This morning, U.S. District Judge Sidney A. Fitzwater dismissed the SEC’s insider trading case against Dallas Mavericks owner Mark Cuban. A copy of the Court’s Order is available here.

In his ruling, Judge Fitzwater focused heavily on the issue of whether the SEC had adequately alleged that Cuban entered into an agreement sufficient to create the duty necessary to establish misappropriation theory liability. The court found that the SEC needed to allege that Cuban entered into an express or implied agreement with Mamma.com (a) not to disclose material, nonpublic information about the PIPE offering, and (b) not to trade on or otherwise use the information.

The court ultimately concluded that the SEC failed to adequately allege the second part of this requirement, i.e., that Cuban agreed not to trade on or otherwise use the information. Judge Fitzwater wrote that

Although at one point Cuban allegedly stated that he was “screwed” because he “[could not] sell,” this appears to express his belief, at least at that time, that it would be illegal for him to sell his Mamma.com shares based on the information the CEO had provided. This statement, however, cannot reasonably be understood as an agreement to sell based on the information. Further, the complaint asserts no facts that reasonably suggest that the CEO intended to obtain from Cuban an agreement to refrain from trading on the information as opposed to an agreement merely to keep it confidential.

The court added that it also was not sufficient that the SEC’s complaint indicated that the executive chairman of Mamma.com may have expected that Cuban would not sell until the PIPE was publicly announced.  “Outside a fiduciary or fiduciary-like relationship, a mere unilateral expectation on the part of the information source–one that is not based on the other party’s agreement to refrain from trading on the information–cannot create the predicate duty for misappropriation theory liability,” the court stated.