Mathew Martoma exits federal court in 2014. Photo: Peter Foley/Bloomberg

The U.S. Court of Appeals for the Second Circuit declined to rehear former SAC Capital portfolio manager Mathew Martoma's insider trading conviction en banc, signaling an end, at least at the circuit level, to a turbulent review of the securities fraud case.

The decision by the circuit not to rehear Martoma's case appeared to reflect a sense of compromise, however uneasy, in the amended split opinion the panel of Chief Judge Robert Katzmann and Circuit Judges Denny Chin and Rosemary Pooler issued in June.

The circuit's denial offered little clues, noting only that “no active member called for an en banc poll.”

Columbia Law School professor John Coffee Jr. said in an email that the panel's second take upholding Martoma's conviction “may have been a shrewd and successful attempt to avert an en banc review.”

“Of course, there is no way for an outsider to know that for certain, but there was certainly a risk of en banc review because the first decision was quite sweeping and seemingly overturned prior precedent,” Coffee said.

Hope for an en banc review seemed to survive based on the continued dissent of Pooler in the amended opinion. An Aug. 23 amicus brief filed by the New York Council of Defense Lawyers pointed to her continued “strong objection” to what the amici called a “complete re-write” of the original opinion that now requires only that “the tipper have a free-standing 'intention to benefit' the tippee, even in the absence of any relationship at all between them.”

This, the defense attorney group argued, remained at odds with the core of the U.S. Supreme Court's landmark decision in 1983's Dirks v. SEC, and affirmed in 2016's Salman v. United States, which established the requirement of a personal benefit, as well as the circuit's own law established in 2014's United States v. Newman, which required a meaningfully close personal relationship between the parties.

The initial panel decision on Martoma's appeal in August 2017 saw a divide between the Second Circuit's requirements in Newman and what the Supreme Court laid out in Salman. The meaningfully close personal relationship required by Newman was suspect under Salman, the majority said, even while acknowledging the Supreme Court did not specifically nullify the test. The Supreme Court had “fundamentally altered the analysis underlying Newman,” however, rendering it “no longer good law,” according to the majority.

The majority's amended opinion dialed back the scope of Salman's impact on Newman, while reaching the same ultimate conclusion for Martoma. Martoma argued at the time that Newman was overruled implicitly, rather than explicitly, by the majority opinion. As long as the tipper intended to benefit the tippee, the relationship requirement was satisfied, regardless if the tipper receives a substantive benefit.

In its brief, the NYCDL argued the panel's amended opinion created “great uncertainty in the law of insider trading, and makes it extraordinarily difficult for amici's members to properly advise or defend their clients in insider trading investigations and prosecutions.”

“It will also make it impossible for district judges in this circuit to know with confidence how to instruct a jury in an insider trading prosecution,” the defense lawyer group argued.

Martoma was represented on appeal by Kirkland & Ellis partner Paul Clement. He declined to comment.

A spokeswoman for the U.S. Attorney's Office for the Southern District of New York also declined to comment.