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Securities and Exchange Commission v. Rocklage

United States Court of Appeals for the First Circuit
470 F.3d 1 (2006)


Facts

Scott Rocklage (Mr. Rocklage) was the Chairman and CEO of Cubist Pharmaceuticals, Inc. (Cubist). Mr. Rocklage often shared non-public information about Cubist with his wife (Mrs. Rocklage) (defendant). Mr. Rocklage always told Mrs. Rocklage that the information was to be kept confidential, and Mrs. Rocklage agreed to keep it to herself. Mrs. Rocklage in fact had an arrangement with her brother, Beaver, under which Mrs. Rocklage would inform Beaver of any material, non-public information she learned about Cubist. Beaver owned stock in Cubist. One day Mr. Rocklage told Mrs. Rocklage that a Cubist drug had failed a clinical trial. Mrs. Rocklage told Mr. Rocklage that she was going to tell Beaver. Mr. Rocklage asked her not to, but Mrs. Rocklage made the disclosure anyway. Upon receiving the information, Beaver sold all his Cubist stock. The Securities and Exchange Commission (SEC) (plaintiff) brought a securities fraud claim against Mrs. Rocklage. Mrs. Rocklage filed a motion to dismiss based on a failure to state a claim. 

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Holding and Reasoning (Lynch, J.)

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