The U.S. Supreme Court’s recent decision in Liu v. SEC, No. 18-1501 (June 22, 2020), limiting the SEC’s ability to obtain monetary equitable relief in securities fraud litigation, may seem an odd topic for this blog.  But Liu is worth some attention because it may foreshadow an impact on calculation and distribution of monetary awards in consumer fraud class actions.  The decision may influence the calculation of disgorgement or restitutionary remedies, and it may signal another hurdle for the controversial judge-made distribution mechanism, cy pres.

Liu v. SEC

In Liu, the SEC won summary judgment in an enforcement action for securities fraud, obtaining an award for “disgorgement” of the funds acquired by defendants from their fraudulent scheme.  The district court declined to deduct any of defendant’s business expenses to offset the “ill-gotten gains,” awarding all sums fraudulently raised from investors.  The Ninth Circuit affirmed, rejecting challenges to both the SEC’s authority to obtain disgorgement and its gross method of calculating the disgorgement award.

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