Cuban case dismissed, for time being

A federal judge in Dallas has dismissed the Securities and Exchange Commission's civil lawsuit charging Dallas Mavericks owner Mark Cuban with insider trading. The ruling raises legal questions about the validity and strength of the SEC's charges against Cuban, the future of the litigation and the laws that govern stock trading. Here are some of the questions and their answers:

This is obviously good news for Cuban, but is it over?

Cuban has reason to celebrate the ruling. U.S. District Judge Sidney A. Fitzwater responded in precise and analytical detail to highly sophisticated arguments raised by Cuban's legal team, a group that includes Ralph Ferrara (who has written seven books on insider trading) and five nationally known law professors. In addition to that good news, Cuban no longer faces any possibility of criminal charges over his dealings with Mama.com. The limitation period on criminal charges expired last month. But the civil case is not necessarily over. As he dismissed the case, Judge Fitzwater also explained to the SEC what it must do if it intends to continue its pursuit of Cuban. The 35-page ruling gives the agency's attorneys 30 days to file a new complaint and includes a road map for the SEC to follow. The charges against Cuban are in some ways unprecedented in the annals of insider trading, but the judge's ruling will help the SEC through this uncharted territory.

If Cuban used private and confidential information to avoid losing money on a stock investment, what is the problem? Isn't that obviously insider trading?

There is no doubt that Cuban was able to avoid a $750,000 loss on his investment in Mama.com Inc. as the result of confidential information he received in a phone call from the company's CEO. But that is not automatically insider trading. The SEC claimed in its lawsuit that Cuban promised not to use the information. That was the basis of the charge. Judge Fitzwater, in his ruling, is telling the SEC that Cuban's promise is not enough. To make the charge stick, the SEC must be able to show that Cuban agreed to "maintain the confidentiality of the information and not to trade or otherwise use it." If Cuban made both promises, according to the ruling, he might be guilty of insider trading. In the complaint the SEC filed against Cuban, it alleged only that Cuban promised to keep the information confidential.

What will the SEC do as the result of the judge's ruling?

SEC lawyers and investigators will review their evidence to determine whether Cuban made the two promises Judge Fitzwater has ruled are required. The evidence includes two telephone conversations and a series of e-mails. Although some of the content of the phone calls and the e-mails is public, parts remain undisclosed and unreported. We do know that in one phone conversation, Cuban said, "I'm screwed. I cannot sell." Is that a promise not to sell? Maybe not. But if the SEC has sufficient statements from Cuban, it will file a new set of charges in an amended complaint.

If the SEC files a new version of the charges, what will be next?

Most cases of insider trading involving only $750,000 are settled. But it is obvious that Cuban is not interested in that option. In his quest for validation, he is investing even more money than he lost in the Mama.com deal. If the SEC files new charges, Cuban will continue with an aggressive defense. It might come down to factual issues. What did Cuban say? What did it mean? If it comes down to a conflict over what was said in the phone conversations, there will be a trial in Dallas with a judge or a jury deciding who is telling the truth.

Lester Munson, a Chicago lawyer and journalist who reports on investigative and legal issues in the sports industry, is a senior writer for ESPN.com.