U.S. Supreme Court Notebook

Supreme Court upholds broad power to curb insider trading


WASHINGTON (AP) — A unanimous Supreme Court on Tuesday sided with the government in a legal clash over the nation's insider trading laws, a victory for prosecutors seeking to curb corruption on Wall Street.
The justices ruled that sharing corporate secrets with friends or relatives is illegal even if the insider providing the tip doesn't receive anything of value in return.

The ruling upheld the conviction of Bassam Yacoub Salman, an Illinois man convicted of making investments based on inside information he received from a member of his extended family. It also limited the impact of a 2014 ruling from the federal appeals court in Manhattan that had raised doubts about the scope of insider trading laws.

Prosecutors have relied on a broad reading of the law to support aggressive anti-corruption efforts that have netted more than 80 arrests and 70 convictions for insider trading over several years.

Writing for the court, Justice Samuel Alito rejected arguments that insider trading prosecutions should be limited to those who make secret profits from revealing confidential data. Government officials had argued that sharing corporate secrets with friends or family is just as damaging to the integrity of financial markets.

Salman was prosecuted for earning more than $1.5 million in profits from trading on nonpublic information he received about future health care deals. The tip originated with Salman's brother-in-law, Maher Kara, an investment banker at Citigroup Global Markets in New York. Maher Kara passed the tip on to his own brother, Michael Kara, who then gave it to Salman.

Salman was aware that Maher Kara was the source. Kara pleaded guilty to conspiracy and securities fraud charges.

Alito said a tipper violates the law by making a gift of confidential information to a trading relative. Kara disclosed confidential information as a gift to his brother with the expectation that his brother would trade on it.
That was a breach of his duty of trust to Citigroup, Alito said, and that breach of duty continued when Salman received the information and traded on it.

 

Justices uphold fraud verdict against State Farm
 

WASHINGTON (AP) — A unanimous Supreme Court has upheld a jury verdict that State Farm Fire and Casualty Co. committed fraud against the federal government after 2005’s Hurricane Katrina.

The justices on Tuesday rejected claims by State Farm that the whistleblower case against the insurer should have been dismissed because its existence was leaked while it was supposed to be secret.

Justice Anthony Kennedy wrote for the court in upholding an appellate ruling that there is no requirement in federal law that the lawsuit be dismissed.

Sisters Cori and Kerry Rigsby filed the fraud lawsuit on behalf of the government after they said they witnessed State Farm shifting Mississippi claims to federal flood insurance that should have been paid by private wind insurance.

 

High court sides  with Samsung in patent dispute


WASHINGTON (AP) — A unanimous Supreme Court on Tuesday sided with smartphone maker Samsung in its high-profile patent dispute with Apple over design of the iPhone.

The justices said Samsung may not be required to pay all the profits it earned from 11 phone models because the features at issue are only a tiny part of the devices.

Apple had won a $399 million judgment against Samsung for copying parts of the iPhone’s patented design, but the case now returns to a lower court to decide what Samsung must pay.

The case is part of a series of disputes between the technology rivals that began in 2011. Apple accused Samsung of duplicating a handful of distinctive iPhone features for which Apple holds patents: the flat screen, the rounded rectangle shape of the phone, and the layout of icons on the screen.

At issue was how much Samsung is required to compensate Apple under an 1887 law that requires patent infringers to pay “total profit.” Apple said that meant all the profits from the phone sales, while Samsung argued it was limited to profits related to the specific components that were copied.

Justice Sonia Sotomayor wrote for the court that the law does not require damages to be based on the entire product, but can be limited to only a component of the product. The decision overturned a ruling from a federal appeals court in Washington, which said that Apple was entitled to all the profits.

But the high court declined to lay out a specific test for how such damage awards should be calculated. Sotomayor said doing so was not necessary and the justices left it up to lower courts to resolve.

Samsung had argued that the hefty award ignored the fact that its phones contain more than 200,000 other patents that Apple does not own. Apple said the verdict was fair because the iPhone’s success was directly tied to its distinctive look.
 

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