United States Securities & Exchange Commission v. Quan

United States Court of Appeals
For the Eighth Circuit
___________________________

No. 14-3707
___________________________

United States Securities and Exchange Commission

lllllllllllllllllllllPlaintiff - Appellee

v.

Marlon Quan; Acorn Capital Group, LLC; Stewardship Investment Advisors, LLC

lllllllllllllllllllllDefendants - Appellants

Stewardship Credit Arbitrage Fund, LLC; Putnam Green, LLC; Livingston Acres, LLC

lllllllllllllllllllllDefendants

ACG II, LLC

lllllllllllllllllllllDefendant - Appellant

Florence Quan

lllllllllllllllllllllDefendant

Nigel Chatterjee; DZ Bank AG Deutsche Zentral-Genossenschaftsbank, Frankfurt
am Main; Sovereign Bank; Topwater Exclusive Fund III, LLC; Freestone Low
Volatility Partners, LP; Freestone Low Volatility Qualified Partners, LP

lllllllllllllllllllllIntervenors

Gary Hansen

lllllllllllllllllllllReceiver
 ____________

Appeal from United States District Court
for the District of Minnesota - Minneapolis
____________

Submitted: October 20, 2015
Filed: March 22, 2016
____________

Before RILEY, Chief Judge, SMITH and SHEPHERD, Circuit Judges.
____________

RILEY, Chief Judge.

Marlon Quan, along with entities he controls, (collectively, Quan, unless
context dictates otherwise) appeals a judgment entered on jury verdicts finding
securities fraud. Quan challenges the coherence of the verdicts, the accuracy of the
jury instructions, and the authority of the district court1 to order disgorgement. We
affirm.

I. BACKGROUND
Marlon Quan managed a hedge fund, Stewardship Credit Arbitrage Fund, LLC
(SCAF) and its offshore twin, Stewardship Credit Arbitrage Fund, Ltd., through his
company Stewardship Investment Advisors, LLC (SIA). The funds invested heavily
in loans to PAC Funding, a company controlled by Thomas Petters. The loans were
meant to finance Petters’s business of buying consumer electronics wholesale and
reselling them to retail stores for a profit. The loans were supposedly secured by the
goods, accounts receivable, or the stores’ promises to pay. Unfortunately, Petters’s

1
The Honorable Ann D. Montgomery, United States District Judge for the
District of Minnesota.

-2-
business was actually a massive Ponzi scheme. Petters used the funds’ money to pay
off other investors and maintain appearances, while pocketing whatever was left for
himself and his family. See generally United States v. Petters, 663 F.3d 375, 379 (8th
Cir. 2011). When the scheme collapsed in the fall of 2008, investors in Quan’s funds
(as well as Quan himself) lost a lot of money.

The U.S. Securities and Exchange Commission (SEC) sued Quan for securities
fraud on two basic theories: (1) he made false statements about what he did to protect
the funds against fraud and other risks; and (2) he concealed problems with the funds’
investments as Petters’s scheme began to unravel. The SEC alleged Quan and his
companies violated Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a); Section
10(b) of the Securities Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder,
17 C.F.R. § 240.10b-5; and Section 206(4) of the Investment Advisers Act, 15 U.S.C.
§ 80b-6(4), and Rule 206(4)-8 thereunder, 17 C.F.R. § 275.206(4)-8. The SEC also
alleged Quan personally violated Section 20(a) of the Securities Exchange Act, 15
U.S.C. § 78t(a), and aided and abetted SCAF’s violations of Section 10(b) and Rule
10b-5 and SIA’s violations of Section 206(4) and Rule 206(4)-8. See also 15 U.S.C.
§ 78t(e) (aiding-and-abetting liability). The case went to trial and a jury found
liability on every count except the alleged violations of Section 17(a)(1) and the
allegation Quan personally aided and abetted SCAF’s violations of Section 10(b) and
Rule 10b-5.

Quan moved for judgment as a matter of law and a new trial. The SEC moved
for remedies and a final judgment. The district court denied Quan’s motions, entered
injunctions against him, and ordered him to disgorge almost $81 million in profits,
plus prejudgment interest. We have jurisdiction of Quan’s appeal. See 28 U.S.C.
§ 1291 (appellate jurisdiction); Fed. R. Civ. P. 54(b) (partial final judgments).

-3-
II. DISCUSSION
A. Verdict Internal Consistency
Quan first argues he is entitled to a new trial because the jury contradicted itself
by finding he violated Rule 10b-5 under the Securities Exchange Act, but did not
violate Section 17(a)(1) of the Securities Act or aid and abet SCAF in violating Rule
10b-5. Before reaching Quan’s argument, we first address a threshold matter.

The district court held Quan could not seek a new trial based on alleged
inconsistencies in the verdicts because he did not ask to have the verdicts sent back
to the jury before it was discharged. The district court relied on our statement, “If a
party feels that a jury verdict is inconsistent, it must object to the asserted
inconsistency and move for resubmission of the inconsistent verdict before the jury
is discharged or the party’s right to seek a new trial is waived.”2 Parrish v. Luckie,
963 F.2d 201, 207 (8th Cir. 1992) (emphasis added); accord, e.g., Brode, 966 F.2d at
1239. Quan arguably objected by saying “I will just state for the record that the
verdict is internally contradictory” after the district court read the verdicts, cf. Fed.
R. Civ. P. 46 (“[A] party need only state the action that it . . . objects to, along with
the grounds for the . . . objection.”); Smith v. Riceland Foods, Inc., 151 F.3d 813, 821
n.6 (8th Cir. 1998), but indisputably did not move for resubmission.

2
Quan argues this court rejected the district court’s approach in Spencer v.
Young, in which we wrote “failure ‘to object to any asserted inconsistencies [or to]
move for resubmission of the inconsistent verdict before the jury is discharged’
waives the right to a new trial,” Spencer v. Young, 495 F.3d 945, 950 (8th Cir. 2007)
(alteration in original) (emphasis added) (quoting Brode v. Cohn, 966 F.2d 1237,
1239 (8th Cir. 1992)). According to Quan, the bracketed alteration reflects a
deliberate choice to say that either objecting or moving for resubmission is sufficient
to preserve the right to a new trial. The language is not as clear as Quan thinks. The
altered sentence reasonably could be read to mean the opposite: either a failure to
object or a failure to make a motion will result in the objection being forfeited and the
right to a new trial lost.

-4-
 We first observe that we have not previously imposed forfeiture in such a
situation—where a party pointed out an alleged inconsistency, but did not formally
request relief. To the contrary, we appear to have arrived at the formulation requiring
both forms of preservation by successively restating general propositions from past
cases that did not themselves contain such a requirement. See, e.g., Parrish, 963 F.2d
at 207 (citing Lockard v. Mo. Pac. R.R., 894 F.2d 299, 304 (8th Cir. 1990) (“[I]f trial
counsel fails to object to any asserted inconsistencies and does not move for
resubmission of the inconsistent verdict before the jury is discharged, the party’s right
to seek a new trial is waived.”)). On the other hand, we also recognize that the
purpose of the forfeiture rule in this context “is to allow the original jury to eliminate
any inconsistencies without the need to present the evidence to a new jury,” thereby
“prevent[ing] a dissatisfied party from misusing procedural rules and obtaining a new
trial for an asserted inconsistent verdict.” Lockard, 894 F.2d at 304. Though that
policy would be partially served by an objection standing alone—which might at least
flag a potential issue for the district court—it would be further advanced by requiring
the objecting party to specify in a motion how it proposes to solve the problem.

We need not definitively weigh these competing rationales here, because the
verdicts in this case are not actually inconsistent. We therefore assume without
deciding Quan preserved his argument and proceed to the merits.

Quan could be entitled to a new trial “only if there was ‘no principled basis
upon which to reconcile the jury’s inconsistent findings.’”3 Top of Iowa Coop., 324

3
Although neither party makes anything of it, we note that the jury’s findings
were ultimate legal conclusions—for example, “On the SEC’s 10b-5 Claim against
Marlon Quan . . . we find in FAVOR of [the SEC]”—so the jury decisions appear to
be general verdicts, rather than interrogatories or special verdicts as suggested by the
verdict form. See Verdict, Black’s Law Dictionary 1791 (10th ed. 2014); cf. Fed. R.
Civ. P. 49(a)(1) (defining a special verdict as “a special written finding on each issue
of fact”). This is noteworthy for two reasons. First, it raises the possibility of

-5-
F.3d at 633 (quoting Bird v. John Chezik Homerun, Inc., 152 F.3d 1014, 1017 (8th
Cir. 1998)). The district court has discretion over whether to grant a motion for a new
trial, but here the decision turns on a question of law, so we address Quan’s two
proffered irreconcilable inconsistencies de novo. See, e.g., Behlmann v. Century Sur.
Co., 794 F.3d 960, 963 (8th Cir. 2015).

1. Liability Under Rule 10b-5, but Not Section 17(a)(1)
The jury found Quan did not violate Section 17(a)(1), but did violate Rule 10b-
5. Section 17(a)(1) makes it illegal “to employ any device, scheme, or artifice to
defraud.” 15 U.S.C. § 77q(a)(1). Rule 10b-5 prohibits the same thing in subsection
(a), but also prohibits, in subsections (b) and (c), respectively, “mak[ing] any untrue
statement of a material fact or . . . omit[ting] to state a material fact necessary in order
to make the statements made, in the light of the circumstances under which they were
made, not misleading” and “engag[ing] in any act, practice, or course of business

viewing Quan’s challenge to the consistency of the verdicts as essentially a challenge
to the jury instructions that allowed those verdicts. See, e.g., Jarvis v. Ford Motor
Co., 283 F.3d 33, 56 (2d Cir. 2002) (Sotomayor, J.) (“Objection to an inconsistency
between two general verdicts that is traced to an alleged error in the jury instruction
or verdict sheet is properly made under Fed. R. Civ. P. 51. Yet to avail itself of relief
under this Rule, a party must object before the jury retires to deliberate.”). Second,
it potentially undermines Quan’s premise that inconsistency would entitle him to a
new trial, because some courts hold general verdicts reflecting contradictory legal
conclusions, unlike special verdicts and interrogatories reflecting confusion or
inconsistent factual findings, are not grounds for overturning verdicts in civil cases.
See, e.g., Zhang v. Am. Gem Seafoods, Inc., 339 F.3d 1020, 1035-36 (9th Cir. 2003)
(collecting cases). But see Will v. Comprehensive Accounting Corp., 776 F.2d 665,
677 & n.5 (7th Cir. 1985). We have not considered that issue in depth, cf. Top of
Iowa Coop. v. Schewe, 324 F.3d 627, 631, 633 (8th Cir. 2003) (addressing what
appear to be general verdicts and suggesting a new trial would have been required if
they were inconsistent), and we need not do so now.

-6-
which operates or would operate as a fraud or deceit upon any person.”4 17 C.F.R.
§ 240.10b-5. Quan argues the verdict is inconsistent because the two provisions
cover the same things and if he violated one he necessarily violated the other.

But that is not what the district court told the jury. According to the jury
instructions, “A device, scheme or artifice to defraud”—the basis for liability under
Section 17(a)(1)—“must involve conduct beyond just misrepresentations or
omissions”—the basis for liability under Rule 10b-5(b). In other words, the bar for
finding liability was higher under Section 17(a)(1) than under Rule 10b-5(b). In light
of those instructions, the straightforward inference from the verdicts is that the jury
concluded Quan made a false statement or misleading omission, but did not do
enough beyond that (at least with scienter) to rise to the level of employing a device,
scheme, or artifice to defraud. Cf. Anheuser-Busch, Inc. v. John Labatt Ltd., 89 F.3d
1339, 1347 (8th Cir. 1996) (“As the unchallenged instructions of the District Court
make clear, the two claims have different elements. In these circumstances, the jury
could have found that [the plaintiff] proved all of the elements of [one claim] while
failing to prove one of the separate elements of the [other claim].”). This
understanding fits aptly with the approach taken at trial, where the parties and the
district court treated the different provisions as separate theories of liability based on
different facts: (1) false-statement or misleading-omission liability for lying about the
funds’ safeguards; and (2) fraudulent-scheme liability for hiding problems with the
Petters investments.

4
Section 17(a) has two other subsections as well, largely paralleling Rule 10b-
5(b) and (c), see 15 U.S.C. § 77q(a)(2), (3), but they are not at issue here. The verdict
form separated the SEC’s claims under Section 17(a)(2) and (3) from those under
Section 17(a)(1) because only subsection (1) requires scienter, see SEC v. Shanahan,
646 F.3d 536, 541 (8th Cir. 2011). All three subsections of Rule 10b-5 require
scienter, by contrast, see id., so the district court kept those claims together.

-7-
 We are not persuaded by any of Quan’s challenges to reconciling the verdicts
in this way. His assertion that Section 17(a)(1) “plainly does impose liability for false
statements, not solely for nonspeech conduct” is beside the point. We evaluate
whether verdicts are consistent in light of how the jury was instructed, not
retrospective arguments about what the law is (which are really just late arguments
about how the jury should have been instructed).5 See, e.g., Gallick v. Balt. & Ohio
R.R., 372 U.S. 108, 120-21 (1963); Guyton v. Tyson Foods, Inc., 767 F.3d 754, 761
& n.4 (8th Cir. 2014); see also Lavoie v. Pac. Press & Shear Co., 975 F.2d 48, 55 (2d
Cir. 1992) (“Surely litigants do not get another opportunity to assign as error an
allegedly incorrect charge simply because the jury’s verdict comports with the trial
court’s instructions.”). And not only did Quan not object to the instruction allowing
the jury to reach different conclusions about Section 17(a)(1) and Rule 10b-5, he
proposed an instruction saying the same thing: “A material misstatement or omission
. . . can be part of a device, scheme, or artifice to defraud, but a single material
misstatement or omission, standing alone, is insufficient to establish a device,
scheme, or artifice to defraud.” That Quan might have had a different reason for
proposing his instruction, as he claims, is immaterial. Quan asked the district court
to state the law a certain way, and he cannot now successfully complain that the

5
Quan’s insistence that the SEC has elsewhere taken the position Section
17(a)(1) imposes liability for false statements or misleading omissions standing
alone—reasoning that a lie is a “device” or “artifice” to defraud, see John P. Flannery,
Securities Act Release No. 9689, Exchange Act Release No. 73,840, Investment
Company Act Release No. 31,374, at 20, 24-25 (Dec. 15, 2014), vacated sub nom.
Flannery v. SEC, Nos. 15-1080, 15-1117, 2015 WL 8121647 (1st Cir. Dec. 8,
2015)—is unavailing for the same reason. And because Quan does not challenge the
sufficiency of the evidence on appeal, we need not consider the appropriateness of
an analogy to the Supreme Court’s recent holding that “when a jury instruction sets
forth all the elements of the charged crime but incorrectly adds one more element, a
sufficiency challenge should be assessed against the elements of the charged crime,
not against the erroneously heightened command in the jury instruction.” Musacchio
v. United States, ___ U.S. ___, ___, 136 S. Ct. 709, 715 (2016).

-8-
district court agreed and the jury listened. See, e.g., Solomon Dehydrating Co. v.
Guyton, 294 F.2d 439, 445 (8th Cir. 1961) (“‘A party cannot complain of an alleged
error in instructions when the same error is found in its own instructions.’” (quoting
Krienke v. Ill. Cent. R.R., 249 F.2d 840, 846 (7th Cir. 1957))).

Quan also protests that the jury “did in fact find non-speech ‘scheme’ liability”
because it found violations of Section 17(a)(3), which targets conduct that might also
constitute a scheme to defraud, see 15 U.S.C. § 77q(a)(3). Quan overlooks the
different mental states required for liability under Section 17(a)’s different
subsections. The jury could well have found liability under subsection (3), requiring
only negligence, without finding the intent or “severe recklessness” necessary for
liability under subsection (1). See Shanahan, 646 F.3d at 541, 543.

Quan’s next argument is not actually about inconsistent verdicts at all. He says
the jury could not have carefully separated liability for false statements or misleading
omissions from liability for fraudulent scheming because it split liability the same
way for one of his finance companies, even though the SEC did not present evidence
about the finance company making any representations whatsoever. That is, at most,
a suggestion the evidence was not sufficient to support the verdict against the finance
company. But Quan has not raised that issue on appeal. It is forfeited.

Quan’s last challenge is both misguided and misleading. He argues the jury
instructions do not in fact support reconciling the verdicts because the district court
told the jury the requirements of Section 17(a) were “substantially the same as” Rule
10b-5, with “three exceptions that are relevant,” and the exceptions did not include
a distinction between scheme liability and false-statement or misleading-omission
liability. But of course nothing in the district court’s top-level comparison of the two
provisions speaks to differences between a subsection of Section 17(a), namely (a)(1),
and Rule 10b-5 as a whole.

-9-
 2. Personal Liability, but Not Aiding-and-Abetting Liability
Under Rule 10b-5
Quan also sees inconsistency in the jury finding he personally violated Rule
10b-5, but did not aid and abet SCAF—the fund—in violating the same rule. Quan
reasons that he indisputably controlled SCAF and used it as “the vehicle through
which [he] sold the securities at issue and committed fraud,” so if he committed fraud,
SCAF did too, with his knowledge and assistance.

The district court concluded the verdicts could be reconciled because the trial
focused on Quan’s role at the other companies involved in managing and operating
the funds and “the jury may have concluded that they lacked sufficient evidence to
determine Quan’s role in SCAF LLC or that Quan had aided and abetted a Section
10(b) violation by SCAF LLC.” In light of “our duty to harmonize [apparently]
inconsistent verdicts” when we can, Anheuser-Busch, 89 F.3d at 1347, and
recognizing the district court’s firsthand experience with the strategy and focus of the
trial, we agree. The funds did not participate in the trial and none of the evidence
showed SCAF actively doing anything. Rather, the SEC told the jury the fund was
“just a big pool of money” that “goes into a bank account, and . . . sits there.” We
think it is reasonable to suppose the jury, having already imposed liability on the
companies that played an active role in the fraud and on Quan directly for running the
whole operation, declined to pile on a finding that Quan was also liable for helping,
in some unspecified way, an entity that, as far as the jury heard, did nothing for itself
and was little more than a piece of paper.

FDIC v. Munn, 804 F.2d 860 (5th Cir. 1987), which Quan cites as analogous
to his case, does not convince us otherwise. In Munn, the Fifth Circuit granted a new
trial to a bank that was found to have committed fraud even though the agent whose
conduct was the only basis for finding fraud was not. Id. at 867. Here, by contrast,
the SEC presented extensive evidence of Quan—the analogue to the bank in
Munn—committing fraud through other entities, apart from SCAF. We also note that

-10-
the decision in Munn was driven in part by the fact that the court had separately
decided to remand for a new trial on other, closely related claims and worried that
limiting the new trial to a subset of the issues would risk confusing the jury, making
it unclear exactly what role the jury’s conflicting findings played in the outcome. Id.

B. Unanimity About False Statements or Misleading Omissions
The second major issue Quan raises relates to the jury instructions about
Section 17(a)(2) and Rule 10b-5(b). Quan asked the district court to instruct the jury
that to find for the SEC under either provision they all needed to agree he made a
particular false statement or misleading omission. The district court refused. Quan
argues that was an abuse of discretion and deprived him of his right to a unanimous
jury verdict, so he is entitled to a new trial.6

Quan’s argument presents the question of whether a particular false statement
or misleading omission is the sort of fact about which the jury must be unanimous to
find liability—labeled an “element” of a violation—or, instead, is just one of the
subsidiary facts by which an element might be proved and about which jurors can
disagree. Cf. Richardson v. United States, 526 U.S. 813, 817 (1999). Reviewing this

6
Quan also posits that because the jury was not given a specific unanimity
instruction, “it may have reached a verdict based on claimed misrepresentations as to
which there was no legally sufficient evidence.” That is a non sequitur. Whether the
jury all agreed about at least one misrepresentation has nothing to do with whether
the evidence was sufficient to support whichever misrepresentations they found.
Quan’s real concern seems to be that the general verdict leaves open the possibility
the jury’s finding of liability rested on alleged misrepresentations of which—he
says—there was not enough evidence. But that speculative risk does not justify a
new trial. See Griffin v. United States, 502 U.S. 46, 59-60 (1991) (refusing to negate
a verdict “‘merely on the chance—remote, it seems to us—that the jury convicted on
a ground that was not supported by adequate evidence when there existed alternative
grounds for which the evidence was sufficient’” (quoting United States v. Townsend,
924 F.2d 1385, 1414 (7th Cir. 1991))).

-11-
question of legal interpretation de novo, see, e.g., Kahle v. Leonard, 563 F.3d 736,
741 (8th Cir. 2009), we agree with the district court that the jury need not agree on
a particular false statement or misleading omission for liability under Section 17(a)(2)
or Rule 10b-5(b).

We begin with the text. The language of the provisions does not conclusively
establish whether a particular false statement or misleading omission is an element,
but neither is it entirely neutral. Although worded slightly differently, both
provisions refer broadly to “any” false statement or misleading omission. See
15 U.S.C. § 77q(a)(2); 17 C.F.R. § 240.10b-5(b). On its face, that formulation would
be satisfied if the jury agreed only on the general proposition that a defendant made
a false statement or misleading omission, regardless of whether they disagreed about
which one. Cf. United States v. Verrecchia, 196 F.3d 294, 299 (1st Cir. 1999)
(considering whether jurors must agree about which particular gun a felon possessed
to find guilt under 18 U.S.C. § 922(g)(1)).

The wider statutory and regulatory context supports that interpretation. “The
‘evil at which [the securities laws are] directed is the fraud in the sale [or purchase]
of securities.’” Little v. United States, 331 F.2d 287, 292 (8th Cir. 1964) (emphasis
omitted) (quoting United States v. Cashin, 281 F.2d 669, 674 (2d Cir. 1960)) (going
on to explain “a scheme to defraud, in relation to a sale of securities, . . . is the gist
of the crime denounced by the Congress in Section 17(a)”). To that end, Section
17(a) and Rule 10b-5 impose liability not only for false statements and misleading
omissions, but also for two other broad and potentially overlapping categories of
fraud. See 15 U.S.C. § 77q(a)(1), (3); 17 C.F.R. § 240.10b-5(a), (c). Their purpose
is to prevent the distortion or perversion of interstate securities markets by fraud, not
to target specific bits of misinformation, further suggesting they are not primarily
concerned with the identity of particular misrepresentations.

-12-
 Quan attempts to counter this reasoning by citing the Eighth Circuit’s model
jury instruction on perjury, which says the jury must all agree about at least one false
statement. See Judicial Comm. on Model Jury Instructions for the Eighth Circuit,
Manual of Model Criminal Jury Instructions for the District Courts of the Eighth
Circuit (2014 ed.) § 6.18.1621 note on use 1.7 As Quan points out, the perjury statute,
like Section 17(a)(2) and Rule 10b-5(b), refers to “any material matter which [the
speaker] does not believe to be true.” 18 U.S.C. § 1621 (emphasis added). Of course,
a model jury instruction is not controlling law and can be incorrect, see, e.g., United
States v. Evans, 272 F.3d 1069, 1081 (8th Cir. 2001), and Quan does not cite any
decisions of this court to support his position. In any event, we see a clear distinction
between the securities laws’ focus on fraud in general and perjury’s much more direct
concern with the content and falsity of particular statements, which distinction
justifies any discrepancy.

In reaching our conclusion on this issue, we give little weight to United States
v. Rice, 699 F.3d 1043 (8th Cir. 2012), or other cases dealing with mail and wire
fraud, cases on which the SEC relies heavily. Though the relevant provisions share
some language and the general subject matter of fraud, the differences between the
laws—the mail- and wire-fraud statutes by their terms impose liability on the use of
the mail or wires to further a “scheme or artifice to defraud,” see 18 U.S.C. §§ 1341,
1343, while Section 17(a)(2) and Rule 10b-5(b) are framed in terms of false
statements or misleading omissions, see 15 U.S.C. § 77q(a)(2); 17 C.F.R. § 240.10b-

7
The model jury instruction on securities fraud does not require unanimity on
a particular false statement or misleading omission. See Judicial Comm. on Model
Jury Instructions for the Eighth Circuit, Manual of Model Criminal Jury Instructions
for the District Courts of the Eighth Circuit (2014 ed.) § 6.15.77q(a) and 78j(b) note
on use 8 (cross-referencing the notes to the model instructions on mail fraud, section
6.18.1341). The accompanying notes do suggest an instruction on unanimity might
be required “if the means used to commit an offense are deemed an element of the
crime,” but do not provide guidance on determining what counts as an element. Id.
§ 6.18.1341 note on use 2.

-13-
5(b)—are significant enough that, in our opinion, Rice does not provide much
guidance in this case.

On the other hand, neither are we swayed by Quan’s claim that fairness favors
requiring unanimity. The conduct prohibited by Section 17(a)(2) and Rule 10b-5(b)
is sufficiently narrow and well-defined that allowing jurors to reach different
conclusions about particular false statements or misleading omissions does not raise
concerns about “wide disagreement . . . about just what the defendant did, or did not,
do” or findings of liability based on a defendant’s “bad reputation,” rather than
specific facts. Richardson, 526 U.S. at 819. And Quan’s assertion that a heightened
unanimity requirement would reduce the risk of a defendant facing potentially
catastrophic liability—which, naturally, is true of any number of laws—does not
implicate the sort of “fairness” relevant to this analysis. See id.

Finally, we note some of the decisions Quan cites address duplicity, or the
improper grouping of multiple separate offenses in a single count of an indictment.
See, e.g., United States v. Yielding, 657 F.3d 688, 702-03 (8th Cir. 2011); United
States v. Holley, 942 F.2d 916, 927-29 (5th Cir. 1991). Though duplicity in some
ways resembles the concern Quan raises, in that both present questions about what
exactly a jury must agree on, it is a separate, conceptually distinct issue. Most simply,
duplicity deals with multiple violations, whereas the issue addressed in this case deals
with multiple ways of committing a single violation. See United States v. Stegmeier,
701 F.3d 574, 581 (8th Cir. 2012) (distinguishing between duplicity and the
possibility of jurors disagreeing about an element of a single charged offense); United
States v. Newell, 658 F.3d 1, 20, 22 n.21 (1st Cir. 2011) (describing the distinction
as being “between unanimity as to a crime’s elements and unanimity as to a crime’s
instances”). Because Quan’s argument throughout this appeal has consistently been
that an instruction was required because “[a] false or misleading statement is an
element of the charged violation,” not because individual counts of the SEC’s

-14-
complaint alleged multiple separate violations,8 we consider the duplicity case law
inapposite and do not address the issue further.

C. Disgorgement
Quan’s last argument is that the district court could not order disgorgement
because it was only authorized to grant equitable relief, see 15 U.S.C. § 78u(d)(5),
and disgorgement—at least when, as here, not limited to specific assets traced back
to a violation—is a legal remedy. Quan raises a question of law, so our review is de
novo. See Parke v. First Reliance Standard Life Ins. Co., 368 F.3d 999, 1006 (8th
Cir. 2004).

Quan’s position finds no support in our precedent or elsewhere in the extensive
body of case law on securities fraud. Cf. SEC v. Ridenour, 913 F.2d 515, 517 (8th
Cir. 1990) (“An individual found liable for fraudulently trading federal securities may
properly be ordered to disgorge any ill-gotten profits.”). To the contrary, “the Federal
Reporter is replete with instances in which judges . . . deeply familiar with equity
practice have permitted the SEC to obtain disgorgement without any mention of
tracing.” FTC v. Bronson Partners, LLC, 654 F.3d 359, 374 (2d Cir. 2011); see also,
e.g., SEC v. Commonwealth Chem. Sec., Inc., 574 F.2d 90, 95 (2d Cir. 1978)
(Friendly, J.). Quan insists the Supreme Court implicitly overruled this longstanding
consensus by holding that a provision allowing only equitable relief did not authorize
a claim for “restitution” because it sought, “in essence, to impose personal liability

8
The only suggestion of a duplicity-based challenge comes in Quan’s reply
brief, but even there Quan treats it as part of his argument about the elements of a
violation and fails to develop it separately. See, e.g., United States v. Williams, 796
F.3d 951, 958 n.4 (8th Cir. 2015) (declining to consider an argument suggested in a
party’s reply brief but not properly developed and adding “as a general rule we do not
entertain arguments that are first raised in a reply brief”), petition for cert. filed, Nov.
4, 2015. Nor does Quan provide any support for extending the doctrine from the
exclusively criminal cases he cites to the civil context.

-15-
. . . for a contractual obligation to pay money,” which was not a remedy “typically
available in equity.” Great-W. Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204,
210, 212 (2002).

But Quan’s case is not about restitution in the same sense, and the SEC seeking
disgorgement is not analogous to a private plaintiff suing for money it is owed under
a contract. See Commonwealth Chem., 574 F.2d at 95 (“[T]he court is not awarding
damages to which plaintiff is legally entitled but is exercising the chancellor’s
discretion to prevent unjust enrichment.”). Indeed, disgorged funds are paid not to
the SEC, but to the district court, which has discretion over how to disburse them.
See SEC v. Cavanagh, 445 F.3d 105, 117 (2d Cir. 2006). Quan cites no authority
suggesting a lawsuit by an organ of the government acting in the public interest to
enforce specific statutory and regulatory provisions and prevent violators from
keeping their ill-gotten gains resembles a traditional suit at law. Cf. id. at 116-20
(“Because chancery courts possessed the power to order equitable disgorgement in
the eighteenth century, we hold that contemporary federal courts are vested with the
same authority.”). In short, Quan utterly fails to dissuade us from affirming the
disgorgement award the district court ordered here as a permissible equitable remedy.

III. CONCLUSION
The jury’s findings were reconcilable, the district court did not need to tell the
jury they could only find Quan liable if they agreed on a particular false statement or
misleading omission, and the district court was authorized to order disgorgement.
The judgment is affirmed, and we remand for further proceedings.
______________________________

-16-