Syllabus

NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
being done in connection with this case, at the time the opinion is issued.
The syllabus constitutes no part of the opinion of the Court but has been
prepared by the Reporter of Decisions for the convenience of the reader.
See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.

SUPREME COURT OF THE UNITED STATES

Syllabus

LIU ET AL. v. SECURITIES AND EXCHANGE
COMMISSION

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE NINTH CIRCUIT

No. 18–1501. Argued March 3, 2020—Decided June 22, 2020

To punish securities fraud, the Securities and Exchange Commission is
authorized to seek “equitable relief” in civil proceedings, 15 U. S. C.
§78u(d)(5). In Kokesh v. SEC, 581 U. S. ___, this Court held that a
disgorgement order in a Securities and Exchange Commission (SEC)
enforcement action constitutes a “penalty” for purposes of the applicable
statute of limitations. The Court did not, however, address
whether disgorgement can qualify as “equitable relief” under
§78u(d)(5), given that equity historically excludes punitive sanctions.
Petitioners Charles Liu and Xin Wang solicited foreign nationals toinvest in the construction of a cancer-treatment center, but, an SEC
investigation revealed, misappropriated much of the funds in violation
of the terms of a private offering memorandum. The SEC brought a
civil action against petitioners, seeking, as relevant here, disgorgement
equal to the full amount petitioners had raised from investors.
Petitioners argued that the disgorgement remedy failed to account for
their legitimate business expenses, but the District Court disagreedand ordered petitioners jointly and severally liable for the full amount.
The Ninth Circuit affirmed.

Held: A disgorgement award that does not exceed a wrongdoer’s net profits
and is awarded for victims is equitable relief permissible under
§78u(d)(5). Pp. 5–20.

(a) In interpreting statutes that provide for “equitable relief,” thisCourt analyzes whether a particular remedy falls into “those categories
of relief that were typically available in equity.” Mertens v. Hewitt
Associates, 508 U. S. 248, 256. Relevant here are two principles of equity
jurisprudence. Equity practice has long authorized courts to strip
wrongdoers of their ill-gotten gains. And to avoid transforming that


Syllabus

remedy into a punitive sanction, courts restricted it to an individual
wrongdoer’s net profits to be awarded for victims. Pp. 5–14.

(1) Whether it is called restitution, an accounting, or disgorgement,
the equitable remedy that deprives wrongdoers of their net profits
from unlawful activity reflects both the foundational principle that
“it would be inequitable that [a wrongdoer] should make a profit out ofhis own wrong,” Root v. Railway Co., 105 U. S. 189, 207, and the countervailing
equitable principle that the wrongdoer should not be punished
by “pay[ing] more than a fair compensation to the person
wronged,” Tilghman v. Proctor, 125 U. S. 136, 145–146. The remedyhas been a mainstay of equity courts, and is not limited to cases involving
a breach of trust or fiduciary duty, see Root, 105 U. S., at 214.
Pp. 6–9.
(2) To avoid transforming a profits award into a penalty, equity
courts restricted the remedy in various ways. A constructive trust was
often imposed on wrongful gains for wronged victims. See, e.g., Bur-
dell v. Denig, 92 U. S. 716, 720. Courts also generally awarded profits-
based remedies against individuals or partners engaged in concerted
wrongdoing, not against multiple wrongdoers under a joint-and-several
liability theory. See, e.g., Ambler v. Whipple, 20 Wall. 546, 559.
Finally, courts limited awards to the net profits from wrongdoing after
deducting legitimate expenses. See, e.g., Rubber Co. v. Goodyear, 9
Wall. 788, 804. Pp. 9–12.
(3) Congress incorporated these longstanding equitable principles
into §78u(d)(5), but courts have occasionally awarded disgorgement in
ways that test the bounds of equity practice. Petitioners claim that
disgorgement is necessarily a penalty under Kokesh, and thus not
available at equity. But Kokesh expressly declined to reach that question.
The Government contends that the SEC’s interpretation has
Congress’ tacit support. But Congress does not enlarge the breadth of
an equitable, profit-based remedy simply by using the term “disgorgement”
in various statutes. Pp. 12–14.
(b) Petitioners briefly claim that their disgorgement award crosses
the bounds of traditional equity practice by failing to return funds tovictims, imposing joint-and-several liability, and declining to deduct
business expenses from the award. Because the parties did not fully
brief these narrower questions, the Court does not decide them here.
But certain principles may guide the lower courts’ assessment of these
arguments on remand. Pp. 14–20.
(1) Section 78u(d)(5) provides limited guidance as to whether the
practice of depositing a defendant’s gains with the Treasury satisfiesits command that any remedy be “appropriate or necessary for the benefit
of investors,” and the equitable nature of the profits remedy gen



Syllabus

erally requires the SEC to return a defendant’s gains to wronged investors.
The parties, however, do not identify a specific order in thiscase directing any proceeds to the Treasury. If one is entered on remand,
the lower courts may evaluate in the first instance whether thatorder would be for the benefit of investors and consistent with equitable
principles. Pp. 14–17.

(2) Imposing disgorgement liability on a wrongdoer for benefits
that accrue to his affiliates through joint-and-several liability runs
against the rule in favor of holding defendants individually liable. See
Belknap v. Schild, 161 U. S. 10, 25–26. The common law did, however,
permit liability for partners engaged in concerted wrongdoing. See,
e.g., Ambler, 20 Wall., at 559. On remand, the Ninth Circuit may determine
whether the facts are such that petitioners can, consistentwith equitable principles, be found liable for profits as partners in
wrongdoing or whether individual liability is required. Pp. 17–18.
(3) Courts may not enter disgorgement awards that exceed the
gains “made upon any business or investment, when both the receiptsand payments are taken into the account.” Goodyear, 9 Wall., at 804.
When the “entire profit of a business or undertaking” results from the
wrongdoing, a defendant may be denied “inequitable deductions.”
Root, 105 U. S., at 203. Accordingly, courts must deduct legitimate
expenses before awarding disgorgement under §78u(d)(5). The District
Court below did not ascertain whether any of petitioners’ expenses
were legitimate. On remand, the lower courts should examine
whether including such expenses in a profits-based remedy is consistent
with the equitable principles underlying §78u(d)(5). Pp. 18–20.


754 Fed. Appx. 505, vacated and remanded.

SOTOMAYOR, J., delivered the opinion of the Court, in which ROBERTS,

C. J., and GINSBURG, BREYER, ALITO, KAGAN, GORSUCH, and KAVANAUGH,
JJ., joined. THOMAS, J., filed a dissenting opinion.


Opinion of the Court

NOTICE: This opinion is subject to formal revision before publication in the
preliminary print of the United States Reports. Readers are requested to
notify the Reporter of Decisions, Supreme Court of the United States, Washington,
D. C. 20543, of any typographical or other formal errors, in order that
corrections may be made before the preliminary print goes to press.

SUPREME COURT OF THE UNITED STATES

No. 18–1501

CHARLES C. LIU, ET AL., PETITIONERS v.
SECURITIES AND EXCHANGE COMMISSION

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE NINTH CIRCUIT

[June 22, 2020]

JUSTICE SOTOMAYOR delivered the opinion of the Court.

In Kokesh v. SEC, 581 U. S. ___ (2017), this Court held
that a disgorgement order in a Securities and ExchangeCommission (SEC) enforcement action imposes a “penalty”
for the purposes of 28 U. S. C. §2462, the applicable statute
of limitations. In so deciding, the Court reserved an antecedent
question: whether, and to what extent, the SEC may
seek “disgorgement” in the first instance through its powerto award “equitable relief ” under 15 U. S. C. §78u(d)(5), apower that historically excludes punitive sanctions. The
Court holds today that a disgorgement award that does not
exceed a wrongdoer’s net profits and is awarded for victimsis equitable relief permissible under §78u(d)(5). The judgment
is vacated, and the case is remanded for the courts
below to ensure the award was so limited.

I
A

Congress authorized the SEC to enforce the Securities
Act of 1933, 48 Stat. 74, as amended, 15 U. S. C. §77a et
seq., and the Securities Exchange Act of 1934, 48 Stat. 881,


Opinion of the Court

as amended, 15 U. S. C. §78a et seq., and to punish securities
fraud through administrative and civil proceedings. In
administrative proceedings, the SEC can seek limited civilpenalties and “disgorgement.” See §77h–1(e) (“In any
cease-and-desist proceeding under subsection (a), the Commission
may enter an order requiring accounting and disgorgement”);
see also §77h–1(g) (“Authority to imposemoney penalties”). In civil actions, the SEC can seek civil
penalties and “equitable relief.” See, e.g., §78u(d)(5) (“Inany action or proceeding brought or instituted by the Commission
under any provision of the securities laws, . . . any
Federal court may grant . . . any equitable relief that maybe appropriate or necessary for the benefit of investors”);
see also §78u(d)(3) (“Money penalties in civil actions” (quotation
modified)).

Congress did not define what falls under the umbrella of
“equitable relief.” Thus, courts have had to consider which
remedies the SEC may impose as part of its §78u(d)(5) powers.


Starting with SEC v. Texas Gulf Sulphur Co., 446 F. 2d
1301 (CA2 1971), courts determined that the SEC had authority
to obtain what it called “restitution,” and what in
substance amounted to “profits” that “merely depriv[e]” adefendant of “the gains of . . . wrongful conduct.” Id., at
1307–1308. Over the years, the SEC has continued to request
this remedy, later referred to as “disgorgement,”1 and

——————

1 Courts have noted the relatively recent vintage of the term “disgorgement.”
See, e.g., SEC v. Cavanaugh, 445 F. 3d 105, 116, n. 24 (CA2
2006). The dissent contends that this recency in terminology alone removes
disgorgement from the class of traditional equitable remedies,
post, at 4 (opinion of THOMAS, J.), despite seeming to recognize disgorgement’s
parallels to restitution-based awards well within that class, post,
at 4–5. It is no surprise that the dissent notes such parallels, given this
Court’s acknowledgment that “disgorgement of improper profits” is “a
remedy only for restitution” that is “traditionally considered . . . equitable.”
Tull v. United States, 481 U. S. 412, 424 (1987); see also infra, at 7.


Opinion of the Court

courts have continued to award it. See SEC v. Commonwealth
Chemical Securities, Inc., 574 F. 2d 90, 95 (CA21978) (explaining that, when a court awards “[d]isgorgement
of profits in an action brought by the SEC,” it is “exercising
the chancellor’s discretion to prevent unjust enrichment”);
see also SEC v. Blatt, 583 F. 2d 1325, 1335 (CA5
1978); SEC v. Washington Cty. Util. Dist., 676 F. 2d 218,
227 (CA6 1982).

In Kokesh, this Court determined that disgorgement constituted
a “penalty” for the purposes of 28 U. S. C. §2462,
which establishes a 5-year statute of limitations for “an action,
suit or proceeding for the enforcement of any civil fine,
penalty, or forfeiture.” The Court reached this conclusion
based on several considerations, namely, that disgorgement
is imposed as a consequence of violating public laws, it is
assessed in part for punitive purposes, and in many cases,
the award is not compensatory. 581 U. S., at ___–___ (slip
op., at 7–9). But the Court did not address whether a §2462
penalty can nevertheless qualify as “equitable relief ” under
§78u(d)(5), given that equity never “lends its aid to enforce
a forfeiture or penalty.” Marshall v. Vicksburg, 15 Wall.
146, 149 (1873). The Court cautioned, moreover, that its
decision should not be interpreted “as an opinion on
whether courts possess authority to order disgorgement inSEC enforcement proceedings.” Kokesh, 581 U. S., at ___,

n. 3 (slip op., at 5, n. 3). This question is now squarely before
the Court.

——————
The dissent also observes the solid equitable roots of an accounting for
profits, post, at 3; accord, infra, at 6 (discussing the equitable origins of
the accounting remedy), a remedy closely resembling disgorgement, see
infra, at 8–9. In any event, casting aside a form of relief solely “based on
the particular label affixed to [it] would ‘elevate form over substance,’ ”
Aetna Health Inc. v. Davila, 542 U. S. 200, 214 (2004), leaving unresolved
the question before us: whether the underlying profits-based award conforms
to equity practice.


LIU v. SEC
Opinion of the Court
B

The SEC action and disgorgement award at issue here
arise from a scheme to defraud foreign nationals. Petition-
ers Charles Liu and his wife, Xin (Lisa) Wang, solicited
nearly $27 million from foreign investors under the EB–5
Immigrant Investor Program (EB–5 Program). 754 Fed.
Appx. 505, 506 (CA9 2018) (case below). The EB–5 Pro-
gram, administered by the U. S. Citizenship and Immigra-
tion Services, permits noncitizens to apply for permanentresidence in the United States by investing in approvedcommercial enterprises that are based on “proposals for
promoting economic growth.” See USCIS, EB–5 Immigrant
Investor Program, https://www.uscis.gov/eb-5. Invest-
ments in EB–5 projects are subject to the federal securities
laws.

Liu sent a private offering memorandum to prospectiveinvestors, pledging that the bulk of any contributions would
go toward the construction costs of a cancer-treatment cen-
ter. The memorandum specified that only amounts col-
lected from a small administrative fee would fund “‘legal,
accounting and administration expenses.’” 754 Fed. Appx.,
at 507. An SEC investigation revealed, however, that Liuspent nearly $20 million of investor money on ostensible
marketing expenses and salaries, an amount far more thanwhat the offering memorandum permitted and far in excessof the administrative fees collected. 262 F. Supp. 3d 957,
960–964 (CD Cal. 2017). The investigation also revealed
that Liu diverted a sizable portion of those funds to per-
sonal accounts and to a company under Wang’s control. Id.,
at 961, 964. Only a fraction of the funds were put toward a
lease, property improvements, and a proton-therapy ma-
chine for cancer treatment. Id., at 964–965.

The SEC brought a civil action against petitioners, alleg-
ing that they violated the terms of the offering documents
by misappropriating millions of dollars. The District Court


Opinion of the Court

found for the SEC, granting an injunction barring petitioners
from participating in the EB–5 Program and imposinga civil penalty at the highest tier authorized. Id., at 975,

976. It also ordered disgorgement equal to the full amount
petitioners had raised from investors, less the $234,899that remained in the corporate accounts for the project. Id.,
at 975–976.

Petitioners objected that the disgorgement award failedto account for their business expenses. The District Court
disagreed, concluding that the sum was a “reasonable approximation
of the profits causally connected to [their] violation.”
Ibid. The court ordered petitioners jointly and severally
liable for the full amount that the SEC sought. App.
to Pet. for Cert. 62a.

The Ninth Circuit affirmed. It acknowledged that Kokesh
“expressly refused to reach” the issue whether the DistrictCourt had the authority to order disgorgement. 754 Fed.
Appx., at 509. The court relied on Circuit precedent to conclude
that the “proper amount of disgorgement in a schemesuch as this one is the entire amount raised less the money
paid back to the investors.” Ibid.; see also SEC v. JT Wallenbrock
& Assocs., 440 F. 3d 1109, 1113, 1114 (CA9 2006)
(reasoning that it would be “unjust to permit the defendants
to offset . . . the expenses of running the very business they
created to defraud . . . investors”).

We granted certiorari to determine whether §78u(d)(5)
authorizes the SEC to seek disgorgement beyond a defendant’s
net profits from wrongdoing. 589 U. S. ___ (2019).

II
Our task is a familiar one. In interpreting statutes like
§78u(d)(5) that provide for “equitable relief,” this Court analyzes
whether a particular remedy falls into “those categories
of relief that were typically available in equity.”
Mertens v. Hewitt Associates, 508 U. S. 248, 256 (1993); see
also CIGNA Corp. v. Amara, 563 U. S. 421, 439 (2011);


Opinion of the Court

Montanile v. Board of Trustees of Nat. Elevator Industry
Health Benefit Plan, 577 U. S. 136, 142 (2016). The “basic
contours of the term are well known” and can be discerned
by consulting works on equity jurisprudence. Great-West
Life & Annuity Ins. Co. v. Knudson, 534 U. S. 204, 217
(2002).

These works on equity jurisprudence reveal two principles.
First, equity practice long authorized courts to strip
wrongdoers of their ill-gotten gains, with scholars and
courts using various labels for the remedy. Second, to avoid
transforming an equitable remedy into a punitive sanction,
courts restricted the remedy to an individual wrongdoer’snet profits to be awarded for victims.

A
Equity courts have routinely deprived wrongdoers of
their net profits from unlawful activity, even though thatremedy may have gone by different names. Compare, e.g.,
1 D. Dobbs, Law of Remedies §4.3(5), p. 611 (1993) (“Accounting
holds the defendant liable for his profits”), with
id., §4.1(1), at 555 (referring to “restitution” as the reliefthat “measures the remedy by the defendant’s gain and
seeks to force disgorgement of that gain”); see also Restatement
(Third) of Restitution and Unjust Enrichment §51,
Comment a, p. 204 (2010) (Restatement (Third)) (“Restitution
measured by the defendant’s wrongful gain is frequently
called ‘disgorgement.’ Other cases refer to an ‘accounting’
or an ‘accounting for profits’”); 1 J. Pomeroy,
Equity Jurisprudence §101, p. 112 (4th ed. 1918) (describing
an accounting as an equitable remedy for the violation
of strictly legal primary rights).
No matter the label, this “profit-based measure of unjust
enrichment,” Restatement (Third) §51, Comment a, at 204,
reflected a foundational principle: “[I]t would be inequitable
that [a wrongdoer] should make a profit out of his own
wrong,” Root v. Railway Co., 105 U. S. 189, 207 (1882). At


Opinion of the Court

the same time courts recognized that the wrongdoer shouldnot profit “by his own wrong,” they also recognized the countervailing
equitable principle that the wrongdoer shouldnot be punished by “pay[ing] more than a fair compensationto the person wronged.” Tilghman v. Proctor, 125 U. S. 136,
145–146 (1888).

Decisions from this Court confirm that a remedy tetheredto a wrongdoer’s net unlawful profits, whatever the name,
has been a mainstay of equity courts. In Porter v. Warner
Holding Co., 328 U. S. 395 (1946), the Court interpreted a
section of the Emergency Price Control Act of 1942 that encompassed
a “comprehensiv[e]” grant of “equitable jurisdiction.”
Id., at 398. “[O]nce [a District Court’s] equity jurisdiction
has been invoked” under that provision, the Court
concluded, “a decree compelling one to disgorge profits . . .
may properly be entered.” Id., at 398–399.

Subsequent cases confirm the “‘protean character’ of the
profits-recovery remedy.” Petrella v. Metro-Goldwyn-
Mayer, Inc., 572 U. S. 663, 668, n. 1 (2014). In Tull v.
United States, 481 U. S. 412 (1987), the Court described
“disgorgement of improper profits” as “traditionally considered
an equitable remedy.” Id., at 424. While the Court
acknowledged that disgorgement was a “limited form of
penalty” insofar as it takes money out of the wrongdoer’shands, it nevertheless compared disgorgement to restitution
that simply “‘restor[es] the status quo,’” thus situating
the remedy squarely within the heartland of equity. Ibid.2

——————

2 The dissent acknowledges that this Court has “referred to disgorgement
as an equitable remedy in some of its prior decisions.” Post, at 6
(citing Feltner v. Columbia Pictures Television, Inc., 523 U. S. 340, 352
(1998)). While the dissent attempts to discount those cases for having
“merely referred to the term” only “in passing,” post, at 6, those cases
expressly “characterized as equitable . . . actions for disgorgement of improper
profits” in analyzing whether certain remedies were traditionallyavailable in equity, Feltner, 523 U. S., at 352 (citing Teamsters v. Terry,
494 U. S. 558, 570 (1990) (“characteriz[ing] damages as equitable wherethey are restitutionary, such as in ‘action[s] for disgorgement of improper


Opinion of the Court

In Great-West, the Court noted that an “accounting for profits”
was historically a “form of equitable restitution.” 534

U. S., at 214, n. 2. And in Kansas v. Nebraska, 574 U. S.
445 (2015), a “‘basically equitable’” original jurisdictionproceeding, the Court ordered disgorgement of Nebraska’sgains from exceeding its allocation under an interstate water
compact. Id., at 453, 475.

Most recently, in SCA Hygiene Products Aktiebolag v.
First Quality Baby Products, LLC, 580 U. S. ___ (2017), theCourt canvassed pre-1938 patent cases invoking equity jurisdiction.
It noted that many cases sought an “accounting,”
which it described as an equitable remedy requiring disgorgement
of ill-gotten profits. Id., at ___ (slip op., at 11).
This Court’s “transsubstantive guidance on broad and fundamental”
equitable principles, Romag Fasteners, Inc. v.
Fossil Group, Inc., 590 U. S. ___, ___ (2020) (slip op., at 5),
thus reflects the teachings of equity treatises that identify
a defendant’s net profits as a remedy for wrongdoing.

Contrary to petitioners’ argument, equity courts did not
limit this remedy to cases involving a breach of trust or offiduciary duty. Brief for Petitioners 28–29. As petitionersacknowledge, courts authorized profits-based relief in patent-
infringement actions where no such trust or special relationship
existed. Id., at 29; see also Root, 105 U. S., at
214 (“[I]t is nowhere said that the patentee’s right to an account
is based upon the idea that there is a fiduciary relation
created between him and the wrong-doer by the fact of
infringement”).

Petitioners attempt to distinguish these patent cases bysuggesting that an “accounting” was appropriate only because
Congress explicitly conferred that remedy by statute
in 1870. Brief for Petitioners 29 (citing the Act of July 8,
1870, §55, 16 Stat. 206). But patent law had not previously
deviated from the general principles outlined above: This

——————
profits’ ”); Tull, 481 U. S., at 424).


Court had developed the rule that a plaintiff may “recover
the amount of . . . profits that the defendants have made by
the use of his invention” through “a series of decisions under
the patent act of 1836, which simply conferred upon the
courts of the United States general equity jurisdiction . . .
in cases arising under the patent laws.” Tilghman, 125

U. S., at 144. The 1836 statute, in turn, incorporated the
substance of an earlier statute from 1819 which grantedcourts the ability to “proceed according to the course and
principles of courts of equity” to “prevent the violation of
patent-rights.” Root, 105 U. S., at 193. Thus, as these cases
demonstrate, equity courts habitually awarded profits-
based remedies in patent cases well before Congress explicitly
authorized that form of relief.

B
While equity courts did not limit profits remedies to particular
types of cases, they did circumscribe the award inmultiple ways to avoid transforming it into a penalty outside
their equitable powers. See Marshall, 15 Wall., at 149.
For one, the profits remedy often imposed a constructivetrust on wrongful gains for wronged victims. The remedyitself thus converted the wrongdoer, who in many cases was
an infringer, “into a trustee, as to those profits, for theowner of the patent which he infringes.” Burdell v. Denig,
92 U. S. 716, 720 (1876). In “converting the infringer into atrustee for the patentee as regards the profits thus made,”
the chancellor “estimat[es] the compensation due from theinfringer to the patentee.” Packet Co. v. Sickles, 19 Wall.
611, 617–618 (1874); see also Clews v. Jamieson, 182 U. S.
461, 480 (1901) (describing an accounting as involving a“‘distribution of the trust moneys among all the beneficiaries
who are entitled to share therein’” in an action against
the governing committee of a stock exchange).
Equity courts also generally awarded profits-based remedies
against individuals or partners engaged in concerted


Opinion of the Court

wrongdoing, not against multiple wrongdoers under a jointand-
several liability theory. See Ambler v. Whipple, 20
Wall. 546, 559 (1874) (ordering an accounting against apartner who had “knowingly connected himself with and
aided in . . . fraud”). In Elizabeth v. Pavement Co., 97 U. S.
126 (1878), for example, a city engaged contractors to install
pavement in a manner that infringed a third party’s
patent. The patent holder brought a suit in equity to recover
profits from both the city and its contractors. The
Court held that only the contractors (the only parties to
make a profit) were responsible, even though the parties
answered jointly. Id., at 140; see also ibid. (rejecting liability
for an individual officer who merely acted as an agent of
the defendant and received a salary for his work). The rule
against joint-and-several liability for profits that have accrued
to another appears throughout equity cases awardingprofits. See, e.g., Belknap v. Schild, 161 U. S. 10, 25–26
(1896) (“The defendants, in any such suit, are therefore liable
to account for such profits only as have accrued to themselves
from the use of the invention, and not for those which
have accrued to another, and in which they have no participation”);
Keystone Mfg. Co. v. Adams, 151 U. S. 139, 148
(1894) (reversing profits award that was based not on whatdefendant had made from infringement but on what third
persons had made from the use of the invention); Jennings

v. Carson, 4 Cranch 2, 21 (1807) (holding that an order requiring
restitution could not apply to “those who were not
in possession of the thing to be restored” and “had no power
over it”) (citing Penhallow v. Doane’s Administrators, 3
Dall. 54 (1795) (reversing a restitution award in admiralty
that ordered joint damages in excess of what each defendant
received)).

Finally, courts limited awards to the net profits fromwrongdoing, that is, “the gain made upon any business or
investment, when both the receipts and payments aretaken into the account.” Rubber Co. v. Goodyear, 9 Wall.


Opinion of the Court

788, 804 (1870); see also Livingston v. Woodworth, 15 How.
546, 559–560 (1854) (restricting an accounting remedy “tothe actual gains and profits . . . during the time” the infringing
machine “was in operation and during no other period”
to avoid “convert[ing] a court of equity into an instrument
for the punishment of simple torts”); Seymour v. McCormick,
16 How. 480, 490 (1854) (rejecting a blanket rule thatinfringing one component of a machine warranted a remedymeasured by the full amounts of the profits earned from the
machine); Mowry v. Whitney, 14 Wall. 620, 649 (1872) (vacating
an accounting that exceeded the profits from infringement
alone); Wooden-Ware Co. v. United States, 106

U. S. 432, 434–435 (1882) (explaining that an innocent trespasser
is entitled to deduct labor costs from the gains obtained
by wrongfully harvesting lumber).

The Court has carved out an exception when the “entireprofit of a business or undertaking” results from the wrongful
activity. Root, 105 U. S., at 203. In such cases, the
Court has explained, the defendant “will not be allowed todiminish the show of profits by putting in unconscionable
claims for personal services or other inequitable deductions.”
Ibid. In Goodyear, for example, the Court affirmedan accounting order that refused to deduct expenses under
this rule. The Court there found that materials for which
expenses were claimed were bought for the purposes of the
infringement and “extraordinary salaries” appeared merely
to be “dividends of profit under another name.” 9 Wall., at
803; see also Callaghan v. Myers, 128 U. S. 617, 663–664
(1888) (declining to deduct a defendant’s personal and living
expenses from his profits from copyright violations, butdistinguishing the expenses from salaries of officers in a
corporation).

Setting aside that circumstance, however, courts consistently
restricted awards to net profits from wrongdoing afterdeducting legitimate expenses. Such remedies, when assessed
against only culpable actors and for victims, fall


Opinion of the Court

comfortably within “those categories of relief that were typically
available in equity.” Mertens, 508 U. S., at 256.

C
By incorporating these longstanding equitable principlesinto §78u(d)(5), Congress prohibited the SEC from seeking
an equitable remedy in excess of a defendant’s net profitsfrom wrongdoing. To be sure, the SEC originally endeavored
to conform its disgorgement remedy to the common-
law limitations in §78u(d)(5). Over the years, however,
courts have occasionally awarded disgorgement in threemain ways that test the bounds of equity practice: by ordering
the proceeds of fraud to be deposited in Treasury fundsinstead of disbursing them to victims, imposing joint-andseveral
disgorgement liability, and declining to deduct even
legitimate expenses from the receipts of fraud.3 The SEC’s
disgorgement remedy in such incarnations is in considerable
tension with equity practices.
Petitioners go further. They claim that this Court effectively
decided in Kokesh that disgorgement is necessarily apenalty, and thus not the kind of relief available at equity.
Brief for Petitioners 19–20, 22–26. Not so. Kokesh expressly
declined to pass on the question. 581 U. S., at ___,

n. 3 (slip op., at 5, n. 3). To be sure, the Kokesh Court evaluated
a version of the SEC’s disgorgement remedy thatseemed to exceed the bounds of traditional equitable principles.
But that decision has no bearing on the SEC’s ability

——————

3 See, e.g., SEC v. Clark, 915 F. 2d 439, 441, 454 (CA9 1990) (requiringdefendant to disgorge the profits that his stockbroker made from unlawful
trades); SEC v. Brown, 658 F. 3d 858, 860–861 (CA8 2011) (per curiam)
(ordering joint-and-several disgorgement of funds collected frominvestors and concluding that “ ‘the overwhelming weight of authorityhold[s] that securities law violators may not offset their disgorgementliability with business expenses’ ”); SEC v. Contorinis, 743 F. 3d 296,
304–306 (CA2 2014) (requiring defendant to disgorge benefits conferred
on close associates).


Opinion of the Court

to conform future requests for a defendant’s profits to the
limits outlined in common-law cases awarding a wrongdoer’s
net gains.

The Government, for its part, contends that the SEC’s interpretation
of the equitable disgorgement remedy has Congress’
tacit support, even if it exceeds the bounds of equity
practice. Brief for Respondent 13–21. It points to the factthat Congress has enacted a number of other statutes referring
to “disgorgement.”

That argument attaches undue significance to Congress’
use of the term. It is true that Congress has authorized theSEC to seek “disgorgement” in administrative actions. 15

U. S. C. §77h–1(e) (“In any cease-and-desist proceeding under
subsection (a), the Commission may enter an order requiring
accounting and disgorgement”). But it makes sense
that Congress would expressly name the equitable powersit grants to an agency for use in administrative proceedings.
After all, agencies are unlike federal courts where, “[u]nlessotherwise provided by statute, all . . . inherent equitable
powers . . . are available for the proper and complete exercise
of that jurisdiction.” Porter, 328 U. S., at 398.

Congress does not enlarge the breadth of an equitable,
profit-based remedy simply by using the term “disgorgement”
in various statutes. The Government argues that under
the prior-construction principle, Congress should be
presumed to have been aware of the scope of “disgorgement”
as interpreted by lower courts and as having incorporatedthe (purportedly) prevailing meaning of the term into its
subsequent enactments. Brief for Respondent 24. But
“that canon has no application” where, among other things,
the scope of disgorgement was “far from ‘settled.’” Armstrong
v. Exceptional Child Center, Inc., 575 U. S. 320, 330
(2015).

At bottom, even if Congress employed “disgorgement” as
a shorthand to cross-reference the relief permitted by
§78u(d)(5), it did not silently rewrite the scope of what the


LIU v. SEC
Opinion of the Court

SEC could recover in a way that would contravene limita-
tions embedded in the statute. After all, such “statutoryreference[s]” to a remedy grounded in equity “must, absent
other indication, be deemed to contain the limitations upon
its availability that equity typically imposes.” Great-West,
534 U. S., at 211, n. 1. Accordingly, Congress’ own use of
the term “disgorgement” in assorted statutes did not ex-
pand the contours of that term beyond a defendant’s net
profits—a limit established by longstanding principles of
equity.

III
Applying the principles discussed above to the facts ofthis case, petitioners briefly argue that their disgorgementaward is unlawful because it crosses the bounds of tradi-
tional equity practice in three ways: It fails to return fundsto victims, it imposes joint-and-several liability, and it de-
clines to deduct business expenses from the award. Be-
cause the parties focused on the broad question whether
any form of disgorgement may be ordered and did not fully
brief these narrower questions, we do not decide them here.
We nevertheless discuss principles that may guide the
lower courts’ assessment of these arguments on remand.

A
Section 78u(d)(5) restricts equitable relief to that which“may be appropriate or necessary for the benefit of inves-
tors.” The SEC, however, does not always return the en-
tirety of disgorgement proceeds to investors, instead depos-
iting a portion of its collections in a fund in the Treasury.
See SEC, Division of Enforcement, 2019 Ann. Rep. 16–17,
https://www.sec.gov/files/enforcement-annual-report-
2019.pdf. Congress established that fund in the Dodd-
Frank Wall Street Reform and Consumer Protection Act for
disgorgement awards that are not deposited in “disgorge-
ment fund[s]” or otherwise “distributed to victims.” 124


Opinion of the Court

Stat. 1844. The statute provides that these sums may beused to pay whistleblowers reporting securities fraud and
to fund the activities of the Inspector General. Ibid. Here,
the SEC has not returned the bulk of funds to victims,
largely, it contends, because the Government has been unable
to collect them.4

The statute provides limited guidance as to whether thepractice of depositing a defendant’s gains with the Treasurysatisfies the statute’s command that any remedy be “appropriate
or necessary for the benefit of investors.” The equitable
nature of the profits remedy generally requires theSEC to return a defendant’s gains to wronged investors for
their benefit. After all, the Government has pointed to noanalogous common-law remedy permitting a wrongdoer’sprofits to be withheld from a victim indefinitely without being
disbursed to known victims. Cf. Root, 105 U. S., at 214–
215 (comparing the accounting remedy to a breach-of-trust
action, where a court would require the defendant to “refund
the amount of profit which they have actually realized”).


The Government maintains, however, that the primaryfunction of depriving wrongdoers of profits is to deny themthe fruits of their ill-gotten gains, not to return the funds to
victims as a kind of restitution. See, e.g., SEC, Report Pursuant
to Section 308(C) of the Sarbanes Oxley Act of 2002,

p. 3, n. 2 (2003) (taking the position that disgorgement isnot intended to make investors whole, but rather to deprivewrongdoers of ill-gotten gains); see also 6 T. Hazen, Law of
Securities Regulation §16.18, p. 8 (rev. 7th ed. 2016) (concluding
that the remedial nature of the disgorgement remedy
does not mean that it is essentially compensatory and

——————

4 According to the Government, petitioners “transferred the bulk oftheir misappropriated funds to China, defied the district court’s order to
repatriate those funds, and fled the United States.” Brief for Respondent
36.


Opinion of the Court

concluding that the “primary function of the remedy is todeny the wrongdoer the fruits of ill-gotten gains”). Under
the Government’s theory, the very fact that it conducted anenforcement action satisfies the requirement that it is “appropriate
or necessary for the benefit of investors.”

But the SEC’s equitable, profits-based remedy must domore than simply benefit the public at large by virtue of
depriving a wrongdoer of ill-gotten gains. To hold otherwise
would render meaningless the latter part of §78u(d)(5). Indeed,
this Court concluded similarly in Mertens when analyzing
statutory language accompanying the term “equitable
remedy.” 508 U. S., at 253 (interpreting the term
“appropriate equitable relief ”). There, the Court found thatthe additional statutory language must be given effect sincethe section “does not, after all, authorize . . . ‘equitable relief
’ at large.” Ibid. As in Mertens, the phrase “appropriateor necessary for the benefit of investors” must mean something
more than depriving a wrongdoer of his net profitsalone, else the Court would violate the “cardinal principle
of interpretation that courts must give effect, if possible, to
every clause and word of a statute.” Parker Drilling Management
Services, Ltd. v. Newton, 587 U. S. ___, ___ (2019)
(slip op., at 9) (internal quotation marks omitted).

The Government additionally suggests that the SEC’spractice of depositing disgorgement funds with the Treasury
may be justified where it is infeasible to distribute the
collected funds to investors.5 Brief for Respondent 37. It is
an open question whether, and to what extent, that practice
nevertheless satisfies the SEC’s obligation to award relief

——————

5 We express no view as to whether the SEC has offered adequate proof
of failed attempts to return funds to investors here. To the extent that
feasibility is relevant at all to equitable principles, we observe that lowercourts are well equipped to evaluate the feasibility of returning funds to
victims of fraud. See, e.g., SEC v. Lund, 570 F. Supp. 1397, 1404–1405(CD Cal. 1983) (appointing a magistrate judge to determine whether itwas feasible to locate victims of financial wrongdoing).


Opinion of the Court

“for the benefit of investors” and is consistent with the limitations
of §78u(d)(5). The parties have not identified authorities
revealing what traditional equitable principles
govern when, for instance, the wrongdoer’s profits cannot
practically be disbursed to the victims. But we need not
address the issue here. The parties do not identify a specific
order in this case directing any proceeds to the Treasury. If
one is entered on remand, the lower courts may evaluate inthe first instance whether that order would indeed be for
the benefit of investors as required by §78u(d)(5) and consistent
with equitable principles.

B
The SEC additionally has sought to impose disgorgementliability on a wrongdoer for benefits that accrue to his affiliates,
sometimes through joint-and-several liability, in a
manner sometimes seemingly at odds with the common-law
rule requiring individual liability for wrongful profits. See,
e.g., SEC v. Contorinis, 743 F. 3d 296, 302 (CA2 2014) (holding
that a defendant could be forced to disgorge not only
what he “personally enjoyed from his exploitation of inside
information, but also the profits of such exploitation that hechanneled to friends, family, or clients”); SEC v. Clark, 915

F. 2d 439, 454 (CA9 1990) (“It is well settled that a tippercan be required to disgorge his tippee’s profits”); SEC v.
Whittemore, 659 F. 3d 1, 10 (CADC 2011) (approving jointand-
several disgorgement liability where there is a close relationship
between the defendants and collaboration in executing
the wrongdoing).

That practice could transform any equitable profits-focused
remedy into a penalty. Cf. Marshall, 15 Wall., at 149.
And it runs against the rule to not impose joint liability infavor of holding defendants “liable to account for such profits
only as have accrued to themselves . . . and not for those
which have accrued to another, and in which they have no


Opinion of the Court

participation.” Belknap, 161 U. S., at 25–26; see also Elizabeth
v. Pavement Co., 97 U. S. 126 (1878).

The common law did, however, permit liability for partners
engaged in concerted wrongdoing. See, e.g., Ambler,
20 Wall., at 559. The historic profits remedy thus allows
some flexibility to impose collective liability. Given the
wide spectrum of relationships between participants andbeneficiaries of unlawful schemes—from equally culpable
codefendants to more remote, unrelated tipper-tippee arrangements—
the Court need not wade into all the circumstances
where an equitable profits remedy might be punitive
when applied to multiple individuals.

Here, petitioners were married. 754 Fed. Appx. 505; 262

F. Supp. 3d, at 960–961. The Government introduced evidence
that Liu formed business entities and solicited investments,
which he misappropriated. Id., at 961. It also
presented evidence that Wang held herself out as the president,
and a member of the management team, of an entity
to which Liu directed misappropriated funds. Id., at 964.
Petitioners did not introduce evidence to suggest that one
spouse was a mere passive recipient of profits. Nor did they
suggest that their finances were not commingled, or that
one spouse did not enjoy the fruits of the scheme, or that
other circumstances would render a joint-and-several disgorgement
order unjust. Cf. SEC v. Hughes Capital Corp.,
124 F. 3d 449, 456 (CA3 1997) (finding that codefendant
spouse was liable for unlawful proceeds where they funded
her “lavish lifestyle”). We leave it to the Ninth Circuit on
remand to determine whether the facts are such that petitioners
can, consistent with equitable principles, be found
liable for profits as partners in wrongdoing or whether individual
liability is required.

C
Courts may not enter disgorgement awards that exceed
the gains “made upon any business or investment, when


Opinion of the Court

both the receipts and payments are taken into the account.”
Goodyear, 9 Wall., at 804; see also Restatement (Third) §51,
Comment h, at 216 (reciting the general rule that a defendant
is entitled to a deduction for all marginal costs incurredin producing the revenues that are subject to disgorgement).
Accordingly, courts must deduct legitimate expenses
before ordering disgorgement under §78u(d)(5). A
rule to the contrary that “make[s] no allowance for the costand expense of conducting [a] business” would be “inconsistent
with the ordinary principles and practice of courtsof chancery.” Tilghman, 125 U. S., at 145–146; cf. SEC v.
Brown, 658 F. 3d 858, 861 (CA8 2011) (declining to deduct
even legitimate expenses like payments to innocent third-
party employees and vendors).

The District Court below declined to deduct expenses on
the theory that they were incurred for the purposes of furthering
an entirely fraudulent scheme. It is true that when
the “entire profit of a business or undertaking” results fromthe wrongdoing, a defendant may be denied “inequitable deductions”
such as for personal services. Root, 105 U. S., at

203. But that exception requires ascertaining whether expenses
are legitimate or whether they are merely wrongful
gains “under another name.” Goodyear, 9 Wall., at 803. Doing
so will ensure that any disgorgement award falls within
the limits of equity practice while preventing defendantsfrom profiting from their own wrong. Root, 105 U. S., at
207.

Although it is not necessary to set forth more guidanceaddressing the various circumstances where a defendant’s
expenses might be considered wholly fraudulent, it sufficesto note that some expenses from petitioners’ scheme went
toward lease payments and cancer-treatment equipment.
Such items arguably have value independent of fueling a
fraudulent scheme. We leave it to the lower court to examine
whether including those expenses in a profits-based


Opinion of the Court

remedy is consistent with the equitable principles underlying
§78u(d)(5).

* * *
For the foregoing reasons, we vacate the judgment below
and remand the case to the Ninth Circuit for further proceedings
consistent with this opinion.

It is so ordered.


THOMAS, J., dissenting

SUPREME COURT OF THE UNITED STATES

No. 18–1501

CHARLES C. LIU, ET AL., PETITIONERS v.
SECURITIES AND EXCHANGE COMMISSION

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE NINTH CIRCUIT

[June 22, 2020]

JUSTICE THOMAS, dissenting.

The Court correctly declines to affirm the Ninth Circuit’sdecision upholding the District Court’s disgorgement order,
but I disagree with the Court’s decision to vacate and remand
for the lower courts to “limi[t]” the disgorgementaward. Ante, at 1. Disgorgement can never be awarded under
15 U. S. C. §78u(d)(5). That statute authorizes the Securities
and Exchange Commission (SEC) to seek only “equitable
relief that may be appropriate or necessary for the
benefit of investors,” and disgorgement is not a traditional
equitable remedy. Thus, I would reverse the judgment of
the Court of Appeals.

I
The Securities Exchange Act of 1934, as amended in
2005, allows the SEC to request “equitable relief ” in federal
district court against those who violate federal securities
laws. §78u(d)(5). According to our usual interpretive convention,
“equitable relief ” refers to forms of equitable reliefavailable in the English Court of Chancery at the time of
the founding. Because disgorgement is a creation of the20th century, it is not properly characterized as “equitablerelief,” and, hence, the District Court was not authorized to
award it under §78u(d)(5).


THOMAS, J., dissenting

A
“This Court has never treated general statutory grants of
equitable authority as giving federal courts a freewheeling
power to fashion new forms of equitable remedies.” Trump

v. Hawaii, 585 U. S. ___, ___ (2018) (THOMAS, J., concurring)
(slip op., at 3). “Rather, it has read such statutes as
constrained by ‘the body of law which had been transplanted
to this country from the English Court of Chancery’in 1789.” Ibid. (quoting Guaranty Trust Co. v. York, 326
U. S. 99, 105 (1945)). As Justice Story put it, “the settled
doctrine of this court is, that the remedies in equity are tobe administered . . . according to the practice of courts ofequity in [England], as contradistinguished from that of
courts of law; subject, of course to the provisions of the acts
of congress.” Boyle v. Zacharie & Turner, 6 Pet. 648, 654
(1832).


We have interpreted other statutes according to this “settled
doctrine.” For example, we have read the term “equitable
relief ” in the Employee Retirement Income SecurityAct of 1974 to refer to “those categories of relief that weretypically available in equity.” Mertens v. Hewitt Associates,
508 U. S. 248, 256 (1993) (emphasis deleted). We have done
the same for the Judiciary Act of 1789, see, e.g., Grupo Mexicano
de Desarrollo, S. A. v. Alliance Bond Fund, Inc., 527

U. S. 308, 318–319 (1999), and for provisions in the Bankruptcy
Code, see Taggart v. Lorenzen, 587 U. S. ___, ___
(2019) (slip op., at 5). There is nothing about §78u(d)(5)
that counsels departing from this approach.

B
Disgorgement is not a traditional form of equitable relief.
Rather, cases, legal dictionaries, and treatises establish
that it is a 20th-century invention.
As an initial matter, it is not even clear what “disgorgement”
means. The majority frankly acknowledges its
“‘“protean character.”’” Ante, at 7 (quoting Petrella v.


THOMAS, J., dissenting

Metro-Goldwyn-Mayer, Inc., 572 U. S. 663, 688, n. 1 (2014)).
The difficulty of defining this supposedly traditional remedy
is the first sign that it is not a historically recognizedequitable remedy. In contrast, an accounting for profits, or
accounting—a distinct form of relief that the majoritygroups with disgorgement—has a well-accepted definition:
It compels a defendant to account for, and repay to a plaintiff,
those profits that belong to the plaintiff in equity. Bray,
Fiduciary Remedies, in The Oxford Handbook of Fiduciary
Law 449 (E. Criddle, P. Miller, & R. Sitkoff eds. 2019). The
definition of disgorgement, after today’s decision, is a remedy
that compels each defendant to pay his profits (and
sometimes, though it is not clear when, all of his codefendants’
profits) to a third-party Government agency (whichsometimes, though it is not clear when, passes the money
on to victims). This remedy has no basis in historical practice.


No published case appears to have used the term “disgorgement”
to refer to equitable relief until the 20th century.
Even then, the earliest cases use the word in a “nontechnical”
sense, Brief for Law Professors as Amici Curiae
22, to describe the action a defendant must take when a
party is awarded a traditional equitable remedy such as an
accounting for profits or an equitable lien.1 For example, in
Byrd v. Mullinix, 159 Ark. 310, 251 S. W. 871 (1923), the
Supreme Court of Arkansas affirmed the imposition of an
equitable lien to prevent a debtor from “put[ting] the money
in property which was itself beyond the reach of creditors,
and to compel its disgorgement,” id., at 316–317, 251 S. W.,
at 872. Likewise, in Armstrong v. Richards, 128 Fla. 561,
175 So. 340 (1937), the Supreme Court of Florida referredto “the right of the taxpayer to require an accounting from

——————

1An equitable lien is imposed on a defendant’s property “as security
for a claim on the ground that otherwise the former would be unjustly
enriched.” Restatement of Restitution §161, p. 650 (1936).


THOMAS, J., dissenting

and disgorgement by public officers and those in collusion
with them,” id., at 564, 175 So., at 341. In these cases, the
term “disgorgement” colloquially described what a defendant
was ordered to do, not the remedy itself.

By the 1960s, published opinions began to use “disgorgement”
to refer to a remedy in the administrative context. In
NLRB v. Local 176, 276 F. 2d 583 (CA1 1960), the agency
had “applied its . . . remedy of disgorgement of dues, requiring
the union to refund to every member who had obtainedemployment on the Company project the dues which he had
paid,” id., at 586 (footnote omitted). The court declined to
enforce this part of the agency’s order, but not because disgorgement
was an impermissible form of relief. Instead, it
found that, in the circumstances of the case, disgorgement“seem[ed] . . . to be an ex post facto penalty.” Ibid.; see also
NLRB v. Local 111, 278 F. 2d 823, 825 (CA1 1960) (enforcing
a disgorgement order from the agency).

By the 1970s, courts started using the term “disgorgement”
to describe a judicial remedy in its own right. When
the SEC initially sought this kind of relief under the Securities
Exchange Act in SEC v. Texas Gulf Sulphur Co., 312

F. Supp. 77 (SDNY 1970), the District Court called it “restitution,”
id., at 93, and the Court of Appeals called it “[r]estitution
of [p]rofits,” SEC v. Texas Gulf Sulphur Co., 446

F. 2d 1301, 1307 (CA2 1971) (emphasis deleted). Courts
soon substituted the label “disgorgement.” SEC v. Manor
Nursing Centers, Inc., 458 F. 2d 1082, 1105 (CA2 1972);
SEC v. Shapiro, 349 F. Supp. 46, 55 (SDNY 1972).

The late date of these cases is sufficient reason to reject
the argument that disgorgement is a traditional equitable
remedy. But it is also telling that, when the SEC beganseeking this relief, it did so without any statutory authority.
Prior to 2005, the SEC lacked the power even to seek “equitable
relief ” in cases like this one. See §305(b), 116 Stat.
779 (amending the Securities Exchange Act). The District
Court in Texas Gulf Sulphur purported to “imply [a] new


THOMAS, J., dissenting

remed[y],” based on its “inherent equity power” and a belief
that “the congressional purpose is effectuated by so doing.”
312 F. Supp., at 91. But the sources it cited are dubious.
The court relied on J. I. Case Co. v. Borak, 377 U. S. 426
(1964), a case about implied causes of action that we havesince abrogated. See Alexander v. Sandoval, 532 U. S. 275,
287 (2001). It also relied on a securities law treatise that
advocated for what it called “restitution” but admitted that
district courts had no express authority to grant the remedy
and that the SEC had never sought this remedy in the past.
3 L. Loss, Securities Regulation 1827–1828 (1961). It is
functionally this same unauthorized remedy that the SECand courts now call “disgorgement.” The details have varied
over time, but the lineage is clear: Disgorgement is “a
relic of the heady days” of courts inserting judicially createdrelief into statutes. Correctional Services Corp. v. Malesko,
534 U. S. 61, 75 (2001) (Scalia, J., concurring).

Disgorgement as a remedy in its own right is also absent
from legal publications until the 20th century. Leading legal
dictionaries did not define the term until the turn of the
20th century. See, e.g., Merriam-Webster’s Dictionary of
Law 143 (1996); Black’s Law Dictionary 480 (7th ed. 1999).
Nor was disgorgement included in the first Restatement ofRestitution, adopted in 1936. The remedy does not appearuntil the Third Restatement, adopted in 2010, which statesthat “[r]estitution remedies” that seek “to eliminate profit
from wrongdoing . . . are often called ‘disgorgement’ or ‘accounting.’”
2 Restatement (Third) of Restitution and Unjust
Enrichment §51(4), p. 203. But “Restatement” is an
inapt title for this edition of the treatise. Like many of themodern Restatements, its “authors have abandoned the
mission of describing the law, and have chosen instead to
set forth their aspirations for what the law ought to be.”
Kansas v. Nebraska, 574 U. S. 445, 475 (2015) (Scalia, J.,
concurring in part and dissenting in part). The inclusion of


THOMAS, J., dissenting

“disgorgement” in the Third Restatement, which the majority
cites in support of its holding, ante, at 6, represents a“‘novel extension’” of equity. Kansas, supra, at 483
(THOMAS, J., concurring in part and dissenting in part)
(quoting Roberts, Restitutionary Disgorgement for Opportunistic
Breach of Contract and Mitigation of Damages, 42Loyola (LA) L. Rev. 131, 134 (2008)).

I acknowledge that this Court has referred to disgorgement
as an equitable remedy in some of its prior decisions.
See, e.g., Feltner v. Columbia Pictures Television, Inc., 523

U. S. 340, 352 (1998). But these opinions merely referred
to the term in passing without considering the question in
depth. The history is clear: Disgorgement is not a form ofrelief that was available in the English Court of Chancery
at the time of the founding.

C
The majority’s treatment of disgorgement as an equitableremedy threatens great mischief. The term disgorgementitself invites abuse because it is a word with no fixed meaning.
The majority sees “parallels” between accounting anddisgorgement, ante, at 2, n. 1, but parallels are by definition
not the same. Even if they were, the traditional remedy of
an accounting—which compels a party to repay profits that
belong to a plaintiff—has important conceptual limitations
that disgorgement does not. An accounting connotes the relationship
between a plaintiff and a defendant. In the
words of one scholar, “it is an accounting by A to B.” Bray,
Fiduciary Remedies, at 454. But disgorgement connotes no
relationship and so is not naturally limited to net profitsand compensation of victims. It simply “is A disgorging.”
Ibid. Further, the traditional remedy of a constructive
trust2 or an equitable lien requires that the “money or prop


——————
2A constructive trust compels a defendant “holding title to property . . .
to convey it to another on the ground that he would be unjustly enriched


THOMAS, J., dissenting

erty identified as belonging in good conscience to the plaintiff
. . . clearly be traced to particular funds or property inthe defendant’s possession.” Great-West Life & Annuity Ins.
Co. v. Knudson, 534 U. S. 204, 213 (2002). Disgorgementreaches further because it has no tracing requirement. Byusing a word with no history in equity jurisprudence, theSEC and courts have made it possible to circumvent the
careful limitations imposed on other equitable remedies.

One need look no further than the SEC’s use of disgorgement
to see the pitfalls of the majority’s acquiescence in itscontinued use as a remedy. The order in Texas Gulf Sulphur
did not depart too far from equitable principles. The
award was limited to the defendants’ net profits and the
funds were held in escrow and were at least partly available
to compensate victims, 446 F. 2d, at 1307. It did not take
long, however, for a district court to order a defendant to
turn over both his profits and the investment “income
earned on the proceeds.” Manor Nursing Centers, 458

F. 2d, at 1105. And in the case before us today, just a half
century later, disgorgement has expanded even further.
The award is not limited to net profits or even money possessed
by an individual defendant when it is imposed
jointly and severally. See ante, at 5. And not only is it notguaranteed to be used to compensate victims, but the imposition
of over $26 million in disgorgement and approximately
$8 million in civil monetary penalties in this case
seems to ensure that victims will be unable to recover anything
in their own actions. As long as courts continue to
award “disgorgement,” both courts and the SEC will continue
to have license to expand their own power.

The majority’s decision to tame, rather than reject, disgorgement
will also cause confusion in administrative prac


——————
if he were permitted to retain it.” Restatement of Restitution §160, at
640–641.


THOMAS, J., dissenting

tice. As the majority explains, the SEC is expressly authorized
to impose “‘disgorgement’” in its in-house tribunals.
Ante, at 13 (quoting 15 U. S. C. §77h–1(e)). It is unclear
whether the majority’s new restrictions on disgorgementwill apply to these proceedings as well. If they do not, theresult will be that disgorgement has one meaning when the
SEC goes to district court and another when it proceeds in-
house.

More fundamentally, by failing to recognize that theproblem is disgorgement itself, the majority undermines
our entire system of equity. The majority believes that insistence
on the traditional rules of equity is unnecessarily
formalistic, ante, at 3, n. 1, but the Founders accepted federal
equitable powers only because those powers depended
on traditional forms. The Constitution was ratified on the
understanding that equity was “a precise legal system”
with “specific equitable remed[ies].” Missouri v. Jenkins,
515 U. S. 70, 127 (1995) (THOMAS, J., concurring). “Although
courts of equity exercised remedial ‘discretion,’ thatdiscretion allowed them to deny or tailor a remedy despite
a demonstrated violation of a right, not to expand a remedybeyond its traditional scope.” Trump, 585 U. S., at ___
(THOMAS, J., concurring) (slip op., at 5). The majority, while
imposing some limits, ultimately permits courts to continue
expanding equitable remedies. I would simply hold that the
phrase “equitable relief ” in §78u(d)(5) does not authorize
disgorgement.

II
After holding that disgorgement is equitable relief, themajority remands for the lower courts to reconsider the disgorgement
order in this case. If the majority is going to accept
“disgorgement” as an available remedy, it should atleast limit the order to be consistent with the traditional
rules of equity. First, the order should be limited to each


THOMAS, J., dissenting

petitioner’s profits. Second, the order should not be imposed
jointly and severally. Third, the money paid by petitioners
should be used to compensate petitioners’ victims.

A
First, the disgorgement order should be limited to “theprofits actually made” by each petitioner. Mowry v. Whitney,
14 Wall. 620, 649 (1872); see also ante, at 11, 18–20.
Defendants in equity traditionally may deduct “allowances
. . . for the cost and expense of the business” from theamount of the award. Root v. Railway Co., 105 U. S. 189,
215 (1882); see also Callaghan v. Myers, 128 U. S. 617, 665
(1888); Elizabeth v. Pavement Co., 97 U. S. 126, 139 (1878);
Rubber Co. v. Goodyear, 9 Wall. 788, 804 (1870). The rationale
behind this rule is that “it is not the function of
courts of equity to administer punishment.” Bangor Punta
Operations, Inc. v. Bangor & Aroostook R. Co., 417 U. S.
703, 717–718, n. 14 (1974) (internal quotation marks omitted);
see also 2 J. Story, Commentaries on Equity Jurisprudence
§1494, p. 819 (13th ed. 1886). Here, however, the
District Court reasoned that “it would be ‘unjust to permit
the defendants to offset against the investor dollars theyreceived the expenses of running the very business they created
to defraud those investors into giving the defendantsthe money in the first place.’” 754 Fed. Appx. 505, 509 (CA9
2018) (quoting SEC v. J. T. Wallenbrock & Assocs., 440

F. 3d 1109, 1114 (CA9 2006)). On remand, the lower courts
should limit the award to each petitioner’s profits.

B
Second, and relatedly, the disgorgement order should not
be imposed jointly and severally. The majority analogizesdisgorgement to accounting, ante, at 6, but this Court has
rejected joint and several liability in actions for an accounting.
Elizabeth, supra, at 139–140; Keystone Mfg. Co. v. Adams,
151 U. S. 139, 148 (1894); Belknap v. Schild, 161 U. S.


THOMAS, J., dissenting

10, 25–26 (1896). The majority instructs the lower courtsto determine whether petitioners were “partners in wrongdoing,”
apparently based on a case about the liability of
partners. Ante, at 10, 18 (citing Ambler v. Whipple, 20 Wall.
546 (1874)). But the liability in that case was premised on
the law of partnership, and nothing indicates that petitioners
here were legal partners. The joint and several order in
this case is thus at odds with traditional equitable rules.3

C
Finally, the award should be used to compensate victims,
not to enrich the Government. Plaintiffs in equity mayclaim “that which, ex aequo et bono [according to what is
equitable and good], is theirs, and nothing beyond this.”
Livingston v. Woodworth, 15 How. 546, 560 (1854). The
money ordered to be paid as disgorgement in no sense belongs
to the Government, and the majority cites no authority
allowing a Government agency to keep equitable relieffor a wrong done to a third party. Requiring the SEC toonly “generally” compensate victims, ante, at 15, is inconsistent
with traditional equitable principles.
Worse still from a practical standpoint, the majority provides
almost no guidance to the lower courts about how to
resolve this question on remand. Even assuming that disgorgement
is “equitable relief” for purposes of §78u(d)(5)
and that the Government may sometimes keep the money,

——————
3For its part, respondent cites the joint and several liability in Jackson

v. Smith, 254 U. S. 586, 589 (1921), but the remedy in that case was aconstructive trust, see Smith v. Jackson, 48 App. D. C. 565, 576 (1919).
As explained above, there is no tracing requirement in the District
Court’s order as would be required in a case of constructive trust. Supra,
at 6–7. The Court also allowed joint and several liability in Belford v.
Scribner, 144 U. S. 488 (1892), a copyright case. But it based its holding
on the fact that, under the relevant copyright statute, “both the printerand the publisher are equally liable to the owner of the copyright for an
infringement.” Id., at 507; see also Washingtonian Publishing Co. v.
Pearson, 140 F. 2d 465, 467 (CADC 1944).


the Court should at least do more to identify the circumstances
in which the Government may keep the money. Instead,
the Court asks lower courts to improvise a solution.
If past is prologue, this uncertainty is sure to create opportunities
for the SEC to continue exercising unlawful power.

* * *
I would reverse for the straightforward reason that disgorgement
is not “equitable relief ” within the meaning of
§78u(d)(5). Because the majority acquiesces in the continued
use of disgorgement under that statute, I respectfully
dissent.