Reply Brief — Ongkaruck Sripetch, Petitioner v. Securities and Exchange Commission

No. 25-466

In the Supreme Court of the United States

ONGKARUCK SRIPETCH, PETITIONER

v.

U.S. SECURITIES AND EXCHANGE COMMISSION

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

REPLY BRIEF FOR THE PETITIONER

KENNETH P. WHITE

TYLER C. CREEKMORE

BROWN WHITE & OSBORN, LLP

333 South Hope Street, 40th Floor

Los Angeles, CA 90071

CHLOE WARNBERG

HAYNES AND BOONE, LLP

1221 McKinney Street, Ste. 4000

Houston, TX 77010

DANIEL L. GEYSER

Counsel of Record

MICHAEL F. QIAN

HAYNES AND BOONE, LLP

2801 N. Harwood Street, Ste. 2300

Dallas, TX 75201

(303) 382-6219

daniel.geyser@haynesboone.com

ANGELA M. OLIVER

HAYNES AND BOONE, LLP

888 16th Street, N.W., Ste. 300

Washington, DC 20006

TABLE OF CONTENTS

Page

Reply brief ....................................................................................... 1

A. Under Liu’s authoritative construction,

disgorgement without pecuniary harm

violates traditional equitable limits and

constitutes an impermissible penalty—and

the government errs in attempting to

rewrite Liu ......................................................................... 1

B. Congress confirmed Liu’s traditional limits

on disgorgement with its post-Liu

statutory enactment—and the government

is wrong that Congress silently rejected

one-third of Liu’s holding................................................. 7

C. The Act’s context and purpose further

confirm that disgorgement requires

pecuniary loss—which the government

fails to refute .................................................................... 10

D. The government cannot use the

Restatement to override Liu or the

traditional limits on disgorgement ................................ 13

Conclusion ...................................................................................... 20

TABLE OF AUTHORITIES

Cases:

Am. Univ. v. Forbes, 183 A. 860 (N.H. 1936) ..................... 18

Catts v. Phalen, 43 U.S. (2 How.) 376 (1844) ...................... 17

CIGNA Corp. v. Amara, 563 U.S. 421 (2011) ..................... 16

Corey v. Struve, 149 P. 48 (Cal. 1915) .................................. 17

Edwards v. Lee’s Administrator, 96 S.W.2d 1028

(Ky. 1936) ........................................................................... 17

Federal Sugar Ref. Co. v. United States Sugar

Equalization Bd., 268 F. 575 (S.D.N.Y. 1920) .............. 17

Great-West Life & Annuity Ins. Co. v. Knudson,

534 U.S. 204 (2002) ........................................................ 4, 17

(I)

II

Page

Cases—continued:

Hamilton-Brown Shoe Co. v. Wolf Bros. & Co.,

240 U.S. 251 (1916) ...................................................... 14, 17

Harris Tr. & Sav. Bank v. Salomon Smith

Barney, Inc., 530 U.S. 238 (2000) ..................................... 4

Keech v. Sandford, 25 Eng. Rep. 223 (Ch. 1726) ............... 17

Kilbourn v. Sunderland, 130 U.S. 505 (1889) .................... 14

Kokesh v. SEC, 581 U.S. 455 (2017) ............................... 1, 2, 5

Leman v. Krentler-Arnold Hinge Last Co.,

284 U.S. 448 (1932) .................................................. 5, 15, 17

Liu v. SEC, 591 U.S. 71 (2020) ........................ 1-10, 12-15, 19

Olwell v. Nye & Nissen Co., 173 P.2d 652

(Wash. 1946) .................................................................. 5, 16

Porter v. Warner Holding Co.,

328 U.S. 395 (1946) ............................................ 6, 14, 15, 18

Raven Red Ash Coal Co. v. Ball,

39 S.E.2d 231 (Va. 1946) ............................................... 6, 17

SEC v. Govil, 86 F.4th 89 (2d Cir. 2023) ............................... 1

SEC v. Jarkesy, 603 U.S. 109 (2024) .......................... 1, 2, 5, 7

Sheldon v. Metro-Goldwyn Pictures Corp.,

309 U.S. 390, 399 (1940)................................................ 7, 17

Spokeo, Inc. v. Robins, 578 U.S. 330 (2016) .......................... 6

Tilghman v. Proctor, 125 U.S. 136 (1888) ....................... 2, 17

Tull v. United States, 481 U.S. 412 (1987) ...................... 2, 14

United States v. Carter, 217 U.S. 286 (1910) .................. 4, 15

Statutes:

15 U.S.C. 78u(d) .......................................... 1, 4, 7, 9, 10, 12, 19

15 U.S.C. 78u(d)(3)(B) ............................................................. 7

15 U.S.C. 78u(d)(5) ............................................................... 3, 4

15 U.S.C. 78u(d)(7) ............................................. 7, 9, 10, 12, 19

15 U.S.C. 78u(d)(9) ................................................................. 10

15 U.S.C. 78u(g) ...................................................................... 10

15 U.S.C. 78u-4(b)(4) ................................................................ 6

15 U.S.C. 78u-6(g)(3)(A)(i) .................................................... 12

III

Page

Miscellaneous:

66 Am. Jur. 2d Restitution § 1 .............................................. 15

1 Dan B. Dobbs, Law of Remedies (2d ed. 1993) ............... 18

Restatement (Third) of Restitution and Unjust

Enrichment ........................................................................ 18

A. Under Liu’s Authoritative Construction, Disgorgement Without Pecuniary Harm Violates

Traditional Equitable Limits And Constitutes An

Impermissible Penalty—And The Government

Errs In Attempting To Rewrite Liu

1. As petitioner established (Br. 15-20), Liu analyzed

disgorgement under Section 78u(d), and it reaffirmed

every key principle that effectively resolves this case. As

Liu explained, disgorgement is a traditional equitable

remedy. Liu v. SEC, 591 U.S. 71, 76 n.1, 80 (2020). It cannot be a punishment or deterrent. Id. at 77; see also

Kokesh v. SEC, 581 U.S. 455, 462, 467 (2017). It instead

“restor[es] the status quo” and provides “fair compensation”—which necessarily contemplates losses to compensate. Liu, 591 U.S. at 80 (internal quotation marks omitted); SEC v. Jarkesy, 603 U.S. 109, 124 (2024) (“equit[y]”

“restore[s] the victim”); SEC v. Govil, 86 F.4th 89, 103 (2d

Cir. 2023) (“[t]he return of funds presupposes pecuniary

harm,” as “[f]unds cannot be returned if there was no deprivation in the first place”). And while equity generally authorizes “courts to strip wrongdoers of their ill-gotten

gains,” that “principle[]” is strictly cabined “to avoid

transforming an equitable remedy into a punitive sanction”: disgorgement is “restricted” to “an individual

wrongdoer’s net profits to be awarded for victims.” Id. at

79 (emphasis added).

Liu established these principles in a freestanding section of its opinion tracing equity jurisprudence—without

regard to the specific language of Section 78u(d). See 591

U.S. at 78-87 (Part II); see also Pet. Br. 19-20 (so explaining). Liu instead focused on the nature of disgorgement

as an equitable remedy; its non-punitive nature; and its

essential function in restoring property and providing

compensation. In short, if “the SEC is not obligated to return any money to victims,” “[s]uch a penalty by definition

(1)

2

does not ‘restore the status quo’ and can make no pretense

of being equitable.” Jarkesy, 603 U.S. at 124; Kokesh, 581

U.S. at 465 (explaining that, pre-Liu, “SEC disgorgement” “bears all the hallmarks of a penalty” because “it is

intended to deter, not compensate”); see also Liu, 591

U.S. at 85-86 (faulting the lower courts’ “version of the

SEC’s disgorgement remedy” for “exceed[ing] the

bounds of traditional equitable principles”).

And because disgorgement itself is an equitable remedy (Liu, 591 U.S. at 76 n.1, 80; Tull v. United States, 481

U.S. 412, 424 (1987)), it is bound by this guiding “equitable

principle”: a “wrongdoer” cannot “be punished by

‘pay[ing] more than a fair compensation to the person

wronged.’” Liu, 591 U.S. at 80 (quoting Tilghman v. Proctor, 125 U.S. 136, 145-146 (1888)); see also id. at 102

(Thomas, J., dissenting) (“the award should be used to

compensate victims”; “[p]laintiffs in equity may claim

‘that which, ex aequo et bono [according to what is equitable and good], is theirs, and nothing beyond this’”) (bracketed text in original).1

The government takes issue with how petitioner cited Kokesh in

his brief, suggesting he failed to note that pre-Liu “SEC disgorgement is not compensatory.” U.S. Br. 15 n.* (quoting Pet. Br. 15 and

Kokesh, 581 U.S. at 464) (emphasis added). This entirely misses the

point: Liu confirmed that equitable remedies (like disgorgement)

cannot be punitive, and it accordingly rejected old “SEC disgorgement” as non-compensatory—because true equitable remedies (like

disgorgement) are “compensat[ory].” 591 U.S. at 80, 85-87. Petitioner’s point was to highlight the contrast between equitable and legal remedies, and “compensation” is a key factor in that calculus. See,

e.g., Kokesh, 581 U.S. at 462 (“a pecuniary sanction operates as a penalty only if it is sought ‘for the purpose of punishment and to deter

others from offending in like manner’—as opposed to compensating

a victim for his loss”) (emphasis added). In any event, Liu established

that disgorgement’s core purpose is indeed “‘compensat[ory].’” 591

U.S. at 80; contra U.S. Br. 15.

1

3

2. The government’s contrary view violates core precepts of disgorgement and stands Liu on its head. It embraces disgorgement as entirely punitive. Br. 15 (“the essential function of disgorgement is to strip wrongdoers of

their wrongful gains”); id. at 24-26. It says no disgorged

funds have to be returned to investors. Id. at 33, 35. It

claims divesting ill-gotten gains is a sole permissible objective. Id. at 31. It insists disgorgement has nothing to do

with restoring or compensating loss. Id. at 15. And it

maintains that Liu’s contrary position (if the government

thinks Liu can be read this way at all) is rooted exclusively

in Section 78u(d)(5)’s specific text—requiring “equitable

relief” “for the benefit of investors.” Id. at 27. But it says

“disgorgement” otherwise can legitimately focus (full

stop) on “depriving” wrongdoers of ill-gotten gains. Id. at

14; see also id. at 12-13.

If these arguments sound familiar, that is because

they are. Twice over. This Court effectively rejected the

same arguments in Liu (e.g., 591 U.S. at 85-88), and petitioner already refuted each of these points here (Pet. Br.

17-20). The government now essentially admits it is seeking a penalty, which it obviously is (Pet. Br. 19 (so establishing))—despite Liu declaring punitive relief off-limits

(e.g., 591 U.S. at 77, 79-80). The government repeatedly

invokes Liu’s “[f]irst” principle of disgorgement

(“strip[ping] wrongdoers of their ill-gotten gains,” 591

U.S. at 79)—while refusing to acknowledge “the countervailing principle” that “wrongdoer[s] should not be punished by ‘pay[ing] more than a fair compensation to the

person wronged’” (id. at 80). And the government,

astoundingly, (re)invokes the same body of pre-Liu

4

lower-court SEC disgorgement decisions (Br. 24-26, 31,

35-36) that Liu itself repudiated (591 U.S. at 85-86 & n.3).2

If the government wishes to stand entirely on the

proposition that Congress upended everything with its

post-Liu 2021 amendments, it is certainly free to do so

(wrong as it is). But the government should at least candidly admit it loses under any fair reading of Liu—and it

prevails only if it can establish Congress (silently) overruled Liu’s definitive construction of “disgorgement.” But

there is no genuine reading of Liu that supports the government here.

Nor can the government sidestep Liu’s holding by

suggesting “the Court had no occasion to construe or define” disgorgement.” U.S. Br. 31 (so suggesting because

“the statute at issue * * * did not contain the word ‘disgorgement’”). This is wishing thinking. The Court’s entire

analysis targeted disgorgement, analyzed its traditional

roots, outlined its permissible boundaries, and explained

when it could (and could not) be employed. It is fanciful to

suggest Liu did not settle the term’s meaning.3

2

The government at least now tacitly acknowledges that Liu’s

holding rested on both Section 78u(d)(5)’s text and equitable principles (Br. 31)—but it still gives short shrift to the controlling equityonly section of Liu’s opinion. See Pet. Br. 19-20.

The government again trots out the same argument that disgorgement’s focus on net gain (not victim loss) somehow shows that

victim loss is irrelevant. Br. 16. Petitioner refuted this before (Br. 1819), and the government remains wrong. Disgorgement’s profit-focus

measure ensures the remedy does not become punitive (which it

would if a defendant were forced to turn over funds exceeding gains);

and it likewise promotes disgorgement’s core objective: reallocating

property to its proper owner. See, e.g., Great-West Life & Annuity

Ins. Co. v. Knudson, 534 U.S. 204, 216 (2002); Harris Tr. & Sav. Bank

v. Salomon Smith Barney, Inc., 530 U.S. 238, 250-251 (2000); United

States v. Carter, 217 U.S. 286, 308 (1910). The gain reflects the sum

3

5

3. Perhaps because it realizes Liu forecloses its position, the government instead focuses on other equitable

authorities. See, e.g., U.S. Br. 17, 18-20. But the government misunderstands when parties can theoretically recover without loss: when enrichment goes to an “uninjured” victim, it does so because the victim has an underlying substantive entitlement to the funds. See, e.g.,

Leman v. Krentler-Arnold Hinge Last Co., 284 U.S. 448,

456 (1932) (“‘The profits which are recoverable against an

infringer of a patent are in fact a compensation for the injury the patentee has sustained from the invasion of his

right.’”); Olwell v. Nye & Nissen Co., 173 P.2d 652, 654

(Wash. 1946) (“‘[a]ctions for restitution have for their primary purpose taking from the defendant and restoring to

the plaintiff something to which the plaintiff is entitled’”).

And in those cases, the failure to convey those funds is itself best understood as a pecuniary loss. See also Part D,

infra.

But there is no such loss here. In this setting, any investor award would be a windfall. It would not “restore

the status quo” (a core condition for disgorgement), e.g.,

Jarkesy, 603 U.S. at 123-124, but instead would change

the status quo and leave an uninjured party better off—

despite Congress’s separate determination that such parties have no right to sue or recover in this context. See

Pet. Br. 25-26. And because such a remedy serves no remedial purpose, it would indeed become an impermissible

penalty. E.g., Jarkesy, 603 U.S. at 123-124; Kokesh, 581

U.S. at 462. Liu simply applies these uniform background

principles to this particular setting.

the court can equitably assign to the party justly entitled to it. But

any attempt to exceed that gain drifts beyond equity and veers into

penalties and damages.

6

Latching onto a single sentence from Justice

Thomas’s Spokeo concurrence, the government says parties can seek unjust enrichment without showing pecuniary harm. Br. 10-11, 19-20, 29 (citing Spokeo, Inc. v. Robins, 578 U.S. 330, 344 (2016) (Thomas, J., concurring)).

There may indeed be contexts where parties can recover

without pecuniary harm (in a sense)—again, because the

underlying substantive law grants that party a right to

any enrichment. E.g., Porter v. Warner Holding Co., 328

U.S. 395, 402 (1946) (“restoring the status quo and ordering the return of that which rightfully belongs to the purchaser or tenant”). Even there, the better understanding

is the parties entitled to gains do suffer loss—in the failure to voluntarily turn over proceeds that rightfully belong to them. E.g., Raven Red Ash Coal Co. v. Ball, 39

S.E.2d 231, 235, 238 & n.2 (Va. 1946). In any event, again,

there is no such underlying substantive right here: an uninjured investor has no right to recover a third party’s

gains without showing economic loss. E.g., 15 U.S.C. 78u4(b)(4). So unlike other settings (copyrights, patents, trust

beneficiaries, principals/agents, landlords/tenants, etc.),

pecuniary loss is necessary to establish any right to relief.

4. According to the government, petitioner’s theory

under Liu is ultimately arbitrary—because supposedly

any showing that even a single investor lost $1 would be

sufficient to disgorge the entirety of a defendant’s net

gains. U.S. Br. 2, 16. The government misstates petitioner’s theory and misunderstands the point of disgorgement.

As Liu confirmed, disgorgement is limited to restoring the status quo; it precludes windfalls, and prohibits

“punish[ing]” a wrongdoer “by ‘pay[ing] more than a fair

compensation to the person wronged.’” Liu, 591 U.S. at

80 (emphasis added); id. at 102 (Thomas, J., dissenting)

(recovery “compensate[s] victims” for what “in equity” “is

7

theirs, and nothing beyond this’”) (emphasis added). Equitable relief is limited to those amounts where a party

has a rightful claim; a $1 injury does not create a rightful

claim to anything beyond $1. E.g., Sheldon v. MetroGoldwyn Pictures Corp., 309 U.S. 390, 399, 405-406

(1940). Any excess amount would be a punishment and a

windfall, and it is precluded by traditional equitable

bounds. Id. at 405-406.

To be sure, the government can always seek penalties

and properly target a wrongdoer’s full “gross” proceeds.

15 U.S.C. 78u(d)(3)(B). But there is no basis for distorting

equitable principles and awarding windfalls to uninjured

investors simply because the government would rather

end-run substantive and procedural safeguards for penal

relief. E.g., Jarkesy, 603 U.S. at 123-124 (requiring jury

trial); Former SEC Attorneys Amicus Br. 6-8.

B. Congress Confirmed Liu’s Traditional Limits On

Disgorgement With Its Post-Liu Statutory Enactment—And The Government Is Wrong That Congress Silently Rejected One-Third Of Liu’s Holding

1. Liu confirmed what disgorgement is and what it is

not, and Congress necessarily ratified Liu’s holding when

it wrote “disgorgement” directly into Section 78u(d)(7).

Pet. Br. 20-25. If Congress wished to override Liu or depart from its traditional common-law meaning, Congress

would have included some textual hint to that effect. Instead, its post-Liu enactment reiterated verbatim the

very term (“disgorgement”) this Court had just defined.

Without explanation, guidance, modification, or change.

There is no direct hint that Congress disagreed with Liu’s

take or rejected the “old soil” accompanying this term of

art. Pet. Br. 21-23. It accordingly follows that Congress

incorporated this settled meaning directly into the statute.

8

2. The government reaches the opposite conclusion,

but its position fails across the board.

a. The government first suggests Congress was necessarily adopting the pre-Liu lower-court decisions that Liu

had just repudiated. Br. 27, 30-39. This is absurd. The relevant presumption is Congress adopts this Court’s holdings, not lower-court decisions. And Congress surely does

not (silently) embrace scattershot lower-court precedent

this Court has rejected.

Congress is always free to respond to this Court’s

holdings. But it is implausible Congress flipped this

Court’s position on its head by codifying the same term

and simply assuming courts would presume Congress

adopted the opposite meaning. And that is especially true

here: Liu itself had just instructed this is not how Congress would alter disgorgement’s meaning: “Congress

does not enlarge the breadth of an equitable, profit-based

remedy simply by using the term ‘disgorgement’” (Liu,

591 U.S. at 86)—which describes precisely what Congress

did.

Simply put: Congress did not reject this Court’s understanding of “disgorgement” by codifying the term disgorgement—in the same statutory section this Court had

just addressed—all to cryptically restore a preexisting

body of disavowed lower-court decisions. The alternative

is obvious: Congress understood disgorgement to mean

what this Court had just said it meant. And whether the

government agrees with this Court’s construction or not,

that interpretation is now embedded in the U.S. Code.

b. The government next suggests Congress resorted

to dictionary definitions or lay understandings over Liu’s

on-point construction of a term of art. U.S. Br. 14, 16-17.

It is not difficult to decide whether Congress’s post-Liu

enactment means (a) the remedy Liu delineated, or (b)

“‘eject (food) from the throat or mouth’” (U.S. Br. 14). The

9

government’s take is not how it works when construing

terms of art imbued with settled common-law meaning.

See Pet. Br. 22-23.

c. Contrary to the government’s contention (Br. 31),

nor is “disgorgement” in Section 78u(d)(7) some kind of

SEC-specific term of art. As petitioner already explained

(Br. 23), there was no need to reiterate disgorgement’s

definition when Liu already embedded that core meaning

into the term itself.

Nor does the government fare any better by focusing

on Section 78u(d)(3)’s reference to “unjust enrichment.”

Br. 20. The government’s reading would render the key

clause—“disgorgement under paragraph (7)”—superfluous. See U.S. Br. 20 (inadvertently conceding—by quoting the provision while omitting the key clause). As previously explained (Pet. Br. 24), the operative term is still

“disgorgement,” and parties must still satisfy disgorgement’s bounds. Congress did not rewrite the core remedy

by labeling the amounts (“unjust enrichment”) that might

properly belong to an injured investor.

d. The government also faults petitioner for ignoring

other features of Congress’s post-Liu enactment. According to the government, Congress expressly adopted two

of Liu’s limitations (in Section 78u(d)(3)(A)(ii)), implicitly

rejected the third (“used to compensate victims”), and did

so by using the term “disgorgement”—which this Court

had just defined and limited to its traditional common-law

scope. See Br. 32-36, 38-39 (suggesting Congress ratified

“some but not all” of Liu).

This again is implausible. Congress does not override

a decision of this Court by negative implication in a subsidiary provision of the Act, especially when that subsection indisputably adopts every other aspect of the decision.

10

If anything, this confirms Congress was implementing

Liu, not dismantling it.4

e. The government finally contests (Br. 37) petitioner’s

position that Congress added Section 78u(d)(7) as part of

a restructuring to restore the limitations period indirectly

eliminated by Liu. Pet. Br. 24-25. And the government

correctly points out that Congress tinkered with the entire limitations regime when it added these provisions.

Yet the government does not dispute that Liu left

SEC disgorgement with no limitations period at all. Pet.

Br. 24. Nor does the government dispute that the 2021

amendments in fact filled that gap. Nor, finally, does the

government have a real answer for Congress’s apparent

drafting choice to separate out disgorgement so it could

assign a limitations period to these claims. Those are the

relevant points—and they confirm Congress was indeed

ratifying Liu.

C. The Act’s Context And Purpose Further Confirm

That Disgorgement Requires Pecuniary Loss—

Which The Government Fails To Refute

1. As previously established (Br. 25-28), Section

78u(d)’s context and purpose reinforce that disgorgement

requires pecuniary loss. The government effectively has

no response.

The government invokes two provisions governing the interaction

between SEC disgorgement and victims’ own private suits for recovery. Br. 23. Section 78u(d)(9) prevents the disgorgement authority “in

paragraph (7)” from being “construed as altering any right that any

private party may have to maintain a suit for a violation of this chapter.” 15 U.S.C. 78u(d)(9). Section 78u(g) prevents consolidation or coordination of SEC actions for equitable relief with private suits. 15

U.S.C. 78u(g). That disgorgement might otherwise overlap with private suits is the very premise of these provisions—if anything, these

confirm that disgorgement compensates victims.

4

11

a. First, the government cannot explain why the same

investors should collect the same funds for the same misconduct in SEC actions that Congress explicitly prohibited them from collecting in private suits. Br. 25-26. The

government’s only semi-response: Congress was concerned about abusive private securities litigation,

whereas there is supposedly no comparable concern for

SEC enforcement actions. Br. 23.

This is a non-sequitur. The limitations on recovery reflect Congress’s judgment that uninjured investors are

not entitled to recover in certain settings. Yet the government’s interpretation of its disgorgement authority would

permit uninjured investors to receive a windfall through

the SEC, even though those same investors would receive

nothing in private litigation. The disconnect is obvious.

b. Second, the government cannot explain why Congress would effectively authorize two penalties in the

same provision, each capped at different amounts, each

with different labels—but each otherwise operating identically. Pet. Br. 26-27. This is not how Congress drafts

statutes. Petitioner’s reading, by contrast, assigns each

remedy a different purpose: one penalizes the wrongdoer

(civil penalties), and the other restores the status quo and

returns funds to injured investors (disgorgement). There

is no reason to construe the statute to introduce a second

round of penalties into a section that already covers penalties.

c. Third, the government has no response—literally—

to the obvious upshot of the government’s reading: it

would frustrate Congress’s calibrated scheme and invite

the SEC to subvert important procedural safeguards—including jury rights for penalty actions. Pet. Br. 27-28. Indeed, the government’s position would permit the SEC to

evade a jury trial (and the substantive criteria for penal-

12

ties) by simply recasting a penalty claim as a disgorgement request. The government cannot explain why Congress would implement a roadmap to so easily end-run the

requirements for seeking penalties.

2. While the government has no answer for petitioner’s

points about the Act’s context and purpose, it does offer a

few separate points of its own. Each is meritless.

a. First, the government cites a tiny handful of other

sections that reference economic loss, and suggests Congress would have included similar language in Section

78u(d)(7) if it intended a similar requirement to apply to

disgorgement. U.S. Br. 21-24. Yet in each example, Congress had a clear reason to specify the existence of investor loss—and there was no comparable term of art to capture the requirement. Here, by contrast, the term “disgorgement” itself does all the work. That term alone

means “restoring the status quo” and providing “fair compensation” to injured parties. Liu, 591 U.S. at 80. Just as

Congress does not always define terms with settled meanings, it had no reason to define “disgorgement” here.

b. Second, the government maintains that “[t]he

Dodd-Frank Act amended the Exchange Act to require

that any disgorgement that is recovered by the SEC but

is not ‘distributed to victims’ must be deposited in the

Commission’s Investor Protection Fund.” Br. 24 (citing 15

U.S.C. 78u-6(g)(3)(A)(i)). And the government further observes that “Congress’s evident recognition that the Commission may use disgorged funds for purposes other than

distribution to victims” proves disgorgement is “independent of any showing of investor loss.” Ibid.

First and foremost, the government fails to reproduce

the full text: Congress was not explicitly addressing “disgorgement” that was not distributed to victims; it addressed “any monetary sanction” not “otherwise distributed to victims.” 15 U.S.C. 78u-6(g)(3)(A)(i). The phrase

13

“monetary sanction” better aligns with penalties than disgorgement—and, if anything, the fact Congress did not

single out disgorgement (and thus might have intended

solely penalties) undercuts the government’s theory.

Second, the government overlooks that disgorged

funds will not always be collected—just as class funds are

not always distributed. Securities violations can affect

large numbers of investors, and the SEC is not obligated

to discuss recovery with each and every person before

seeking relief (even if the SEC is required to track down

the full information necessary to establish the proper

amount of disgorgement). Any time a party does not collect disgorgement (for any reason), the government may

have extra cash to deposit in the Fund—even if the government had to prove pecuniary harm (for every single

dollar collected) before obtaining a disgorgement award.

Either way, this is far too thin a read to overcome Liu and

the traditional limits on disgorgement.

D. The Government Cannot Use The Restatement To

Override Liu Or The Traditional Limits On Disgorgement

As previously established, there is no basis for thinking Congress read the Restatement’s detailed provisions

and plucked out the relevant reporter’s notes and comments to devise an atypical form of disgorgement that departs from Liu and this Court’s traditional principles.

But even putting the implausible aside, the government has misread the Restatement and its other commonlaw sources. Properly understood, disgorgement restores

funds to the proper owner—which necessarily means a

victim must be out of pocket. But that does not necessarily

mean a victim suffered a direct diminution of value. If the

underlying substantive law assigns a party a right to certain proceeds, the failure of the wrongdoer to voluntarily

turn over those proceeds is itself the relevant “loss.” This

14

answers the government’s (and its amici’s) concerns that

petitioner’s view would somehow rewrite the law in other

areas. Not so at all. Each example they invoke involves a

situation where a party is entitled (per underlying substantive law) to the gain—and thus the failure to turn over

the gain itself is economic loss.

That, however, is the opposite of this situation: an investor has no right to funds without a showing of direct

loss as a result of any violation. There is no underlying securities law that grants the right to any proceeds—and,

indeed, the law expressly forecloses recovery in a private

suit. Parties are not entitled to windfalls (here or elsewhere), which is precisely what disgorgement here would

be.

While Liu already does the hard work—and while

Congress’s ratification of Liu forecloses further inquiry—

these principles establish the government’s error even as

a matter of first principles. That itself reinforces petitioner’s case and warrants reversal.

1. Liu traced disgorgement’s lineage to three traditional equitable remedies—restitution, accounting for

profits, and constructive trusts—each of which presupposes that the claimant has lost something of monetary

value. See Pet. Br. 29-32. This Court has said time and

again: restitution “restor[es] the status quo and order[s]

the return of that which rightfully belongs” to the victim.

Porter v. Warner Holding Co., 328 U.S. 395, 402 (1946);

Tull v. United States, 481 U.S. 412, 422, 424 (1987). Accounting and constructive trusts follow suit, awarding

profits as “an equitable measure of compensation” to “the

true owner.” Hamilton-Brown Shoe Co. v. Wolf Bros. &

Co., 240 U.S. 251, 259 (1916). And this Court has rejected

accounting claims when the claimants have not suffered

pecuniary harm. Kilbourn v. Sunderland, 130 U.S. 505,

516-517 (1889).

15

The government does not meaningfully dispute any of

that. Its only response is to cherry-pick from three

sources. U.S. Br. 30.

The government first focuses on a line in American Jurisprudence that describes modern trends, U.S. Br. 30—

while ignoring the same source’s statement that the “earlier common law” used “restitution” to “denote the return

or restoration of a specific thing or condition.” 66 Am. Jur.

2d Restitution § 1 (emphasis added). This Court’s precedent rightfully follows that earlier common law tradition.

See, e.g., Porter, 328 U.S. at 402.

Next, the government insists that Leman v. KrentlerArnold Hinge Last Co. stands for the proposition that

“‘actual pecuniary loss’ [is] not required for accounting.”

U.S. Br. 30 (quoting Leman v. Krentler-Arnold Hinge

Last Co., 284 U.S. 448, 456 (1932)). Not so. What Leman

actually said was that an accounting was not “measured”

by “damages, in the sense of actual pecuniary loss.” 284

U.S. at 456 (emphasis added).

When there was no “actual”—i.e., out-of-pocket—loss

justifying damages at law, equity courts stepped in to

compensate for a wider range of pecuniary harm. See ibid.

(profits served as “a substitute for legal damages” to “insure full compensation to the party injured”). Leman is

illustrative: the defendant unlawfully profited off the

plaintiff’s intellectual property, so the court restored

those profits to their rightful owner—the plaintiff. That

squarely supports petitioner’s position. See Pet. Br. 31-32,

36; see, e.g., Liu, 591 U.S. at 81-82 (describing equitable

accounting in patent cases, where a plaintiff may recover

“profits that the defendants have made by the use of his

invention”) (quotation omitted).

The government’s cramped view of pecuniary harm

also causes it to misread United States v. Carter, 217 U.S.

286 (1910). There, an Army officer skimmed secret profits

16

off deals he made on the government’s behalf. Id. at 297.

Because any “profit made by an agent in the execution of

his agency must be accounted for to the principal,” the

Court concluded that the Army officer owed his profits to

the government as a “debt.” Id. at 308 (quotation omitted).

The government had a right to the officer’s profits and

was at a financial loss for as long as the officer held them.

That is pecuniary harm. Whether there was “actual

loss”—i.e., money taken from the government’s pocket—

was thus beside the point. Id. at 305.

In short, the government’s foray into this Court’s

precedent surrounding restitution, accounting, and constructive trusts only confirms Petitioner’s point: equitable

disgorgement has always been tethered to the restoration

of something with monetary value that rightfully belongs

to a victim.5

2. The government next pivots to a handful of supposed counter-examples—each of which, under the correct view of pecuniary harm, reinforces petitioner’s position.

Take Olwell v. Nye & Nissen Co., 173 P.2d 652 (Wash.

1946), the government’s lead example. The court held that

to recover profits, the plaintiff must show that he “incurred a loss.” 173 P.2d at 653. And the loss was monetary:

the defendant profited from his use of the plaintiff’s eggwashing machine without the plaintiff’s permission, which

made the plaintiff the “true owner” of those profits. See

Finding no support with restitution, accounting, or constructive

trusts, the government retreats to CIGNA Corp. v. Amara, 563 U.S.

421 (2011). Br. 19. That case involved a “surcharge”—not one of the

profits-based equitable remedies underlying disgorgement. And the

relief in CIGNA was loss-based, required “actual harm,” and compensated the plaintiffs for “money owed” to them. 563 U.S. at 441, 444.

CIGNA does not suggest disgorgement is available without pecuniary

harm.

5

17

Hamilton-Brown Shoe Co. v. Wolf Bros. & Co., 240 U.S.

251, 259 (1916). The plaintiff was left short until the funds

were restored. That is pecuniary harm. Pet. Br. 36; see,

e.g., Knudson, 534 U.S. at 214 & n.2 (accounting is available to recover “profits produced by the defendant’s use of

[the plaintiff’s] property”).

The same is true when a defendant unlawfully profits

from a plaintiff’s easement,6 patent,7 copyright,8 trademark,9 underground land,10 “beet tops”11—or any other

property.12 Cases involving special relationships of trust

fit the same mold: the wrongdoer acts on the victim’s behalf, so any profit gained from that relationship belongs

to the victim—and the victim stays in the hole until those

funds are restored.13 There may be no “actual” or out-ofpocket loss, but there is pecuniary harm. In each case, the

6

See, e.g., Raven Red Ash Coal Co. v. Ball, 39 S.E.2d 231 (Va. 1946).

See, e.g., Leman v. Krentler-Arnold Hinge Last Co., 284 U.S. 448

(1932); see also Tilghman v. Proctor, 125 U.S. 136, 145 (1888) (“[I]n

equity the profits made by the infringer of a patent belong to the patentee and not to the infringer.”).

7

See, e.g., Sheldon v. MetroGoldwyn Pictures Corp., 309 U.S. 390

(1940).

8

9

See, e.g., Hamilton-Brown Shoe Co., 240 U.S. 251.

See, e.g., Edwards v. Lee’s Administrator, 96 S.W.2d 1028 (Ky.

1936).

11

See, e.g., Corey v. Struve, 149 P. 48 (Cal. 1915).

10

12

As for Federal Sugar Ref. Co. v. United States Sugar Equalization Bd., 268 F. 575 (S.D.N.Y. 1920): the government relies on a case

with obvious pecuniary loss (losing a $200,000+ contract), and quotes

a statement the court itself acknowledged was dicta. Id. at 583; U.S.

Br. 19.

13

See, e.g., Keech v. Sandford, 25 Eng. Rep. 223 (Ch. 1726) (trustee

and beneficiary); Catts v. Phalen, 43 U.S. (2 How.) 376 (1844) (employee and employer).

18

profits are in the defendant’s possession, but the underlying substantive law assigns those profits to the plaintiff.

Equity intervenes to “restor[e] the status quo and order[]

the return of that which rightfully belongs” to the victim.

Porter, 328 U.S. at 402.

Put simply, the case of uninjured securities investors

stands on different footing: there is no “duty of restitution” when “the plaintiff was deprived of nothing due it,”

and “[n]othing was taken away from it which belonged to

it.” Am. Univ. v. Forbes, 183 A. 860, 862 (N.H. 1936). Unlike all its other examples, the government cannot identify

any substantive right to the funds, and it cannot identify

any loss warranting disgorgement.

4. Lastly, the government’s reliance on academic

sources does not change the fact that this Court has already resolved the common-law questions at issue in this

case.

The government does not deny that the Restatement

(Third) of Restitution and Unjust Enrichment—and its

predecessors—openly depart from equity’s traditional

limits. Portions of the Restitution Restatements may be

informative, but this Court has never adopted the Restatement’s normative conclusions about whether equitable disgorgement requires a showing of pecuniary harm.

And even on its own terms, the Restatement (Third) actually reinforces Petitioner’s point: every one of its illustrations involves pecuniary harm, when viewed under the

proper framework.

Nor does Dobbs help the government. Dobbs asserts

that restitution is available when “the defendant has been

unjustly enriched by receiving something * * * that

properly belongs to the plaintiff.” 1 Dan B. Dobbs, Law of

Remedies § 4.1(2), at 371 (2d ed. 1993); see also ibid. (restitution “rectifies unjust enrichment by forcing restoration to the plaintiff”).

19

In the end, none of this commentary changes the result. Congress was not looking at the Restatement, or

Palmer, or Dobbs when it enacted Section 78u(d)(7)—it

was looking at Liu. The SEC seeks to rewind to a pre-Liu

world, canvassing pre-Liu decisions and scavenging for

secondary sources that might support its position. Liu did

the work. Congress adopted the output. And that is what

“obviate[s] the need * * * for the sorts of wide-ranging

historical inquiries in which the Liu Court engaged.” U.S.

Br. 38.

20

CONCLUSION

The judgment of the court of appeals should be reversed, and the case should be remanded for further proceedings.

Respectfully submitted.

KENNETH P. WHITE

TYLER C. CREEKMORE

BROWN WHITE & OSBORN LLP

333 South Hope Street, 40th Floor

Los Angeles, CA 90071

DANIEL L. GEYSER

Counsel of Record

MICHAEL F. QIAN

HAYNES AND BOONE, LLP

2801 N. Harwood Street, Ste. 2300

Dallas, TX 75201

(303) 382-6219

daniel.geyser@haynesboone.com

CHLOE WARNBERG

HAYNES AND BOONE, LLP

1221 McKinney Street, Ste. 4000

Houston, TX 77010

ANGELA M. OLIVER

HAYNES AND BOONE, LLP

888 16th Street, N.W., Ste. 300

Washington, DC 20006

APRIL 2026