BLAU V. LEHMAN, 368 U. S. 403 (1962)

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U.S. Supreme Court

Blau v. Lehman, 368 U.S. 403 (1962)

Blau v. Lehman

No. 66

Argued December 12-13, 1961

Decided January 22, 1962

368 U.S. 403


Petitioner, a stockholder in a corporation with stock registered on a national securities exchange, sued under § 16(b) of the Securities Exchange Act of 1934 to recover on behalf of the corporation from one of its directors and a partnership of which he was a member "short-swing" profits realized by them on the purchase and sale by the partnership of stock of the corporation within a period of less than six months. Petitioner alleged that the partnership had "deputed" the director to represent its interests on the corporation's board of directors and that, by reason of his inside information, he had caused the partnership to purchase the stock of the corporation. The District Court found that these allegations were not supported by the evidence, and that the partnership had bought the stock solely on the basis of the corporation's public announcements, and without consulting the director. Accordingly, it denied a judgment against the partnership and the director for the full amount of the resulting profits and awarded a judgment against the director for only his proportionate share of the partnership's profits on these transactions, without interest. The Court of Appeals affirmed in all respects.

Held: the judgment is affirmed. Pp. 368 U. S. 404-414.

(1) The findings of the courts below on the disputed factual issues were not clearly erroneous; they were not conclusions of law; and they are sustained. Pp. 368 U. S. 408-409.

(2) The partnership was neither an officer nor a 10% stockholder of the corporation, and it cannot be held liable as a director under § 16(b). Pp. 368 U. S. 409-413.

(a) The findings of the courts below, which are accepted by this Court, preclude a finding that the partnership actually functioned as a director of the corporation through a partner who had been deputized by the partnership to perform a director's duties, not for himself, but for the partnership. Pp. 368 U. S. 409-410.

(b) The fact that § 3(a)(9) defines "person" as including a partnership does not require that the entire partnership be held liable as an "insider" under § 16(b) merely because one of its members was a director of the corporation. P. 368 U. S. 410.

Page 368 U. S. 404

(c) This Court cannot extend the coverage of § 16(b) so as to include a partnership of which a director is a member. Pp. 368 U. S. 410-413.

(3) The courts below properly held that the director was liable only for any profit realized by himself, and not for all the profits earned by the partnership on these transactions. Pp. 368 U. S. 413-414.

(4) Denial by the two courts below of interest on the amount for which the director was held liable was neither so unfair nor so inequitable as to require this Court to upset it. P. 368 U. S. 414.

286 F.2d 786, affirmed.

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