No.

22-____

In the
Supreme Court of the United States
REV. FATHER EMMANUEL LEMELSON
(F/K/A GREGORY LEMELSON) AND
LEMELSON CAPITAL MANAGEMENT, LLC,
Petitioners,
V.
SECURITIES AND EXCHANGE COMMISSION,
Respondent.

On Petition for a Writ of Certiorari to the

United States Court of Appeals
for the First Circuit

PETITION FOR A WRIT OF CERTIORARI

Douglas S. Brooks Russell G. Ryan

Thomas M. Hoopes Counsel of Record
LIBBY HOOPES BROOKS John Vecchione
& MULVEY, P.C. Kaitlyn Schiraldi
260 Franklin Street Markham S. Chenoweth
Boston, MA 02110 NEW CIVIL LIBERTIES
(617) 338-9300 ALLIANCE
1225 19th Street, NW
Suite 450
Washington, DC 20036
(202) 869-5210
[email protected]

Counsel for Petitioners

 i

QUESTIONS PRESENTED

Section 10(b) of the Securities Exchange Act of

1934 prohibits any “manipulative or deceptive device
or contrivance,” as defined by Securities and
Exchange Commission rule, in connection with the
purchase or sale of any security. SEC Rule 10b-5—
which this Court has repeatedly held cannot create or
expand liability beyond what § 10(b) prohibits—
purports to make it unlawful not only “[t]o employ any
device, scheme, or artifice to defraud” or “[t]o engage
in “any act, practice, or course of business which
operates or would operate as a fraud or deceit upon
any person,” but also “[t]o make any untrue statement
of a material fact or to omit to state a material fact
necessary in order to make the statements made, in
the light of the circumstances under which they were
made, not misleading.”
The jury in this case found no “device, scheme, or
artifice to defraud” and no “act, practice, or course of
business which operates or would operate as a fraud
or deceit.” But it did find that three sentences or
sentence fragments, embedded within Petitioners’
five published written reports and four online
interviews about a publicly traded corporation, were
intentionally or recklessly made “untrue statements
of material fact or [omissions] to state material facts
necessary in order to make the three statements
made not misleading.” The First Circuit affirmed the
district court’s judgment that rejected Petitioners’
First Amendment defense, held Petitioners liable
 ii

under § 10(b) and Rule 10b-5, imposed a $160,000

penalty, and enjoined Petitioners for five years.
The questions presented are:
1. Absent proof of fraud or deception, does the
First Amendment protect a securities market
participant from being punished and enjoined by the
government for intentionally or recklessly making
untrue statements or omissions of material fact while
criticizing a publicly traded corporation?
2. Absent proof of fraud or deception, do untrue
statements or omissions of material fact, even if made
intentionally or recklessly, constitute a “manipulative
or deceptive device or contrivance” punishable under
§ 10(b) of the Securities Exchange Act of 1934 and
SEC Rule 10b-5?
 iii

PARTIES TO THE PROCEEDINGS

Petitioners Rev. Father Emmanuel Lemelson
(f/k/a Gregory Lemelson) and Lemelson Capital
Management, LLC were defendants in the U.S.
District Court for the District Massachusetts and
appellants in the U.S. Court of Appeals for the First
Circuit.
Respondent Securities and Exchange Commission
was the plaintiff in the district court and the appellee
in the First Circuit.
The Amvona Fund, LP, was a “relief defendant” in
the U.S. District Court for the District of
Massachusetts but is not a party to the proceedings in
this Court.
On March 18, 2020, the district court “[a]llowed as
unopposed” a motion by Ligand Pharmaceuticals, Inc.
for joinder as an interested party. Ligand is not a
party to the proceedings in this Court.
 iv

RELATED PROCEEDINGS
SEC v. Gregory Lemelson, et al., No. 18-cv-11926
(D. Mass.), judgment entered March 30, 2022.
SEC v. Gregory Lemelson, a/k/a Father
Emmanuel Lemelson, No. 22-1630 (1st Cir.),
judgment entered January 3, 2023.
In the Matter of Gregory Lemelson, SEC
Administrative Proceeding File No. 3-20828, order
instituting proceedings issued April 20, 2022.
 v

TABLE OF CONTENTS
Page
QUESTIONS PRESENTED ........................................... i
PARTIES TO THE PROCEEDINGS........................... iii
RELATED PROCEEDINGS ........................................ iv
TABLE OF CONTENTS ................................................ v
TABLE OF AUTHORITIES ....................................... viii
PETITION FOR A WRIT OF CERTIORARI ............... 1
OPINIONS AND ORDERS BELOW ............................ 1
JURISDICTION ............................................................. 1
PROVISIONS INVOLVED............................................ 1
INTRODUCTION ........................................................... 3
STATEMENT OF THE CASE ...................................... 5
REASONS FOR GRANTING THE PETITION ......... 16
I. THE DECISION BELOW CONFLICTS WITH
THIS COURT’S ESTABLISHED FIRST
AMENDMENT PRECEDENT IN THREE
DISTINCT WAYS ..................................................... 16
A. Even False Statements of Fact Are
Protected by the “Breathing Space”
the First Amendment Requires ................. 17
B. Abridgements of Free Speech
Demand Clear and Convincing Proof
of Falsity and Intent—and Rigorous
Appellate Scrutiny ...................................... 19
C. Lemelson’s Speech Fell Outside Any
“Fraud” Exception to the First
Amendment ................................................. 20
 vi

II. FEDERAL SECURITIES REGULATION NEEDS

THIS COURT’S FIRST AMENDMENT
GUIDANCE.............................................................. 21
III. EXCHANGE ACT SECTION 10(b) AND SEC
RULE 10b-5 DO NOT REACH NON-
FRAUDULENT FALSE STATEMENTS ....................... 25
IV. THIS CASE PROVIDES AN IDEAL VEHICLE TO
DECIDE THE FIRST AMENDMENT QUESTION
AND THE SECURITIES LAW QUESTION ................... 28

CONCLUSION ............................................................. 30

APPENDIX
Appendix A
Order, United States Court of Appeals for the First
Circuit, U.S. Securities & Exchange Commission v.
Lemelson, No. 22-1630 (Mar. 6, 2023) ........................1a
Appendix B
Opinion, United States Court of Appeals for the First,
U.S. Securities & Exchange Commission v. Lemelson,
No. 22-1630 (Jan. 3, 2023) ...........................................3a
Appendix C
Memorandum and Order, United States District
Court for the District of Massachusetts, Securities &
Exchange Commission v. Lemelson, No. 18-11926-PBS
(Mar. 30, 2022) ........................................................... 32a
 vii

Appendix D
Final Judgment, United States District Court for the
District of Massachusetts, Securities & Exchange
Commission v. Lemelson, No. 18-11926-PBS (Mar. 30,
2022) ........................................................................... 53a
Appendix E
Jury Verdict Form, United States District Court for
the District of Massachusetts, Securities & Exchange
Commission v. Lemelson, No. 18-11926-PBS (Nov. 5,
2021) ........................................................................... 55a
 viii

TABLE OF AUTHORITIES
Page(s)
CASES

Aaron v. SEC,
446 U.S. 680 (1980) ............................................... 26

Axon Enterprise, Inc. v. FTC,

143 S.Ct. 890 (2023) .............................................. 15

Bd. of Educ. v. Pico,

457 U.S. 853 (1982) ............................................... 28

Blue Chip Stamps v. Manor Drug Stores,

421 U.S. 723 (1975) ............................................... 25

Bose Corp. v. Consumers Union,

466 U.S. 485 (1984) ......................................... 18, 19

Cent. Bank of Denver v.

First Interstate Bank of Denver,
511 U.S. 164 (1994) ............................................... 25

Counterman v. Colorado,
143 S. Ct. 2106 (2023) ........................................... 19

Ernst & Ernst v. Hochfelder,

425 U.S. 185 (1976) ............................................... 26

Gertz v. Robert Welch, Inc.,

418 U.S. 323 (1974) ............................................... 19
 ix

Illinois ex rel. Madigan v.

Telemarketing Assocs., Inc.,
538 U.S. 600 (2003) ............................................... 20

Lamont v. Postmaster General,

381 U.S. 301 (1965) ............................................... 28

Lorenzo v. SEC,
139 S. Ct. 1094 (2019) ........................................... 27

Lowe v. SEC,
472 U.S. 181 (1985) ............................................... 23

Morrison v. Nat'l Austl. Bank Ltd.,

561 U.S. 247 (2010) ............................................... 25

Morrison v. Olson,
487 U.S. 654 (1988) ............................................... 17

N.Y. Times v. Sullivan,

376 U.S. 254 (1964) ............................................... 19

NAM v. SEC,
800 F.3d 518 (D.C. Cir. 2015) ............................... 24

SEC v. Lemelson,
334 F.R.D. 359 (D. Mass. 2020) ............................ 11

SEC v. Lemelson,
355 F. Supp. 3d 107 (D. Mass. 2019) .................... 20

SEC v. Lemelson,
532 F. Supp. 3d 30 (D. Mass. 2021) ...................... 10

SEC v. Moraes,
No. 22-cv-8343, 2022 WL 15774011
(S.D.N.Y. Oct. 28, 2022) ........................................ 24
 x

SEC v. Novinger,
40 F.4th 297 (5th Cir. 2022) ................................. 24

SEC v. Zandford,
535 U.S. 813 (2002) ............................................... 25

Stoneridge Inv. Partners, LLC v. Scientific-Atlanta,

Inc.,
552 U.S. 148 (2008) ............................................... 25

Time, Inc. v. Pape,

401 U.S. 279 (1971) ............................................... 18

United States v. Alvarez,

567 U. S. 709 (2012) ........................................ 17, 18

United States v. O’Hagan,

521 U.S. 642 (1997) ............................................... 25

CONSTITUTIONAL PROVISIONS

U.S. Const. amend. I .................................................. 1

STATUTES

15 U.S.C. § 77q(a)..................................................... 26

15 U.S.C. § 78j(b).......................................1, 12, 25, 26

REGULATIONS

17 C.F.R. § 240.10b-5 ..........................2, 12, 22, 26, 27

OTHER AUTHORITIES

Frederick Schauer,
The Boundaries of the First Amendment:
 xi

A Preliminary Exploration of Constitutional

Salience, 117 HARV. L. REV. 1765 (2004) .............. 22

In re Lemelson, SEC Investment Advisers Act

Rel. No. 6000 (Order Instituting Proceedings
Apr. 20, 2022), available at
https://www.sec.gov/litigation/admin/2022/ia-
6000.pdf. ................................................................ 15

James C. Goodale,
The First Amendment and Securities Act: A
Collision Course?,
N.Y.L.J. Apr. 8, 1983 ............................................ 21

Karl M. F. Lockhart,
A ‘Corporate Democracy’?: Freedom of Speech and
the SEC,
104 Va. L. Rev. 1593 (2018) .................................. 23

Michael R. Siebecker,
Corporate Speech, Securities Regulation, and an
Institutional Approach to the First Amendment, 58
WM. & MARY L. REV. 613 (2006) ........................... 21

Philip Hamburger,
How the Government Justifies Its Social-Media
Censorship, Wall St. J., (Jun. 12, 2023),
https://www.wsj.com/articles/how-the-government-
justifies-its-social-media-censorship-free-speech-
supreme-court-doctrine-precedent-biden-laptop-
twitter-fbi-facebook-af57b191 ............................... 16

Roberta S. Karmel,
The First Amendment and Government Regulation
of Economic Markets,
55 BROOK. L. REV. 1 (1989) ................................... 21
 xii

Sean J. Griffith,
What’s ‘Controversial’ About ESG?
A Theory of Compelled Commercial Speech Under
the First Amendment,
101 NEB. L. REV. 876 (2023)............................ 21, 22

Wendy Gerwick Couture,

The Collision Between the First Amendment and
Securities Fraud,
65 ALA. L. REV. 903 (2014) .............................. 23, 29
 1

PETITION FOR A WRIT OF CERTIORARI

Petitioners respectfully seek a writ of certiorari to
review the judgment of the United States Court of
Appeals for the First Circuit.
OPINIONS AND ORDERS BELOW
The opinion of the First Circuit is reported at 57
F.4th 17 and is reproduced at App. 3a-31a. The
verdict form returned by the jury in the district court
is reproduced at App. 55a-56a, and the district court’s
judgment is reproduced at App.53a-54a.
JURISDICTION
The First Circuit denied Petitioners’ timely motion
for rehearing en banc on March 6, 2023. App. 1a-2a.
On May 19, 2023, Justice Jackson extended the time
to file a petition for a writ of certiorari until July 31,
2023. This Court has jurisdiction under 28 U.S.C.
§ 1254(1).
PROVISIONS INVOLVED
The First Amendment to the U.S. Constitution
provides in relevant part:
Congress shall make no law … abridging the
freedom of speech, or of the press … .
Section 10(b) of the Securities Exchange Act of
1934, 15 U.S.C. § 78j(b), provides in relevant part:
It shall be unlawful for any person, directly or
indirectly, by the use of any means or
instrumentality of interstate commerce or of the
mails, or of any facility of any national securities
exchange …
 2

(b) To use or employ, in connection with the

purchase or sale of any security, … any
manipulative or deceptive device or contrivance in
contravention of such rules and regulations as the
Commission may prescribe as necessary or
appropriate in the public interest or for the
protection of investors.
SEC Rule 10b-5, 17 C.F.R. § 240.10b-5, provides:
It shall be unlawful for any person, directly or
indirectly …,
(a) To employ any device, scheme, or artifice to
defraud,
(b) To make any untrue statement of a material
fact or to omit to state a material fact necessary in
order to make the statements made, in the light of
the circumstances under which they were made,
not misleading, or
(c) To engage in any act, practice, or course of
business which operates or would operate as a
fraud or deceit upon any person,
in connection with the purchase or sale of any
security.
 3

INTRODUCTION
Nobody likes being criticized. Criticism can seem
unfair, inaccurate, and even ill-motivated. But the
default response to unwelcome criticism, and the one
the First Amendment demands, is robust debate and
counter-speech—not federal prosecution and prior
restraint.
Powerful, publicly traded corporations don’t like
criticism either. Criticism can hurt sales and
corporate brands, depress stock prices, expose
corporate misconduct or mismanagement, and
threaten executives’ compensation and job security.
But unlike many targets of criticism, publicly traded
corporations have no shortage of resources or
platforms to refute their critics. They can issue press
releases or social media posts. They can hold press
conferences. They can organize conference calls with
market analysts. They can enlist friendly market
analysts to challenge naysayers with positive and
optimistic counter-analysis. Their executives can
appear for TV, radio, or online interviews. They can
demand corrections or retractions and, if they have
sufficient proof, they can even sue their critics for
damages.
In this case, however, publicly traded
pharmaceutical corporation Ligand Pharmaceuticals,
Inc. eschewed those conventional options and took a
different tack: It enlisted federal law enforcement to
punish, silence, and deplatform its critic. When
Petitioner Rev. Father Emmanuel Lemelson and his
eponymous investment fund (collectively referred to
herein as “Lemelson”) publicly announced in 2014
that they had taken a “short” position in Ligand stock,
 4

and then explained their reasons for doing so in a

series of detailed reports and online interviews,
Ligand lobbied agents at Respondent Securities and
Exchange Commission (“SEC”) and demanded that
the agency investigate and prosecute Lemelson. That
lobbying eventually paid off.
After four years of investigation, SEC charged
Lemelson with securities fraud in 2018, claiming his
criticism of Ligand in 2014 was part of a fraudulent
scheme to profit from his fully disclosed short position
in Ligand stock. After trial, a jury rejected all of
SEC’s fraud allegations. But the jury nevertheless
found that one isolated sentence and a second isolated
sentence fragment—both embedded within
Lemelson’s 56 pages of published written reports
about Ligand—along with a two-second, unscripted
sentence fragment in one of Lemelson’s four online
interviews about the company, were “untrue”
statements or omissions of material fact made
“intentionally or recklessly.” Based on that finding,
the district court held Lemelson liable for using or
employing a “manipulative or deceptive device or
contrivance” under § 10(b) of the Securities Exchange
Act of 1934 (the “Exchange Act”) and SEC Rule 10b-5
“Rule 10b-5”). The district court imposed a $160,000
penalty and enjoined Lemelson from making similar
statements or omissions for five years.
This petition comes to the Court at a time when
free speech rights are under increasingly relentless
assault. Given the unusual clarity of the jury verdict,
the petition offers the Court an ideal opportunity to
decide whether, absent proof of fraud or deception, the
First Amendment prohibits SEC from penalizing and
enjoining commentary about publicly traded
 5

corporations and other financial matters of public

concern any time that commentary contains a few
purported inaccuracies or omissions later deemed
intentional or reckless. It also presents the Court, in
the alternative, with an ideal opportunity to clarify
that, absent proof of fraud or deception, even
intentional or reckless “untrue statements” and
omissions, do not amount to a “manipulative or
deceptive device or contrivance” punishable under
Exchange Act § 10(b) or Rule 10b-5.
STATEMENT OF THE CASE
1. Lemelson is an ordained Greek Orthodox priest,
an activist investor, and a whistleblower on publicly
traded corporations. During the period relevant here,
he also managed an investment fund called the
Amvona Fund. App. 5a. Lemelson is a prolific
analyst and commentator on topics related to public
securities markets and the companies whose
securities trade in those markets, including some in
which his investment fund invested. Id. Over the past
13 years, he has published scores of written reports
concerning publicly traded corporations and related
matters of public concern, has been interviewed
dozens of times to offer his perspective and expertise
on such matters, and has been widely cited and
quoted in the global media for his analyses and
opinions.
2. In May 2014, on behalf of the investment fund
he managed, Lemelson began building a “short”
position in the stock of Ligand Pharmaceuticals, Inc.
Id. A short position is typically taken by someone who
believes the market is overvaluing a company’s stock,
or overlooking corporate mismanagement or
 6

misconduct, and who then stands to profit if and when

the stock price declines. Ligand is a publicly traded
pharmaceutical corporation whose principal product
at the relevant time was Promacta, an FDA-approved
orphan drug for treating the side effects of certain
therapies for hepatitis C. App.5a-6a. Ligand had
recently sponsored the creation of, and entered into a
licensing agreement with, another pharmaceutical
company called Viking Therapeutics, Inc., which was
not yet a publicly traded corporation but was in the
process of registering its shares with SEC to allow
them to trade in public markets. Id.
3. Between June and August 2014, Lemelson
wrote five detailed reports about Ligand, which he
published and made available to the general public
without charge on the website of his investment fund
and then republished through the investment news
and commentary website Seeking Alpha
(www.seekingalpha.com). App. 7a. As was true with
his reports about other companies and topics, his
opinion and analysis were at times covered by other
media outlets including USA Today, Benzinga, Street
Insider, and others. In his written reports concerning
Ligand, which collectively totaled 56 pages, Lemelson
fully disclosed his short position; questioned in detail
Ligand’s finances, accounting, business prospects,
solvency, integrity, management competence, 2014
bond offering, and licensing arrangement with
Viking; and explained why he believed Ligand’s stock
was vastly overvalued and had no intrinsic value.
Lemelson’s reports also included prominent and
extensive disclosures cautioning readers that he could
not guarantee the accuracy, timeliness, or
completeness of the information presented. Thus,
 7

immediately after the initial “Overview” paragraph of

his written reports appeared the following
“Disclaimer”:
Following publication, Lemelson Capital
may transact in the securities of the company.
Lemelson Capital has obtained all information
herein from sources it believes to be accurate
and reliable. However, such information is
presented “as is,” without warranty of any kind
whether express or implied. Lemelson Capital
makes no representation, express or implied, as
to the accuracy, timeliness, or completeness of
any such information or with regard to the
results obtained from its use. All expressions of
opinion are subject to change without notice,
and Lemelson Capital does not undertake to
update this report or any information contained
herein.
A more detailed “Full Disclaimer” appeared at the end
of each report.1

1 The full disclaimer read as follows:

As of the publication date of this report, Lemelson
Capital Management LLC has a short position in the
Company covered herein (Ligand Pharmaceuticals)
and stands to realize gains in the event that the price
of the stock declines. Following publication of the
report, Lemelson Capital may transact in the securities
of the Company covered herein. All content in this
report represents the opinions of Lemelson Capital.
Lemelson Capital has obtained all information herein
from sources it believes to be accurate and reliable.
However, such information is presented “as is,” without
warranty of any kind, whether express or implied.
Lemelson Capital makes no representation, express or
 8

implied, as to the accuracy, timeliness, or completeness

of any such information or with regard to the results
obtained from its use. All expressions of opinion are
subject to change without notice, and Lemelson Capital
does not undertake to update or supplement this report
or any information contained herein.
This document is for informational purposes only and
it is not intended as an official confirmation of any
transaction. All market prices, data and other
information are not warranted as to completeness or
accuracy and are subject to change without notice. The
information included in this document is based upon
selected public market data and reflects prevailing
conditions and Lemelson Capital’s views as of this date,
all of which are accordingly subject to change.
Lemelson Capital’s opinions and estimates constitute a
best efforts judgment and should be regarded as
indicative, preliminary and for illustrative purposes
only.
Any investment involves substantial risks, including,
but not limited to, pricing volatility, inadequate
liquidity, and the potential complete loss of principal.
This report’s estimated fundamental value only
represents a best efforts estimate of the potential
fundamental valuation of a specific security, and is not
expressed as, or implied as, assessments of the quality
of a security, a summary of past performance, or an
actionable investment strategy for an investor.
This document does not in any way constitute an offer
or solicitation of an offer to buy or sell any investment,
security, or commodity discussed herein or of any of the
affiliates of Lemelson Capital. Also, this document does
not in any way constitute an offer or solicitation of an
offer to buy or sell any security in any jurisdiction in
which such an offer would be unlawful under the
securities laws of such jurisdiction. To the best of
Lemelson Capital’s abilities and beliefs, all information
contained herein is accurate and reliable.
 9

During the relevant period, Lemelson also

participated in at least four separate interviews
(collectively consuming more than an hour of airtime)
that were broadcast by the online investment website
Benzinga (www.benzinga.com). In those interviews,
Lemelson offered a similarly negative assessment of
Ligand and its financial prospects. App. 7a.
4. Lemelson’s negative assessment of Ligand
ultimately proved prescient. The company’s stock
price declined by approximately one-third in the
months after Lemelson began publishing his
warnings, although the district court found
insufficient evidence to tie this overall stock price
decline even to Lemelson’s entire body of criticism
over that period, much less the three isolated
sentences and sentence fragments the jury ultimately
found untruthful or misleading, App.46a, 47a, 51a.
Those who found Lemelson’s research and
commentary persuasive and heeded his warnings

Lemelson Capital reserves the rights for their

affiliates, officers, and employees to hold cash or
derivative positions in any Company discussed in this
document at any time. As of the original publication
date of this document, investors should assume that
Lemelson Capital is short shares of Ligand and may
have positions in financial derivatives that reference
this security and stand to potentially realize gains in
the event that the market valuation of the Company’s
common equity is lower than prior to the original
publication date. These affiliates, officers, and
individuals shall have no obligation to inform any
investor about their historical, current, and future
trading activities. In addition, Lemelson Capital may
benefit from any change in the valuation of any other
companies, securities, or commodities discussed in this
document.
 10

realized significant investment gains or avoided

significant investment losses, whereas those who
didn’t either lost money or missed the opportunity for
investment gains. In short, free speech in the
marketplace worked as our founders intended.2
5. Unsurprisingly, Ligand did not appreciate
Lemelson’s unflattering commentary and
whistleblowing, nor the decline in its stock price in
2014. But instead of using its many available
platforms to publicly refute Lemelson’s criticism, the
company directed its lawyers, including a former
high-ranking SEC official, “to lean on the SEC to get
an injunction on Lemelson’s activities.” SEC v.
Lemelson, 532 F. Supp. 3d 30, 36-37 (D. Mass. 2021)
(district court recitation of undisputed facts on
summary judgment). As Ligand’s chief executive
officer acknowledged in his trial testimony, the
company wanted Lemelson “silenced for good.”
Ligand’s lawyers then filed two written complaints
with SEC (one in 2014 and the other in 2015); met
with one team of SEC staff in Boston in September
2014 (using a PowerPoint presentation that “included

2 Even after covering his short position at a profit in October

2014, Lemelson continued to speak out against Ligand. For
example, he published several additional written reports and
interviews about Ligand from 2015 through 2018 (none of which
SEC ever challenged), filed five whistleblower reports with SEC
over the same period, and wrote two detailed open letters to
Congress—one in December 2016 and the other in July 2018—
in which he accused Ligand of, among other things, ongoing
securities fraud and abuse of the Orphan Drug Act of 1983. The
July 2018 letter, which preceded SEC’s filing of the complaint in
this case by two months, also accused SEC of incompetency and
financial illiteracy in failing to detect and prosecute Ligand’s
misconduct.
 11

photos of Lemelson in his priestly robes” and

baselessly accused him of engaging in an “affinity
fraud” against his parishioners); met with a different
team of SEC staff in June 2015 (after the Boston staff
declined Ligand’s entreaties to investigate and
prosecute Lemelson); and “communicated with SEC
staff by email and telephone between September 2014
and March 2018.” Id. Ligand also enlisted a then-
sitting member of Congress (who was later criminally
indicted for unrelated reasons) to write a letter to the
SEC Chair, coincident with the June 2015 meeting
between the company’s lawyers and SEC staff, urging
that the SEC investigate Lemelson. See SEC v.
Lemelson, 334 F.R.D. 359, 361 (D. Mass. 2020)
(denying SEC motion for protective order).
6. Ligand’s relentless campaign to “lean on” SEC
eventually paid off. After four years of Ligand’s
lobbying and the resulting SEC investigation, SEC
filed a complaint against Lemelson that singled out a
small handful of sentences and sentence fragments
scattered among Lemelson’s 56 pages of written
reports and four online interviews during 2014 as
allegedly containing factual assertions that were
either untrue or, if true, incomplete and thus
misleading.
SEC’s complaint alleged no inaccuracies in any of
the other hundreds of sentences contained in
Lemelson’s reports and interviews about Ligand. Nor
did the complaint question the prescience of
Lemelson’s overall assessment of Ligand, as it
specifically acknowledged that Ligand’s stock price
fell by approximately 34 percent from June 2014
through October 2014 for reasons the district court
ultimately found could not be causally connected to
 12

any of the three statements the jury found untrue or

misleading. App. 46a, 47a, 51a (refusing to award
SEC any disgorgement of Lemelson’s profits because
“it is difficult to see how Lemelson is responsible for
the entirety of the drop in Ligand’s stock price” and
because “SEC has not presented a reasonable
approximation of the pecuniary gain” attributable to
the three isolated untrue statements ultimately found
by the jury).
Still, SEC’s complaint repeatedly positioned
Ligand as a victim and faulted Lemelson for the
perceived offenses of “attacking Ligand with the
intent to convince the investing public that Ligand’s
stock was overvalued;” publishing reports and
interviews “intended to create a negative view of the
company and its value and, consequently, to drive
down the price of the company’s stock;” publishing
reports about Ligand that “were negative and took a
dim view of the company’s value and prospects;” and
publishing reports and interviews for the purpose of
“shak[ing] investor confidence in Ligand and driv[ing]
down Ligand’s share price.” Despite the precipitous
fall in Ligand’s stock price as Lemelson had warned,
SEC’s complaint alleged that Lemelson’s criticism of
Ligand involved “fraud, deceit, manipulation, and/or
deliberate disregard of regulatory requirements and
directly resulted in losses to other persons,” and thus
that Lemelson violated Exchange Act § 10(b), 15
U.S.C. § 78j(b), and SEC Rule 10b-5 thereunder, 17
C.F.R. § 240.10b-5. The complaint further alleged
that Lemelson engaged in fraudulent, deceptive, or
manipulative conduct in violation of § 206(4) of the
Investment Advisers Act of 1940, 15 U.S.C. § 80b-6(4),
 13

and SEC Rule 206(4)-8 thereunder, 17 C.F.R.

§ 275.206(4)-8.
7. After a nine-day trial in the fall of 2021, a jury
rejected nearly all of SEC’s allegations. More
specifically, the jury found that SEC did not prove, by
even a preponderance of the evidence, that Lemelson
“intentionally or recklessly engag[ed] in a scheme to
defraud, or any act, practice, or course of business
which operates or would operate as a fraud or deceit.”
App. 55a-56a. It also found that SEC did not prove
any intentional or even negligent fraud in violation of
the Investment Advisers Act or the relevant SEC rule
thereunder. Id. And it further found that SEC did not
prove that Lemelson’s harshest statements about
Ligand—claiming the company was effectively
insolvent—were intentional or reckless
misstatements or omissions. Id.
Despite rejecting all of SEC’s charges of fraud and
deceit, the jury found that, with respect to three of the
isolated sentences and sentence fragments SEC had
singled out from Lemelson’s five written reports and
four oral interviews, Lemelson had “intentionally or
recklessly made untrue statements of material fact or
omitted to state a material fact necessary in order to
make the statements made, in light of the
circumstances under which they were made, not
misleading.” Id.3 Only one of the three statements
directly concerned Ligand; the other two were about
Ligand’s affiliated licensee, Viking, whose securities

3 Although Lemelson vehemently disagrees with the jury’s

findings of untruthfulness and intent (or recklessness), for
purposes of this petition he accepts and does not dispute those
findings.
 14

Lemelson never traded. The three statements were:

(1) a two-second, unscripted sentence fragment from
one of Lemelson’s four internet radio interviews
concerning Ligand, in which he asserted that in a
telephone interview the day before—as reflected in
his contemporaneous handwritten notes from the
call—Ligand’s investor relations representative had
“basically agreed” with Lemelson’s opinion that
Ligand’s main product, Promacta, was “literally going
to go away;” (2) Lemelson’s assertion in a written
report, after quoting directly from a public SEC filing
made by Viking, that the Viking financial statements
included within its SEC filing were “unaudited;” and
(3) Lemelson’s assertion in the same written report—
when referring to a Viking risk disclosure in the same
public SEC filing that said “[w]e intend to rely on
third parties to conduct our preclinical studies and
clinical trials”—that “Viking does not intend to
conduct any preclinical studies or trials.” App. 7a-10a.
The jury was not asked to further specify, and did
not specify, whether it found these three statements
to be untrue or, as explicitly permitted by the jury
instructions, literally true but nevertheless
materially incomplete and misleading. Upon the
jury’s verdict, and after denying Lemelson’s various
post-trial motions, the district court held Lemelson
liable for violating Exchange Act § 10(b) and SEC
Rule 10b-5 thereunder. App. 53a-54a. As punishment,
the district court entered final judgment imposing a
$160,000 penalty and, without further specificity or
elaboration, enjoining Lemelson from violating those
provisions for a period of five years. Id. The entire text
of the court’s injunction reads: “Defendants are
enjoined from violating Section 10(b) of the Exchange
 15

Act and Rule 10b-5 for a period of five years.” App.

52a, 54a.4
8. The First Circuit affirmed in all respects.
Notwithstanding Lemelson’s principal contention
that the district court judgment abridged his free
speech rights under the First Amendment, the
appeals court applied conventional principles of
review for appeals from civil cases determined by a
jury, such as “constru[ing] facts in the light most
favorable to the jury verdict;” “draw[ing] any
inferences in favor of the [prevailing party];”
“abstain[ing] from evaluating the credibility of the
witnesses or the weight of the evidence;” “asking
whether a rational jury could have found in favor of
the party that prevailed;” and “set[ting] aside the jury
verdict only if the jury failed to reach the only result

4 Less than a month after the district court entered its

judgment, SEC initiated a follow-on administrative
proceeding—assigning itself as final adjudicator and citing the
district court’s injunction as its statutory predicate—in which
the same two SEC prosecutors who served as the agency’s lead
counsel in the district court have requested that the agency now
summarily bar Lemelson from ever again participating in the
securities industry. See In re Lemelson, SEC Investment
Advisers Act Rel. No. 6000 (Order Instituting Proceedings Apr.
20, 2022), https://www.sec.gov/litigation/admin/2022/ia-
6000.pdf. That non-jury proceeding remains pending, but
Lemelson might be forgiven for suspecting that SEC is unlikely
to rule against both itself and the lawyers who served as its lead
counsel throughout the contentious proceedings in the district
court, and in favor of its erstwhile litigation adversary. See Axon
Enterprise, Inc. v. FTC, 143 S. Ct. 890, 907 n.1 (2023) (Thomas,
J., concurring) (noting SEC’s “tendency to overwhelmingly agree
with” its own decisions).
 16

permitted by the evidence.” App. 12a (citations and

internal quotations omitted).
Applying those deferential review principles, the
First Circuit found no fault with the jury’s verdict.
Following established circuit precedent, the court
categorically rejected Lemelson’s First Amendment
arguments because the three specific sentences the
jury found untruthful (or, as the court acknowledged,
perhaps literally true but nevertheless misleading
“half-truths”) were, in the court’s view, statements of
fact rather than opinion. App. 13a-16a. The court then
found sufficient evidence in the record to establish the
materiality and scienter elements required for
liability under Exchange Act § 10(b) and Rule 10b-5.
App. 16a-27a. It subsequently denied Lemelson’s
timely petition for rehearing en banc. App. 1a-2a.
REASONS FOR GRANTING THE PETITION
I. THE DECISION BELOW CONFLICTS WITH THIS
COURT’S ESTABLISHED FIRST AMENDMENT
PRECEDENT IN THREE DISTINCT WAYS
The district court’s judgment, affirmed by the
First Circuit, directly and profoundly abridges
Lemelson’s freedom of speech.5 At the behest of a
publicly traded pharmaceutical corporation,

5 The First Amendment forbids the government from so much

as “abridging” (i.e., reducing) the freedom of speech, and thus
provides broader protection from government restriction than
would a bar against “prohibiting” speech. Philip Hamburger,
How the Government Justifies Its Social-Media Censorship, Wall
St. J. (Jun. 12, 2023), https://www.wsj.com/articles/how-the-
government-justifies-its-social-media-censorship-free-speech-
supreme-court-doctrine-precedent-biden-laptop-twitter-fbi-
facebook-af57b191
 17

Lemelson was prosecuted and penalized by the

federal government for criticizing that corporation,
and he was enjoined for five years—under threat of
contempt—from engaging in similar criticism. This
Court and others frequently confront relatively
indirect First Amendment threats that are clad, so to
speak, in sheep’s clothing, where the hand of
government is more insidious. Here, by contrast, the
free speech threat is straightforward and obvious;
there is nothing subtle about it. To borrow Justice
Scalia’s poignant metaphor, “this wolf comes as a
wolf.” Morrison v. Olson, 487 U.S. 654, 699 (1988)
(Scalia, J., dissenting).
The First Circuit nevertheless dismissed
Lemelson’s First Amendment defense because, in its
view, the three isolated statements the jury found
untruthful (or half-truthful) were assertions of fact
rather than opinion. That holding conflicts with this
Court’s established First Amendment precedent for at
least three reasons.
A. Even False Statements of Fact Are
Protected by the “Breathing Space” the
First Amendment Requires
Contrary to the First Circuit’s foundational
premise, there is no categorical exception to the First
Amendment for even deliberately untrue statements
of fact. United States v. Alvarez, 567 U. S. 709 (2012)
(plurality opinion) (habitual liar’s knowingly false
factual claim of having been awarded Congressional
Medal of Honor protected). As the plurality opinion in
Alvarez confirmed, “[t]he remedy for speech that is
false is speech that is true.” Id. at 726.
 18

First Amendment protection is especially critical

when the government cherry-picks for prosecution
and punishment a few isolated factual statements
from a voluminous trove of opinionated and otherwise
factually accurate commentary on a matter of public
interest. See, e.g., Bose Corp. v. Consumers Union, 466
U.S. 485 (1984) (false factual assertion made within a
larger article evaluating the quality of loudspeaker
systems); Time, Inc. v. Pape, 401 U.S. 279 (1971)
(knowing failure, in an article describing a
government report on police brutality, to acknowledge
that factual statements from the report about a
certain police supervisor were mere allegations from
a private lawsuit rather than the government’s own
findings). As this Court has repeatedly recognized,
“[the] erroneous statement is inevitable in free
debate” and “must be protected if the freedoms of
expression are to have the ‘breathing space’ that they
‘need . . . to survive.’” N.Y. Times v. Sullivan, 376 U.S.
254. 271-72 (1964)) (quoting NAACP v. Button, 371 U.
S. 415, 433 (1963)); Bose Corp., 466 U.S. at 513 (same;
quoting Sullivan); accord Alvarez, 567 U.S. at 718
(“some false statements are inevitable if there is to be
an open and vigorous expression of views in public
and private conversation, expression the First
Amendment seeks to guarantee”).
The First Circuit’s zero-tolerance approach to
misstatements and omissions—focusing on two
isolated sentences about a Ligand affiliate plucked
from 56 pages of opinionated written commentary and
a two-second, unscripted soundbite from one of four
oral interviews—turned these longstanding First
Amendment presumptions upside down.
 19

B. Abridgements of Free Speech Demand

Clear and Convincing Proof of Falsity and
Intent—and Rigorous Appellate Scrutiny
The First Circuit’s extreme deference to the jury
verdict likewise contravened this Court’s established
First Amendment precedent. Where, as here, free
speech rights hang in the balance, this Court has
consistently demanded proof of falsity and
intentionality by “clear and convincing evidence.”
Gertz v. Robert Welch, Inc., 418 U.S. 323, 342 (1974);
accord Sullivan, 376 U.S. at 285-86 (1964) (proof of
falsity and intent must be of “convincing clarity”). The
Court has also demanded searching independent
appellate examination of that evidence to ensure
“that the judgment does not constitute a forbidden
intrusion on the field of free expression,” Sullivan,
376 U.S. at 285; accord Bose Corp., 466 U.S. at 499
(quoting Sullivan and citing additional cases). Even
when speech falls into one of the “limited areas”
beyond First Amendment protection, this Court has
repeatedly recognized the need for “strategic
protection” to ensure that protected speech is not
chilled or self-censored. Counterman v. Colorado, 143
S. Ct. 2106, 2115 (2023).
C. Lemelson’s Speech Fell Outside Any
“Fraud” Exception to the First
Amendment
Lemelson’s speech did not fall within any of the
limited areas this Court has placed beyond First
Amendment protection. Specifically, it was outside
any exception for fraudulent speech—for at least two
independent reasons. First, the jury specifically found
that Lemelson, in speaking out about Ligand, did not
 20

“intentionally or recklessly engage in a scheme to

defraud, or any act, practice, or course of business
which operates or would operate as a fraud or deceit.”
35a. The jury found three untrue (or half-true)
statements, but unanimously rejected every SEC
allegation of fraud. App. 55a-56a.
Second, the district court’s jury instructions—
consistent with prevailing law in the First Circuit and
elsewhere—specifically excused SEC from having to
prove several essential elements traditionally
required to establish a common law fraud claim,
including reliance, causation, or compensable harm.
See also SEC v. Lemelson, 355 F. Supp. 3d 107, 109
(D. Mass. 2019) (denying in substantial part
Lemelson’s motion to dismiss). Indeed, it would have
been impossible to prove these elements here, because
any hypothetical investor who heeded Lemelson’s
warnings and sold Ligand stock—whether by
liquidating an existing long position or taking a short
position—would have realized a sizable financial
benefit given the stock price decline over the ensuing
weeks and months. Not surprisingly, therefore, SEC
proved no deception or losses and the district court
specifically found that “SEC has not provided any
evidence that it could identify victims.” 51a. Thus,
even if the jury had found the watered-down version
of “fraud” that courts have allowed in the SEC
enforcement context—which it did not—that finding
would have been woefully insufficient to sweep
Lemelson’s speech into any recognizable fraud
exception to the First Amendment. Illinois ex rel.
Madigan v. Telemarketing Assocs., Inc., 538 U.S. 600,
617 (2003) (“Simply labeling an action one for ‘fraud,’
of course, will not carry the day”).
 21

II. FEDERAL SECURITIES REGULATION NEEDS THIS

COURT’S FIRST AMENDMENT GUIDANCE
This Court has never weighed in on the
intersection of securities regulation and freedom of
speech, and the decision below effectively grants SEC
an exemption from First Amendment restrictions.
Review is warranted to make clear to lower courts
that no such exemption exists and to provide them
with necessary guidance regarding constitutional
limits on SEC’s power to abridge free speech.
More than most other federal agencies, SEC is
largely in the business of regulating speech. E.g.,
Sean J. Griffith, What’s ‘Controversial’ About ESG? A
Theory of Compelled Commercial Speech Under the
First Amendment, 101 NEB. L. REV. 876, 901-02 (2023)
(securities laws “consist primarily of rules either
prohibiting or compelling speech”); Michael R.
Siebecker, Corporate Speech, Securities Regulation,
and an Institutional Approach to the First
Amendment, 58 WM. & MARY L. REV. 613, 641 (2006)
(“securities regulation primarily involves restrictions
on speech,” with rules that “both compel and prohibit
corporate speech” and “regulate the content, form,
and scope of corporate communications”); James C.
Goodale, The First Amendment and Securities Act: A
Collision Course?, N.Y.L.J. Apr. 8, 1983 at 1 (“there is
no greater statutory regulation of speech than the
[federal securities laws].”)6 Indeed, a significant

6 A former SEC commissioner once said that “[s]ecurities

regulation is essentially the regulation of speech,” including both
censorship and “a fair amount of prior restraint.” Roberta S.
Karmel, The First Amendment and Government Regulation of
Economic Markets, 55 BROOK. L. REV. 1, 1 (1989), while a
 22

portion of SEC regulatory and enforcement activity is

directed at telling companies and individuals what
they must, may, or may not say about an increasing
number of subjects. Griffith, 101 NEB. L. REV. at 902
Many SEC rules—including the one Lemelson was
punished and enjoined for violating—overtly regulate
and criminalize speech. 17 C.F.R. § 240.10b-5(b); see
Schauer, 117 HARV. L. REV. at 1779 (securities actions
“produce a milieu in which materials pertaining to a
company's securities are written and distributed
under the threat of sanction for false, misleading, or
omitted disclosure”).
Notwithstanding that securities regulation entails
significant restrictions on free speech, SEC has been
largely immune from First Amendment challenges.
This has led some academics and commentators to
infer (sometimes approvingly) that the agency and its
regulatory mission enjoy the functional equivalence of
an exemption from First Amendment scrutiny. E.g.,
Griffith, 101 NEB. L. REV. at 902 (“There is [among
securities law professors] a claim for a kind of
constitutional exceptionalism for securities law,” with
some even arguing that “securities regulation
somehow lies out of [First Amendment] bounds.”);
Schauer, 117 HARV. L. REV. at 1769 (“It is not that
such regulation satisfies a higher burden of
justification imposed by the First Amendment.
Rather, the First Amendment does not even show up
in the analysis.”). While that may slightly overstate

prominent First Amendment scholar once said it “would not be

wholly inaccurate” to describe SEC as the “Content Regulation
Commission,” Frederick Schauer, The Boundaries of the First
Amendment: A Preliminary Exploration of Constitutional
Salience, 117 HARV. L. REV. 1765, 1778-79 (2004).
 23

the case, appellate decisions addressing First

Amendment rights in the context of federal securities
law are noticeably rare. See, e.g., Karl M. F. Lockhart,
A ‘Corporate Democracy’?: Freedom of Speech and the
SEC, 104 VA. L. REV. 1593, 1624 (2018) (“Courts have
almost never seen challenges based on freedom of
speech to proxy regulations and securities regulation
in general.”); Wendy Gerwick Couture, The Collision
Between the First Amendment and Securities Fraud,
65 ALA. L. REV. 903, 905-06 (2014) (“these regulations
have been only rarely challenged in court” on First
Amendment grounds).
The last time this Court granted certiorari to
address the interplay between securities regulation
and free speech—nearly 40 years ago—the Court
ultimately declined to rule on a newsletter publisher’s
First Amendment objection to registering with SEC
as an investment adviser after holding that the
publisher fit within a statutory exception to the
registration requirement. Lowe v. SEC, 472 U.S. 181,
208-11 (1985).7 Three concurring justices would have
reached the constitutional question and sustained the
publisher’s First Amendment challenge in that case.
472 U.S. at 228-36 (White, J., concurring).8

7 As discussed below, the Court could similarly avoid the First

Amendment issue here by holding that untruthful speech,
without more, does not constitute a “manipulative or deceptive
device or contrivance” within the meaning of Exchange Act
§ 10(b).
8 See also Pirate Investor LLC v. SEC, 561 U.S. 1026 (2010)
(denying certiorari petition of investment newsletter, supported
by more than 20 media organizations as amici, which was
penalized in an SEC enforcement case for making false
statements); Nike, Inc. v. Kasky, 539 U.S. 654, 655 (2003) (per
 24

Lemelson’s petition presents the Court with an

overdue opportunity to decide the extent, if any, to
which SEC regulation and enforcement is subject to
First Amendment scrutiny. Review is especially
warranted now, given SEC’s continuing disregard of
free speech rights both in its regulatory agenda, see,
e.g., NAM v. SEC, 800 F.3d 518 (D.C. Cir. 2015)
(setting aside SEC “conflict mineral” disclosure rule
on First Amendment grounds), and in its enforcement
program, see, e.g., SEC v. Novinger, 40 F.4th 297, 308
(5th Cir. 2022) (Jones, J., concurring) (noting, with
respect to SEC’s non-negotiable demand that its
enforcement targets agree to a gag order as a
condition of any settlement, that “[a] more effective
prior restraint is hard to imagine”); SEC v. Moraes,
No. 22-cv-8343, 2022 WL 15774011 at *1 (S.D.N.Y.
Oct. 28, 2022) (SEC “stands nearly alone” among all
federal agencies in demanding gag orders as a
condition of settlement).
III. EXCHANGE ACT SECTION 10(b) AND SEC RULE
10b-5 DO NOT REACH NON-FRAUDULENT FALSE
STATEMENTS
The decision below upheld liability under
Exchange Act § 10(b) and SEC Rule 10b-5 based on
speech that the jury found untrue but not fraudulent.
This unprecedented expansion of liability under these

curiam) (6-3 decision dismissing certiorari petition as

improvidently granted in false advertising case that, in Justice
Breyer’s dissenting view, “directly concern[ed] the freedom of
Americans to speak about public matters in public debate,”
where waiting to decide the issue “extracts a heavy First
Amendment price” in the form of self-censorship and a “chilling
effect”).
 25

oft-litigated provisions of federal securities law

warrants the Court’s review.
Exchange Act § 10(b) prohibits—indeed
criminalizes—“use or employ[ment],” in connection
with the purchase or sale of any security, of any
“manipulative or deceptive device or contrivance” in
contravention of such rules and regulations that SEC
may prescribe. 15 U.S.C. § 78j(b). Enabled by that
statute, SEC hastily promulgated Rule 10b-5 in 1942.
See Blue Chip Stamps v. Manor Drug Stores, 421 U.S.
723, 767 (1975) (quoting Remarks of Milton Freeman,
Conference on Codification of the Federal Securities
Laws, 22 BUS. LAW. 793, 922 (1967) (SEC staff, with
little discussion, drafted the rule by “put[ting] ...
together” § 10(b) with § 17(a) of the Securities Act of
1933 and obtaining the SEC commissioners’ approval
the same day with oral input from only one
commissioner, whose sole comment before signing off
was, “Well, …, we are against fraud, aren’t we?”)).
Notwithstanding its hasty and impulsive provenance
(and perhaps because of it), Rule 10b-5 has since
spawned decades of prolific federal court litigation,
including SEC’s case against Lemelson.
This Court has repeatedly held that liability under
SEC Rule 10b-5 is coextensive with liability under
Exchange Act § 10(b)—that is, the rule cannot create
or expand liability for conduct that is not prohibited
by its enabling statute. See, e.g., Morrison v. Nat’l
Austl. Bank Ltd., 561 U.S. 247, 262 (2010); Stoneridge
Inv. Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S.
148, 157 (2008); SEC v. Zandford, 535 U.S. 813, 816
n.1 (2002); United States v. O’Hagan, 521 U.S. 642,
651-54 (1997); Cent. Bank of Denver v. First Interstate
Bank of Denver, 511 U.S. 164, 172-73, 177 (1994);
 26

Aaron v. SEC, 446 U.S. 680, 689-90 (1980); Ernst &

Ernst v. Hochfelder, 425 U.S. 185, 212-214 (1976). In
this case, an overly literal reading of Rule 10b-5
resulted in liability for speech that is not prohibited
by the rule’s enabling statute, and thus the rule was
invalidly applied.
On its face, Exchange Act § 10(b) does not abridge
speech—not even intentionally fraudulent speech.
Nor does the statute mention the word “fraud” at all.
The statute prohibits “manipulative or deceptive
device[s] or contrivance[s].” 15 U.S.C. § 78j(b). And
Congress presumably intended this statute to
prohibit manipulative or deceptive conduct, rather
than speech, because just a year earlier it had enacted
§ 17(a) of the Securities Act of 1933. Subparagraph
(2) of that section expressly prohibits “obtain[ing]
money or property by means of any untrue statement
of a material fact or any omission to state a material
fact necessary in order to make the statements made,
in light of the circumstances under which they were
made, not misleading,” 15 U.S.C. § 77q(a)(2)—
language conspicuously absent from Exchange Act
§ 10(b). Yet, even under this potentially speech-
abridging provision of the Securities Act § 17(a)(2),
liability attaches only if the speaker “obtain[ed]
money or property” by means of misleading speech.
By contrast, subparagraph (b) of SEC Rule 10b-5
purports to prohibit and criminalize “untrue” speech
and nothing more, something Congress obviously
never intended when it enacted Exchange Act § 10(b).
As applied here against Petitioner Lemelson, SEC
Rule 10b-5 was stretched well beyond anything
prohibited by its enabling statute (or even by
Securities Act § 17(a)(2), which SEC did not charge
 27

Lemelson with violating). SEC did allege fraudulent

conduct in addition to the making of “untrue”
statements or omissions of material fact, but the jury
rejected all of SEC’s fraudulent conduct charges.
More specifically, and as previously noted, the jury
found that SEC did not prove that Lemelson violated
either subparagraph (a) of Rule 10b-5 (by
“intentionally or recklessly engaging in a scheme to
defraud”), 17 C.F.R. § 240.10b-5(a), or subparagraph
(c) of the rule (by engaging in any “act, practice, or
course of business which operates or would operate as
a fraud or deceit”), id. § 240.10b-5(c). See App. 55a.
The jury found only that Lemelson intentionally or
recklessly made three untrue statements or omissions
of material fact in violation of subparagraph (b) of the
rule, 17 C.F.R. § 240.10b-5(b). See App. 56a.
In a sense, then, this case is the flip side of Lorenzo
v. SEC, 139 S. Ct. 1094 (2019), which is instructive
here. In Lorenzo, this Court held that even where an
accused wrongdoer was not the “maker” of an untrue
statement under subparagraph (b) of SEC Rule 10b-
5, and thus could not be penalized for violating that
subparagraph of the rule, he could still be penalized
for disseminating the untrue statement if doing so
was also part of a fraudulent scheme, act, practice, or
course of business that violated subparagraph (a) or
(c) of the rule. Id. at 1099. Here we have the opposite
scenario to what was presented in Lorenzo: As found
by the jury, SEC proved only the making of an untrue
statement that was not also part of any fraudulent
scheme, act, practice, or course of business that would
have violated subparagraph (a) or (c) of the rule.
Importantly, the jury also did not make any finding
that Lemelson used or employed any “manipulative or
 28

deceptive device or contrivance,” as required for

liability under Exchange Act § 10(b) or derivatively
under SEC Rule 10b-5.
IV. THIS CASE PROVIDES AN IDEAL VEHICLE TO
DECIDE THE FIRST AMENDMENT QUESTION AND
THE SECURITIES LAW QUESTION

This case presents the Court with an ideal vehicle

to address whether and to what extent SEC may
lawfully penalize and silence speech that analyzes
and challenges the disclosures, financial health, and
financial prospects of publicly traded corporations.
Such speech—even when it includes isolated errors
(as is inevitable)—plays a critical role in the robust
give-and-take that ensures fair and transparent
markets. Punishing, silencing, chilling, or otherwise
abridging such speech violates not only the First
Amendment rights of the speakers, but also those of
the investing public to hear dissenting views about
the companies they might consider investing in. Cf.
Bd. of Educ. v. Pico, 457 U.S. 853 (1982) (“the right to
receive ideas is a necessary predicate to the
recipient’s meaningful exercise of his own rights of
speech, press, and political freedom”); Lamont v.
Postmaster General, 381 U.S. 301 (1965) (law
directing postmaster general to detain incoming mail
deemed communist political propaganda violated
recipient’s First Amendment rights and “is at war
with the ‘uninhibited, robust, and wide-open’ debate
and discussion that are contemplated by the First
Amendment” (quoting Sullivan, 376 U.S. at 270)).
The decision below, if allowed to stand, would
embolden SEC to punish and silence other critics of
public companies whenever the agency, as here,
 29

deems the criticism to be even slightly ill-informed or

misguided. It would undoubtedly chill commentators
and analysts from speaking out for fear of facing
Lemelson-like consequences. It would also embolden
other publicly traded corporations to enlist federal
law enforcement in efforts to silence and punish their
critics—especially when, as here, they lack the clear
and convincing evidence of actual malice needed to
prove defamation or other tort claims. See generally
Couture, 65 ALA. L. REV. at 906 (arguing for full
application of actual malice standard to securities law
claims that are based on allegedly false statements by
corporate outsiders). The Court should seize this
opportunity to ensure that robust commentary and
debate about our publicly traded companies remains
free, unpunished, and un-chilled.
It is also critically important for this Court to
clarify the reach of Exchange Act § 10(b) and SEC
Rule 10b-5 when untrue speech about publicly traded
corporations is not fraudulent. Does the mere
utterance of untrue statements—even if done
intentionally or recklessly—amount to a
“manipulative or deceptive device or contrivance”
punishable under Exchange Act § 10(b) and SEC Rule
10b-5, absent proof that the statements were also part
of a fraudulent scheme, act, practice, or course of
business? Given the unusual clarity of the jury verdict
here, this case offers a rare and ideal vehicle for
deciding that question.
 30

CONCLUSION
The petition for a writ of certiorari should be
granted.

Respectfully submitted,

Douglas S. Brooks Russell G. Ryan

Thomas M. Hoopes Counsel of Record
LIBBY HOOPES BROOKS John Vecchione
& MULVEY, P.C. Kaitlyn Schiraldi
260 Franklin Street Markham S. Chenoweth
Boston, MA 02110 NEW CIVIL LIBERTIES
(617) 338-9300 ALLIANCE
1225 19th Street, NW
Suite 450
Washington, DC 20036
(202) 869-5210
[email protected]

Counsel for Petitioners Rev. Fr. Emmanuel Lemelson and

Lemelson Capital Management, LLC

July 31, 2023

 No. 22-____

In the
Supreme Court of the United States
REV. FATHER EMMANUEL LEMELSON
(F/K/A GREGORY LEMELSON) AND
LEMELSON CAPITAL MANAGEMENT, LLC,
Petitioners,
V.
SECURITIES AND EXCHANGE COMMISSION,
Respondent.

On Petition for a Writ of Certiorari to the

United States Court of Appeals
for the First Circuit

APPENDIX

Douglas S. Brooks Russell G. Ryan

Thomas M. Hoopes Counsel of Record
LIBBY HOOPES BROOKS John Vecchione
& MULVEY, P.C. Kaitlyn Schiraldi
260 Franklin Street Markham S. Chenoweth
Boston, MA 02110 NEW CIVIL LIBERTIES
(617) 338-9300 ALLIANCE
1225 19th Street, NW
Suite 450
Washington, DC 20036
(202) 869-5210
[email protected]

Counsel for Petitioners

 TABLE OF APPENDICES

Appendix A
Order, United States Court of Appeals for the First
Circuit, U.S. Securities & Exchange Commission v.
Lemelson, No. 22-1630 (Mar. 6, 2023) .....................1a
Appendix B
Opinion, United States Court of Appeals for the
First, U.S. Securities & Exchange Commission v.
Lemelson, No. 22-1630 (Jan. 3, 2023) ......................3a
Appendix C
Memorandum and Order, United States District
Court for the District of Massachusetts, Securities &
Exchange Commission v. Lemelson, No. 18-11926-
PBS (Mar. 30, 2022) ................................................32a
Appendix D
Final Judgment, United States District Court for the
District of Massachusetts, Securities & Exchange
Commission v. Lemelson, No. 18-11926-PBS (Mar.
30, 2022) ..................................................................53a
Appendix E
Jury Verdict Form, United States District Court for
the District of Massachusetts, Securities & Exchange
Commission v. Lemelson, No. 18-11926-PBS (Nov. 5,
2021) ........................................................................55a
 1a

Appendix A

UNITED STATES COURT OF APPEALS

FOR THE FIRST CIRCUIT

No. 22-1630

U.S. SECURITIES & EXCHANGE COMMISSION,

Plaintiff–Appellee,
v.
GREGORY LEMELSON, a/k/a Father Emmanuel
Lemelson; LEMELSON CAPITAL
MANAGEMENT, LLC,
Defendants–Appellants,
THE AMVONA FUND, LP,
Defendant.

Before

Barron, Chief Judge,

Kayatta, Lynch, Gelpí, and Montecalvo, Circuit
Judges.

ORDER OF COURT

Entered: March 6, 2023

 2a

Pursuant to First Circuit Internal Operating

Procedure X(C), the petition for rehearing en banc has
also been treated as a petition for rehearing before the
original panel. The petition for rehearing having been
denied by the panel of judges who decided the case,
and the petition for rehearing en banc having been
submitted to the active judges of this court and a
majority of the judges not having voted that the case
be heard en banc, it is ordered that the petition for
rehearing and petition for rehearing en banc be
denied.
By the Court:
Maria R. Hamilton, Clerk
cc:
Donald Campbell Lockhart, Paul Gerard Alvarez,
Alfred A. Day, Ezekiel L. Hill, Marc Jonathan Jones,
Kevin Paul Martin, Douglas Scott Brooks, Thomas M.
Hoopes, Brian J. Sullivan, William E. Evans III
 3a

Appendix B

UNITED STATES COURT OF APPEALS

FOR THE FIRST CIRCUIT

No. 22-1630

U.S. SECURITIES & EXCHANGE COMMISSION,

Plaintiff, Appellee,
v.
GREGORY LEMELSON, a/k/a Father Emmanuel
Lemelson; LEMELSON CAPITAL
MANAGEMENT, LLC,
Defendants, Appellants,
THE AMVONA FUND, LP,
Defendant.

APPEAL FROM THE UNITED STATES DISTRICT

COURT FOR THE DISTRICT OF
MASSACHUSETTS

[Hon. Patti B. Saris, U.S. District Judge]

_________________________________________________

Before
Kayatta, Lynch, and Gelpí,
Circuit Judges.

Kevin P. Martin, with whom William E. Evans III,

Goodwin Procter LLP, Douglas S. Brooks, Brian J.
Sullivan, Thomas M. Hoopes, and Libby Hoopes
 4a

Brooks, P.C. were on brief, for appellants.

Ezekiel L. Hill, Attorney, Securities and Exchange
Commission, with whom Dan M. Berkovitz, General
Counsel, John W. Avery, Deputy Solicitor, and Paul
G. Alvarez, Senior Appellate Counsel, were on brief,
for appellee.
_________________________________________________
January 3, 2023
_________________________________________________

LYNCH, Circuit Judge. The U.S. Securities and

Exchange Commission (the “SEC”) brought a civil
enforcement action against Gregory Lemelson, also
known as Father Emmanuel Lemelson (“Lemelson”);
Lemelson Capital Management, LLC; and the
Amvona Fund, LP. After trial, the jury found
Lemelson liable for three untrue statements of a
material fact in violation of Section 10(b) of the
Securities Exchange Act of 1934, 15 U.S.C. § 78j(b),
and SEC Rule 10b-5, 17 C.F.R. § 240.10b-5. After the
jury verdict and further briefing and argument, the
district court judge, who had presided over the jury
trial, ordered Lemelson to pay a civil penalty and
enjoined him from violating Section 10(b) and Rule
10b-5 for five years. See SEC v. Lemelson, 596 F.
Supp. 3d 227, 238 (D. Mass. 2022).
In this appeal, Lemelson argues that his three
statements were protected by the First Amendment
and that the SEC failed to introduce sufficient
evidence to support the jury’s determination that the
statements were (1) of fact rather than opinion, (2)
material, and (3) made with scienter. He also
contends that the district court abused its discretion
 5a

and committed an error of law in entering the

injunction. We reject Lemelson’s arguments and
affirm.
I.
A.
The following facts were presented to the jury.
While working as an investment adviser and fund
manager at Lemelson Capital Management, LLC,
Lemelson managed all investments for a hedge fund
called the Amvona Fund. In this role, Lemelson
published online reports and conducted interviews
regarding companies in whose stock the Amvona
Fund invested. For example, Lemelson sometimes
posted his reports on Seeking Alpha, a website where
contributors post opinions or reports concerning
financial topics. Unlike paid portals like Bloomberg
where investment analysts traditionally post their
research, Seeking Alpha is a non-subscription and
open-forum resource, which Lemelson selected in
order to expand the audience for his reports.
In May 2014, the Amvona Fund began building a
short position 1 in the stock of Ligand
Pharmaceuticals, Inc. (“Ligand”), a biotechnology
company. At the time, Ligand was a small “virtual
company” that would discover or acquire the economic
rights to new drug candidates, license those

1“To take a short position in a stock means to sell borrowed

stock at the current price in the hope that the stock price will
decline and the borrower will be able to return the borrowed
stock by purchasing it at the later, lower price.” Universal
Commc’n Sys., Inc. v. Lycos, Inc., 478 F.3d 413, 422 n.5 (1st Cir.
2007).
 6a

candidates to other companies for development, and

partner with other entities to manufacture and
market approved drugs.
Ligand’s principal product in 2014 was Promacta,
a drug that had been approved by the U.S. Food and
Drug Administration (the “FDA”) and various foreign
drug agencies for treatment related to several medical
disorders, including hepatitis C. Ligand partnered
with other companies to manufacture and market
Promacta in return for royalty payments based on
those sales. As of May 2014, Ligand expected
Promacta royalties to be a substantial portion of its
future revenues. Promacta is still on the market
today.
Ligand had also recently entered a licensing
agreement with Viking Therapeutics, Inc. (“Viking”),
a biopharmaceutical drug development company.
Under the licensing deal, Viking would develop
certain Ligand drug candidates and Ligand would
acquire royalty rights and equity in Viking. Viking
focused on the development of novel therapies for
metabolic and endocrine disorders.
Viking had exclusive rights to five drug
candidates based on molecules licensed from Ligand.
As of 2014, all five drug candidates were undergoing
preclinical studies or clinical trials, which were
required before seeking FDA approval so that the
drugs eventually could be brought to market.
According to Viking’s Form S-1 2 (the “Viking S-1”)

2 A Form S-1, or a “Registration Statement Under the

Securities Act of 1933,” is filed by a company making a public
stock offering. See, e.g., Versyss Inc. v. Coopers & Lybrand, 982
F.2d 653, 654 (1st Cir. 1992).
 7a

filed on July 1, 2014, Viking “intend[ed] to rely on

third parties to conduct [its] preclinical studies and
clinical trials.” (Emphasis omitted).
The Viking S-1 contained both audited and
unaudited financial data about Viking. It also
included a report from Marcum LLP, an accounting
firm that had “audited [Viking’s] . . . balance
sheets . . . as of December 31, 2012 and 2013.”
Between June and August 2014, Lemelson
published reports and conducted interviews in which
he criticized Ligand’s finances, prospects, and
management and argued that Ligand stock was
vastly overvalued. As relevant here, Lemelson made
statements related to both Promacta and Viking. We
describe each of the three statements for which the
jury found liability.
i. The Promacta Statement
On June 16, 2014, Lemelson published his first
report concerning Ligand on his website and on
Seeking Alpha. The report stated that Ligand “face[d]
it[s] biggest existential threat” from “what is likely to
be a momentous impairment of its largest royalty
generating asset, Promacta,” due largely to a
competitive threat from a new drug called Sovaldi.
On June 18, Lemelson discussed Promacta’s
future during a phone call with Bruce Voss, Ligand’s
investor relations representative. The next day,
Lemelson gave a radio interview for the financial
website Benzinga. The interview was for Benzinga’s
online “PreMarket Prep” show, which provides
investors with information prior to market open.
During the interview, Lemelson stated the following
 8a

about Promacta:
Promacta accounted for 72 percent of
[Ligand’s] royalty revenues ... [and] is
literally going to go away.
I mean I had discussions with
management just yesterday -- excuse
me, their [investor relations] firm, and
they basically agreed. And they said,
look, we understand Promacta is going
away.
(Emphasis added). Lemelson’s statement that Voss
told Lemelson that Ligand understood Promacta was
“going away” (the “Promacta Statement”) is the first
statement at issue in this appeal.
ii. The Viking Statements
The next two statements at issue were made about
two weeks later by Lemelson in his next report
concerning Ligand. Both statements concerned
Viking.
First, the report stated the following about
Viking’s drug development capabilities:
Viking does not intend to conduct any
preclinical studies or trials and does not
own any products or intellectual
property or manufacturing abilities and
leases space from Ligand. Viking
appears to be a single-purpose vehicle
created to raise more capital from public
markets for its sponsor, Ligand
Pharmaceuticals.
 9a

(Emphasis added). The statement that “Viking does

not intend to conduct any preclinical studies or trials”
(the “Preclinical Studies Statement”) is the second
statement at issue in this appeal.
Next, the report stated the following about the
financial data included in the Viking S-1:
On April 7, 2014, Viking’s Board of
Directors appointed Marcum LLP as an
independent registered public
accounting firm stating [in the Viking S-
1]:
“From September 24, 2012
(Inception) through April 7,
2014, neither we nor anyone on
our behalf consulted with
Marcum regarding (1) the
application of accounting
principles to a specified
transaction, either completed or
proposed, (2) the type of audit
opinion that might be rendered
on our financial statements, or
(3) any matter that was either
the subject of a
disagreement . . . or a
‘reportable event’ . . . .”
In other words, Marcum was merely
hired, but the company has not yet even
consulted with the firm on any material
issues. The financial statements
provided on the [Viking S-1] accordingly
are unaudited.
 10a

(Emphasis added). The statement that Viking’s

“financial statements provided on the [Viking S-1]
accordingly are unaudited” (the “Audit Statement”) is
the third statement at issue in this appeal.
Lemelson made the Preclinical Studies Statement
and the Audit Statement (collectively, the “Viking
Statements”) in support of his broader statement that
Viking was a “single-purpose vehicle” and a “shell
company” being used by Ligand to “generate paper
profits to stuff [Ligand’s] own balance sheet.”
In the following months, Lemelson published
several more reports critical of Viking and Promacta’s
prospects. Lemelson continued building the Amvona
Fund’s short position in Ligand stock throughout this
time. Ligand’s stock price declined, and Lemelson
covered the short position on various dates for a
profit.
B.
On September 12, 2018, the SEC filed a complaint
against Lemelson, Lemelson Capital Management,
LLC, and the Amvona Fund in the U.S. District Court
for the District of Massachusetts. As later amended,
the complaint alleged, inter alia, that the Promacta
Statement and the Viking Statements were material
misstatements of fact prohibited by Section 10(b) and
Rule 10b-5. 3 The case went to trial and, after both

3 The SEC also alleged that Lemelson (1) engaged in a

fraudulent scheme and course of business in violation of
subsections (a) and (c) of Rule 10b-5; (2) made other untrue
statements that there were “significant concerns about Ligand’s
imminent insolvency” and that Ligand’s “liabilities exceeded
tangible assets, meaning the company was insolvent”; and (3)
misled his own investors in contravention of the Investment
 11a

parties rested, Lemelson unsuccessfully moved for

judgment as a matter of law. On November 5, 2021,
the jury found Lemelson liable for the three
statements. 4
After the jury verdict, Lemelson renewed his
motion for judgment as a matter of law pursuant to
Federal Rule of Civil Procedure 50(b). Lemelson
argued, inter alia, that the Viking Statements were
opinions protected by the First Amendment and that
the SEC failed to produce sufficient evidence that all
three statements were material and made with
scienter. The district court rejected these arguments
and denied the motion.
The district court then received briefing and heard
argument concerning the proper remedies for
Lemelson’s violations. The SEC requested, inter alia,
a $656,500 civil penalty against Lemelson and an
injunction permanently enjoining him from violating
Section 10(b) and Rule 10b-5. Lemelson countered
that the civil penalty should be “far less” than $80,000
and that no injunction should be issued. The district
court assessed a civil penalty of $160,000 and
enjoined Lemelson from violating Section 10(b) and
Rule 10b-5 for five years. 5 Lemelson, 596 F. Supp. 3d

Advisers Act.
4 The jury found Lemelson not liable with respect to the
SEC’s other claims.
5 The injunction also applied to Lemelson Capital
Management, LLC. Lemelson, 596 F. Supp. 3d at 238. The
district court declined to (1) enter a civil penalty against
Lemelson Capital Management, LLC; (2) order joint and several
disgorgement of the defendants’ pecuniary gain; or (3) assess
prejudgment interest. Id. at 230. The SEC has not appealed
 12a

at 238. The court rejected the SEC’s contention that a

permanent injunction was warranted, noting that
Lemelson’s “violation was not as severe as in many of
the cases where courts ordered permanent
injunctions.” Id. at 233.
Lemelson timely appealed. 6
II.
We review de novo a district court’s denial of a
motion for judgment as a matter of law. Suero-Algarín
v. CMT Hosp. Hima San Pablo Caguas, 957 F.3d 30,
37 (1st Cir. 2020). In reviewing the record, we
“construe facts in the light most favorable to the jury
verdict, draw any inferences in favor of the non-
movant, and abstain from evaluating the credibility
of the witnesses or the weight of the evidence.” Id. We
“ask whether . . . a rational jury could have found in
favor of the party that prevailed,” Bisbal-Ramos v.
City of Mayagüez, 467 F.3d 16, 22 (1st Cir. 2006), and
set aside the jury verdict “only if the jury failed to
reach the only result permitted by the evidence,”
Quiles–Quiles v. Henderson, 439 F.3d 1, 4 (1st Cir.
2006).
Section 10(b) prohibits, “in connection with the
purchase or sale of any security,” the “use or

these decisions. Nor is the amount of the civil penalty at issue in

this appeal.
6 The district court also denied Lemelson’s motion for a new
trial. Because Lemelson develops no argument on appeal
concerning this denial, he has waived the issue. See United
States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990).
 13a

employ[ment]” of “any manipulative or deceptive

device or contrivance in contravention” of SEC
regulations. 15 U.S.C. § 78j(b). Subsection (b) of Rule
10b-5 declares it “unlawful,” “in connection with the
purchase or sale of any security,” to “make any untrue
statement of a material fact or to omit to state a
material fact necessary in order to make the
statements made . . . not misleading.” 17 C.F.R. §
240.10b-5(b).
Lemelson argues that the jury verdict must be
overturned for three reasons. First, he argues that the
Viking Statements were opinions that are protected
by the First Amendment and nonactionable under
Section 10(b) and Rule 10b-5. Second, he contends
that the SEC failed to introduce evidence sufficient to
prove that the Promacta Statement and Viking
Statements were material. Finally, he argues that the
jury lacked a sufficient basis to find that he made the
Promacta Statement and Viking Statements with
scienter. We address each argument in turn.
A.
Lemelson first contends that the Viking
Statements were statements of opinion 7 and thus
were nonactionable under Rule 10b-5 and protected
by the First Amendment. We disagree.
“A [Rule 10b-5] violation . . . requires a false, or
misleadingly omitted, statement of fact.” Constr.
Indus. & Laborers Joint Pension Tr. v. Carbonite,

7 Lemelson does not argue that the Promacta Statement was

a statement of opinion.
 14a

Inc., 22 F.4th 1, 7 (1st Cir. 2021). The “most

significant difference between statements of fact and
expressions of opinion is that ‘a statement of fact ...
expresses certainty about a thing, whereas a
statement of opinion . . . does not.’” Id. (quoting
Omnicare, Inc. v. Laborers Dist. Council Constr.
Indus. Pension Fund, 575 U.S. 175, 183 (2015)).
A reasonable jury could have concluded that the
Viking Statements “expresse[d] certainty
about . . . thing[s],” and thus were actionable
statements of fact, for a number of reasons. Omnicare,
575 U.S. at 183. In the Preclinical Studies Statement,
Lemelson wrote that “Viking does not intend to
conduct any preclinical studies or trials,” and in the
Audit Statement, he asserted that Viking’s “financial
statements provided on the [Viking S-1] . . . are
unaudited.” Neither statement was prefaced by words
like “I think” or “I believe,” which “can play a role in
demonstrating a lack of certainty.” Carbonite, 22
F.4th at 7 (citing Omnicare, 575 U.S. at 187). Both
statements were factually contradicted by the Viking
S-1, which included audited financial data and stated
Viking’s intention to “expend substantial funds in
research and development, including preclinical
studies and clinical trials.” Indeed, Lemelson himself
in his testimony characterized the Audit Statement
as a “mistake[n]” reading of the Viking S-1. And even
though Viking intended to have third parties conduct
preclinical studies and clinical trials on its behalf, a
rational jury could have found the Preclinical Studies
Statement to be, at the least, a misleading “half-
truth[]” actionable under Rule 10b-5. SEC v.
Johnston, 986 F.3d 63, 72 (1st Cir. 2021); see also
Lucia v. Prospect St. High Income Portfolio, Inc., 36
 15a

F.3d 170, 175 (1st Cir. 1994) (“[T]he fact that a

statement is literally accurate does not preclude
liability under federal securities laws.”).
Lemelson cites a series of First Circuit defamation
cases for the proposition that the First Amendment
generally precludes liability “when the speaker
‘outlines the facts available to him, thus making it
clear that the challenged statements represent his
own interpretation of those facts and leaving the
reader free to draw his own conclusions.’” McKee v.
Cosby, 874 F.3d 54, 61 (1st Cir. 2017) (quoting Riley
v. Harr, 292 F.3d 282, 289 (1st Cir. 2002)); see also,
e.g., Phantom Touring, Inc. v. Affiliated Publ’ns, 953
F.2d 724, 730 (1st Cir. 1992). Lemelson reasons that
the Viking Statements simply “interpret[ed]” the
facts in the Viking S-1, and thus that the statements
were protected opinions.
The SEC argues that the First Amendment
principles at issue are limited to the defamation
context, and notes that Lemelson has failed to cite any
cases applying those principles in the context of
Section 10(b) and Rule 10b-5. Because we determine
the Viking Statements to be statements of fact, we
need not decide whether the cases cited by Lemelson
reach beyond defamation law. Even were we to
consider these cases and apply de novo review, see
Naser Jewelers, Inc. v. City of Concord, 513 F.3d 27,
32 (1st Cir. 2008), Lemelson’s argument fails because
the Viking Statements “reasonably would be
understood to declare or imply provable assertions of
fact,” McKee, 874 F.3d at 60-61 (quoting Phantom
Touring, 953 F.2d at 727). Far from presenting
interpretations of the facts contained in the Viking S-
1, the Viking Statements are flatly inconsistent with
 16a

those facts. See, e.g., Piccone v. Bartels, 785 F.3d 766,

771 (1st Cir. 2015) (“[T]he speaker can immunize his
statement from defamation liability by fully
disclosing the non-defamatory facts on which his
opinion is based.” (emphasis added)); id. at 774 (“The
First Amendment generally protects statements of
opinion where the speaker ‘outlines the facts
available to him, thus making it clear that the
challenged statements represent his own
interpretation of those facts . . . .’” (internal quotation
marks omitted) (quoting Riley, 292 F.3d at 289)
(emphases added)); see also Cheng v. Neumann, 51
F.4th 438, 444 (1st Cir. 2022) (noting that
“statement[s] of opinion” without “provably false
factual connotation[s]” can receive First Amendment
protection against defamation suits (quoting
Milkovich v. Lorain J. Co., 497 U.S. 1, 20 (1990))).
Further, Lemelson was “claiming to be in possession
of objectively verifiable facts,” not merely “expressing
a subjective view” of the Viking S-1. McKee, 874 F.3d
at 61 (quoting Riley, 292 F.3d at 289); see also Cheng,
51 F.4th at 444.
B.
Lemelson next argues that even if all three
statements were untrue statements of fact, a
reasonable jury could not have on the evidence
presented, concluded that the statements were
material.
Liability under subsection (b) of Rule 10b-5 only
lies with respect to misstatements or omissions of
“material fact.” 17 C.F.R. § 240.10b-5(b) (emphasis
added). To prove materiality, the SEC must show that
there exists a “substantial likelihood” that the fact
 17a

“would have been viewed by the reasonable investor

as having significantly altered the ‘total mix’ of
information made available.” Basic Inc. v. Levinson,
485 U.S. 224, 231–32 (1988) (quoting TSC Indus., Inc.
v. Northway, Inc., 426 U.S. 438, 449 (1976)). The
determination of materiality is typically left to the
jury. In re Cabletron Sys., Inc., 311 F.3d 11, 34 (1st
Cir. 2002).
We first address the Promacta Statement and
then address the Viking Statements. We conclude
that the SEC introduced evidence sufficient for a
rational jury to find all three statements material.
i.
The controversy over the Promacta Statement
stemmed from the June 18 phone call between
Lemelson and Voss. No transcript of the call was
introduced at trial, and Lemelson and Voss offered
different accounts of their dialogue. According to
Lemelson, Voss “said [Ligand] agreed that [Sovaldi]
would eliminate the need for Promacta.” According to
Voss, Lemelson himself “made th[e] comment” that
“Promacta sales are going to go away” and then
followed the comment with a “rhetorical ‘don’t you
agree?’ ”, to which Voss provided no verbal reply. Voss
testified that he had actually informed Lemelson that
Promacta had a “bright future.” The jury credited
Voss’s account of the call, finding the Promacta
Statement -- i.e., Lemelson’s statement that Voss
affirmatively “said” that Ligand understood Promacta
was “going away” -- to be an “untrue statement of a
material fact” in violation of Rule 10b-5.
A reasonable jury could have found the Promacta
Statement material. First, the SEC introduced
 18a

evidence demonstrating the importance of Promacta

to Ligand’s bottom line. See Carbonite, 22 F.4th at 8
(noting that the “importan[ce] [of a] product” to a
company is relevant in determining the materiality of
a statement concerning that product’s effectiveness).
Ligand had released positive revenue data for
Promacta, noting, for example, that increased
Promacta royalties contributed to aggregate royalty
revenues of $7.9 million for the three months ending
March 31, 2014, compared to $5.8 million for the same
period in 2013. Further, witness testimony
demonstrated that investment analysts had projected
augmented Promacta revenues from 2015 to 2020,
that Promacta could potentially expand into new
geographic markets, and that new medical
applications for Promacta were being pursued. And
the jury also considered evidence that Sovaldi would
not negatively impact Promacta sales to patients with
certain medical conditions. Ligand thus had “expected
[Promacta royalties] to be a substantial portion of [its]
ongoing revenues” and knew that setbacks for
Promacta “could significantly impair [Ligand’s]
operating results and/or reduce the market price of
[its] stock.”
The SEC also produced evidence demonstrating
investors’ alarm and concern about the Promacta
Statement and that they communicated those
concerns to Ligand. For example, one Ligand
shareholder emailed Ligand about the Benzinga
interview and stated that the Promacta Statement
“seem[ed] to [the shareholder] to be a flat out
falsehood” that warranted “legal action.” Ligand’s
President, Matthew Foehr, wrote an email the day
after the interview stating that Foehr was “fielding
 19a

questions from pretty major [share]holders” about the

interview. Further, the SEC introduced the testimony
of Robert Fields, a portfolio manager who testified
that it “[w]ould . . . have been important to [him] as
an investor in Ligand if Promacta was, in fact, going
away” because Promacta “made up the majority of the
current revenue of [Ligand]” and was Ligand’s
“largest source of cash flow.” 8
The jury also considered evidence that Lemelson
himself took credit for the decline in Ligand’s stock
value in the summer of 2014. For example, in an email
to another investment adviser in October 2014,
Lemelson wrote that his “multi-month battle with
[Ligand]” was “paying off” because it resulted in
Ligand’s shares being “down ~40% since [Lemelson]
published” his first report on June 16. A reasonable
jury could infer that Lemelson himself believed that
the Promacta Statement, which was a substantial
part of his “battle” with Ligand, would be material to
investors.
Lemelson contends that the Promacta Statement
cannot have been material given that Voss signaled
at least “tacit agreement” by failing to respond to

8 The presence of Fields’ testimony distinguishes this case

from United States v. Bingham, 992 F.2d 975 (9th Cir. 1993), a
case cited by Lemelson in support of his argument that the SEC
failed to prove the Promacta Statement’s materiality. There, the
defendant failed to disclose that he was an officer and director of
the issuer of stock he was selling, and the government’s sole
materiality evidence was broker testimony that brokers “would
always find a buyer’s or seller’s status as a corporate officer to
be of interest.” Id. at 976. In contrast with the “abstract”
testimony in Bingham, id., Fields’ testimony was specific to
Ligand and the Promacta Statement.
 20a

Lemelson’s comment that Promacta was “going to go

away.” But this argument does not confront the fact
that during his interview with Benzinga, Lemelson
stated that Voss affirmatively “said” that Promacta
was going away. Voss testified that he “[a]bsolutely
[did] not” say those words or “anything to that effect.”
A rational jury could have found Voss’s account of the
phone call more credible than Lemelson’s. See Suero-
Algarín, 957 F.3d at 37 (noting that when
adjudicating a motion for judgment as a matter of
law, the court must “abstain from evaluating the
credibility of the witnesses”). A rational jury could
also find that investors would likely react much more
adversely to news that Ligand said Promacta was
going away than they would to news that a Ligand
representative said nothing when Lemelson so
claimed, while also saying that Promacta had a
“bright future.”
ii.
A rational jury also could find the Viking
Statements material. As with Promacta, the SEC
introduced evidence demonstrating the importance of
the Viking deal to Ligand. See Carbonite, 22 F.4th at
8. For example, Foehr testified that Ligand needed
Viking’s “development expertise” because Ligand did
not have that expertise “internally,” and Fields
attested that “[t]he potential economic royalties that
Ligand [could] receive from Viking number[ed] in the
multiple billions of dollars.”
Further, a reasonable jury could have inferred
that investors were concerned about the Viking
Statements. Foehr testified that Ligand received “an
increasing number of questions about [Lemelson’s]
 21a

reports from a variety of individuals, investors,” and

“other companies” with whom Ligand was
“working . . . on potential licenses.” And importantly,
Fields testified that it would “have been important for
[him] to know as an investor” if “Viking were a shell.”
Although Fields did not specifically identify the
Viking Statements, Lemelson himself acknowledges
that he made the Preclinical Studies Statement “to
support his opinion that Viking [was] a single-
purpose vehicle/shell company.” Drawing all
inferences in the SEC’s favor, see Suero-Algarín, 957
F.3d at 37, a reasonable jury could have viewed the
Viking Statements as important parts of Lemelson’s
broader argument that Viking was a shell company,
which Fields believed was material.
Lemelson argues that the public availability of the
Viking S-1 precludes a jury from finding his
statements material. Because the Viking S-1 reported
audited financial results and detailed Viking’s
intentions to manage preclinical studies and clinical
trials, Lemelson contends, his false statements to the
contrary cannot have altered the “total mix” of
information available to investors. We disagree.
Lemelson is not helped by his reference to our
statement that it is “not a material omission to fail to
point out information of which the market is already
aware.” Thant v. Karyopharm Therapeutics Inc., 43
F.4th 214, 222 (1st Cir. 2022) (emphasis added)
(quoting Baron v. Smith, 380 F.3d 49, 57 (1st Cir.
2004)). We have never held that it cannot be a
material misstatement to flatly contradict publicly
available facts. See, e.g., Ponsa-Rabell v. Santander
Sec. LLC, 35 F.4th 26, 34 (1st Cir. 2022)
(distinguishing “omissions” from “affirmative
 22a

misrepresentations”); Johnston, 986 F.3d at 72

(bypassing dispute about duty to disclose because
defendant “chose to make statements”). Indeed,
Lemelson’s position would risk foreclosing Rule 10b-5
liability for all untrue statements belied by public
securities filings. 9
Lemelson cites Teamsters Local 282 Pension Trust
Fund v. Angelos, 762 F.2d 522 (7th Cir. 1985), and
Phillips v. LCI International, Inc., 190 F.3d 609 (4th
Cir. 1999). He misleadingly argues that these cases
hold that “even lies are not actionable” when an
investor “possesses information sufficient to call the
[mis]representation into question.” Teamsters, 762
F.2d at 529–30; see also Phillips, 190 F.3d at 617. In
Teamsters, the Seventh Circuit addressed not the
materiality element, but rather the “reliance”
element in a private (not brought by the SEC)
securities enforcement suit, noting (in dicta) that a
plaintiff investor cannot “claim . . . that he relied on
or was deceived by [a] lie” if he in fact “knows enough
so that the lie . . . still leaves him cognizant” of the
truth. 762 F.2d at 530. But in an enforcement action
brought by the SEC, the SEC need not prove any

9 Lemelson is correct that public SEC filings, like the Viking

S-1, are part of the “total mix” of information available to
investors. See, e.g., United States v. Contorinis, 692 F.3d 136,
143 (2d Cir. 2012). But he cites no cases holding that a statement
contradicting such filings could not be “viewed by [a] reasonable
investor as having significantly altered th[at] ‘total mix.’” Basic,
485 U.S. at 231–32 (quoting TSC Indus., 426 U.S. at 449).
Similarly, we reject Lemelson’s contention that his statements
were rendered categorically immaterial by his identifying
himself as a short seller in his reports.
 23a

individual investor’s reliance. See SEC v. Tambone,

597 F.3d 436, 447 n.9 (1st Cir. 2010) (en banc). In
Phillips, which also involved a private suit, the
Fourth Circuit found not actionable an executive’s
statement, after merger negotiations had recently
taken place, that “[w]e’re not a company that’s for
sale”; the court emphasized that the executive “did
not deny present or future merger negotiations” and
“actually indicated that there would be mergers in the
company’s future.” 190 F.3d at 619 (alteration in
original). Here, in contrast, Lemelson specifically
stated that Viking was unaudited and would not
conduct preclinical studies or trials.
C.
Finally, Lemelson contends that even if all three
statements were “untrue statement[s] of a material
fact” under Rule 10b-5, a reasonable jury could not
have found that he made the statements with the
requisite scienter.
Evidence of scienter is required to establish
violations of Section 10(b) and Rule 10b-5. Johnston,
986 F.3d at 74. Proof of scienter requires “a showing
of either conscious intent to defraud or ‘a high degree
of recklessness.’” SEC v. Ficken, 546 F.3d 45, 47 (1st
Cir. 2008) (quoting ACA Fin. Guar. Corp. v. Advest,
Inc., 512 F.3d 46, 58 (1st Cir. 2008)). A “high degree
of recklessness” entails “‘a highly unreasonable
omission,’ one that not only involves ‘an extreme
departure from the standards of ordinary care,’ but
also ‘presents a danger of misleading buyers or sellers
that is either known to the defendant or is so obvious
the actor must have been aware of it.’” Johnston, 986
F.3d at 74 (quoting Corban v. Sarepta Therapeutics,
 24a

Inc., 868 F.3d 31, 37 (1st Cir. 2017)).

First addressing the Promacta Statement and
then examining the Viking Statements, we find the
evidence sufficient to support the jury’s finding that
Lemelson made all three statements with scienter.
i.
As to the Promacta Statement, a reasonable jury
could have credited Voss’s testimony that he
“[a]bsolutely [did] not” say that Promacta was going
away or “anything to that effect.” Rather, Voss told
Ligand leadership that he “represented [Ligand]
forcefully” during his call with Lemelson and “pointed
out that [hepatitis C] is only one of several indications
for [Promacta], and that even within [hepatitis C]
there exists a sizeable market for Promacta
independent of Sovaldi.” Voss testified that he
informed Lemelson of these views and that Promacta
had a “bright future.”
A rational jury could find that Lemelson knew
Voss’s account of the call to be accurate, yet
intentionally or recklessly chose to misconstrue the
conversation. See Johnston, 986 F.3d at 74 (“[A]
defendant’s publication of statements when that
defendant ‘knew facts suggesting the statements
were inaccurate or misleadingly incomplete is classic
evidence of scienter.’” (quoting Aldridge v. A.T. Cross
Corp., 284 F.3d 72, 83 (1st Cir. 2002))). Indeed, Voss
emailed Lemelson after the Benzinga interview,
writing that Voss “never made th[e] statement [that
Promacta was going away], never agreed with that
statement[,] and never would because it’s not true,”
but Lemelson never responded to the email or
“publicly acknowledge[d]” Voss’s competing
 25a

interpretation of the call.

ii.
The SEC also introduced sufficient evidence for
the jury to find that Lemelson made the Viking
Statements with scienter. In particular, a reasonable
jury could infer that Lemelson understood from the
Viking S-1 that Viking had audited financials and
that Viking intended to manage preclinical studies
and trials, yet intentionally or recklessly made
statements to the contrary.
Lemelson held himself out as a sophisticated
investor who had been “featured, quoted or cited in
substantially every major global financial news media
outlet.” He made all the investment decisions for the
Amvona Fund, which he touted as “one of the world’s
top-performing hedge [f]unds.” He also testified to
having read “hundreds of financial statements.”
Lemelson admitted that he read and “carefully
researched” the Viking S-1. The Viking S-1
extensively detailed Viking’s intentions to manage
preclinical studies and clinical trials, and it included
various audited financial data. Given Lemelson’s
financial expertise and his testimony that he closely
reviewed the Viking S-1, a reasonable jury could
conclude that Lemelson “knew facts suggesting the
[Viking] [S]tatements were inaccurate or
misleadingly incomplete.” Johnston, 986 F.3d at 74
(quoting Aldridge, 284 F.3d at 83); see also Geffon v.
Micrion Corp., 249 F.3d 29, 36 (1st Cir. 2001) (noting
that “disregard of current factual information
acquired prior to the statement at issue” can be
evidence of scienter). Indeed, Lemelson testified that
he knew a Form S-1 cannot be filed without audited
 26a

financial data, a fact also mentioned by Foehr in his

testimony. And even if the Preclinical Studies
Statement were taken as literally true because Viking
planned to hire third parties to conduct studies and
trials on its behalf, a rational jury could conclude that
Lemelson presented the statement as a misleading
“half-truth[ ],” supporting an inference of scienter.
Johnston, 986 F.3d at 72. Whether or not a reasonable
jury could have concluded that the Viking Statements
were intentional misstatements to investors, a
rational jury could find that Lemelson made the
statements with a “high degree of recklessness,”
Ficken, 546 F.3d at 47 (quoting ACA Fin. Guar. Corp.,
512 F.3d at 58), particularly given that he published
the statements two days after the Viking S-1 became
public and without first contacting anyone at Viking
for comment.
Further, the importance of the Ligand short
position to Lemelson could lead a reasonable jury to
infer that he would investigate Viking thoroughly.
Lemelson testified that the short position comprised
a “substantial part” of the Amvona Fund’s portfolio
and that 34 percent of the invested funds was his
“family’s money.” Although the fact that Lemelson
“stood to benefit from wrongdoing” does not itself
necessarily prove scienter, Kader v. Sarepta
Therapeutics, Inc., 887 F.3d 48, 60 (1st Cir. 2018)
(quoting Greebel v. FTP Software, Inc., 194 F.3d 185,
197 (1st Cir. 1999)), a reasonable jury could infer that
Lemelson would have carefully researched Viking
and thus been aware of the misleading nature of his
statements, cf. Carbonite, 22 F.4th at 9 (“[T]he
importance of a particular item to a defendant can
support an inference that the defendant is paying
 27a

close attention to that item . . . .” (internal quotation

marks omitted) (quoting Loc. No. 8 IBEW Ret. Plan &
Tr. v. Vertex Pharms., Inc., 838 F.3d 76, 82 (1st Cir.
2016))).
We reject Lemelson’s challenge to the jury’s
scienter finding and, as noted, reject Lemelson’s other
challenges to the jury verdict. We affirm the jury
verdict.
III.
Lemelson argues that the district court abused its
discretion and committed an error of law in enjoining
him from violating Section 10(b) and Rule 10b-5 for
five years. We disagree.
In an SEC enforcement action, we review the
district court’s decision to enter an injunction for
abuse of discretion. SEC v. Sargent, 329 F.3d 34, 38
(1st Cir. 2003). Abuse of discretion occurs “when a
material factor deserving significant weight is
ignored, when an improper factor is relied upon, or
when all proper and no improper factors are assessed,
but the [district] court makes a serious mistake in
weighing them.” Id. (quoting Indep. Oil & Chem.
Workers of Quincy, Inc. v. Procter & Gamble Mfg. Co.,
864 F.2d 927, 929 (1st Cir. 1988)). “[A] district court
[also] abuses its discretion if it incorrectly applies the
law to particular facts.” Id. (quoting Am. Bd. of
Psychiatry & Neurology, Inc. v. Johnson-Powell, 129
F.3d 1, 3 (1st Cir. 1997)).
Congress authorized the SEC to seek injunctive
relief to prevent violations of securities laws. See 15
U.S.C. § 78u(d)(1). A district court may enter such an
injunction “where there is, ‘at a minimum, proof that
 28a

a person is engaged in or is about to engage in a

substantive violation of either [the Securities Act of
1933 or the Securities Exchange Act of 1934] or of the
regulations promulgated thereunder.’” Sargent, 329
F.3d at 39 (quoting Aaron v. SEC, 446 U.S. 680, 700–
01 (1980)). The legal standard for issuance of the
injunction is a “reasonable likelihood of recidivism,”
which is assessed by looking at “several factors, none
of which is determinative.” Id. These factors include,
inter alia, (1) the “nature of the violation, including
its egregiousness and its isolated or repeated nature,”
(2) “whether the defendants will, owing to their
occupation, be in a position to violate again,” and (3)
“whether the defendants have recognized the
wrongfulness of their conduct.” Id.
The district court properly weighed these three
factors and considered no improper ones. First, it
examined the “nature of the violation” and found that
the Promacta Statement was “particularly
egregious.” Lemelson, 596 F. Supp. 3d at 233. As the
district court emphasized, Promacta was “Ligand’s
key product.” Id. The jury determined that Lemelson
falsely told the public that Voss said Promacta was
“going away,” when in fact Voss said just the opposite:
that Promacta had a “bright future.” And Lemelson
“derived a[] direct personal profit” from the
misstatement by cashing in his short position.
Sargent, 329 F.3d at 39.
Next, the district court noted that Lemelson would
be in a position to violate again owing to his
occupation as an investment adviser and
management of a new hedge fund called the Spruce
Peak Fund since early 2021. Lemelson, 596 F. Supp.
3d at 233. In contrast with the two defendants’
 29a

occupations in Sargent -- webcasting and dentistry,

respectively, see Sargent, 329 F.3d at 39–40 --
Lemelson’s continued position as a hedge fund
manager and investment adviser would readily allow
him to benefit from future material misstatements
concerning investments.
Lemelson argues that the district court committed
an error of law by issuing an injunction on the basis
of a mere possibility, rather than a likelihood, of
future violations. He relies on the fact that the district
court wrote that Lemelson “will be able to violate
again.” Lemelson, 596 F. Supp. 3d at 233. Although
Lemelson is correct that the legal standard is a
“reasonable likelihood of recidivism,” Sargent, 329
F.3d at 39 (emphasis added), not a mere possibility of
future violations, he takes the district court’s
language out of context. The district court’s statement
that Lemelson “will be able to violate again” was
made when applying the factor from Sargent
concerning “whether the defendant[] will, owing to
[his] occupation, be in a position to violate again.” Id.
(emphasis added). The court correctly quoted this
factor and ultimately applied the “reasonable
likelihood of recidivism” standard. Lemelson, 596 F.
Supp. 3d at 231. No legal error occurred.
Finally, the district court determined that
Lemelson had failed to “recognize the wrongfulness of
his conduct.” Id. at 233. The court referenced the fact
that Lemelson incurred sanctions by violating a
protective order and leaking confidential material
related to the litigation to the press. Id. at 232–33.
Further, when the district judge heard post-verdict
argument on whether to impose an injunction, she
allowed Lemelson to speak and Lemelson said he
 30a

would “never regret the things [he] did.” Also,

Lemelson’s lack of regret and remorse is highlighted
by the fact that even after Voss emailed Lemelson
that Voss had never said Promacta was going away,
Lemelson never took steps to inform the public of
Voss’s disagreement with Lemelson’s account of what
was said. Lemelson had opportunities to correct his
misstatements and took advantage of none of them.
That there was no abuse of discretion is further
evidenced by the district court’s careful rejection of
the SEC’s request for a permanent injunction. The
court contrasted Lemelson’s case with various cases
that each involved “egregious conduct occurring over
prolonged periods of time.” Id. at 231–32; see, e.g.,
SEC v. Wall, No. 19-cv-00139, 2020 WL 1539919, at
*8 (D. Me. Mar. 31, 2020) (violations spanning more
than four years); SEC v. Chan, 465 F. Supp. 3d 18, 38
(D. Mass. 2020) (scheme lasting nearly two years);
SEC v. Present, No. 14-cv-14692, 2018 WL 1701972,
at *1, *5 (D. Mass. Mar. 20, 2018) (twenty-one
violations over multiple years). The court concluded
that Lemelson’s “violation was not as severe as in
many of the cases where courts ordered permanent
injunctions” and enjoined Lemelson for only five
years. Lemelson, 596 F. Supp. 3d at 233. That this
was within the district court’s discretion is consistent
with case law in other circuits. See, e.g., SEC v.
Levine, 517 F. Supp. 2d 121, 147 (D.D.C. 2007), aff’d,
279 F. App’x 6 (D.C. Cir. 2008) (ten-year injunction);
SEC v. Johnson, 595 F. Supp. 2d 40, 45 (D.D.C. 2009)
(five-year injunction); SEC v. Spartan Sec. Grp., No.
19-cv-448, 2022 WL 3224008, at *5 (M.D. Fla. 2022)
 31a

(same). 10
Lemelson notes that the SEC did not seek any
injunctive relief until 2021. Even so, there was no
abuse of discretion in the district court’s view that
there still existed a “reasonable likelihood of
recidivism.” Sargent, 329 F.3d at 39. Indeed, the
district court acknowledged during the motion
hearing that the lack of violations since 2014
“mitigate[d] against a lifetime bar” and accordingly
chose to enter a five-year injunction instead. Doing so
was not an abuse of discretion. See Negrón-Almeda v.
Santiago, 528 F.3d 15, 21 (1st Cir. 2008) (“Under
[abuse of discretion review], we may not reverse a
determination simply because we, if sitting as a court
of first instance, would have weighed the relevant
considerations differently.”).
IV.
For the foregoing reasons, the judgment of the
district court is affirmed.

10 Lemelson objects to the SEC’s use of the injunction to seek

a lifetime associational bar against him under 15 U.S.C. § 80b-
3. As Lemelson notes, when the district court later denied
Lemelson’s motion to amend the judgment, the court “agree[d]
[that] a lifetime ban would be excessive.” Nevertheless, only the
five-year injunction is on appeal here, and the district court was
within its discretion in imposing that injunction. If the SEC
imposes an associational bar, Lemelson may appeal that
decision in a separate action. See, e.g., Kornman v. SEC, 592
F.3d 173, 175, 181 (D.C. Cir. 2010).
 32a

Appendix C

UNITED STATES DISTRICT COURT

DISTRICT OF MASSACHUSETTS

SECURITIES AND )
EXCHANGE )
COMMISSION, )
)
Plaintiff, )
)
v. ) Civil Action
) No. 18-11926-PBS
)
GREGORY LEMELSON )
and LEMELSON )
CAPITAL )
MANAGEMENT, LLC, )
)
Defendants, )
)
and )
)
THE AMVONA FUND, )
LP, )
)
Relief Defendant. )

MEMORANDUM AND ORDER

March 30, 2022
Saris, D.J.
 33a

INTRODUCTION
The Securities and Exchange Commission (“SEC”)
brought a civil enforcement action against
Defendants Gregory Lemelson (“Lemelson”) and
Lemelson Capital Management, LP (“LCM”) for
violations of the Securities Exchange Act and the
Investment Advisers Act of 1940 (the “Advisers Act”).
Following a trial, the jury returned a mixed verdict on
November 5, 2021, finding Lemelson liable for three
false statements and not liable under a scheme
liability theory and the Advisers Act. The SEC now
moves for entry of final judgment (Dkt. 244). The SEC
requests this Court order: (1) an injunction
permanently restraining and enjoining Defendants
from violating Section 10(b) of the Securities
Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 [17
C.F.R. § 240.10b-5]; (2) a $656,500 civil penalty
against Lemelson; (3) a $775,000 civil penalty against
LCM; (4) $656,500 in joint and several disgorgement
against Lemelson and LCM; and (5) prejudgment
interest of $208,624. Lemelson opposes all five
components of the proposed order (Dkt. 260). After
hearing, the Court enters the following final
judgment: Defendants are enjoined from violating
Section 10(b) of the Exchange Act and Rule 10b-5 for
a period of five years, and Lemelson is ordered to pay
a Tier III civil penalty in the amount of $160,000.
FACTUAL BACKGROUND
I. The Charged Conduct
Lemelson served as Chief Investment Officer of
LCM in 2014. Lemelson managed the Amvona Fund
through LCM, and he “made all investment decisions
for that fund.” Dkt. 246-5 (Parties’ Agreed-to Facts),
 34a

¶ 5. Beginning in May 2014, the Amvona Fund took a

short position in shares of Ligand Pharmaceuticals,
Inc. Lemelson and LCM took a short position on
behalf of the Amvona Fund on thirteen dates between
May 2014 and October 2014. The total short position
from this period was $5,082,334.60. Between June
and August of that year, Lemelson published five
reports concerning Ligand. In a report published July
3, 2014, Lemelson represented that Viking
Therapeutics, Inc., (“Viking”), a company that signed
a licensing deal with Ligand, “does not intend to
conduct any preclinical studies or trials and does not
own any products or intellectual property or
manufacturing abilities and leases space from
Ligand.” Dkt. 246-11 at 7. Lemelson wrote that
“Viking appears to be a single-purpose vehicle created
to raise more capital from public markets for its
sponsor, Ligand Pharmaceuticals.” Id. In the same
report, Lemelson mused that Viking had a “curious
relationship” with its accounting firm and stated that
Viking “has not yet even consulted with the firm on
any materials issues” and “[t]he financial statements
provided on the S1 accordingly are unaudited.” Id. at
9–10.
Between June and October, Lemelson also gave
four interviews on Benzinga Premarket Prep Shows
(“Benzinga”). During his interview with Benzinga on
June 19, 2014, Lemelson described a phone call with
Bruce Voss, Ligand’s investor relations firm
representative. Lemelson said “It’s literally going to
go away, I mean, I had discussions with [Ligand]
management just yesterday – excuse me, their
[Ligand’s] IR [investor relations] firm. And they
basically agreed. They said, ‘Look, we understand
 35a

Promacta’s going away.’” Dkt. 246-5, ¶ 14. Lemelson

and LCM covered the short position on five dates, for
a total of $3,785,690.19. The Amvona Fund profited
$1,296,644.41 from the short position in Ligand.
II. The Litigation
The SEC charged Lemelson and LCM with
violations of Section 10(b) and Rule 10b-5 of the
Securities Exchange Act and Section 206(4) and Rule
206(4)-8 of the Investment Advisers Act. The jury
determined that the SEC proved Lemelson
“intentionally or recklessly made untrue statements
of a material fact or omitted to state a material fact
necessary in order to make the statements made, in
light of the circumstances under which they were
made, not misleading” as to the Benzinga interview,
the Viking audit statement, and the Viking
preclinical trial statement. Dkt. 246-8 (Verdict Form)
at 1–2.
The jury answered “No” for the allegedly false
statements about Ligand’s insolvency and found no
Rule 10b-5 scheme liability. The jury also answered
“No” on the two questions related to whether the SEC
proved that Lemelson intentionally, recklessly, or
negligently violated the Advisers Act. Id.
Over the course of this acrimonious litigation, this
Court has issued opinions on a motion to dismiss (Dkt.
29), motions for summary and partial summary
judgment (Dkt. 146), a motion in limine to exclude
argument that the statements were opinions (Dkt.
204), and a motion for renewed judgment as a matter
of law (Dkt. 243), and the Court assumes familiarity
with those opinions.
 36a

DISCUSSION
I. Injunction
A. Legal Standard
Section 21(d) of the Exchange Act provides that
the SEC may bring an action to enjoin a person
“engaged or [] about to engage” in violations of the
Act, and “upon a proper showing a permanent or
temporary injunction or restraining order shall be
granted without bond.” 15 U.S.C. § 78u(d)(1). An
injunction is appropriate where there is, “at a
minimum, proof that a person is engaged in or is
about to engage in a substantive violation of either
one of the Acts or of the regulations promulgated
thereunder.” SEC v. Sargent, 329 F.3d 34, 39 (1st Cir.
2003) (quoting Aaron v. SEC, 446 U.S. 680, 700–01
(1980)). The legal standard for issuing an injunction
is “reasonable likelihood of recidivism, not an
imminent threat of it.” Sargent, 329 F.3d at 39.
Courts assess the likelihood of recidivism through
several, non-dispositive factors: “the nature of the
violation, including its egregiousness and its isolated
or repeated nature”; “whether the defendants will,
owing to their occupation, be in a position to violate
again”; and “whether the defendants have recognized
the wrongfulness of their conduct.” Id.
The Second Circuit has cautioned that “when
defendants are active in the securities field ‘[a]n
injunction is a drastic remedy, not a mild
prophylactic.’” SEC v. Am. Bd. of Trade, Inc., 751 F.2d
529, 535–36 (2d Cir. 1984) (quoting Aaron, 446 U.S.
at 703 (Burger, C.J., concurring)); see also SEC v.
Johnson, 595 F.Supp.2d 40, 45 (D.D.C. 2009)
(imposing a temporary injunction of five years and
 37a

warning of the seriousness of a permanent

injunction). One court has held that violations of
securities laws are not enough on their own to satisfy
egregiousness. See SEC v. Snyder, No. H-03-04658,
2006 WL 6508273, at *2 (S.D. Tex. Aug. 22, 2006).
Many district courts in this circuit have issued
permanent injunctions for egregious conduct
occurring over prolonged periods of time. For
prolonged schemes, see SEC v. Wall, No. 2:19-cv-
00139-JHR, 2020 WL 1539919, at *8 (D. Me. Mar. 31,
2020); SEC v. Chan, 465 F. Supp. 3d 18, 38 (D. Mass.
2020); SEC v. Present, No. 14-cv-14692-LTS, 2018
WL 1701972 at *1 (D. Mass. Mar. 20, 2018). For
repeated conduct, see SEC v. Weed, 315 F. Supp. 3d
667, 676 (D. Mass. 2018). For egregiously fraudulent
conduct, see SEC v. Cody, No. 16-cv-12510, 2019 WL
6619195 at *4 (D. Mass. Dec. 5, 2019); SEC v.
Druffner, 517 F. Supp. 2d 502, 513 (D. Mass. 2007).
B. Parties’ Arguments
The SEC seeks a permanent injunction. The SEC
argues that Defendants’ violations “were deliberately
calculated to strike at the heart of Ligand’s business.”
Dkt. 245 at 3–4. In its view, the fraudulent
statements focused on “Ligand’s most important
product (Promacta) and a vital new business
relationship (Viking).” Dkt. 245 at 4. The SEC avers
that the conduct was egregious and repetitive because
the jury found that Lemelson made three separate
fraudulent statements, Lemelson never corrected the
statements, and Lemelson never publicly
acknowledged that Voss denied his claim. Moreover,
the SEC contends that not only is Lemelson in a
position where he could violate again, but he likely
 38a

will violate again.

The Commission bolsters this claim by pointing to
what it describes as Lemelson’s “improper behavior”
during litigation and his “minimizing and
mischaracterizing the meaning and import of the jury
verdict.” Id. at 5. The SEC points out that this Court
sanctioned Lemelson $100 per page of leaked
material after Lemelson violated a protective order
and leaked 50 pages of material to the press. The SEC
also emphasizes that Lemelson, through his counsel,
threatened a priest, who had provided allegedly false
information about Lemelson’s credentials as a priest
to the Commission, with litigation.
Lemelson opposes, emphasizing that the jury
found that the three discrete statements were not
part of a larger scheme and over seven years have
passed since Lemelson made the statements.
Lemelson contends that the violations in the case
were not egregious because he did not cover any of his
short position as to the statements made on July 3
about Viking, and he covered “less than 6% of his
overall position” six hours after his Benzinga radio
interview. Dkt. 260 at 4. Lemelson also argues that
the July 3 statements were about Viking, a company
whose stock Lemelson did not trade, and the SEC did
not offer evidence that Ligand’s stock price was
impacted by the Viking statements. Lemelson next
argues that the conduct was not repetitive because
“[t]hree isolated statements out of thousands of pages
of published work and multiple media appearances
does not constitute ‘repeated’ conduct.” Id. at 6.
Lemelson further avers that the Court can be assured
that Lemelson will not violate again because he has
not been charged with any securities violations before
 39a

or after the present case. He contends that the SEC’s

“improper behavior” justification is unrelated, as
Lemelson was already sanctioned for violating the
protective order and counsel’s letter to a third-party
priest cannot be used as support for the proposition
that Lemelson is likely to engage in future violations.
Finally, Lemelson asks that the Court consider
general equity concerns. If the Court issues an
injunction, he emphasizes, the Commission will likely
seek to permanently bar Lemelson from working as
an investment advisor. Lemelson has provided the
Court with eleven letters of support from his investors
who want him to stay on as their advisor.
C. Analysis

1. Nature of the Violation

As to the nature of the violation, the jury found

that Lemelson made three different material false
statements. However, he was found not liable for an
overarching scheme, indicating that the SEC was not
able to prove that these three separate statements
were connected to a scheme to defraud Ligand
investors. I find that one of the three statements, that
Bruce Voss agreed that Promacta, Ligand’s key
product, was going away, was particularly egregious.
The three fraudulent statements were made on June
19 and July 3. While Lemelson engaged in a campaign
to drive down Ligand’s stock, the material
misstatements occurred over the course of a short
time period.
2. Position to Violate Again
Lemelson will be able to violate again, as he
 40a

continues to work as an investment adviser and

recently started a new fund, Spruce Peak Fund.
Investors will continue to look to his advice and rely
on the truthfulness of his reports.
3. Acknowledgement of Wrongdoing
Finally, Lemelson continues to unabashedly
defend his actions. Lemelson does not recognize the
wrongfulness of his conduct or acknowledge when he
was clearly wrong (like the statements about Viking).
His pugilistic approach to the litigation (e.g., the
tweets and the leaked documents) indicates he has
not learned his lesson.
Considering the factors laid out in Sargent and the
precedent above, Lemelson’s conduct merits an
injunction, but his violation was not as severe as in
many of the cases where courts ordered permanent
injunctions. A temporary injunction is more
appropriate in this case. The Court sets the injunction
for a period of five years.
II. Civil Penalty
A. Legal Standard
Section 20(d)(2) of the Securities Act, 15 U.S.C. §
77t(d)(2), and § 21(d)(3) of the Exchange Act, 15
U.S.C. § 78u(d)(3) provide that the civil penalty “shall
be determined by the court in light of the facts and
circumstances.” 15 U.S.C. §§ 77t(d)(2)(A),
78u(d)(3)(B)(i). “The tier determines the maximum
penalty, with the actual amount of the penalty left up
to the discretion of the district court.” SEC v. Kern,
425 F.3d 143, 153 (2d Cir. 2005) (citing 15 U.S.C. §
77t(d)). Tier II requires “fraud, deceit, manipulation,
 41a

or deliberate or reckless disregard of a regulatory

requirement.” 15 U.S.C. § 77t(d)(2)(B). Tier III
requires the fraud elements of Tier II plus that “such
violation directly or indirectly resulted in substantial
losses or created a significant risk of substantial
losses to other persons.” 15 U.S.C. § 77t(d)(2)(C).
Both parties consider the appropriate penalty
under the following factors: “the egregiousness of the
violation, the defendant’s willingness or failure to
admit wrongdoing, the isolated or repeated nature of
the violations, the degree of scienter involved, the
defendant’s cooperation with authorities or lack
thereof, and the defendant’s current financial
condition.” SEC v. Esposito, No. 16-cv-10960-ADB,
2018 WL 2012688, at *9 (D. Mass. Apr. 30, 2018) (the
“Esposito factors”).
B. Parties’ Arguments
The SEC argues that Lemelson should be ordered
to pay a third-tier penalty of $656,500. This amount
reflects Lemelson’s pecuniary interest in the
approximately $1.3 million of profits gained by the
Amvona Fund. The SEC calculates this amount by
adding Lemelson’s share of the profits based on his
34% ownership of the assets in the Amvona Fund
($442,000) plus a 25% performance fee he collected on
the remaining profits of $214,000. The SEC adds that
LCM should also pay a third-tier penalty of $775,000,
“the amount authorized at the time of the offending
conduct against entities under Exchange Act Section
21(d)(3)(B)(iii).” Dkt. 245 at 9. The SEC argues that
the Court should impose a separate penalty for LCM
“[d]espite the parties’ agreement at trial to focus on
Lemelson as a proxy for LCM as to the fraudulent
 42a

conduct at issue” because LCM enabled Lemelson to

carry out the fraudulent conduct. Id.
The SEC condemns defendants’ conduct as
repetitive and egregious. Further, it argues that
Lemelson has failed to take responsibility for his
misconduct, the conduct involved a high degree of
scienter, and defendants’ fraud created a risk of
significant losses to Ligand investors. The SEC points
out that Lemelson himself took credit for driving
down Ligand’s stock, indicating that three false
statements were made with scienter. He has refused
to take responsibility despite the jury’s verdict. The
SEC alleges that he continues to engage in deceitful
practices, citing to a tweet that Lemelson sent out
from three accounts after the jury verdict. The tweet
quotes part of the first line of a Law360 article, saying
“A Boston federal jury on Friday absolved a Greek
Orthodox priest of fraud claims in a U.S. SEC suit
alleging he launched a short-and-distort scheme
through his hedge fund . . . .” Dkt. 245 at 11. The SEC
contends that this was an effort to mislead the public
and minimize the seriousness of the jury’s verdict.
Lemelson insists that the Court should impose less
than the $80,000 maximum for a Tier II penalty. Tier
III is inappropriate, Lemelson argues, because the
SEC has not shown there was substantial loss or
significant risk of such loss in the case. Lemelson
contends that he never claimed that any decline in
Ligand’s stock price was attributable to the three
statements for which he was found liable. He also
calls the SEC’s social media argument false and
hypocritical. Lemelson “simply retweeted this
article—he did not draft its language or otherwise
comment on it.” Dkt 260 at 18–19. Further, Lemelson
 43a

calls out the SEC for their own misleading press

release after the trial, entitled “SEC Wins Jury Trial
Against Hedge Fund Adviser Who Ran Manipulative
Short Scheme.” Dkt. 260 at 19 (quoting Dkt. 261-34).
Finally, Lemelson avers that the Court should not
allow the SEC to “improperly double-dip” with
separate civil monetary penalties for both Lemelson
and LCM. Dkt. 260 at 21.
In reply, the SEC adds the expert report of its
expert Dr. Erin Smith to bolster the argument that
Defendants’ fraud created a risk of investor loss. The
SEC contends first that actual losses are not
necessary; and second, even if they were necessary,
their expert demonstrates that investors traded in
reliance on that information on the two days on which
Defendants made their fraudulent statements.
C. Analysis
As an initial matter, Lemelson and LCM should
not face separate civil penalties. Before trial, the
parties agreed that “because LCM was controlled and
operated entirely by Fr. Lemelson, there would be no
need for separate evidence to try to establish liability
against both Fr. Lemelson and LCM.” Dkt. 260 at 21.
The parties’ earlier agreement undercuts the SEC’s
argument that the entities engaged in distinct
conduct for purposes of a penalty.
In asking for a Tier II violation, Lemelson
essentially concedes “fraud, deceit, manipulation, or
deliberate or reckless disregard of a regulatory
requirement.” 15 U.S.C. § 77t(d)(2)(B). His fraud is
not in question. To enter Tier III, the SEC must show
that his violations caused substantial losses or
created a significant risk of substantial loss to
 44a

investors. The SEC attaches Dr. Smith’s expert report

and a letter from Robert H. Fields of Cardinal Capital
Management, LLC, who testified at trial, stating he
is “confident the false and misleading statements
Father Lemelson made likely artificially depressed
the price of Ligand’s stock, thereby harming
investors.” Dkt. 268-1. As to the Benzinga interview,
Dr. Smith’s report concludes “that the interview is
associated with a -2.44% abnormal decline in Ligand’s
stock price, which is statistically significant at the
90% confidence level.” Dkt. 266-1 at 13. As to the July
report containing the statements about Viking, she
“estimated that Ligand’s stock price declined by -
1.95%, which is statistically significant at the 99%
confidence level.” Dkt. 266-1 at 14. Dr. Smith further
found that, after Newswire distributed Lemelson’s
July 3 report about Viking on July 7, Ligand’s stock
price declined by -3.97%, statistically significant at
the 99% confidence level.
While Lemelson focuses on actual losses, the SEC
is correct that a significant risk of substantial loss is
enough to qualify a violation for Tier III penalties.
Courts have differed on what is required to show a
significant risk of loss, however. Some courts have not
required concrete evidence that any investors traded
(or were at risk of trading) in reliance on such
statements. See SEC v. Monterosso, 557 F. App’x 917,
929 (11th Cir. 2014) (holding that a significant risk of
substantial loss to investors exists wherever the
fraudulent statements at issue “would have been
important to any reasonable shareholder”); SEC v.
SeeThruEquity, LLC, No. 18 Civ. 10374 (LLS), 2022
WL 171196, at *2 (S.D.N.Y. Jan. 19, 2022)
(“Disseminating such materially false information
 45a

into the market created a significant risk of

substantial loss to the investing public.”) (citing SEC
v. Universal Express, Inc., 646 F. Supp. 2d 552, 568
(S.D.N.Y. 2009) (explaining that a defendant’s mere
“dissemination of materially false information
create[d] a significant risk of substantial loss to the
investing public”)).
Other courts have refused to infer a “significant
risk of substantial losses” in the absence of proof that
such a risk existed. See SEC v. Madsen, No. 17-CV-
8300 (JMF), 2018 WL 5023945, at *4 (S.D.N.Y. Oct.
17, 2018) (“Although all Section 10(b) or Rule 10b-5
frauds could be said to create some ‘risk’ of some
‘harm’ to investors, the Remedies Act reserves third-
tier civil penalties for those frauds that create a
significant risk of substantial losses.”) (internal
citations omitted); SEC v. Eiten, No. No. 11-12185-
GAO, 2014 WL 4965102, at *2 (D. Mass. Sept. 30,
2014) (“The SEC argues that Eiten’s false reports
could have resulted in investor losses, but has not
demonstrated any amount of actual losses that were
substantial.”); SEC v. Todt, No. 98 Civ. 3980 (JGK),
2000 WL 223836, at *12 (S.D.N.Y. Feb. 25, 2000)
(refusing to impose a third-tier penalty without
evidence that any investors “ever seriously
entertained” transacting based on the fraud).
Based on the verdict and evidence, I find that at
least one of the statements, the Promacta remark in
the Benzinga interview, would have been extremely
important to a reasonable investor and created a
significant risk of substantial loss. A reasonable
investor hearing that a company’s key product is
“going away” would be influenced to sell. Lemelson
himself bragged that he was responsible for Ligand
 46a

losing $500 million in market capital. Further, Dr.

Smith’s analysis provides persuasive evidence that
investors traded in reliance on all three statements.
Dr. Smith found that the radio interview and the July
3 report are associated with abnormal declines in
Ligand’s stock price. While the amount of actual loss
attributable to the three false statements over the
entire period of time when Lemelson engaged in his
campaign against Ligand between June and October
is unclear, Lemelson’s violations created a significant
risk of substantial losses to investors. Therefore, a
Tier III penalty is appropriate.
A third-tier violation is capped at the greater of
“the gross amount of pecuniary gain to such
defendant as a result of the violation” or $160,000
when the statute is adjusted for inflation. See 15
U.S.C. § 77t(d)(2)(c); Inflation Adjustments to the
Civil Monetary Penalties Administered by the
Securities and Exchange Commission (as of January
15, 2022), SEC (Jan. 15, 2022),
https://www.sec.gov/enforce/civil-penalties-inflation-
adjustments.htm. The SEC proffers that $656,500 is
the appropriate penalty as it represents Lemelson’s
pecuniary gain over the entire short campaign. But
the statute requires that the pecuniary gain be a
result of the violation, and the SEC has not shown
that Lemelson’s entire gain is a reasonable
approximation for the amount of money he gained as
a result of his three false statements. Remember, the
jury found that Lemelson was not liable for a short-
and-distort scheme, so it is not correct that the entire
short campaign is a proxy for Lemelson’s violation.
The SEC ignores the other negative reports published
at the same time, the volatility of the stock before and
 47a

after the events, and their expert’s view on assessing

causal impact. Dr. Smith explains that “stocks react
to news very quickly, typically within five to fifteen
minutes of the announcement,” and “the impact of an
event on the stock price can be measured by the
change in the stock price immediately surrounding
the announcement.” Dkt. 266-1 at 11. Looking to the
expert’s intraday event study, the price of Ligand
stock fifteen minutes prior to the radio interview was
$66.59. Fifteen minutes after the interview, the price
dropped to $64.47. This drop of - 2.44% is the
“abnormal return” that the expert associates with the
statement, though the expert hedges that “[w]hile the
price reaction measured from the close on the
previous day to 15 minutes after the statement is
statistically significant at the 90% level, it is not
statistically significant when I use alternative
estimation windows (1 minute before to 15 minutes
after and 1 minute before to 5 minutes after).” Id. at
13 n.49. The SEC expert therefore cautions that “this
result should be considered as weak evidence of an
effect.” Id. Noticeably absent from the expert report is
an attempt to calculate the pecuniary gain connected
to each false statement.
The SEC has not demonstrated that Lemelson’s
misstatements were reflected in the price months
later, as opposed to “confounding news and trading
noise irrelevant to the event.” Id. at 11. Because the
SEC has proposed a penalty based on an overarching
scheme and has not reduced the penalty to reflect
factors outside of the statement, the Court adopts the
statutorily set penalty of $160,000.
 48a

III. Disgorgement
A. Parties’ Arguments
The SEC next requests disgorgement of
Defendants’ pecuniary gain from the short campaign,
$656,500. The SEC also asks that the disgorgement
be ordered to be joint and several, citing several
recent District of Massachusetts cases that have
ordered the entity and the entity’s sole owner jointly
and severally liable. See Esposito, 2018 WL 2012688,
at *9 (ordering managing director and entity jointly
and severally liable for total disgorgement and
prejudgment interest); SEC v. Locke Capital Mgmt.,
Inc., 794 F. Supp. 2d 355, 369 (D.R.I. 2011) (holding
entity and entity’s sole owner jointly and severally
liable for disgorgement); SEC v. Tropikgadget FZE,
146 F. Supp. 3d 270, 282 (D. Mass. 2015) (holding
defendants jointly and severally liable for
disgorgement amount with prejudgment interest).
Lemelson stresses that the Supreme Court’s
recent decision in Liu v. SEC, 140 S. Ct. 1936 (2020),
explains why disgorgement is inappropriate in this
case. Lemelson points out that the Liu Court held that
disgorgement can only be awarded if it benefits
victims. Lemelson notes that the Commission “makes
no attempt to identify any alleged victim or suggest a
process to identify such alleged victims.” Dkt. 260 at
14. Instead, in a footnote, the SEC said that the
Commission could establish a Fair Fund to determine
the feasibility of identifying victims.
B. Analysis
In Liu, the Supreme Court held that “a
disgorgement award that does not exceed a
 49a

wrongdoer’s net profits and is awarded for victims is

equitable relief permissible under § 78u(d)(5).” Liu,
140 S. Ct. at 1940. Liu first discusses longstanding
equitable principles, where equity courts “limited
awards to the net profits from wrongdoing.” Id. at
1945. While the Court “has carved out an exception
when the ‘entire profit of a business or undertaking’
results from the wrongful activity,’” aside from that
exception, “courts consistently restricted awards to
net profits from wrongdoing after deducting
legitimate expenses.” Id. at 1945–46 (quoting Root v.
Lake Shore & M.S. Ry. Co., 105 U.S. 189, 203 (1881)).
The Court also clarified the purpose of disgorgement.
Section 78u(d)(5) restricts equitable relief to “that
which ‘may be appropriate or necessary for the benefit
of investors.’” Id. at 1947 (quoting 15 U.S.C. §
78u(d)(5)). The Court rejected the Government’s
position that the “primary function of depriving
wrongdoers of profits is to deny them the fruits of
their ill-gotten gains, not to return the funds to
victims as a kind of restitution.” Id. at 1948. Rather,
“the SEC’s equitable, profits-based remedy must do
more than simply benefit the public at large by virtue
of depriving a wrongdoer of ill-gotten gains.” Id.
“The court’s power to order disgorgement extends
only to the amount with interest by which the
defendant profited from his wrongdoing.” SEC v.
MacDonald, 699 F.2d 47, 54 (1st. Cir. 1983) (en banc)
(quoting SEC v. Blatt, 583 F.2d 1325, 1335 (5th Cir.
1978)). In MacDonald, the First Circuit, sitting en
banc, was asked
whether, where [a defendant]
fraudulently purchased company shares
“while in possession of material non-
 50a

public information [he should be

required, in an action brought by the
Commission,] to disgorge the entire
profits he realized from his subsequent
sale of those securities about a year
later, rather than limiting disgorgement
to an amount representing the increased
value of the shares at a reasonable time
after public dissemination of the
information.”
699 F.2d at 52. The court focused on whether the later
profits were “causally related” to the wrongdoing. Id.
at 54. After the investing public learned of the
information and the market responded, any
“subsequent profits” were “purely new matter” and
not subject to disgorgement. Id. at 54–55. The court
explained that “[t]here should be a cut-off date” in
cases where “the sellers have an opportunity to take
remedial action.” Id. at 54.
“I]n order to establish a proper disgorgement
amount, ‘the party seeking disgorgement must
distinguish between the legally and illegally derived
profits.’ ” SEC v. Razmilovic, 738 F.3d 14, 31 (2d Cir.
2013) (quoting CFTC v. British Am. Commodity
Options Corp., 788 F.2d 92, 93 (2d Cir. 1986)). While
private enforcement suits are different from SEC
suits, that difference “does not entirely eliminate the
need for proof of a causal connection between the
securities violation and the disgorged funds.” SEC v.
Teo, 746 F.3d 90, 103 (3rd Cir. 2014). This Court “may
exercise its equitable power only over property that is
causally related to the wrongdoing.” SEC v. First City
Fin. Corp., 890 F.2d 1215, 1231 (D.C. Cir. 1989).
Though disgorgement “may well be a key to the SEC’s
 51a

efforts to deter others from violating the securities

laws, [it] may not be used punitively.” Id. The burden
initially rests with the SEC to “establish[ ] a
reasonable approximation of the profits causally
related to the fraud.” Razmilovic, 738 F.3d at 31.
In light of the volatility of the stock price, the
jury’s lack of a finding of scheme liability, and the
SEC’s lack of adequate discussion of victims, the
Court will not order disgorgement in this case. The
Supreme Court recently made clear that
disgorgement is a tool intended to benefit investors,
not to further punish the defendant. See Liu, 140 S.
Ct. at 1948. While the SEC seeks to argue that stock
volatility and confounding events are irrelevant, it is
difficult to see how Lemelson is responsible for the
entirety of the drop in Ligand’s stock price between
June and October 2014. Without scheme liability, it
seems that the defendant’s “wrongdoing” would be
more properly limited to profits that resulted from his
three specific false statements. Moreover, the
investing public had access to information about at
least two of the statements—that Viking was audited
and that it would have third parties conduct
preclinical trials—and therefore could take remedial
action. As discussed above, the SEC has not presented
a reasonable approximation of the pecuniary gain
from these three statements. Moreover, the SEC has
not provided any evidence that it could identify
victims and has left open whether it is feasible to
create a Fair Fund. See Dkt. 245 at 13 n.3 (“The
Commission desires to distribute collected civil
penalties, disgorgement, and prejudgment interest to
affected investors via a Fair Fund established
pursuant to Section 308(a) of the Sarbanes-Oxley Act,
 52a

if feasible. Once the Defendants pay the ordered

disgorgement and penalties, the Commission will
determine the feasibility of a distribution and petition
this Court to establish the Fair Fund.”). The Court
declines to impose disgorgement; therefore, there is
no need to discuss prejudgment interest.
ORDER
For the reasons stated above, the Court orders the
following final judgment:
Defendants are enjoined from violating Section
10(b) of the Exchange Act and Rule 10b-5 for a period
of five years, and Lemelson is ordered to pay a Tier III
civil penalty in the amount of $160,000 forthwith.
SO ORDERED.
/s/ PATTI B. SARIS
Hon. Patti B. Saris
United States District Judge
 53a

Appendix D

UNITED STATES DISTRICT COURT

DISTRICT OF MASSACHUSETTS

Securities and Exchange

Commission
______________________

Plaintiff

v. CIVIL ACTION
NO. 18-11926-PBS

Gregory Lemelson, et al
_______________________
Defendant(s)

JUDGMENT IN A CIVIL CASE

I. XX Jury Verdict. This action came before the
court for a trial by jury. The issues have been tried
and the jury has rendered its verdict.
IT IS ORDERED AND ADJUDGED:
Count 1: Fraud in the Purchase or Sale of Securities
in Violation of Section 10(b) of the Exchange Act and
Rule 10b-5 Thereunder
Judgment is hereby entered for the Plaintiff
Count 2: Fraudulent, Deceptive, or Manipulative Act
or Practice to Investors or Potential Investors in
Pooled Investment Vehicle in Violation of Section
206(4) of the Investment Advisers Act and Rule
 54a

206(4)-8 Thereunder
Judgment is hereby entered for the
Defendant

II. XX Decision by the Court after the jury

verdict
IT IS ORDERED AND ADJUDGED:
Defendants are enjoined from violating
Section 10(b) of the Exchange Act and Rule
10b-5 for a period of five years, and Lemelson
is ordered to pay a Tier III civil penalty in the
amount of $160,000 forthwith.

Robert M. Farrell Clerk of

Court
/s/ M. Malloy
Deputy Clerk
Dated:3/30/2022
 55a

Appendix E

UNITED STATES DISTRICT COURT

DISTRICT OF MASSACHUSETTS

SECURITIES AND )
EXCHANGE )
COMMISSION, )
)
Plaintiff, )
)
v. ) Civil Action
) No. 18-11926-PBS
)
GREGORY LEMELSON )
)
Defendant, )

VERDICT FORM
Saris, D.J.
1. Did the Securities and Exchange Commission
prove that Father Gregory Lemelson violated
Rule 10b-5 (a) and (c) by intentionally or
recklessly engaging in a scheme to defraud, or
any act, practice, or course of business which
operates or would operate as a fraud or deceit?
Yes ___ No X
2. Did the Securities and Exchange Commission
prove that defendant intentionally or
recklessly made untrue statements of a
material fact or omitted to state a material fact
necessary in order to make the statements
 56a

made, in light of the circumstances under

which they were made, not misleading with
respect to the following statements:
(a) The Benzinga Interview (Exhibit 3, page 16)
Yes X No ____
(b) The Viking audit statement (Exhibit 4, page
10)
Yes X No ____
(c) The Viking preclinical trial statement
(Exhibit 4, page 7).
Yes X No ____
(d) The insolvency statements (Exhibit 6, pages
1–2; Exhibit 7, pages 3–6).
Yes ___ No X
3. Did the Securities and Exchange Commission
prove that defendant intentionally or
recklessly violated the Advisors Act?
Yes ___ No X
4. Did the Securities and Exchange Commission
prove that defendant negligently violated the
Advisors Act?
Yes ___ No X
I certify that the answer to each of the questions is
unanimous.
Dated: 11/5/2021 Christopher Michelangelo
Foreperson
 No. _______
In The
Supreme Court of the United States
________________ 

REV. FATHER EMMANUEL LEMELSON

(F/K/A GREGORY LEMELSON) AND
LEMELSON CAPITAL MANAGEMENT, LLC,
Petitioners,
V.

SECURITIES AND EXCHANGE COMMISSION,

Respondent.

CERTIFICATE OF SERVICE

On this 31st day of July, 2023, a copy of the above referenced PETITION FOR
WRIT OF CERTIORARI was sent by U.S. mail and email to:

Elizabeth Prelogar
Solicitor General of the United States
Room 5616
Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
[email protected]
Counsel of Record for Respondent

Respectfully submitted,

/s/ Russell G. Ryan

Counsel of Record
John Vecchione
Kaitlyn Schiraldi
Markham S. Chenoweth
NEW CIVIL LIBERTIES ALLIANCE
1225 19th Street, NW
Suite 450
Washington, DC 20036
(202) 869-5210
[email protected]
 No. _______
In The
Supreme Court of the United States
________________ 

REV. FATHER EMMANUEL LEMELSON

(F/K/A GREGORY LEMELSON) AND
LEMELSON CAPITAL MANAGEMENT, LLC,
Petitioners,
V.

SECURITIES AND EXCHANGE COMMISSION,

Respondent.

CERTIFICATE OF WORD COUNT

I hereby certify on this 31st day of July, 2023, that the above referenced
PETITION FOR WRIT OF CERTIORARI contains 7,272 words.

Respectfully submitted,

/s/ Russell G. Ryan

Counsel of Record
John Vecchione
Kaitlyn Schiraldi
Markham S. Chenoweth
NEW CIVIL LIBERTIES ALLIANCE
1225 19th Street, NW
Suite 450
Washington, DC 20036
(202) 869-5210
[email protected]