United States Court of Appeals for the Second Circuit
574 F.3d 42 (2d. Cir. 2009)
Oleksandr Dorozhko (defendant) had an online-trading account with Interactive Brokers LLC (Interactive). IMS Health, Inc. (IMS) announced that it would release its quarterly earnings during an analyst conference call. Thomson Financial, Inc. (Thomson) managed the online release of IMS’s earnings reports. Hours before the report’s official release, a computer hacker hacked into Thomson’s secure server and downloaded the IMS data from the server. Shortly after the hacking, Dorozhko, who had never used his Interactive account before, bought a significant amount of IMS put options. In buying these options, Dorozhko was betting that IMS’s stock price would decline within a two-day period by greater than 20 percent. Later that day, IMS announced that its earnings were 28 percent below Wall Street expectations. The next day, IMS’s stock price dropped 28 percent. Dorozhko sold his options and realized a huge profit overnight. Interactive noticed the irregular trading activity and reported it to the Securities and Exchange Commission (SEC) (plaintiff). The SEC alleged that Dorozhko was the hacker and brought a fraud claim under § 10(b) of the Securities Exchange Act of 1934 (the Act). The SEC argued that, when hacking, Dorozhko affirmatively misrepresented himself to gain access to material, nonpublic information and traded securities based on that information. The district court held a preliminary hearing and denied the SEC’s request for a preliminary injunction. Specifically, the district court held that computer hacking was not deceptive conduct under § 10(b). The district court reasoned that a breach of a fiduciary duty of disclosure was required for any deceptive conduct under § 10(b). Because Dorozhko owed no fiduciary duty to IMS or Thomson, because he was an outsider and had no relationship to either company, Dorozhko’s behavior did not violate § 10(b).
Rule of Law
Holding and Reasoning (Cabranes, J.)
What to do next…
Unlock this case brief with a free (no-commitment) trial membership of Quimbee.
You’ll be in good company: Quimbee is one of the most widely used and trusted sites for law students, serving more than 97,000 law students since 2011. Some law schools—such as Yale, Vanderbilt, Berkeley, and the University of Illinois—even subscribe directly to Quimbee for all their law students. Read our student testimonials.
Learn more about Quimbee’s unique (and proven) approach to achieving great grades at law school.
Quimbee is a company hell-bent on one thing: helping you get an “A” in every course you take in law school, so you can graduate at the top of your class and get a high-paying law job. We’re not just a study aid for law students; we’re the study aid for law students. Read more about Quimbee.
Here's why 222,000 law students have relied on our case briefs:
- Written by law professors and practitioners, not other law students. 14,100 briefs, keyed to 189 casebooks. Top-notch customer support.
- The right amount of information, includes the facts, issues, rule of law, holding and reasoning, and any concurrences and dissents.
- Access in your classes, works on your mobile and tablet. Massive library of related video lessons and high quality multiple-choice questions.
- Easy to use, uniform format for every case brief. Written in plain English, not in legalese. Our briefs summarize and simplify; they don’t just repeat the court’s language.