A federal appeals court on Tuesday reinstated the SEC's insider trading case against billionaire Mark Cuban, which had been dismissed more than a year ago, saying the case should not have been dismissed and should proceed instead. 

Mr. Cuban is accused of selling shares of Mamma.com after he received confidential information, from its CEO during phone call in 2004, that the Internet search company was going to sell additional shares through a private offering.  According to the SEC’s civil suit, Mr. Cuban sold 600,000 shares of Mamma.com, a 6.3% stake, to avoid a loss of $750,000;  the sale was completed within a day of receiving the information. 

In July 2009, Federal Judge Sidney Fitzwater, in Dallas, ruled that the SEC had failed to prove that Mr. Cuban had made an agreement with Mamma.com’s CEO that he would not sell his own shares.  But the Fifth Circuit Court of Appeals in New Orleans said in its ruling that “the allegations, taken in their entirety, provide more than a plausible basis to find that the understanding between the CEO and Cuban was that he was not to trade, that it was more than a simple confidentiality agreement.” 

The case now returns to the federal court in Dallas for “further proceedings, including discovery, consideration of a summary judgment and a trial, if reached.  The SEC is pleased;  Mr. Cuban's counsel will request a rehearing of the case.   [NYT Dealbook, 9/21]