Securities and Exchange Commission v. Panuwat

Background

At a February 26, 2024 pretrial conference, the court heard argument on the parties’ motions in limine, which are requests to limit evidence or arguments at trial. The Securities and Exchange Commission’s theory was that Panuwat received confidential information through his role as an insider at Medivation and used that information for his personal benefit by trading Incyte securities. The order ruled on what the parties could present to the jury; it did not determine liability.

Panuwat’s Motions

- Use of “insider trading”: Denied. The court held that misappropriation liability is recognized as a form of insider-trading liability and allowed the SEC to use the phrase. The court said it would instruct the jury that “insider trading” is a term of art and is not pejorative. - Evidence about Tesaro and Relypsa trades: Denied. Panuwat could present limited evidence that the trades occurred in 2016, involved biopharmaceutical stocks, produced a gain, and made him less risk-averse. If he made those trades a more central part of his defense by introducing additional details, the SEC could cross-examine him about them. The court did not address a discovery dispute concerning those trades at that time. - News articles and analyst reports: Denied without prejudice to objection at trial. The SEC could offer the reports to show how the market discussed Medivation, Incyte, Pfizer, and similar companies in relation to one another, or to show the effect of news about Pfizer acquiring Medivation. The SEC could not offer the reports to prove the truth of the matters asserted. The court also noted that the relevance of reports issued after Panuwat’s Incyte trade was unclear and could be addressed at trial. - Video of Panuwat’s investigative testimony: Denied. The SEC could use the video of Panuwat’s May 15, 2020 sworn testimony, including excerpts in its opening statement. The court found that sanctions for the missing November 2020 video were not appropriate because the SEC had acted reasonably, and Panuwat had the November transcript and would testify himself. - Dr. Becker’s expert testimony: Denied. Applying Federal Rule of Evidence 702 and the court’s duty to screen expert testimony for relevance and reliability, the court found Dr. Becker qualified to testify about merger-and-acquisition dynamics and market interactions. The court held that her lack of specific biopharmaceutical experience, her selection of event-study dates, the size of her samples, and her use of news and analyst reports were matters for cross-examination and the jury’s assessment of weight, not grounds for exclusion. The court also allowed her rebuttal report and testimony, including statistical regressions responding to the opinions of Panuwat’s expert, Michiel McCarty. Dr. Becker was not permitted to testify about Panuwat’s state of mind; if she did so, the jury would be instructed to disregard it.

The SEC’s Motions

- Lawrence Pines’ rebuttal expert testimony: Denied. The court found that although some of Pines’ opinions did not directly contradict Dr. Becker, they could reduce the impact of her opinions and therefore were proper rebuttal. If Pines had offered new theories or opinions requiring a response, the SEC could submit a report by March 11, 2024, if necessary. - Testimony about Medivation’s policies: Denied in part, granted in part. Panuwat could testify about what he understood Medivation’s policies to mean when he made the Incyte trade and why, including his claimed lack of training or knowledge about misappropriation. Medivation employees Hung, Piscitelli, and Guernsey could testify about non-hearsay conversations with Panuwat, training, enforcement of the policies, and office culture related to the trade. They could not testify about the policies’ legal meaning, speculate, or describe a policy, practice, or understanding without adequate foundation. - Evidence about Tesaro and Relypsa trades: The order referred to the court’s discussion of Panuwat’s corresponding motion. The SEC could use additional details about those trades if Panuwat opened the door by presenting them more centrally in his defense. - Evidence about Panuwat’s child with severe special needs: Denied, but proceed with caution. Panuwat could testify about facts concerning his child to the extent they were relevant. The court barred using the child’s condition to evoke jury sympathy and required references to be brief and fact-based. - Evidence and argument about consequences of a liability verdict: Granted in part. Panuwat could testify about his experience as a hobbyist trader, his finance background, his knowledge of securities-law penalties, and his career aspirations to the extent relevant to intent. He could not present evidence about the consequences he might face in this case. The court would instruct the jury that the court, not the jury, decides remedies and that the jury may not consider remedies when deciding whether the SEC proved its case by a preponderance of the evidence. - Characterizing the SEC’s case as unique, novel, or unprecedented: Granted in part, denied in part. Panuwat could testify that he was unaware of similar cases, because that could relate to intent and the deception element of misappropriation. His expert could explain that insider-trading cases typically involve trading the securities of the company whose confidential information was learned. But the parties could not call the case or theory “highly unusual,” “unique,” “novel,” “unanticipated,” “unexpected,” or lacking fair notice, or suggest that the theory was improper. - Argument about forensic examination of the email: Granted. Panuwat could argue that he did not see the email containing confidential information, but he could not argue that the SEC had the burden to conduct a forensic examination of his computer. The court found the circumstantial evidence concerning the email strong and considered the proposed argument a red herring whose prejudicial effect outweighed its value. - Deposition testimony without notice and a showing of unavailability: Reserved. The court stated that it would address this issue if it arose at trial.

Disposition and Effect

The order was a procedural ruling on motions in limine. It set limits on evidence, testimony, and argument for trial but did not decide whether the SEC or Panuwat would prevail on the underlying securities-law claims. The order was signed by Judge William H. Orrick on March 8, 2024.