James O’Hagan (defendant) was a partner in the law firm that represented Grand Metropolitan PLC in its tender offer of Pillsbury Company (Pillsbury) common stock. The possibility of the tender offer was confidential and not public until the offer was formally made by Grand Met. However, during the time when the potential tender offer was still confidential and nonpublic, O’Hagan used the inside information he received through his firm to purchase call options and general stock in Pillsbury. Subsequently, after the information of the tender offer became public, Pillsbury stock skyrocketed and O’Hagan sold his shares, making a profit of over $4 million. The Securities and Exchange Commission (SEC) initiated an investigation into O’Hagan’s transactions and brought charges against O’Hagan for violating § 10(b) and § 14(e) of the Securities Exchange Act. The trial jury convicted O’Hagan, but the United States Court of Appeals for the Eighth Circuit reversed on the grounds that violation of SEC Rule 10b-5 cannot be grounded in the misappropriation theory of insider trading. The United States Supreme Court granted certiorari.