The recent insider trading decision in United States v. Newman, 2014 WL 6911278, has begun to impact cases and individuals beyond its caption. As has been widely reported, on Dec. 10, 2014, the U.S. Court of Appeals for the Second Circuit handed down an opinion that reaffirmed the teachings of the U.S. Supreme Court’s landmark decision in Dirks v. SEC, to wit, that for tippee liability to exist in an insider trading case, the government must prove that the tippee knew of a personal benefit received by the tipper. The widely discussed decision has raised questions before at least one jurist about guilty pleas already taken in an insider trading matter completely unrelated to Newman. The question the court in United States v. Durant had to resolve: Does Newman, a case brought under the classical theory of insider trading, apply with equal force to cases brought under the misappropriation theory?
After several rounds of briefing by the relevant parties, on Jan. 22, 2015, Judge Andrew L. Carter vacated the guilty pleas of the defendants in Durant and reserved as to whether an outright dismissal of the indictment is warranted.
