Introduction

In April 2024, following a jury trial in federal court in Northern California, Matthew Panuwat, a former executive at a biopharma company, was found liable for insider trading. The case, which was filed in 2021 by the U.S. Securities and Exchange Commission (SEC), involved so-called “shadow trading” by Panuwat, who, while in possession of material nonpublic information (MNPI) about his employer, Medivation (Company A), traded in the securities of another biopharma company, Incyte (Company B). We previously covered the verdict here. The notion that such trading was prohibited insider trading set off intense debate in the marketplace about the propriety of the theory and its implications for compliance programs.

That debate is now before the U.S. Court of Appeals for the Ninth Circuit. Panuwat filed his appeal arguing that he is entitled to judgment as a matter of law because the SEC did not and could not prove that he owed a fiduciary duty to Medivation not to trade in Incyte securities based on Medivation’s MNPI, or, alternatively, that the case should be remanded for a new trial. On June 11, 2026, a three-judge panel of the Ninth Circuit held oral argument on Panuwat’s appeal, with the panel composed of Judges Jacqueline Nguyen, Lawrence VanDyke and Robert Huie (sitting by designation from the Southern District of California).

During what Judge Nguyen described as a “very lively hearing,” both sides received their share of skepticism from the judges about their respective arguments. As we await a written ruling from the panel, the following highlights from the oral argument give insight into how the panel could rule:

Defense Argument

• Judge Nguyen expressed doubt as to whether the introduction of extrinsic evidence to determine the meaning of Medivation’s insider trading policy, which prohibited trading by employees while in possession of MNPI not just in Medivation securities but also in those of “another publicly traded company,” would even have been helpful for Panuwat had the district court permitted it. Judge Nguyen observed that the evidence would show that the drafters of the policy “knew what they were doing” and were purposeful in how they scoped the language relating to trading restrictions.
• In response to an argument that the district court had erred in not allowing Panuwat to present Medivation’s CEO and outside counsel as witnesses to testify about the insider trading policy, Judge Nguyen noted that the district court had not altogether prohibited the testimony; instead, it required that the defense first lay a foundation if these witnesses were to be called, which the defense ultimately chose not to do.
• With respect to the defense’s argument that the Medivation insider trading policy trumped any implicit duty of confidentiality owed by Panuwat through principles of agency, Judge Nguyen questioned whether this argument was being raised for the first time on appeal, thus resulting in forfeiture.
• Judge Nguyen stated that because the case was post-jury verdict, under harmless error review (which requires the appellate court to affirm a judgment where the district court’s error was harmless), if there were any evidence demonstrating that Medivation and Incyte were competitors, the SEC would still prevail, even assuming one of the district court’s instructions to the jury was wrong.

SEC Argument

• Judge VanDyke expressed from the start of the SEC’s argument that he found the SEC’s interpretation of Medivation’s insider trading policy to be a “stretch” and that the policy was unambiguous, but in Panuwat’s, not the SEC’s, favor. This line of questioning strikes at the heart of the SEC’s case, since the wording of the insider trading policy was the primary basis upon which the SEC established that Panuwat owed a duty not to trade in Incyte’s securities while in possession of Medivation MNPI. Panuwat argued that when describing prohibited trading in “another publicly traded company,” the policy’s list of “significant collaborators, customers, partners, suppliers or competitors” was exhaustive rather than illustrative, and that because Incyte did not fall into any of those categories, his trades were not covered. The question of whether the companies were competitors was hotly contested at trial, with Panuwat arguing that the companies produced entirely different drugs treating different cancers. The district court repeatedly rejected this reading, finding that the word “including” made the list exemplary. Judge VanDyke’s suggestion that the policy was unambiguous in Panuwat’s favor would represent a sharp departure from the district court’s textual analysis and, if adopted by the panel, could undermine the SEC’s primary theory of duty.
• Judge VanDyke went on to describe the SEC’s argument as “very fuzzy” and said that he had an issue with this “whole case,” including with respect to the jury instructions. The jury instruction dispute was flagged as a likely appellate issue even before the verdict: Panuwat objected that the district court’s instructions allowed the jury to find liability based merely on Medivation’s having “entrusted” him with information without requiring the SEC to prove he knowingly breached a specific fiduciary duty. Panuwat also sought but was denied a “good faith defense” instruction.
• Judge VanDyke also asked the SEC whether a written insider trading policy would trump a general entrustment theory. “Entrustment” was the term the judges used to describe a duty arising from Medivation’s having entrusted Panuwat with confidential information through principles of agency—the theory on which the district court had instructed the jury it could find liability. In response to the SEC stating that that issue did not need to be decided at this time, Judge VanDyke continued to pursue this line of questioning and asked the SEC to assume that there was a conflict between the written policy and a general entrustment theory. Judge VanDyke pressed the SEC on its position as to whether a written policy or entrustment theory would be deemed superior. This line of questioning carries particular significance given the dispute at trial over whether Medivation and Incyte were competitors. If the written policy did not clearly cover Incyte—because it was not a “competitor” or other enumerated category—the SEC could potentially fall back on a broader “entrustment” theory to establish a duty, effectively imposing trading restrictions beyond those the employer had expressly set out in the policy.
• Judge VanDyke’s final remarks included a statement that if the jury had been provided a “legally incorrect route to reach a verdict,” the case would need to be sent back for a new trial, even if the jury might have also had a “legally proper” route, as there would be no way to know which route was taken.

Takeaways

Given that both sides received skepticism and probing questions from different judges, it is difficult to discern from the hearing alone who will prevail and whether the Ninth Circuit’s decision will turn on more substantive matters (e.g., scope of the insider trading policy) or procedural issues (e.g., forfeiture of arguments not raised in the district court). Nonetheless, even Judge VanDyke’s defense-supportive comments suggest that, at most, Panuwat might succeed in obtaining a new trial, rather than a finding that Panuwat is entitled to judgment as a matter of law because he had no duty to Medivation not to trade in the Incyte securities, as requested by Panuwat in his brief to the Ninth Circuit. We will provide an update once the Ninth Circuit issues its opinion.