The applicable rule of law for this case will be displayed here.

This section contains the nature of the case and procedural background.

D was the head football coach at the University of Oklahoma. Lee Allan Smith was General Manager of television station KTVY in Oklahoma City. Harold D. Deem managed his own investments, and he was a partner, along with Kennedy, in S&H Investments, an investment partnership. Harold L. Hodges was the Owner and President of Core Oil and Gas, as well as the Owner and President of Bill Hodges Truck Company. Robert E. Amyx was Vice President of Core Oil and Gas and Vice President of Bill Hodges Truck Company, and has been a partner, along with Hodges, in Hodges, Amyx, Cross and Hodges, an investment partnership. Robert M. Hoover, Jr. was Chairman of the Board of Directors of Oklahoma Energies Corporation, a publicly traded company. Texas International Company (TIC) is a Delaware corporation with principal offices located in Oklahoma City. TIC's common stock was registered with the SEC and traded on the New York Stock Exchange, as well as other exchanges. On June 18, 1982, a wholly-owned subsidiary of TIC merged with Phoenix Resources Company (Phoenix) and Phoenix became a wholly-owned subsidiary of TIC. Prior to the merger, TIC owned in excess of fifty percent of the common stock of Phoenix, and, by reason of such ownership position, controlled Phoenix through election of three of the five members of the Phoenix Board of Directors. Phoenix, the successor of King Resources Company, was a Maine corporation with principal offices located in Oklahoma City. At all times mentioned in the complaint prior to the merger, Phoenix's common stock was registered with the SEC and was traded in the Over-the-Counter securities market on the National Association of Securities Dealers Automated Quotation System. On June 8-9, 1981, Kennedy purchased 6,000 shares of Phoenix. Between June 10-12, 1981 sold all for a pretax profit of $118,587. On June 8- 9, 1981, Hoover purchased 16,500 shares of Phoenix, and on June 10, 1981, sold them all for a pretax profit of $267,728 and paid D and Smith approximately $110,491. On June 8- 9, 1981, Amyx, on behalf of the Hodges, Amyx, Cross and Hodges investment partnership, purchased 13,000 shares and on June 10-11, 1981, sold them all for a pretax profit of $ $205,055. They paid D and Smith $85,310. On June 6, 1981, four days prior to the public announcement concerning Phoenix, a state invitational secondary school track meet was held at the University of Oklahoma campus. D arrived at the meet between 10:00 and 10:30 a.m. to watch his son compete, and George and Linda Platt arrived between 9:00 and 10:00 a.m. to watch their son compete. G. Platt recognized P, and they greeted each other. Neither knew that the other would be attending the meet. They knew each other but were in each other’s close social orbits. D knew that G. Platt was Chairman of the Board of TIC and further knew that TIC was a substantial shareholder of Phoenix because D was a stockholder in TIC and thereby knew Phoenix was a subsidiary. G. Platt and D exchanged pleasantries. D departed and continued on through the bleachers. Throughout the day, D moved around a great deal, at times speaking with his son or other participants and their families, signing autographs and watching the different events on the field. D joined the Platts to visit with them about three to five times. D and the Platts talked about their sons' participation in the meet, the oil and gas business, the economy, football, and their respective personal investments. They never had any conversations regarding Phoenix or Morgan Stanley, nor did they have any conversations regarding any mergers, acquisitions, take-overs, or possible liquidations of Phoenix in which Morgan Stanley would play a part. G. Platt did not make any stock recommendations, nor did he intentionally communicate material, non-public corporate information to Switzer about Phoenix. Eventually, D lay down on a row of bleachers behind the Platts to sunbathe while waiting for his son's next event. While sunbathing, he overheard G. Platt talking to his wife about his trip to New York the prior day. G. Platt mentioned Morgan Stanley and his desire to dispose of or liquidate Phoenix. G. Platt talked about several companies bidding on Phoenix. Switzer also overheard that an announcement of a 'possible' liquidation of Phoenix might occur the following Thursday. D remained on the bleachers behind the Platts for approximately twenty minutes, then got up and continued to move about. D had no knowledge as to whether the information he had overheard was confidential. G. Platt was not conscious of P's presence nor that D had overheard any conversation. After the meet, D returned home and looked up the price of Phoenix. He then had dinner with Sedwyn Kennedy and told Kennedy he had overheard a conversation about the possible liquidation of Phoenix and that it would probably occur or be announced the next Thursday. D told him the source was a gentleman who was an executive with TIC. D did not tell Kennedy the man was G. Platt. D and Kennedy are close friends and have known each other since 1966. Switzer and Kennedy each expressed an intention to purchase Phoenix stock. Kennedy telephoned Deem, his partner in S&H Investments, to discuss the possible purchase of Phoenix stock. Kennedy told Deem that D had talked to him about Phoenix, but did not give him any other details. Kennedy and Deem agreed to purchase shares of Phoenix through their partnership, S&H Investments. D called Lee Allan Smith about the information regarding the possible liquidation or buy-out of Phoenix. D and Smith decided to approach Harold Hodges and Robert Hoover about providing the capital for buying some Phoenix stock with them because Smith and D had insufficient available cash at that time to purchase a significant number of shares on their own. D and Smith met with Hodges and spilled the beans, but D did not state the source of the information, and Hodges did not inquire. Hodges agreed to supply the capital and purchase the stock, and that any profits or losses would be split 50/50 with D and Smith on one side. Hodges told Robert Amyx and instructed him to make stock purchases in both companies. D and Smith met with Robert Hoover at his home, where he was having a party. D and Smith arrived separately. Smith first discussed the matter with Hoover and did not mention where he had received the information. P also told Hoover something was going to happen with Phoenix, but did not say from whom he had heard the information. Hoover agreed to purchase Phoenix stock jointly with P and Switzer. Hoover advanced the capital and purchased the stock for his account, based on an understanding that any losses or profits would be split, fifty percent (50%) to Hoover, and the remaining fifty percent (50%) to be divided between P and Switzer. G. Platt did not learn of D's purchase or sale of Phoenix stock or of the conversation D had overheard until on or about March 10 or 11, 1982. On March 10, D called G. Platt at Platt's condominium in Snow Mass, Colorado, and asked to meet with him because D said something he had inadvertently done would affect Platt. D told G. Platt that he had been sitting behind G. Platt and his wife at the track meet on June 6, 1981, and had overheard the conversation about Phoenix. He told him that D and other friends of his had purchased and sold Phoenix stock. On March 22, 1982, G. Platt, D and Gist met at TIC's offices, and D again related the facts he had told G. Platt on or about March 10 or 11, 1982. G. Platt did not share in the profits. G. Platt did not receive any direct or indirect pecuniary gain nor any reputational benefit likely to translate into future earnings due to Switzer's inadvertent receipt of the information regarding Phoenix. None of the defendants had a relationship of trust and confidence with Phoenix, its shareholders, or G. Platt. None of these defendants knew or acted in reckless disregard of circumstances through which they could have had a reason to believe that the information they received was disclosed by an insider of Phoenix for an improper purpose.

The legal issues presented in this case will be displayed here.

The court's holding and decision will be displayed here.

Legal analysis from Dean's Law Dictionary will be displayed here.