 1983, it remains the law today, that is completely fine with the government…..[I]f the Court is more at home with the language that was actually used in Dirks and wants to reaffirm it, it should do so.
Yet despite the potential for controversy, at least five justices seemed inclined to affirm Salman’s conviction Wednesday morning, judging from a transcript of the oral argument. The justices leaning toward affirmance appeared to include Anthony Kennedy and the four liberal-leaning justices: Stephen Breyer, Ruth Bader Ginsburg, Sonia Sotomayor, and Elena Kagan.
“You’re asking us to cut back significantly from something that we said several decades ago—something Congress has shown no indication that it’s unhappy with,” she told Salman’s attorney, Alexandra Shapiro. “And you’re asking us essentially to change the rules in a way that threatens that integrity [of the nation’s markets].”
Justice Samuel Alito was the most skeptical questioner of the government’s attorney, Deputy Solicitor General Michael Dreeben, but even he did not seem resolutely opposed to affirmance. Justice Clarence Thomas did not ask any questions. …
The [Newman] ruling shocked Manhattan U.S. Attorney Preet Bharara, who had brought a wave of insider-trading prosecutions since assuming office in August 2009. He has charged 111 people with that offense to date, but since Newman he has had to dismiss at last 10 of those cases—including several for which he had already obtained guilty pleas.
When the Supreme Court declined to review the Newman case, but then agreed to hear Salman, some people assumed Salman’s conviction would be overturned.
But the questioning at today’s argument suggested the opposite.
“To help a close family member is like helping yourself,” Justice Breyer said during the questioning, explaining why he thought that giving a gift to a relative conferred a personal benefit on oneself.
“Dirks says there’s a benefit in making a gift,” said Justice Kennedy, while questioning Salman’s attorney, Shapiro. “As Justice Breyer points out, you certainly benefit from giving to your family. It ennobles you and, in a sense it helps you financially because you make them more secure.”
The Government did not get off scot-free, however. Several Justices did express concern that a rule that equated “personal benefit” with almost anything would leave prosecutors and the SEC with too much discretion and not provide clear-cut rules to market participants. Justices Alito and Sotomayor in particular pushed back when the Government suggested an even looser standard that essentially eliminated the personal benefit requirement whenever the tipper disclosed information for a non-corporate purpose. Justice Breyer also underscored the importance of drawing clear lines for market participants and regulators to follow.
“I’m not worried so much about this case,” Justice Stephen Breyer said. “I am worried about line-drawing.”