Reliance Electric Co. v. Emerson Electric Co.

404 U.S. 418 (1972)

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Nature of the Case

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Facts

Emerson (P) owned 13.2% of D corporation shares. This resulted from P's attempted acquisition of Dodge Manufacturing Co. The purchase price of the stock was $63 per share. A short time thereafter, the shareholders of Dodge approved a merger with Reliance Electric Co (D). P then sold 37,000 shares of Dodge common stock at $68 per share. This sale reduced holdings under the 10% mark for liability under section 16(b). The remaining shares were then sold to Dodge at $69 per share. P got rid of its holdings in two sales both of them within six months of purchase. The first sale reduced P's holdings to 9.96% and the second disposed of the remainder. P filed a declaratory action to determine its liability. The issue before the court was whether the profits from the second sale were recoverable under Section 16(b). The district court held P liable for the entire profits from both sales. The court of appeals reversed.