Cuban Files Reply Brief for Attorneys' Fees: No Confidentiality Agreement & Misconduct by the SEC

On October 28, 2009, Mark Cuban filed a Reply Brief in Support of Motion for Attorneys’ Fees and Expenses (“The Reply”) in the Northern District of Texas – Dallas Division.  The Reply contends Cuban is entitled to Attorneys’ fees and expenses from the SEC for three reasons: (1) Cuban’s alleged acknowledgment of the information was confidential did not create a confidentiality agreement; (2) The SEC knew at the time it filed its Complaint it could not establish any of the elements of a contractual duty; and (3) the SEC failed to rebut the clear indicia of investigative misconduct.

First, the Reply argues that the SEC lacked both factual and legal support for its allegation that Mr. Cuban agreed to keep information confidential.  The SEC claims that when Cuban talked to Guy Fauré, Mamma.com’s CEO, about the upcoming PIPE offering, Mr. Cuban accepted a duty to keep this information confidential.  Although Mr. Fauré cannot remember the exact words of the conversation, the SEC contends Cuban must have acknowledged the information he was about to receive was confidential.  The Reply contends, however, that Cuban never “agreed” to a duty of confidentiality, only that he was receiving confidential information. The Reply contends that mere acknowledgement, or express recognition, of receiving confidential information did not constitute an agreement to keep that information confidential.

Second, Cuban argues the SEC could not establish a contractual duty to keep information confidential because there was no offer or acceptance.  Mr. Fauré never made an offer to Cuban because he never asked Cuban to keep the information confidential as a condition of receipt.  The Reply further contends that if Mr. Fauré’s statements could be construed as an offer, Cuban never accepted this offer.  Cuban stated “acknowledgement” does not constitute a promise to perform under an agreement.  Nor did his statement “now I’m screwed, I cannot sell” constitute acceptance as the court previous held.  Further, this statement could not be a valid acceptance because it came after the confidential information was conveyed and therefore the statement would be for past consideration.

Finally, the Reply argues the SEC does not rebut the instances of investigative misconduct and the court can characterize this non-responsiveness as evidence of lack of good faith.  First, the SEC failed to address the effects of Chairman Cox’s recusal from the Commission’s vote on whether to authorize the enforcement action.  Second, the SEC insists that it has no obligation to provide the Commission with Cuban’s Wells submission when in fact the federal regulation states the submissions will be forwarded to the Commission.  Third, when the SEC issued the Wells notice its investigation was not substantially complete and the SEC did not have sufficient evidence to bring an action against Cuban.  Fourth, the SEC failed to explain why the Mamma.com investigation was closed immediately before retaking Mr. Fauré’s testimony regarding Cuban.  Fifth, the SEC never addressed Cuban’s concerns regarding abuse of the Wells process in connection with re-taking Mr. Fauré’s testimony to force-feed the right answers to Mr. Fauré. 

The Reply contends the SEC knew all along that Cuban never entered into a confidentiality agreement with Mamma.com and still continued the case.  Therefore, it is appropriate for the court to sanction the SEC for its meritless case and award Mr. Cuban attorneys’ fees and expenses.

Primary materials for this case may be found on the DU Corporate Governance Website.