Smolowe V Delendo Corp.

136 F.2d 231 (2nd Cir. 1941)

Purchase the Printed Copy at bsmsphd.com

Nature of the Case

To access this section all you need to do is click here and register.

Facts

Seskis and Kaplan (Ds) each owned about 12 percent of the 800,000 shares of $1 par value stock issued by D. D had negotiated a sale in 1936 but it was terminated because of D's contingent liability on a tax claim. That claim was eventually settled around April 1940. Negotiations with Schenley's were reopened and were consummated by sale on April 30, 1940, for $4,000,000, plus the assumption of certain of the Corporation's liabilities. From December 1, 1939, to May 30, 1940, Seskis (D) purchased 15,504 shares for $25,150.20 and sold 15,800 shares for $35,550, while Kaplan (D) purchased 22,900 shares for $48,172 and sold 21,700 shares for $53,405.16. Ps brought separate actions under this statute on behalf of themselves and other stockholders for recovery by the Corporation under §16(b). The court held Ds liable for the maximum profit even conceding that they made the trades in good faith and without any 'unfair' use of inside information. Seskis (D) was liable for $9,733.80, and Kaplan (D) was liable for $9,161.05. Ds appealed.