Gupta v. United States
913 F.3d 81
| 2d Cir. | 2019Background
- Rajat Gupta was convicted of insider trading and conspiracy for providing material nonpublic information to Raj Rajaratnam and others; convictions affirmed on direct appeal (Gupta I).
- Gupta moved under 28 U.S.C. § 2255, arguing the district court’s jury instruction on the “personal benefit” element was legally invalid in light of this Court’s decision in United States v. Newman.
- At trial the court instructed that the government need not prove a financial or tangible benefit; maintaining a good relationship with a frequent business partner could suffice.
- Gupta had objected to the instruction at trial but did not raise the issue on direct appeal; he sought collateral relief claiming cause and prejudice, actual innocence, and reliance on Montgomery for retroactivity.
- The district court denied relief, holding Gupta procedurally defaulted the claim, failed to show cause or prejudice, and that the instruction was consistent with Dirks and later Supreme Court authority.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the jury instruction on "personal benefit" was legally invalid post-Newman | Instruction improperly allowed non-pecuniary, non-tangible benefits (e.g., maintaining a relationship) and thus conflicted with Newman’s quid pro quo/pecuniary formulation | Instruction was consistent with Dirks; Newman’s pecuniary gloss was rejected by the Supreme Court in Salman; non-pecuniary/intangible benefits are valid | Instruction was legally valid; Salman confirms non-pecuniary benefits suffice; no relief granted |
| Whether Gupta’s failure to raise the instruction on direct appeal was excused (cause) | Newman created a new rule making the instruction invalid; appellate counsel could not reasonably have raised it earlier | Other defendants raised similar objections pre-Newman; the claim was available on direct appeal and thus not cause | No cause shown; procedural default not excused |
| Whether the erroneous instruction (if any) prejudiced Gupta’s trial (prejudice) | The instruction infected the trial and deprived Gupta of due process | Instructions read in context and matched Dirks; ample evidence supported intent and benefit, so no due-process prejudice | No prejudice shown; instruction, read in context, did not render trial unfair |
| Whether Gupta is actually innocent such that default should be excused | In light of Newman, Gupta’s conduct is not criminal and he is actually innocent | Record contains strong evidence of quid pro quo intent, tangible financial links, and timely trades showing intent to benefit | Not actually innocent under Schlup; overwhelming evidence supports conviction |
Key Cases Cited
- United States v. Gupta, 747 F.3d 111 (2d Cir. 2014) (direct-appeal decision affirming Gupta’s convictions)
- United States v. Newman, 773 F.3d 438 (2d Cir. 2014) (articulated a stricter pecuniary/quid pro quo test for personal benefit)
- Dirks v. SEC, 463 U.S. 646 (1983) (established that personal benefit can be pecuniary or reputational and may be inferred from relationship suggesting a quid pro quo)
- Salman v. United States, 137 S. Ct. 420 (2016) (rejected Newman’s pecuniary-only requirement; confirmed non-pecuniary/intangible benefits suffice)
- Bousley v. United States, 523 U.S. 614 (1998) (standards for excusing procedural default: cause and prejudice or actual innocence)
- Frady v. United States, 456 U.S. 152 (1982) (habeas relief cannot replace a direct appeal; prejudice standard for jury instructions is demanding)
- Schlup v. Delo, 513 U.S. 298 (1995) (actual-innocence gateway requires showing that no reasonable juror would have convicted in light of all evidence)
- United States v. Martoma, 894 F.3d 64 (2d Cir. 2018) (applies Dirks to uphold that an intent to benefit a tippee can demonstrate breach of duty)