Opinion ID: 406453
Heading Depth: 1
Heading Rank: 3

Heading: the rlc-rpi stock-for-assets exchange:

Text: 22 Appellant Rathborne has argued that the RLC-RPI stock-for-assets exchange constituted a statutory sale of securities for the purposes of Section 10(b) and that as an ultimate recipient of RPI stock, he has standing to assert a 10b-5 claim challenging the transaction. We do not agree. 23 An arms-length stock-for-assets trade between two distinct and independent corporations will constitute a purchase or sale of securities for the purposes of § 10(b). Swanson v. American Consumer Industries, 415 F.2d 1326, 1330 (7th Cir. 1969). However, a transfer of securities from a wholly controlled subsidiary to its parent or between two corporations wholly controlled by a third does not amount to a statutory purchase or sale. See e.g., International Controls Corporation v. Vesco, 490 F.2d 1334, 1343 (2nd Cir. 1974) ((S) elf-dealing transaction (between corporation and wholly controlled subsidiary) does not ... satisfy the 'purchase or sale' requirement of § 10(b) and Rule 10b-5); In Re Penn Central Securities Litigation, 347 F.Supp. 1324, 1336-1339 (E.D.Pa.1972), aff'd, 494 F.2d 528, 532-539 (3rd Cir. 1974) 15 ; cf. Blau v. Mission Corp., 212 F.2d 77, 80 (2nd Cir. 1954) (exchange of shares between parent corporation and wholly controlled subsidiary is not a statutory purchase or sale, but is a mere transfer between corporate pockets). 24 In this case, all parties agree that the new-born RPI was an entity spawned and wholly controlled by its corporate parent, RLC. The stock-for-assets trade between RLC and RPI can hardly be characterized as the kind of arms-length transaction which would constitute a statutory purchase or sale. Rather, it was a mere transfer between corporate pockets. We therefore conclude the RLC-RPI stock-for-assets exchange did not amount to a purchase or sale transaction for the purposes of § 10(b) or Rule 10b-5. 25 Moreover, even if we were to assume that the RLC-RPI stock-for-assets trade did constitute a statutory purchase or sale, we find that this plaintiff lacks standing to challenge the transaction. There were only two parties to the RLC-RPI stock-for-assets trade: RLC and RPI. Even if the stock-for-assets trade did constitute a purchase or sale, only RLC or RPI would have standing as actual purchasers or sellers to bring a 10b-5 action. This shareholder-plaintiff does not. Blue Chip Stamps v. Manor Drug Stores, supra at 738. 16 26 Thus, we reject the appellant's contention that the RLC-RPI stock-for-assets exchange can serve as the basis for his 10b-5 action. This stock-for-assets trade did not constitute a statutory purchase or sale of securities. Moreover, even if the trade had involved a sale, this plaintiff was not a party to the transaction and therefore was not an actual purchaser or seller of securities. 27