Friends of the Cuban

Some heavy hitters have come out on Marc Cuban's side, filing an amicus brief on his behalf arguing that he broke no laws when he sold stock in Mamma.com based allegedly on information he received from the CEO of the company (via WSJ's law blog):

In a brief filed Monday, law professors from Harvard University, Yale University, the University of Chicago, the University of California at Los Angeles and Southern Methodist University argue that the U.S. Securities and Exchange Commission made a legalistic land grab when it sued Cuban for insider trading involving a Canadian company, Mamma.com.

[...]

In its lawsuit last year, the SEC said Cuban sold his stake in Mamma.com in June 2004 after learning the company planned to sell additional shares through a private offering. The SEC alleges he violated an oral agreement to keep the sensitive information confidential, thereby committing insider trading.

Cuban's lawyers have not conceded that he made such an agreement.

But if he did, they argue, he isn't liable for insider trading because he had no fiduciary duty to keep the information confidential. Cuban was a large shareholder in Mamma.com but not a company executive or board member.

"In the context of a business relationship, a confidentiality agreement alone is insufficient to create a fiduciary or similar relationship of trust and confidence between the parties," the five professors wrote in their brief, echoing earlier filings by Cuban's team.