SEC v. Hallam

Case: 21-10222 Document: 00516399901 Page: 1 Date Filed: 07/19/2022

United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit

FILED
July 19, 2022
No. 21-10222
Lyle W. Cayce
Clerk

Securities and Exchange Commission,

Plaintiff—Appellee,

versus

Parker R. Hallam,

Defendant—Appellant.

Appeal from the United States District Court
for the Northern District of Texas
No. 3:19-CV-1735

Before Smith, Elrod, and Oldham, Circuit Judges.
Jerry E. Smith, Circuit Judge:
Parker Hallam helped run a thicket of ersatz energy companies. When
the SEC sued him for numerous securities violations, he agreed not to contest
liability, and he agreed to certain remedies at a high level of generality. He
appeals the particulars of the remedies ordered by the district court. Among
other things, he says the court ignored Liu v. SEC, 140 S. Ct. 1936 (2020),
when it ordered him to “disgorge” his ill-gotten gains. Because the district
court had authority to impose the contested relief, we affirm.
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No. 21-10222

I.
The SEC accused Hallam of violating antifraud1 and registration2
provisions of the Securities Act and antifraud3 provisions of the Exchange Act
and Rule 10b-5. Hallam neither admitted nor denied those allegations but
consented to a judgment containing four relevant prongs of relief. First, he
agreed to pay a civil penalty in an amount to be determined by the court.
Second, he agreed that the court could determine whether he should be
permanently enjoined from dealing in securities except for his own account.
Third, Hallam agreed to “pay disgorgement of ill-gotten gains.” Fourth, he
agreed to pay “prejudgment interest” on those gains, “based on the rate of
interest used by the [IRS] for the underpayment of federal income tax.” The
court entered judgment to those effects.
Nearly three years later, the SEC moved the district court to calculate
the monetary remedies and enjoin Hallam from dealing in securities. The
SEC requested a finding that Hallam’s ill-gotten gains totaled $1,901,480.
That figure derived from a forensic accounting firm’s calculation of the total
disbursements Hallam had received from the fraudulent entities within the
statutory limitations period. The SEC asked for “disgorgement” in that
amount and calculated the prejudgment interest at $424,375.38. It did not
specify the appropriate civil penalty but requested that the court impose one
of the options in the highest tier allowed by statute.
Before Hallam responded to the SEC’s motion, the Supreme Court
decided Liu, which identified constraints on the “disgorgement” remedy
sought by the SEC. More on that later.

1
15 U.S.C. § 77q(a).
2
15 U.S.C. § 77e.
3
15 U.S.C. § 78j(b); 17 C.F.R. § 240.10b-5.

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Liu changed Hallam’s tune. He told the district court that Liu
“banished” existing precedent on securities remedies, which he said vitiated
his prior consent. His brief focused on the SEC’s supposed inability to force
him to disgorge his profits. But according to Hallam, Liu also foreclosed the
SEC’s ability to get prejudgment interest, a “penalty offset,”4 or an injunc-
tion against his future securities dealings, even though Liu didn’t directly
address those topics. In the alternative, Hallam requested a “live” evidenti-
ary hearing to help the court “in the assessment of [which civil] penalty
tier[ ]” to apply to his conduct.
Just before the district court ruled, Congress amended the Exchange
Act explicitly to authorize “disgorgement” of wrongdoers’ “unjust enrich-
ment.”5 Again, more on that later.
The district court rejected Hallam’s positions entirely. It denied his
request for a hearing. It read Liu to reaffirm disgorgement’s availability in
Exchange Act cases. It relied on pre-Liu precedent to hold that the SEC was
entitled to disgorgement. Likewise, it concluded that Liu imposed no new
constraints on the SEC’s ability to get prejudgment interest, a “penalty
offset,”6 or an injunction against his future securities dealings. And it didn’t

4
The SEC describes a “penalty offset” as an order preventing a securities defen-
dant from later requesting that any civil penalty be deducted from any future compensatory
damages that the defendant might be compelled to pay a third party in another lawsuit.
That order is enforceable by repaying to the United States the amount of any such “offset”
that is later ordered.
5
The William M. (Mac) Thornberry National Defense Authorization Act for Fiscal
Year 2021 (“2021 NDAA”), Pub. L. No. 116-283, § 6501, 134 Stat. 3388, 4625–26 (2021)
(amending 15 U.S.C. § 78u).
6
The court ordered that Hallam “shall not, after offset or reduction of any award
of compensatory damages in any Related Investor Action based on [his] payment of dis-
gorgement in this action, argue that he . . . is entitled to . . . offset or reduction of such
compensatory damages award by the . . . payment of a civil penalty in this action (‘Penalty
Offset’). If the court in any Related Investor Action grants such a Penalty Offset, [Hallam]

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mention the (then very recent) statutory amendment.
The court entered final judgment ordering Hallam to pay $1,901,480
in “disgorgement” and $424,375.38 in prejudgment interest. It also imposed
a civil penalty of an extra $1,901,480 after concluding that Hallam’s conduct
merited the highest amount provided by the Exchange Act: a penalty equal
to his “pecuniary gain.” Finally, the court enjoined Hallam from “participat-
ing . . . in the issuance, purchase, offer, or sale of any unregistered securities”
except in regard to his own account.
Hallam appeals each of those orders and the denial of an evidentiary
hearing. He says the lack of an evidentiary hearing denied him due process.
He also renews three substantive challenges to the district court’s remedies.
First, he claims that the SEC failed to ground its request for “disgorgement”
in a category of relief that was typically available in equity.7 Second, he sub-
mits that prejudgment interest is permitted neither by the securities laws nor
by equity jurisprudence. Third, he posits that the district court had no power
to enjoin him from dealing in unregistered securities, which is ordinarily
lawful. None of those contentions can defeat this judgment.

II.
Hallam says he was entitled to a live hearing before being “deprived of
[a] significant property interest.” Boddie v. Connecticut, 401 U.S. 371, 379
(1971). Only that procedure, he claims, could have disentangled the “unusu-
ally complex set of facts, . . . lengthy chronology, and numerous transactions
and parties” underlying the SEC’s request for relief. At that hearing, Hallam
maintains, he could have mounted “many challenges to the sufficiency and

shall . . . pay the amount of the Penalty Offset to [a fund created by the SEC].” Hallam does
not appeal that order, so we do not consider its legality.
7
See Liu, 140 S. Ct. at 1942; Mertens v. Hewitt Assocs., 508 U.S. 248, 256 (1993).

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No. 21-10222

content of the financial data . . . [that] formed the basis for the court’s dis-
gorgement award . . . and the credibility assessments necessary for the multi-
faceted penalty-tier determination.”
Part of that claim is new. Hallam never asked the district court for a
live hearing to challenge the evidence establishing the financial transactions
that unjustly enriched him. In his brief, he titled the tenth section “Request
for Supplemental, Post-Discovery Briefing and a Hearing.” He said that “the
issues to be resolved in the assessment of penalty tiers” merited “the live
appearance of the defendant[ ] for the Court to judge the veracity of his
account and the sincerity of his testimony.” (Emphasis added.) For the other
issues, he noted that the court would have to “sift through competing ver-
sions of facts and challenged accountings,” but he never said that had to hap-
pen in a courtroom. Instead, he requested “some limited discovery” and
“supplemental briefing” on those questions.
So Hallam forfeited any right he may have had to a live hearing to hash
out the details of his financial transactions. To preserve it for appeal, he was
required to “press and not merely intimate” that due process claim “before
the district court.”8 He didn’t just fail to press the issue; he effectively dis-
claimed it by explicitly requesting a hearing on one set of issues but not the
other—within the same section of his brief. That’s why the district court
understood his request for a hearing to relate only to his state of mind, such
as whether he acted in “good faith” and “on the advice of an attorney,
accountant, or auditor.” Accordingly, we consider only whether Hallam was

8
Fontenot v. Colvin, 661 F. App’x 274, 276 (5th Cir. 2016) (per curiam) (quoting
Hardman v. Colvin, 820 F.3d 142, 152 (5th Cir. 2016)); see also SEC v. Team Res. Inc.,
942 F.3d 272, 279 (5th Cir. 2019) (holding that a securities defendant was not entitled to a
live evidentiary hearing where it did not move the district court to conduct one and merely
requested supplemental discovery), vacated on other grounds, 141 S. Ct. 186 (2020) (in light
of Liu).

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entitled to a live hearing regarding the appropriate civil penalty.

A.
The process required to deprive someone of property depends on “the
nature of the case.” Mullane v. Cent. Hanover Bank & Tr. Co., 339 U.S. 306,
313 (1950). The “essential requirements” are “notice and an opportunity to
respond” to the government’s position. Cleveland Bd. of Educ. v. Loudermill,
470 U.S. 532, 546 (1985). Whether that opportunity to respond includes the
right to provide live testimony depends on the extent to which a full hearing
would aid the court in resolving complex, difficult issues of fact. See Merri-
man v. Sec. Ins. Co. of Hartford, 100 F.3d 1187, 1191–92 (5th Cir. 1996). So we
must consider the question posed to the district court.
Both the Securities Act and the Exchange Act authorize civil penalties
in a three-tiered structure.9 Both statutes instruct courts to determine the
“amount of the penalty . . . in light of the facts and circumstances.”10 The
penalties allowed by each tier are capped by the greater of a fixed amount per
violation or “the gross amount of pecuniary gain” that the violation created
for the defendant.11 The fixed amount is higher for higher tiers.12 An offense
makes a defendant eligible for a second-tier penalty if it “involved fraud,

9
Compare 15 U.S.C. § 77t(d)(2), with id. § 78u(d)(3)(B).
10
Id. § 77t(d)(2)(A); id. § 78u(d)(3)(B)(i).
11
Id. § 77t(d)(2); id. § 78u(d)(3)(B).
12
Compare id. §§ 77t(d)(2)(A), 78u(d)(3)(B)(i) (capping the first-tier per-violation
penalty at “$5,000 for a natural person or $50,000 for any other person”), with id.
§§ 77t(d)(2)(B), 78u(d)(3)(B)(ii) (capping the second-tier per-violation penalty at
“$50,000 for a natural person or $250,000 for any other person”), and id. §§ 77t(d)(2)(C),
78u(d)(3)(B)(iii) (capping the third-tier per-violation penalty at “$100,000 for a natural
person or $500,000 for any other person”). Those figures have been superseded by amend-
ment and regulation, but that isn’t relevant here. See SEC v. Life Partners Holdings, Inc.,
854 F.3d 765, 781 (5th Cir. 2017).

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deceit, manipulation, or deliberate or reckless disregard of a regulatory re-
quirement.”13 And it makes a defendant eligible for a third-tier penalty if it
also “resulted in substantial losses or created a significant risk of substantial
losses to other persons.”14
But those provisions set only the maxima and provide courts with little
guidance in fixing the amount. Nor have we explained what factors that court
must or may consider.15 Instead, we review a civil-penalty order for abuse of
discretion. Life Partners Holdings, 854 F.3d at 781. A district court abuses its
discretion when it omits a factor “that should be given significant weight,”16
relies heavily on an irrelevant factor,17 or unreasonably balances the relevant
factors.18 See In re Volkswagen of Am., Inc., 545 F.3d 304, 310 & n.4 (5th Cir.
2008) (en banc). That standard leaves the district court substantial latitude
in structuring its decisionmaking process.
The district court explained that it considered five factors in assessing

13
15 U.S.C. § 77t(d)(2)(B); id § 78u(d)(3)(B)(ii).
14
Id. § 77t(d)(2)(C)(II); id § 78u(d)(3)(B)(iii)(bb).
15
Other circuits have decided that question. See, e.g., SEC v. Sargent, 329 F.3d 34,
41–42 (1st Cir. 2003) (“In evaluating whether or not to assess civil penalties, a court may
take seven [sic] factors into account, such as: (1) the egregiousness of the violations; (2) the
isolated or repeated nature of the violations; (3) the defendant’s financial worth; (4) wheth-
er the defendant concealed his trading; (5) what other penalties arise as the result of the
defendant’s conduct; and (6) whether the defendant is employed in the securities indus-
try.”); SEC v. Rajaratnam, 918 F.3d 36, 44–45 (2d Cir. 2019) (declining to recognize or
adopt an exclusive list of relevant factors).
16
SEC v. Warren, 534 F.3d 1368, 1370 (11th Cir. 2008) (per curiam).
17
Cf. United States v. Scott, 654 F.3d 552, 555 (5th Cir. 2011) (explaining that, in
another context, a district court abuses its discretion by giving “significant weight to an
irrelevant or improper factor”).
18
Cf. Piper Aircraft Co. v. Reyno, 454 U.S. 235, 257 (1981) (explaining, in another
context, that a district court’s “decision deserves substantial deference” under abuse-of-
discretion review “where its balancing of [the relevant] factors is reasonable”).

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the appropriate penalty: (1) the seriousness of the offenses; (2) Hallam’s state
of mind; (3) the risk or realization of financial losses created by the conduct;
(4) the frequency of the violations; and (5) Hallam’s financial condition. It
held that Hallam was eligible for a third-tier penalty because his conduct
“involved fraud or deceit” and “caused substantial losses to other people.”
The court concluded (1) that Hallam’s offenses were egregious; (2) that he
was at least severely reckless; (3) that his violations caused investors to lose
about $70 million; (4) that he continuously violated securities laws for more
than four years; and (5) that he hadn’t substantiated his claim to destitution.
Hallam doesn’t directly challenge that reasoning—just the denial of a
live hearing. So we assume without deciding that the district court’s analysis
was faithful to the securities laws. We ask only whether the nature of its
inquiry entitled Hallam to “a full adversarial evidentiary hearing.” Louder-
mill, 470 U.S. at 545.

B.
Hallam answers that question affirmatively by relying on SEC v.
Smyth, 420 F.3d 1225, 1230–33 (11th Cir. 2005). That appeal, like Hallam’s,
arose from proceedings that determined the amount of monetary remedies
owed by a securities defendant who had agreed not to contest liability without
specifying the gain or harm attributable to the wrongdoing. The district court
rejected the defendant’s request for a hearing and entered judgment ordering
monetary remedies based on the record and the briefs. The Eleventh Circuit
vacated that judgment. It explained that the due process right to be heard
required an evidentiary hearing because the defendant had proffered “essen-
tial evidence” not already in the record. Id. at 1233.
The Eleventh Circuit tied its concerns to Federal Rule of Civil
Procedure 55, which governs the entry of default judgments. As in this case,
a default judgment was not entered in Smyth. But the court explained that

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“[n]one of the Rules of Civil Procedure fits hand in glove the situation”
presented when the SEC moves for judgment as to remedies after the
defendant consents to an adverse judgment on liability. Id. at 1231 n.12. Rule
55(b)(2), it said, “most closely satisfies” the “common sense notions of
justice that inhere in the Due Process Clause.” Id.19 And while Rule 55(b)(2)
does not always require a hearing, Smyth “did not present one of the ‘limited
circumstances’ under which the district court could properly exercise its
discretion not to hold a hearing.” Id. at 1233.
Hallam says we have “cited Smyth with approval.” We have done no
such thing. In Team Resources, 942 F.3d at 278–79, we distinguished Smyth as
irrelevant because the defendant never requested a hearing, only extra
discovery. Id. at 279. That decision was neither an embrace nor a rejection
of our sister circuit’s holding.
Nor do we now decide whether to adopt Smyth. It is once again easily
distinguishable. Smyth relied on the promise of new, “essential” evidence to
be introduced during the requested hearing. That’s not true here.
To the extent that he has preserved the issue, Hallam says he wanted
the hearing so that he could testify about his “scienter and good faith.” He
notes the “insight and perception gleaned from watching a witness’[s]
demeanor and performance on the stand.”
Maybe so. But even if that would have helped the district court assess
his scienter, that would answer only a small part of the ultimate question: the

19
That rule explains when default judgment can be entered in cases where the
amount of monetary remedies is neither “certain” nor readily computable. See Fed. R.
Civ. P. 55(b)(1), (2). The rule provides, “The court may conduct hearings or make
referrals . . . when, to enter or effectuate judgment, it needs to: (A) conduct an accounting;
(B) determine the amount of damages; (C) establish the truth of any allegation by evidence;
or (D) investigate any other matter.” Fed. R. Civ. P. 55(b)(2) (emphasis added).

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appropriate penalty amount. As we have explained, the district court enjoyed
broad discretion in deciding what was relevant to that inquiry and how much
weight to give each factor.
Hallam’s scienter was far from the controlling factor in its analysis,
which we have assumed to be permissible. The court said only that if he had
relied in good faith on “professional advice,” it would “generally weigh
against a high penalty amount.” In holding that he was eligible for a tier-three
penalty, the court said it was relying on “all of the factors,” but it chose to
emphasize the length of time during which Hallam committed the violations
and the amount of financial harm to investors—not his scienter.
What’s more, the consent agreement prevented Hallam from contest-
ing facts highly probative of his scienter. He agreed that the allegations in the
First Amended Complaint “shall be accepted as and deemed true.” That
complaint accused him of violating the Securities Act “knowingly or with
severe recklessness.” It did the same thing regarding the Exchange Act. If
that wasn’t enough, the granular factual allegations explained how Hallam
“directed the [fraudulent] firms’ sales efforts” for years, approved sales
materials containing misrepresentations within his knowledge, approved cash
transfers among fraudulent corporate entities, and pocketed investors’
money. Hallam’s self-serving proclamations of good faith, live or written,
were nearly worthless against that mountain of incontrovertible contrary
evidence.
This is, in other words, far from a case in which the defendant sought
to introduce “essential evidence” not already in the record. Smyth, 420 F.3d
at 1233. Hallam sought to introduce evidence barely probative of a single
factor in a multi-factor, highly discretionary inquiry. Smyth is inapposite.
So we do not decide whether or under what circumstances the Due
Process Clause compels a district court to hold a live hearing before fixing a

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civil penalty amount. Federal Rule of Civil Procedure 78(b) permits district
courts to “determin[e] motions on briefs, without oral hearings.” Hallam
agreed that the amount of the civil penalty would “be determined by the
Court upon motion of the Commission.” The SEC then moved the court to
enter judgment ordering Hallam to pay the civil penalty. Deciding the
amount on the record and briefs was consistent with the rules of civil
procedure and the parties’ agreement.
Even if the demands of due process can supersede that procedure,
they can’t do that here. Hallam can’t show that live “testimony could have
. . . altered the impact” of the other evidence of his scienter.20 Nor can he
show that another finding on scienter could have overcome the other factors
on which the court relied. The district court did not abuse its discretion by
denying him a live hearing.

III.
We now consider the impact of Hallam’s consent agreement on his
remaining contentions. He agreed to “pay disgorgement of ill-gotten gains
[and] prejudgment interest thereon.” He further agreed that the interest
would be “based on the rate of interest used by the [IRS] for the under-
payment of federal income tax as set forth in 26 U.S.C. § 6621(a)(2).” And
he accepted that the district court could “determine whether [he] should be
permanently restrained and enjoined” from dealing in securities on others’
behalf. (Emphasis added.) The SEC says Hallam’s consent to those remedies
forecloses some of his contentions.

20
Plummer v. Univ. of Hous., 860 F.3d 767, 776 (5th Cir. 2017); see also Mathews v.
Eldridge, 424 U.S. 319, 335 (1976) (explaining that one of the factors used to identify “the
specific dictates of due process” is “the probable value, if any, of [the] additional . . .
procedural safeguard[ ]”).

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Hallam disagrees. He points out that “parties may not, by consent and
agreement, confer power on the court to impose unauthorized equitable
remedies.” And he maintains that the district court was “without discretion
to impose” any of the “unauthorized equitable remedies” described above.
Ordinarily, a party may not appeal an issue decided by a consent judg-
ment. Ybarra v. Dish Network, LLC, 807 F.3d 635, 639–40 (5th Cir. 2015).
Hallam identifies a special case where prospective orders, once agreed to, can
be modified because of “significant change[s] in either factual conditions or
in law.” Rufo v. Inmates of Suffolk Cnty. Jail, 502 U.S. 367, 384 (1992). That
occurs where, for instance, “changed factual conditions make compliance
with the decree substantially more onerous,” id., or “one or more of the obli-
gations placed upon the parties has become impermissible under federal law,”
id. at 388.21 Hallam cites only cases concerning such prospective relief.22
But only one contested aspect of the judgment is prospective: the
injunction against dealing in unregistered securities. As to that remedy, the
consent agreement established nothing new. It said only that the district
court “shall determine” the propriety of the injunction. The court would
have had that power anyway. Both the Securities Act and the Exchange Act
authorize the SEC to seek injunctions to prevent securities violations.23
Similarly, the consent judgment has little to say about disgorgement.
It provides only that Hallam “shall pay disgorgement of ill-gotten gains.”

21
See also Fed. R. Civ. P. 60(b)(5)–(6).
22
Viz. United States v. Swift & Co., 286 U.S. 106, 110–114 (1932); Sys. Fed’n No. 91,
Ry. Emps.’ Dep’t v. Wright, 364 U.S. 642, 644 (1961); Rufo, 502 U.S. at 372–77; Agostini v.
Felton, 521 U.S. 203, 209–14 (1997); LULAC, Dist. 19 v. City of Boerne, 659 F.3d 421, 436
(5th Cir. 2011); Cooper v. Tex. Alcoholic Beverage Comm’n, 820 F.3d 720, 740–41 (5th Cir.
2016).
23
15 U.S.C. §§ 77t(b), 78u(d)(1).

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Determining the precise meaning of “disgorgement” is no easy task. Nor
does the agreement specify the method for calculating Hallam’s “ill-gotten
gains,” much less provide a number. It says only that the district court must
determine the amount.
So the consent judgment doesn’t prevent Hallam from challenging
either the injunction or the disgorgement award. It has no effect on the pro-
priety of the injunction, a question to which we return infra Section IV. And
it forecloses Hallam only from challenging the SEC’s ability—under any cir-
cumstances—to get a disgorgement award. But he hasn’t done that. Instead,
he claims that the SEC failed to ground its request in the categories of relief
typically available in equity jurisprudence. That contention is consistent with
the language of the consent judgment, even if it is legally mistaken.
Accordingly, we fully consider it infra Section V.
But the consent judgment has more bite regarding Hallam’s challenge
to the prejudgment interest rate. Hallam now urges that the prejudgment
interest award is inconsistent with limits on equity jurisprudence and
amounts to a penalty. We do not consider those challenges because Hallam
agreed to pay the specific interest rate that the district court applied.24 In
doing so, he waived the contentions he raises on appeal.

24
The court applied the “IRS rates of interest on tax underpayments and refunds”
during the quarters in which Hallam’s wrongdoing occurred, as the consent judgment pro-
vided. That rate “is a floating rate which is adjusted each quarter [to approximate] the time
value of money for each quarter in which the wrongdoer has the benefit of the funds.”
Applying that calculation to Hallam’s wrongdoing yielded $424,375.38. That sum assumes
that the amount of his disgorgement award was correct. Because the court affirms that
amount, see infra Section V, there is no need to recalculate the interest award. Hallam has
never identified any error in transcribing the IRS interest rate or calculating the total from
the amount of the disgorgement award.

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IV.
Hallam has also forfeited his challenge to the district court’s
“conduct-based injunction” (capitalization altered), but for another reason.
The court “permanently enjoined [him] from participating, directly or indir-
ectly . . . in the issuance, purchase, offer, or sale of any unregistered securities
. . . [except] for his own personal account.” Selling unregistered securities is
sometimes lawful.25 But the court concluded that it was authorized to enjoin
Hallam anyway because it found him “reasonabl[y] likel[y]” to violate the
securities laws again.
The district court explicitly claimed authority to issue the injunction
from 15 U.S.C. §§ 77t(b) and 78u(d)(1). Those provisions authorize district
courts to enjoin securities defendants “engaged or . . . about to engage in any
acts or practices which constitute . . . a violation” of certain provisions of the
securities laws.26 Section 77t(b) also allows injunctions against “acts or
practices which . . . will constitute” violations of the provisions to which it
applies. (Emphasis added.)
Hallam urges this court to vacate the injunction because an “injunc-
tion against future participation in the sale or issuance of securities is not a
remedy Congress chose to include in the Securities or Exchange Act.” In his
opening brief, he says Congress has impliedly precluded other forms of
injunctive relief by including the explicit injunctive authorizations at
“15 U.S.C. §§ 77e(a) and (c), 77t(e), and 78u(d)(2).” Notably absent from
that list are Sections 77t(b) and 77u(d)(1)—the provisions on which the dis-
trict court relied. Nor does Hallam elsewhere explain why the court was
wrong about what those provisions permit. Indeed, by Hallam’s admission,

25
See generally 15 U.S.C. §§ 77c, 77d; 17 C.F.R. § 230.144.
26
15 U.S.C. § 77t(b); accord id. § 78u(d)(1) (using nearly identical language).

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he “did not ‘address’ these statutes [because] they provide no authority for a
court to enjoin a defendant from engaging in future lawful conduct.”
That decision was mistaken. “[A]ny issue not raised in an appellant’s
opening brief is forfeited.” United States v. Bowen, 818 F.3d 179, 192 n.8 (5th
Cir. 2016). One way that an appellant can forfeit an argument is “by failing
to adequately brief the argument on appeal.” Rollins v. Home Depot USA,
8 F.4th 393, 397 (5th Cir. 2021). To be adequate, a brief must “address the
district court’s analysis and explain how it erred.” Id. at 397 n.1 (citing Brink-
mann v. Dallas Cnty. Deputy Sheriff Abner, 813 F.2d 744, 748 (5th Cir. 1987)).
Hallam failed to do that. So we do not consider his position.

V.
Finally, we arrive at the thorniest issue presented by Hallam’s appeal:
whether the district court erred by ordering him to pay a “disgorgement”
award based on this circuit’s pre-Liu caselaw. We conclude that it did not err.

A.
The concept of “disgorgement” as a securities remedy is essentially
the product of a runaway mutation. It found its way into our jurisprudence
after the Second Circuit spliced it into the Exchange Act’s general grant of
jurisdiction. It then leaked from that laboratory and spread rapidly to each
regional circuit, including ours.
“Disgorgement” has never been a precise legal term.27 Nonetheless,
we must try to understand it with as much precision as it will bear because
the outcome here depends on it. To do that, we have two lodestars. First is
Liu’s conclusion that disgorgement awards—if not their label—are deeply
rooted in historical equity jurisprudence. Second is a recent statutory

27
See, e.g., infra notes 88–89 and accompanying text.

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amendment that, for the first time, explicitly added “disgorgement” to the
list of remedies available in civil securities enforcement proceedings. To
contextualize those developments, we begin by more thoroughly summariz-
ing the history of the remedy of disgorgement.

1.
The original Exchange Act contained little remedial detail. See Secur-
ities Exchange Act of 1934, Pub. L. No. 73-291, tit. I, §§ 1–34, 48 Stat. 881,
881–905 (1934). It empowered courts to enjoin “acts or practices which
constitute or will constitute a violation of the [Exchange Act].” Id. § 21(e) at
900. It gave certain courts “exclusive jurisdiction . . . of all suits in equity and
actions at law brought to enforce [the Act].” Id. § 27 at 902–03. And it
explained that “[t]he rights and remedies [it created] shall be in addition to
. . . all other rights and remedies . . . at law or in equity.” Id. § 28 at 903.
In 1971, the Second Circuit became the first federal appeals court to
interpret the Exchange Act to permit the recovery of “restitution of profits.”
SEC v. Tex. Gulf Sulphur Co., 446 F.2d 1301, 1307 (2d Cir. 1971) (capitaliza-
tion altered); Liu, 140 S. Ct. at 1940–41; id. at 1952 (Thomas, J., dissenting).
But it found no “specific statutory authority” for that remedy. Tex. Gulf Sul-
phur, 446 F.2d at 1307. Instead, it grounded “restitution” in the “general
equity power” conferred by the Exchange Act. Id. It held that “the SEC may
seek other than injunctive relief in order to effectuate the purposes of the Act,
so long as such relief is remedial relief and is not a penalty assessment.” Id.
at 1308. It upheld an award ordering the defendants to repay “the profits they
had derived” from their securities violations. Id. at 1307.
The following year, the Second Circuit elaborated. For the first time
in appellate securities law, it used the term “disgorge” to refer to the repay-
ment of profits. SEC v. Manor Nursing Ctrs., Inc., 458 F.2d 1082, 1103 (2d
Cir. 1972). It reiterated that “neither the [Securities] nor [the Exchange]

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No. 21-10222

Act[ ] specifically authorize[s]” that remedy, id., but declared that “it is for
the federal courts to adjust their remedies so as to grant the necessary relief
where federally secured rights are invaded,” id. (quoting J.I. Case Co. v.
Borak, 377 U.S. 426, 433 (1964)) (alterations adopted). “[R]equiring the
disgorging of proceeds” was necessary, it explained, to “make violations un-
profitable” and preserve the securities laws’ “deterrent effect.” Id. at 1104.
But it limited that remedy to recovering the ill-gotten gains without including
the “profits and income earned on the proceeds,” id., consciously allowing
wrongdoers to profit from their temporary possession of the funds.28
The Second Circuit’s decisions suggest two things. First, it thought it
was creating a new remedy. Its partial reliance on Borak shows that it was
performing its “duty . . . to be alert to provide such remedies as are necessary
to make effective the congressional purpose.” Borak, 377 U.S. at 433. After
all, Texas Gulf Sulphur and Manor Nursing were decided before Cort v. Ash,
422 U.S. 66, 78 (1975), and other cases abrogated that understanding of the
role of federal courts.
Second, the circuit’s conception of “disgorgement” was essentially
restitutionary, although it was slightly narrower. Like all restitution, it was
measured by the defendant’s gain, not the injured party’s loss.29 But the
court’s categorical exclusion of income earned on the proceeds of wrong-

28
Manor Nursing, 458 F.2d at 1104–05 (“While compelling the transfer of the
profits on the proceeds arguably might add to the deterrent effect . . . , this in our view does
not justify arbitrarily requiring those appellants who invested wisely to refund substantially
more than other appellants.”).
29
Compare 1 Dan B. Dobbs, Dobbs Law of Remedies: Damages,
Equity, Restitution 552 (2d ed. 1993) (The purpose of restitution “is to prevent the
defendant’s unjust enrichment by recapturing the gains the defendant secured in a trans-
action.”), with Russell L. Weaver et al., Principles of Remedies Law 167
(3d ed. 2017) (“Compensatory damages seek to place . . . the victim of a legal wrong[ ] in
. . . her ‘rightful position’[ ].”).

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doing is inconsistent with an unqualified importation of the principles of
restitution, which permit an injured party to recover a conscious wrongdoer’s
earnings on his property after the proper showing.30
In any event, not long after the Second Circuit decisions, the Fifth
Circuit adopted the disgorgement remedy. In SEC v. Blatt, 583 F.2d 1325,
1335 (5th Cir. 1978), we held that a district court “acted properly within its
equitable powers” by ordering a securities defendant to “disgorge the profits
that he obtained by fraud” (citing Manor Nursing, 458 F.2d at 1104). We
called disgorgement “restitution” and “remedial and not punitive” and
agreed with the Second Circuit that disgorgement could not include “income
earned on ill-gotten profits.” Id.
A later Fifth Circuit opinion deepened the terminological confusion.
In SEC v. Huffman, 996 F.2d 800, 802 (5th Cir. 1993), we described Blatt’s
reasoning as containing only a “casual reference[ ]” to the law of restitution.
We explained that “disgorgement is not precisely restitution” because it
“wrests ill-gotten gains from the hands of a wrongdoer.” Id. We continued:
“Disgorgement does not aim to compensate the victims of the wrongful acts,
as restitution does.” Id. That seems to get matters precisely backwards,
given that restitution’s defining feature is its measurement by the wrong-
doer’s gain and not the victim’s loss. But the word “restitution” as used in

30
Olwell v. Nye & Nissen Co., 173 P.2d 652, 654 (Wash. 1946) (“In s[ome] cases the
measure of restitution is determined with reference to the tortiousness of the defendant’s
conduct or the negligence or other fault of one or both of the parties in creating the situation
giving rise to the right to restitution. . . . If [the defendant] was consciously tortious in
acquiring the benefit, he is also deprived of any profit derived from his subsequent dealing
with it.”) (quotation and emphasis omitted). Olwell concerned legal—not equitable—
restitution in an assumpsit action. Id. But the same sort of recovery was available in equit-
able restitution. Restatement (First) of Restitution § 202 & cmt. c (Am. L.
Inst. 1936).

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Huffman referred to a term contained in an unrelated federal statute,31 not the
law of remedies generally. Huffman held only that a disgorgement award was
not a “debt” under that statute, id. at 803, so it did not repudiate disgorge-
ment’s foundations as established by Blatt, Texas Gulf Sulphur, and Manor
Nursing.
The D.C. Circuit was the first to articulate the prevailing standard for
quantifying a disgorgement award. In SEC v. First City Financial Corp.,
890 F.2d 1215, 1231 (D.C. Cir. 1989), it held that “disgorgement need only be
a reasonable approximation of profits causally connected to the violation.” It
established a burden-shifting framework in which the government must first
demonstrate that an amount reasonably approximated a defendant’s unlawful
gain. Id. at 1232. If the government does so, the burden shifts to the defen-
dant to rebut that showing by demonstrating “a clear break in or considerable
attenuation of the causal connection between the illegality and the ultimate
profits.” Id. (citing Manor Nursing, 458 F.2d at 1104).
Every regional circuit has since adopted or applied that framework.32
We have done so―albeit in an unpublished decision―to affirm a disgorge-
ment award while explaining that the standard of review was abuse of discre-
tion. SEC v. Halek, 537 F. App’x 576, 581 (5th Cir. 2013). And we have
applied it “arguendo” in holding that an award termed “disgorgement,” but

31
The Federal Debt Collection Procedures Act of 1990. Huffman, 996 F.2d at 801.
32
See SEC v. Happ, 392 F.3d 12, 31 (1st Cir. 2004); SEC v. Lorin, 76 F.3d 458, 462
(2d Cir. 1996); SEC v. Teo, 746 F.3d 90, 105–07 (3d Cir. 2014); HUD v. Cost Control Mktg.
& Sales Mgmt. of Va., Inc., 64 F.3d 920, 927 (4th Cir. 1995); Allstate Ins. Co. v. Receivable Fin.
Co., 501 F.3d 398, 413 (5th Cir. 2007); SEC v. Zada, 787 F.3d 375, 382 (6th Cir. 2015); SEC
v. Durham, 799 F. App’x 928, 930 (7th Cir. 2020) (per curiam); SEC v. Lawton,
449 F. App’x 555, 556 (8th Cir. 2012) (per curiam); SEC v. Platforms Wireless Int’l Corp.,
617 F.3d 1072, 1096 (9th Cir. 2010); SEC v. Curshen, 372 F. App’x 872, 883 (10th Cir. 2010);
SEC v. Calvo, 378 F.3d 1211, 1217 (11th Cir. 2004).

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based in Texas tort law, had failed to meet the “reasonable approximation”
part of the standard. Allstate, 501 F.3d at 412–14. But we have never formally
adopted it in a published opinion as the standard for calculating the amount
of disgorgement awards.33
Meanwhile, in 2002, Congress added remedial language to the codi-
fied Exchange Act.34 Under the subsection containing the paragraph that
authorizes courts to enjoin violative “acts or practices,”35 which we men-
tioned earlier, it added a new paragraph: “In any action or proceeding
brought [by the SEC] under any provision of the securities laws, [the SEC]
may seek, and any Federal court may grant, any equitable relief that may be
appropriate or necessary for the benefit of investors.”36
We did not address that amendment in Allstate, Seghers, or Halek. We
did not even cite that language until 2020, after Liu was decided.37 What’s
more, no circuit appears to have referenced that amendment in support of its
disgorgement jurisprudence until 2015.38

33
We also referred to the burden-shifting framework in SEC v. Seghers,
404 F. App’x 863, 864 (5th Cir. 2010) (per curiam), in which we held that the district court
had not abused its discretion in concluding that the SEC had failed to meet its “reasonable
approximation” burden.
34
Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, tit. III, § 305(b), 116 Stat. 745,
778–79 (2002).
35
Securities Exchange Act § 21(e) (codified at 15 U.S.C. § 78u(d)(1)).
36
Sarbanes-Oxley Act § 305(b) (codified at 15 U.S.C. § 78u(d)(5)).
37
See SEC v. Team Res., Inc., 815 F. App’x 801, 801 (5th Cir. 2020) (per curiam)
(remanding in light of Liu); SEC v. Blackburn, 15 F.4th 676, 681 (5th Cir. 2021).
38
See SEC v. Custable, 796 F.3d 653, 654 (7th Cir. 2015); SEC v. Quan, 817 F.3d
583, 594 (8th Cir. 2016); SEC v. Kokesh, 834 F.3d 1158, 1164 (10th Cir. 2016), rev’d on other
grounds, Kokesh v. SEC, 137 S. Ct. 1635 (2017); SEC v. World Cap. Mkt., Inc., 864 F.3d 996,
1003 (9th Cir. 2017).

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The Supreme Court first addressed this sort of disgorgement in 2017.
See Kokesh, 137 S. Ct. at 1639. But it held only that “[d]isgorgement, as it is
applied in SEC enforcement proceedings, operates as a penalty under [a gen-
eral statute of limitations].” Id. at 1645. It flagged and reserved the question
“whether courts possess authority to order disgorgement in SEC enforce-
ment proceedings or . . . whether courts have properly applied disgorgement
principles in this context,” and it didn’t speculate as to where in the securities
laws any such authority might be found. Id. at 1642 n.3. That acknowledge-
ment teed up Liu.

2.
In Liu, the Court held, 140 S. Ct. at 1940, that “a disgorgement award
[meeting certain conditions] is equitable relief permissible under
§ 78u(d)(5)”—that is, the “any equitable relief” language added by the 2002
amendment. As it first had in Mertens, 508 U.S. at 256, the Court interpreted
the nebulous, though nearly ubiquitous, statutory term “equitable relief” to
mean “those categories of relief that were typically available in equity.” Liu,
140 S. Ct. at 1942. To decide whether disgorgement, as it had been ordered
by courts since Texas Gulf Sulphur, was consistent with historical equity
practice, the Court consulted “works on equity jurisprudence.” Id.
The Court concluded that a remedy stripping wrongdoers of their
profits is consistent with equity practice so long as it conforms to two impor-
tant limitations. First, the award cannot exceed the “net profits from wrong-
doing,” which must account for the “actual gains and profits” attributable to
the wrong and “deduct[ ] legitimate expenses.” Id. at 1942–46 (quotation
omitted).39 Second, the award must be “for the benefit of investors,” id.

39
This limitation contains a sub-limitation on disgorgement awards based on joint-
and-several liability. Because the award may not exceed net profits, courts must pay careful
attention to determining the profits each wrongdoer received. Liu, 140 S. Ct. at 1949.

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at 1949, which is to say that it must reflect the notion from equity that a
wrongdoer may be treated as a sort of trustee ex delicto, who is considered to
hold the property on behalf of the wronged, id. at 1944.40
So the Court explained that the core of modern disgorgement jurispru-
dence was sufficiently rooted in equity but that courts had sometimes strayed
in applying it. Id. at 1946. It “le[ft] it to the lower court[s],” id. at 1950, to
decide in the first instance the extent to which particular aspects of
disgorgement-award calculation are consistent with those broad principles,
id. at 1947–50.
But a more fundamental question remains. Are those broad limita-
tions on disgorgement awards the only limitations necessary to comply with
historical equity practice? Or must attempts to get “disgorgement” also sat-
isfy the particular elements of a traditional equitable remedy?
To re-frame the question slightly: Did the Liu Court recognize “dis-
gorgement” as an independent equitable remedy that is consistent with
historical practice—terminological differences notwithstanding—so long as
it stays within the Court’s enumerated limitations? Or did it recognize that
the Exchange Act permits courts to award traditional profit-stripping
remedies—all of which share the Court’s enumerated limitations—under the
label “disgorgement?”
Language in Liu lends support to both readings. On the one hand, the

Wrongdoers must be held responsible “for such profits only as have accrued to themselves
and not for those which have accrued to another, . . . in which they have no participation.”
Id. (quotation omitted and alteration adopted). There may be an exception to that principle
for “partners engaged in concerted wrongdoing,” but that exception’s contours haven’t yet
been defined. Id.
40
See also 4 John Norton Pomeroy & John Norton Pomeroy Jr.,
A Treatise on Equity Jurisprudence § 1053, at 119–21 (5th ed. 1941).

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Court described deprivation of net profits as a single “remedy” that has
“gone by different names.” Id. at 1942.41 It explained that this remedy has
generalizable features “[n]o matter the label.” Id. at 1943. It noted the
remedy’s “protean character.” Id. (quotation omitted). And it referred to
one traditional equitable action as “closely resembling disgorgement,” id.
at 1940 n.1, which implies that the former is not a sub-category of the broader
label “disgorgement.”
On the other hand, the Court sometimes talked about disgorgement
as a category of remedies.42 For instance, it observed that “the profits
remedy often imposed a constructive trust on wrongful gains.” Id. at 1944
(emphasis added). That statement supports the second reading because a
constructive trust is an independent, equitable restitutionary remedy with its
own requirements.43 The Court also expressed concern that ordering a
“joint-and-several liability” form of disgorgement could “transform any
equitable profits-focused remedy into a penalty.” Id. at 1949 (emphasis
added). It referred to disgorgement as a “profit-based measure of unjust
enrichment,” id. at 1943 (quotation omitted), which tends to support the
second reading because unjust enrichment is not a particular restitutionary
remedy but the basis for all restitution.44
Further supporting the second reading, the opaque language in Liu

41
We hereinafter refer to this potential meaning of Liu as the “first reading.”
42
We hereinafter refer to this potential meaning of Liu as the “second reading.”
43
1 Dobbs, supra note 29, at 587–600; 4 Pomeroy, supra note 40, § 1044, at 93–
97. Moreover, at least one of those requirements is inconsistent with how courts have
ordered “disgorgement,” as we explain infra notes 46–49 and accompanying text.
44
See Restatement (First) of Restitution § 1 (Am. L. Inst. 1936)
(“A person who has been unjustly enriched at the expense of another is required to make
restitution to the other.”).

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may generally be explained by the Court’s conviction that the “label affixed”
to a remedy should not be permitted to “elevate form over substance.” Id.
at 1941 n.1 (quotations omitted). That principle counsels emphasis on the
question “whether the underlying profits-based award conforms to equity
practice,” id., which may be the question that any court confronting a request
for “disgorgement” must ask anew.
The first reading is probably more natural. But there is a substantive
reason to adopt the second reading. The Court has used the same Mertens
test to interpret very similar language—“appropriate equitable relief”—in
ERISA.45 In that context, it was careful to preserve the particular require-
ments of the underlying equitable remedies, including, for instance, the
requirement for a constructive trust that “money or property identified as
belonging . . . to the plaintiff could clearly be traced to particular funds or
property in the defendant’s possession.” Great-West Life & Annuity Ins. Co.
v. Knudson, 534 U.S. 204, 213 (2002). So the Court’s reliance on Mertens in
Liu may mean that it intended to do so again.
The difference between the two readings of Liu is consequential. If,
to get disgorgement, the SEC must satisfy the elements of an equitable res-
titutionary remedy, it faces a much higher bar than it did before Liu. The
parties have identified two candidate remedies, which are also the remedies
identified by the Liu Court as historically grounding “disgorgement.” Each
suggested remedy has salient limitations.
The first remedy is a constructive trust. We have just mentioned its
defining requirement, which is sometimes called “tracing.” It can only be

45
See 29 U.S.C. § 1132(a)(3)(B); Great-West Life & Annuity Ins. Co. v. Knudson, 534
U.S. 204, 210, 212 (2002); SEC v. Camarco, No. 19-1486, 2021 WL 5985058, at *21–22
(10th Cir. Dec. 16, 2021) (unpublished) (Bacharach, J., dissenting).

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“used when the defendant has a legally recognized right in a particular
asset.”46 Equity considers that asset to be held on behalf of the wronged
party. So the wronged party may recover that party’s interest by identifying
that precise asset or tracing anything that has been “substituted for it.”47
That requirement is onerous, but it sometimes imparts a benefit to the
wronged party because the asset may appreciate in value or may be exchanged
for something more valuable, providing the party with “remedies far more
complete than the compensatory damages obtainable in courts of law.”48 To
satisfy the tracing requirement, if there is one, the SEC would need to identify
particular funds from the fraudulent businesses that are still in Hallam’s
possession—or assets that he purchased with those particular funds, tracked
all the way through the chain of possession. In that context, money isn’t con-
sidered fungible.49
The second remedy, which is also sometimes also called an action,50 is
an “accounting” or an “accounting for profits.” The purpose of an account-
ing is to determine how much profit a wrongdoer got “from improper use of
the plaintiff’s property or entitlements” and force him to return it to the

46
1 Dobbs, supra note 29, at 591.
47
Id. at 590.
48
4 Pomeroy, supra note 40, § 1044, at 96.
49
See, e.g., Rosenberg v. Collins, 624 F.2d 659, 663 (5th Cir. 1980) (“Under the
present circumstances, none of the customers of the bankrupt could successfully trace his
or her funds so as to sustain . . . a constructive trust theory because all of the funds from the
900 customers of the bankrupt were co-mingled in a single back account . . . .”).
50
See, e.g., 4 Pomeroy, supra note 40, § 1420, at 1076 (“The action of account-
render was one of the most ancient actions known to the common law. . . . [But] the action
of account-render fell into disuse, and a jurisdiction in equity to entertain suits for an
accounting grew up.”) (footnoted omitted); McMaster v. Gould, 276 U.S. 284, 285 (1928)
(“The petitioners brought an action in equity . . . for an accounting of syndicate funds.”).

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plaintiff.51 Recovering funds in an accounting doesn’t require the plaintiff to
trace his funds to some particular account.52 But the parties dispute whether
an accounting remedy carries another requirement: that the defendant pos-
sess some definable item (a res) belonging to the plaintiff that generates an
uncertain amount of profit.
The SEC says accounting “did not involve a res or tracing.” It’s
unclear whether the SEC here uses the term “res” to refer to a profit-
generating item or just to the tracing requirement (in the sense that tracing
requires a plaintiff to identify his property in the form of a “particular res or
fund of money”).53 But all of its sources for that proposition refer only to the
lack of a tracing requirement.54 And Hallam retorts that the SEC couldn’t
satisfy the threshold requirements to get an equitable accounting, tracing
aside.
Equitable accounting really refers to “three different remedies,”55 but
only one form could be relevant here. The first form applies when a legal
accounting is impossible because “the accounts between the parties are of
such a complicated nature that only a court of equity can satisfactorily unravel
them.”56 That applies in only “rare case[s]” implicating extraordinary com-

51
1 Dobbs, supra note 29, at 610.
52
Id. at 588 (“Unlike the [constructive] trust . . . , accounting does not seek any
particular res or fund of money; the defendant will be forced to yield up profits, but the
defendant can pay from any monies he might have, not some special account.”).
53
Id.
54
See id. at 588; 4 Pomeroy, supra note 40, § 1416, at 1070; 2 Restatement
(Third) of Restitution & Unjust Enrichment § 51 cmt. b (Am. L. Inst.
2010).
55
1 Dobbs, supra note 29, at 609.
56
Dairy Queen, Inc. v. Wood, 369 U.S. 469, 478 (1962) (quotations omitted).

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plexity that not even an appointed special master can help a jury unravel.57
There is no reason to think it would apply here. The second variety is an
antediluvian form of discovery that has “little or no use today” under the
Federal Rules of Civil Procedure.58 The third, relevant, form returns to the
wronged party “gains received from improper use of the plaintiff’s property
or entitlements” and gives the “defendant the burden of proving appropriate
deductions for expenses he incurred in reaping those profits.”59
The only relevant form of accounting thus requires an identifiable res
that “produces profits or income.”60 That principle is illustrated by Sheldon
v. Metro-Goldwyn Pictures Corp., 309 U.S. 390 (1940). MGM stole the plot of
the plaintiffs’ play and adapted it into the screenplay that served as the basis
for a film.61 Id. at 396–97. The Supreme Court affirmed the district court’s
grant of an accounting for profits, which was intended to determine the por-
tion of the film’s net profits attributable to the stolen screenplay instead of
other aspects of its “production and direction.” Id. at 398, 406–09. That sort
of accounting remedy was common in intellectual-property cases.62 That’s
because those cases squarely present the problem of having to distinguish
between the portion of profits attributable to the intellectual property—the
profit-generating res—and other parts of the production process. Without

57
Id.
58
1 Dobbs, supra note 29, at 610; see also Fed. R. Civ. P. 26(b), 34.
59
1 Dobbs, supra note 29, at 610.
60
Id. at 588; Knudson, 534 U.S. at 214 n.2.
61
Letty Lynton (Metro-Goldwyn-Mayer 1932).
62
See, e.g., Providence Rubber Co. v. Goodyear, 76 U.S. (9 Wall.) 788, 789, 801–04
(1869); Birdsall v. Coolidge, 93 U.S. 64, 68–69 (1876); City of Elizabeth v. Am. Nicholson
Pavement Co., 97 U.S. 126, 138 (1877); Root v. Lake Shore & M.S. Ry. Co., 105 U.S. 189, 194
(1881); Callaghan v. Myers, 128 U.S. 617, 663–67 (1888).

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that problem, there is no need for an equitable accounting because the sum
owed is certain and “the remedy at law is entirely adequate.”63
The SEC’s request for disgorgement here didn’t implicate a profit-
generating res. It merely identified a series of cash transfers from the fraudu-
lent companies. Nor did it trace those funds into assets still in Hallam’s pos-
session. So it has not satisfied the requirements of either of the historically
available equitable remedies identified by the parties.
The question whether the disgorgement order complies with Liu’s
directions thus depends on whether the SEC needed to satisfy the require-
ments of a traditional equitable remedy—that is, on which reading of Liu is
correct. But before this or any other circuit could authoritatively construe
Liu, Congress amended the Exchange Act again. So the plot thickens.

3.
There are three relevant aspects to the amendments. Each applies to
the same subsection of the Exchange Act—21(e) in the original Act,64 which
is codified at 15 U.S.C. § 78u(d).65 That subsection is captioned “Injunction
proceedings; authority of court to prohibit persons from serving as officers
and directors; money penalties in civil actions; disgorgement.”66
First, Congress expanded Section 78u(d)(3). That section was previ-
ously titled “Money penalties in civil actions” and concerned only the
authority to impose the sort of penalties discussed supra Section II.A.67 The

63
4 Pomeroy, supra note 40, § 1421, at 1081.
64
Securities Exchange Act § 21(e).
65
2021 NDAA § 6501.
66
15 U.S.C. § 78u(d). The word “disgorgement” was added by the amendments.
67
2021 NDAA § 6501(a)(1)(A).

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title now reads, “Civil money penalties and authority to seek disgorge-
ment.”68 It confers jurisdiction on district courts to “require disgorgement
. . . of any unjust enrichment by the person who received such unjust enrich-
ment as a result of [an Exchange Act] violation.”69
Second, Congress added Section 78u(d)(7), titled, “Disgorgement.” It
provides, “In any action or proceeding brought by the [SEC] under any prov-
ision of the securities laws, the [SEC] may seek, and any Federal court may
order, disgorgement.”70
Third, Congress added Section 78u(d)(8). It establishes “[l]imitations
periods” for certain remedies authorized by Section 78u(d).71 It is relevant
here because it distinguishes between “Disgorgement”72 and “Equitable
remedies.”73 “Disgorgement” is subject to either a five- or ten-year limita-
tions period depending on the statutory provision violated,74 while “any
equitable remedy” must be sought within ten years.75
Congress also provided that those amendments “shall apply with
respect to any action or proceeding that is pending on . . . the date of enact-
ment of [the 2021 NDAA].”76 Since the amendment “makes clear that it is

68
Id.
69
2021 NDAA § 6501(a)(1)(B)(ii); 15 U.S.C. § 78u(d)(3)(A)(ii).
70
2021 NDAA § 6501(a)(3); 15 U.S.C. § 78u(d)(7).
71
2021 NDAA § 6501(a)(3); 15 U.S.C. § 78u(d)(8).
72
15 U.S.C. § 78u(d)(8)(A).
73
Id. § 78u(d)(8)(B).
74
Id. § 78u(d)(8)(A).
75
Id. § 78u(d)(8)(B).
76
2021 NDAA § 6501(b). That provision of the bill appears to have been desig-
nated for codification as a statutory note rather than a freestanding section. See id. We
attach no significance to that fact. “[W]hether . . . a provision is . . . set out as a section or

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retroactive, [we] must apply [it] in reviewing judgments still on appeal that
were rendered before the law was enacted, and must alter the outcome
accordingly.” Plaut v. Spendthrift Farm, Inc., 514 U.S. 211, 226 (1995).77

4.
Other circuits have yet to grapple with those amendments. Two cir-
cuits have recently reassessed their disgorgement jurisprudence, but neither
relied on the amendments, and neither elected to publish its opinion.
The Second Circuit, in a summary order, reaffirmed that a district
court’s authority to order disgorgement is rooted in Section 78u(d)(5)’s “any
equitable relief” language. SEC v. de Maison, No. 21-620, 2021 WL 5936385,
at *1–2 (2d Cir. Dec. 16, 2021) (unpublished). It concluded that Liu left its
prior “reasonable approximation of profits” test undisturbed. Id. at *2 (quo-
tation omitted). It rejected the defendant’s contention that Liu requires
tracing, id., which at least hints that the court adopted the first reading of Liu.
The Tenth Circuit did essentially the same thing. It also concluded
that its “reasonable approximation of profits” test for calculating disgorge-
ment would continue to apply after Liu, rejecting the defendant’s call for a
strict tracing requirement. Camarco, 2021 WL 5985058, at *13–17 (quotation
omitted). That holding appeared to rest on the first possible reading of Liu.

a statutory note[ ] does not in any way affect the provision’s meaning or validity.” Office
of the Law Revision Counsel, About Classification of Laws to the United States
Code, https://uscode.house.gov/about_classification.xhtml. That classification decision is
merely “editorial.” Id. The retroactivity provision has the force of law because it was con-
tained in the statute passed by Congress and signed by the President. See U.S. Nat’l Bank
of Or. v. Indep. Ins. Agents of Am., Inc., 508 U.S. 439, 448 (1993).
77
See also United States v. Schooner Peggy, 5 U.S. (1 Cranch) 103, 110 (1801) (“[I]f
subsequent to the judgment and before the decision of the appellate court, a law intervenes
and positively changes the rule which governs, the law must be obeyed, or its obligation
denied.”).

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Id. at *16 (“Liu acknowledged the availability of disgorgement as an equitable
remedy . . . .”) (emphasis added). It also continued to ground disgorgement
in Section 78u(d)(5). Id. at *13.78 But curiously, the court added that the
second reading of Liu “may well prevail one day”; it merely declined “to
stand alone on this matter.” Id at *16.
Judge Bacharach dissented in Camarco. He would have adopted the
second reading of Liu; he thought the appropriate post-Liu question was “[I]s
the requested remedy one that was typically available in equity?” Id. at *22
(citing Mertens, 508 U.S. at 256). He concluded that an equitable accounting
could not apply to the case before the court for the same reason we stated
above. Id. at *23. So he would have applied a tracing requirement as in the
case of a constructive trust. Id. at *21–22. And he reasoned that the 2021
Exchange Act amendments merely confirmed Liu’s reading of Section
78u(d)(5). See id. at *25.
The Camarco majority did not offer a contrary view of the amend-
ments. Instead, it explained that it was “limit[ing its] analysis to the contours
of equitable disgorgement” and “leaving for another day whether the
amended version of § 78u permits for disgorgement as a statutory-based
remedy in law.” Id. at *2 n.3. So far, Liu appears to have changed very little
circuit caselaw, and the amendments have changed even less.

B.
1.
Hallam reads Liu differently from the Second and Tenth Circuits’
analysis. According to him, Liu “banished” prior caselaw regarding

78
That’s at least partially attributable to the fact that the SEC had specifically
pleaded a request for “equitable disgorgement” in Camarco. Id. at *2 n.3. Hallam agreed
only that the district court could “order disgorgement.”

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disgorgement. He favors the second reading of Liu, which would require each
individual “disgorgement” order to satisfy the elements of an historically
available equitable remedy.
Hallam’s reading of the statutory amendment is less forceful. At oral
argument, his counsel claimed that the new statutory provisions are “not . . .
of concern to this court.”79 He suggested that it would be inappropriate to
rely on those amendments as the basis for affirming the disgorgement award
because they were not considered by the district court.80 And he contended
that the amendments aren’t retroactively applicable because the basis for
ordering disgorgement is the consent agreement, which Hallam entered into
before the amendments were enacted.81 He conceded, though, that the
amendments are “not a codification of Liu.”82
The SEC disagrees about the meanings of both Liu and the amend-
ments. It advances the first reading of Liu, which would mean that dis-
gorgement has no limitations beyond those identified by the Court. It rebuts
Hallam’s contention that Liu “nullified fifty years of disgorgement prece-
dent” by pointing out that Liu had only “occasional” criticisms of the lower
courts’ disgorgement awards.
To hear the SEC tell it, the statutory amendments may mean nothing
at all. Its counsel informed the court that Congress didn’t “change the nature
of the relief that’s available”; it merely “codifie[d]” Liu.83 Its position is that
even if the amendments change anything, those changes relate to aspects of

79
Oral Argument at 2:17–2:22.
80
Id. at 2:22–2:57.
81
Id. at 3:28–5:05.
82
Id. at 2:57–3:05.
83
Oral Argument at 19:38–20:06.

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disgorgement awards that aren’t relevant here.84

2.
Neither party’s interpretation of the amendments is persuasive. For
starters, we reject the suggestion that the amendments merely codify Liu.
“When Congress acts to amend a statute, we presume it intends its amend-
ment to have real and substantial effect.” Intel Corp. Inv. Pol’y Comm. v.
Sulyma, 140 S. Ct. 768, 779 (2020) (quotation omitted). And “we are hesitant
to adopt an interpretation of a congressional enactment which renders
superfluous another portion of that same law.” Republic of Sudan v. Harrison,
139 S. Ct. 1048, 1058 (2019) (quotation omitted).
The “codification-of-Liu” reading of the amendments would violate
both principles. It would mean that Congress added two paragraphs to Sec-
tion 78u(d) and changed a third without altering the requirements for the
remedy that was the subject of all three revisions. And it would render nearly
each new word redundant with the unaltered Section 78u(d)(5)—which had
just been held to permit relief going by the same name as the name assigned
to the newly added to the statutory language. That reading is unsupportable.
We also disagree that Congress’s recent word on the subject is irrele-
vant to our decision. As we have explained, we are bound to apply an expli-
citly retroactive change in the law that is effected before we render judgment.
Plaut, 514 U.S. at 226. It doesn’t matter that Hallam agreed to the “disgorge-
ment” before the statute was amended. That agreement included no further
content to give meaning to that remedy’s scope. So its amount was always
going to be determined by reference to extracontractual legal principles.

84
Id. at 21:01–21:56. For instance, it may vitiate the requirement that the award be
“for the benefit of investors.” Id.; see also 15 U.S.C. § 78u(d)(5); Liu, 140 S. Ct. at 1947–
49. Neither party has raised that contention, so we have no occasion to consider it.

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Hallam did not complain when Liu appeared to impose new constraints on
the scope of that remedy. Instead, he made those purportedly novel limita-
tions the cornerstone of his legal strategy. He may not now complain about
Congress’s decision to nullify those constraints—if they ever existed.
Nor do we think the amendments should necessarily be addressed first
by the district court. True, we often emphasize the “general rule . . . that we
are a court of review, not of first view.”85 But we need not remand where the
district court’s judgment, issued before the congressional action, turns out to
be vindicated. First Gibraltar Bank, FSB v. Morales, 42 F.3d 895 (5th Cir.
1995).86 The district court set forth a detailed rationale for awarding dis-

85
Texas v. Biden, 20 F.4th 928, 965 (5th Cir. 2021) (quotation omitted), cert. granted,
142 S. Ct. 1098 (2022).
86
In First Gibraltar, we affirmed a judgment based on a statutory amendment
enacted after our initial disposition of the appeal. The district court granted summary judg-
ment for the defendants, concluding that challenged state regulations had not been pre-
empted by federal law. We first reversed after concluding that federal agencies had
preempted state law by promulgating regulations. First Gibraltar, 42 F.3d at 896. Then,
before our mandate issued, Congress amended the relevant statute to make clear that it
couldn’t be the basis for preempting state law. Id. at 897. We revisited the matter, noting
our obligation to review the judgment under “the law as it currently exists.” Id. at 898.
After concluding that the amendment “restrict[ed] the congressional delegation of author-
ity” to agencies to preempt state law, id. at 900, we concluded that the challenged regula-
tions hadn’t been preempted. So we affirmed the original judgment, id. at 902, even though
we did so based on an amendment that didn’t exist when the district court reached its
decision.
This case is like First Gibraltar—it is not a situation in which the change in law
presents the risk that the original judgment may “operate to deny litigants substantial
justice.” Concerned Citizens of Vicksburg v. Sills, 567 F.2d 646, 650 (5th Cir. 1978) (quotation
omitted). “In such cases, where circumstances have changed between the ruling below and
the decision on appeal, the preferred procedure is to remand to give the district court an
opportunity to pass on the changed circumstances.” Id. at 649–50.
Here, as we will explain, the statutory amendments reaffirm the legal framework in
place when Hallam and the SEC reached the original consent agreement. So there is no
risk of denying either litigant substantial justice in applying the amendment to the

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gorgement under the pre-Liu legal framework. The question posed by Liu
and the amendments is purely legal: whether that framework still applies or
has been displaced. We are well-positioned to consider how the answer to
that question applies to this case.

3.
As amended, Section 78u(d) authorizes disgorgement in a legal—not
equitable—sense. In doing so, it ratifies the pre-Liu disgorgement framework
used by every circuit court of appeals.
At oral argument, Hallam’s counsel stressed the difficulty in making
sense of the now-statutory term “disgorgement.”87 He’s right that generic
definitions of “disgorge” are often unilluminating.88 But that isn’t univer-
sally true; there is some evidence that the term had a public meaning resem-
bling its eventual use in securities law, even before the Second Circuit used it
in Manor Nursing.89 In any event, the historical pedigree of disgorgement as

judgment.
87
Oral Argument at 3:06–3:20 (“The [NDAA] amendments are . . . blunt instru-
ments. It’s still not clear what [they] mean. For example, [they] just use[ ] the word ‘dis-
gorgement.’ What does that mean?”).
88
For instance, most dictionary definitions—both those published around the time
of the amendments and those published around the time courts started using the term in
securities law—describe disgorgement as the act of emptying something. E.g., Web-
ster’s New Collegiate Dictionary 327 (1977) (defining “disgorge” as “to dis-
charge contents[, for example, ]where the river [disgorges] into the sea[ ]”). See also, e.g.,
1 Edward Gibbon, The Decline and Fall of the Roman Empire 104 (1776)
(“The dens of the amphitheatre disgorged at once a hundred lions . . . .”). As Justice
Thomas observed in his Liu dissent, 140 S. Ct. at 1951–53, the term was infrequently used
in law or equity before the 1960s. Black’s Law Dictionary did not define the term until 1999.
Disgorgement, Black’s Law Dictionary 480 (7th ed. 1999) (“The act of giving up
something (such as profits illegally obtained) on demand or by legal compulsion.”).
89
That is, some definitions emphasize a figurative use of the term “disgorge” that
“especially” refers to the return of ill-gotten gains. The year before Manor Nursing, one
dictionary defined “disgorge” as “to discharge the contents of . . . [especially] to give up

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a remedy or a legal term has only ancillary relevance because we face a ques-
tion different from the one in Liu. Our task is to understand what the amend-
ments meant to a reasonable reader at the time they were enacted.
Three principles of statutory interpretation shape that inquiry. First,
we consider “disgorgement” as a “legal term of art,” not in its ordinary
sense, because it is an undefined statutory term that had an established legal
meaning by 2021. FAA v. Cooper, 566 U.S. 284, 291–92 (2012); see also Air
Wis. Airlines Corp. v. Hoeper, 571 U.S. 237, 248 (2014). Second, we consider
the whole Section 78u(d) as amended, not just the text of the amendments.
Home Depot U.S.A., Inc. v. Jackson, 139 S. Ct. 1743, 1748 (2019). Third, we
“assume that, when Congress enacts statutes, it is aware of relevant judicial
precedent.” Ryan v. Valencia Gonzales, 568 U.S. 57, 66 (2013) (quotation
omitted).
That first principle establishes that Congress ratified either Liu or the
pre-Liu circuit practice. “When a statutory term is ‘obviously transplanted
from another legal source,’ it ‘brings the old soil with it.’” Taggart v. Loren-
zen, 139 S. Ct. 1795, 1801 (2019) (quoting Hall v. Hall, 138 S. Ct. 1118, 1128
(2018)). That “old soil” includes a remedy’s threshold requirements and
auxiliary enforcement doctrines. Id. Whatever “disgorgement” meant—or
didn’t mean—at the merger of law and equity or in 1971, it was an established
legal term with plenty of “soil” by 2021. All twelve regional circuits had long

illicit or ill-gotten gains.” Webster’s Third New Int’l Dictionary 649 (1971).
And by 1989—and still in 2022—the Oxford English Dictionary defined “disgorge” as
“[t]o discharge as if from a mouth; to empty forth; [especially] to give up what has been
wrongfully appropriated.” 4 Oxford English Dictionary 772 (2d ed. 1989); id.
(Mar. 2022 update), https://www.oed.com/view/Entry/54376. See also, e.g., 4 Arthur
Wellesley, The Dispatches of Field Marshall the Duke of Welling-
ton 121 ( John Gurwood ed., rev. ed. 1837) (planning to negotiate “some mode to be
devised to make the French Generals disgorge the church plate which they have stolen”).

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since maintained that a remedy by that name was available under the Ex-
change Act.90 And the Court had very recently recognized that a remedy or
category of remedies under that label was consistent with “longstanding
principles of equity.” Liu, 140 S. Ct. at 1947. The question is: From which
pot did Congress transplant the term into the Exchange Act?
The second and third principles we introduced above demonstrate
that Congress used the term “disgorgement” to authorize the sorts of dis-
gorgement awards courts were ordering before Liu.
Our mandate is to give effect to “every word and every provision” of
Section 78u(d).91 And it cannot be overlooked that the statute now distin-
guishes itself from Liu’s foundations in two critical ways. For one thing, it
explicitly authorizes “disgorgement” in Section 78u(d)(7), while Liu found
that authority already present in the “equitable relief” allowed by the
(unchanged) Section 78u(d)(5).92 If the amendments merely ratify Liu, one
of those sections is “superfluous.” Harrison, 139 S. Ct. at 1058. But more
importantly, the whole act also demonstrates that the sort of “disgorgement”
authorized by the amendments cannot be an equitable remedy, which clashes
with Liu from the get-go. See Liu, 140 S. Ct. at 1940 (“[A] disgorgement
award . . . is equitable relief . . . .”).
Section 78u’s text now twice distinguishes between disgorgement and
equitable remedies. It does so first in paragraphs (d)(5) and (d)(7). The for-
mer is captioned “Equitable relief” and authorizes “any equitable relief that

90
Supra note 32 and accompanying text.
91
Nielsen v. Preap, 139 S. Ct. 954, 969 (2019) (quoting Antonin Scalia &
Bryan A. Garner, Reading Law: The Interpretation of Legal Texts
174 (2012)).
92
See 15 U.S.C. § 78u(d)(5); id. § 78u(d)(7); Liu, 140 S. Ct. at 1940.

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may be appropriate or necessary for the benefit of investors.”93 The latter is
captioned “Disgorgement” and authorizes a remedy by the same name.94
Then again, in paragraph (d)(8), the same textual distinction is made when
the statute specifies limitations periods.95 The obvious implication is that
“disgorgement” is not “equitable relief.”
Still, there is a potentially countervailing textual implication. Para-
graph (d)(3), which gives district courts jurisdiction to order disgorgement,
explains that the awards must consist “of any unjust enrichment.”96 That
phrasing is consistent with a remedy rooted in equity, given that “unjust
enrichment” is another term of art—the basis for all restitution, which is
often equitable.97 And it is consistent with Liu, which described equitable
disgorgement as a “profit-based measure of unjust enrichment.” Liu,
140 S. Ct. at 1943 (quotation omitted).
But not all restitution is equitable. Indeed, “[t]he earliest proceedings
in common law courts were restitutionary in nature.”98 One example of an
extant restitutionary legal action is quasi-contract.99 And the “basis” for lia-
bility in a claim for quasi contract is “unjust enrichment.” Schall v. Camors,

93
15 U.S.C. § 78u(d)(5) (emphasis added).
94
Id. § 78u(d)(7).
95
Compare id. § 78u(d)(8)(A) (“disgorgement”), with id. § 78u(d)(8)(B) (“any
equitable remedy” (emphasis added)).
96
Id. § 78u(d)(3)(A) (“United States district court[s] . . . shall have jurisdiction to
. . . require disgorgement under [15 U.S.C. § 78u(d)(7)] of any unjust enrichment by the
person who received such unjust enrichment as a result of [an Exchange Act] violation.”).
97
Supra note 44 and accompanying text.
98
Restatement (First) of Restitution 5 (Am. L. Inst. 1936).
99
Id. at 5–9. See also id. § 5 (“The appropriate proceeding in an action at law for
the payment of money by way of restitution is . . . [,] in States retaining common law forms
of action, an action of general assumpsit.”).

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251 U.S. 239, 254 (1920). Congress’s decision to measure the “disgorge-
ment” remedy by “unjust enrichment” is thus consistent with either a legal
or an equitable remedy. So paragraph (d)(3) can’t defeat the implications of
paragraphs (d)(5), (d)(7), and (d)(8).
There is also a sense in which explicitly authorizing a remedy in a stat-
ute’s text is inconsistent with that remedy’s being rooted in equity. The his-
torical role for equity was to occupy that space “not regulated by some
express or written law.”100 As it is often said, “equity follows the law.”101 Any
federal-court jurisdiction to order equitable remedies must be conferred by
Congress.102 But when Congress does that for non-injunctive equitable relief,
it typically uses the generic term “equitable relief,” Knudson, 534 U.S. at 217
& n.3, as it did in the 2002 Exchange Act amendments, 15 U.S.C. § 78u(d)(5),
a term that imports with it the whole body of traditional equity jurisprudence,
Liu, 140 S. Ct. at 1942, 1947. The decision to name one particular remedy
(other than an injunction) further suggests that the remedy is not equitable.
That conclusion is bolstered by applying the third principle. If we pre-
sume that Congress was aware of Liu, its decision substantially to amend the
statute six months later concerning the same subject is unlikely to be an impri-
matur.103 Such swift, expansive action is more consistent with a desire to

100
1 Joseph Story, Commentaries on Equity Jurisprudence 5 (1st
ed. 1836).
101
27 Am. Jur. 2d Equity § 123 (1964). That “maxim is susceptible of various
interpretations.” Id. One interpretation is that equity is that which is unprovided for at
law; it can either be “completely outside of the law” while “leav[ing] the law concerning
the same subject-matter in full force and efficacy,” or “directly opposed to the law which
applies to the same subject-matter.” 1 John Norton Pomeroy, Treatise on
Equity Jurisprudence § 427, at 468 (1st ed. 1881).
102
See Rees v. City of Watertown, 86 U.S. (19 Wall.) 107, 120–22 (1873).
103
See, e.g., Fed. Republic of Ger. v. Philipp, 141 S. Ct. 703, 711 (2021); cf. City of

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curtail the Court’s decision—that is, to permit the sort of disgorgement
awards ordered before the Court reemphasized “the limitations upon its
availability that equity typically imposes,” Liu, 140 S. Ct. at 1947 (quoting
Knudson, 534 U.S. at 211 n.1)).
So we conclude that Sections 78u(d)(3) and (d)(7) authorize legal “dis-
gorgement” apart from the equitable “disgorgement” permitted by Liu.
That answers the question which “soil,” Taggart, 139 S. Ct. at 1801, came
with the “term of art,” Cooper, 566 U.S. at 292, that Congress used. We must
therefore apply the burden-shifting framework that prevailed before Liu.

4.
To get legal disgorgement, the SEC has the burden reasonably to
approximate the defendant’s “unjust enrichment” attributable to the securi-
ties violation. 15 U.S.C. § 78u(d)(3); Halek, 537 F. App’x at 581; First City
Fin., 890 F.2d at 1232.104 That amount may not include “income earned on
ill-gotten profits,” Blatt, 583 F.2d at 1335, but it may include interest, id. If
the SEC carries that burden, the burden then shifts to the defendant. To
rebut the SEC’s evidence, the defendant must prove that the requested

Boerne v. Flores, 521 U.S. 507, 512 (1997).
104
Although Congress inserted the language authorizing disgorgement into the
codified Exchange Act, we use the phrase “securities violation” rather than “Exchange Act
violation.” That’s because 15 U.S.C. § 78u(d)(7) permits disgorgement in actions brought
“under any provision of the securities laws.” Since this case concerns a defendant who
admitted liability under the Exchange Act, we do not here decide whether the amendments
permit disgorgement where no Exchange Act violation occurs. The text suggests as much,
and we have previously assumed without comment that disgorgement applied to violations
of the Securities Act even though the language that Liu held to permit disgorgement was
located only in the codified Exchange Act. See SEC v. Kahlon, 873 F.3d 500, 508–09 (5th
Cir. 2017) (per curiam). But Section 78u now arguably grants jurisdiction to “require dis-
gorgement” only for violations of “this chapter”—i.e., the Exchange Act. See 15 U.S.C.
§ 78u(d)(3)(A) (emphasis added).

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amount is “unreasonable,” Halek 537 F. App’x at 581, for instance, by inter-
rupting the causal chain identified by the SEC, First City Fin., 890 F.2d
at 1232. Since the calculation of the amount of unjust enrichment is a ques-
tion of fact, we review a district court’s order for abuse of discretion. Halek,
537 F. App’x at 581.
The district court concluded that the SEC had met its burden reason-
ably to approximate Hallam’s net profits from the securities violations at
$1,901,480. That figure, if accurate, represents the amount he was unjustly
enriched because his net profit is the sum total of the “advantage” he gained
from his illegal conduct.105 And the amount is a facially reasonable estimate
of his unjust enrichment because it precisely identifies specific transactions
that enriched Hallam.106 So the burden shifted to him to discredit that
approximation.
Hallam has invested little energy in attempting to do so before this
court, preferring instead to mount a wholesale attack on the foundations of
the burden-shifting framework. He says, for example, that the SEC’s approx-
imation “does not comport with the pre-fusion law of equity.” He adds that
“salary-type distributions,” such as those at issue here, are also “not recov-
erable in equity.” Even if those statements are true, they are irrelevant
because, as we have explained, the SEC is permitted to obtain legal disgorge-
ment. The question before us is factual: Did the district court clearly err in
concluding that $1,901,480 is a reasonable approximation of Hallam’s net
benefit from his violations? 107

105
Restatement (First) of Restitution § 1 cmt. b (Am. L. Inst. 1936).
106
Contra Seghers, 404 F. App’x at 864 (holding that the SEC had failed to meet its
reasonable-approximation burden where it “fail[ed] to explain adequately the source of
funds” it sought to disgorge).
107
Clear error is the standard for the factual component of abuse-of-discretion

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Hallam makes three points that are responsive to that question. First,
he points out that the SEC calculated that figure by adding up “disburse-
ments” he received from the fraudulent entities. But those disbursements,
he says, are not the right sort of “profit” because the “scheme was perpe-
trated” by the companies, not by him personally—and those disbursements
are expenses, not profits, vis-à-vis the companies. Second, he maintains that
the SEC did not “segregate the sources of these payments between ‘legiti-
mate’ and ‘illegitimate’ business conduct.” Third, he claims that “many of
the payments were from unknown companies not connected to the allegations
. . . , others were indemnification for attorney’s fees or reimbursement of
expenses, and many were paid not to Hallam but to undescribed other
entities.” The district court rejected each of those contentions.
Hallam’s first objection is fundamentally misguided. Hallam is a
proper subject for a disgorgement award because he is a “person who
received . . . unjust enrichment as a result of [a securities] violation.”
15 U.S.C. § 78u(d)(3)(A)(ii). His consent agreement prevents him from con-
testing his obligation to “pay disgorgement of ill-gotten gains.” Any obliga-
tion owed by the fraudulent entities is separate and irrelevant.
In sum, as to Hallam, any money he received enriched him. The only
remaining question is whether that enrichment was unjust in the sense that it
was attributable to violations of the securities laws. That leads to his second
and third objections.
Hallam tells this court that the energy companies he helped run
weren’t completely fraudulent. He points to evidence in the record purport-
ing to show that those entities engaged in some “legitimate business activ-
ities” and truly owned “working interests in wells [that] were actually

review. Volkswagen, 545 F.3d at 310.

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No. 21-10222

drilled.” (Emphasis deleted.) That may be. And it’s true that legitimate
enrichment, unconnected to the violations, must be disregarded when calcu-
lating a disgorgement award. But that principle doesn’t apply here.
Hallam—not merely the companies—violated the law by selling
“working interest investments using misleading offering materials.” So even
if the companies were partially legitimate, that doesn’t change the fact that
all of the securities transactions during the relevant period were unlawful. The
district court found that its calculation of Hallam’s unjust enrichment was
“the compensation Hallam received for his role in the sale of these securities.”
(Emphasis added.) Hallam’s second point is no basis for holding that clearly
erroneous.
It’s also true that the payments must have been connected to the
companies for which Hallam sold securities. But Hallam’s attempt to dis-
prove that connection was utterly conclusory. He provided the district court
with a “table of entries [he thought were] in error,” amounting to
$1,712,573.26 of the $1,901,480 in disbursements identified by the SEC. He
provided little detail and no proof for that assertion. For instance, a whop-
ping $906,436.63 was labeled “[i]ncorrect” without further elaboration;
$100,300 more was dismissed as “wrongfully attributed.” The district court
did not clearly err by rejecting those barebones contradictions.
The district court properly concluded that $1,901,480 is a reasonable
approximation of Hallam’s “wrongfully obtained net profits.” So it was
empowered to order legal disgorgement in that amount under Section
78u(d)(3)(A)(ii) and (7).

5.
Because we have concluded that the award was permissible as legal
disgorgement, we do not consider whether it met the standards for equitable
disgorgement under Section 78u(d)(5) and Liu. That is, we do not decide

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No. 21-10222

which reading of Liu is correct—or whether equitable disgorgement has sur-
vived the 2021 Exchange Act amendments. This court likely will need to
resolve those and related questions in future cases.
For instance, as we have explained, an award including income that a
defendant earned on his unjust enrichment is not permissible as legal dis-
gorgement. But some equitable profit-based remedies, such as a constructive
trust, allow that sort of recovery. So if we are confronted with an appeal from
a request for an award of that nature, we may need to decide whether it could
be equitable disgorgement consistent with Liu’s constraining those awards to
“net profits,” 140 S. Ct. at 1947. And that may also require us to resolve
Hallam’s contention that the SEC is required strictly to trace the ill-gotten
gains, and the profits on them, into assets still held by the defendant.108
Whether a securities defendant has a Seventh Amendment right to a
jury trial to determine the amount of disgorgement is another potential differ-
ence between legal and equitable disgorgement that may require us con-
clusively to interpret Liu. The general rule is that the Seventh Amendment
applies to “actions brought to enforce statutory rights that are analogous to
common-law causes of action ordinarily decided in English law courts in the
late 18th century, as opposed to those customarily heard by courts of equity
or admiralty.” Feltner v. Columbia Pictures Television, Inc., 523 U.S. 340, 348
(1998).109 Courts answer that question by “examin[ing] both the nature of
the statutory action and the remedy sought.” Id.110 Because securities dis-

108
The SEC’s counsel conceded at oral argument that such an award of “profits on
profits” would require tracing, even after Liu. Oral Argument at 22:56–24:14.
109
See Jarkesy v. SEC, 34 F.4th 446, 451–59 (5th Cir. 2022) (holding that the Sev-
enth Amendment jury-trial right applies to SEC actions seeking civil penalties for violations
of securities-fraud statutes).
110
See also Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 40–42 (1989); Tull v.

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gorgements awards have previously been considered equitable, defendants
have not been afforded a jury trial to determine the amounts. SEC v. Com-
monwealth Chem. Sec., 574 F.2d 90, 94–96 (2d Cir. 1978).111 Our conclu-
sion―that what we have called legal disgorgement is distinct from the equit-
able disgorgement recognized in Liu―may have altered that analysis. But we
lack jurisdiction to decide whether that changes the outcome because Hallam
has not pressed a jury demand, having waived that right in his consent agree-
ment. So that question, too, must await another day.
Finally, as we have observed, no party has asked us to consider
whether a legal disgorgement award must be “for the benefit of investors.”
See Blackburn, 15 F.4th at 681 n.4 (quoting 15 U.S.C. § 78u(d)(5)) (declining
to decide the issue). Accordingly, we do not decide that question either,112
while noting that the 2021 amendments “specifically authoriz[e] disgorge-
ment without [including that] language.” Id.
* * *
None of Hallam’s challenges to the district court’s remedies has
merit. He has foreclosed some of them by failing to raise them timely or to
raise them properly. And Congress has foreclosed his position on the availa-
bility of disgorgement without tracing or a profit-generating res. The district
court had authority to impose each element of its remedies, and it did not
abuse its discretion in doing so. The judgment ordering Hallam to pay
$4,227,335.38 plus any postjudgment interest and to refrain from dealing in
unregistered securities except in his own account is AFFIRMED.

United States, 481 U.S. 412, 417–18 (1987).
111
Accord Osborn v. Griffin, 865 F.3d 417, 461 (6th Cir. 2017); SEC v. Rind, 991 F.2d
1486, 1493 (9th Cir. 1993); cf. Life Partners Holdings, 854 F.3d at 781–82.
112
Supra note 84.

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No. 21-10222

Andrew S. Oldham, Circuit Judge, concurring in part:
I join all but Part V of the majority opinion. As to that part, I
understand the relevant questions presented differently. In a consent
judgment, Parker Hallam agreed that the district court “shall order” and that
he will “pay disgorgement of ill-gotten gains . . . in an amount to be
determined by the Court upon motion by the Commission.” He also agreed
that he “may not challenge the validity of this Consent of the [Consent]
Judgment.” The district court then entered the consent judgment. After
that, the Supreme Court decided Liu v. SEC, 140 S. Ct. 1936 (2020), and
Congress amended 15 U.S.C. § 78u in the National Defense Authorization
Act for Fiscal Year 2021, Pub. L. No. 116-283, 134 Stat. 3388, 4626 (2021)
(“statutory amendment”).
In my view, the questions presented are two: (1) What did Hallam
agree to pay in the consent judgment? And (2) what effect, if any, did Liu and
the statutory amendment have on that agreement? As to (1), I would hold
that the district court did not clearly err in calculating Hallam’s agreed-upon
disgorgement as $1,901,480. And as to (2), Hallam argues that Liu and the
statutory amendment prevent the district court from awarding a
disgorgement remedy. Maybe that’s right; maybe it’s wrong. But either way,
it seems difficult or impossible to reach that question in the face of a consent
judgment entered before the law changed. The real question is whether Liu
or the statutory amendment somehow prevented Hallam from consenting to
more than what the applicable statutes arguably permitted. As to that
question, Hallam makes no argument, and I see nothing in Liu or the
statutory amendment to suggest that Hallam can’t consent to the
disgorgement awarded by the district court.

46