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Lemelson v. SEC

May the SEC punish commentary about publicly traded corporations that contains a few purported misstatements or omissions when a jury has cleared the accused of all fraud and deception charges? Surprisingly perhaps, the Supreme Court has never answered this question. So, for now, the SEC punishes such speech freely.

Rev. Fr. Emmanuel Lemelson, a Greek Orthodox priest and activist investor, issued five lengthy reports and several online interviews about Ligand Pharmaceuticals in 2014. Under pressure from Ligand, SEC investigated Fr. Lemelson for years and eventually charged him with fraud in 2018. Although a jury rejected all fraud allegations, it did find that one sentence and one sentence fragment (about a company he didn’t trade in) embedded in some 56 pages of written reports, and one two-second online interview comment, were misleading. The U.S. District Court for the District of Massachusetts then held Fr. Lemelson liable for violating the Securities Exchange Act of 1934 and SEC Rule 10b-5. It fined him $160,000 and barred him from making similar statements for five years.

The U.S. Court of Appeals for the First Circuit declined to overturn that ruling, claiming Fr. Lemelson’s three isolated statements were assertions of fact, not opinion, and thus unprotected by the First Amendment. That decision contradicts well-established Supreme Court precedent demanding “clear and convincing evidence” proving intentional deception before speech loses First Amendment protection. The jury specifically found Fr. Lemelson did not “intentionally or recklessly engage in a scheme to defraud, or any act, practice, or course of business which operates or would operate as a fraud or deceit.” The jury also determined he did not defraud his own investors, even under a lower negligence standard, and it did not find his harshest statements about the company’s insolvency untrue.

In December 2023, the Supreme Court rejected NCLA’s petition for a writ of certiorari in this case.

Rev. Father Emmanuel Lemelson, Petitioner in Lemelson, et al. v. SEC

Mark Chenoweth
President and Chief Legal Officer
John J. Vecchione
Senior Litigation Counsel
Russ Ryan
Senior Litigation Counsel
Kaitlyn Schiraldi
Staff Attorney

Petitioners’ Reply Brief in Support of Petition for a Writ of Certiorari

November 17, 2023 | Read More

Petition for a Writ of Certiorari

July 31, 2023 | Read More


NCLA Asks Supreme Court to Hear Securities Law Appeal with Major First Amendment Implications

August 1, 2023 | Read More



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