Court Opinion

ID: 4635369
Source: CourtListenerOpinion
Date Created: 2020-11-23 16:00:28.138599+00
Date Added: 2024-06-11T07:58:22.422728
License: Public Domain

19-2703 (L)
Packer v. Raging Capital Management

                           UNITED STATES COURT OF APPEALS
                               FOR THE SECOND CIRCUIT

                                          August Term 2020

        Argued: August 17, 2020                                    Decided: November 23, 2020

                                   Docket Nos. 19-2703, 19-2852

------------------------------------------
BRAD PACKER, DERIVATIVELY ON BEHALF OF 1-800-FLOWERS.COM, INC.,

             Plaintiff - Appellee-Cross-Appellant,

                                 V.

RAGING CAPITAL MANAGEMENT, LLC, RAGING CAPITAL MASTER FUND, LTD.,
WILLIAM C. MARTIN,

             Defendants - Appellants-Cross-Appellees,

1-800-FLOWERS.COM, INC.,

        Defendant.
------------------------------------------

Before: NEWMAN, POOLER Circuit Judges. 1

        Appeal and cross-appeal from a judgment of the Eastern District of New

York (Gary R. Brown, Magistrate Judge), granting summary judgment in favor of

        1 Circuit Judge Peter W. Hall, originally a member of this panel, is currently unavailable. The appeal
is being decided by the remaining members of the panel, who are in agreement. See 2d Cir. IOP E(b).

                                                          1
Brad Packer in a derivative suit on behalf of 1-800-Flowers.com, Inc. against

Raging Capital Master Fund, Ltd. (”Master Fund”). The District Court ruled that

Master Fund was the beneficial owner of more than ten percent of the shares of 1-

800-Flowers, Inc., which were bought and sold within a period of six months. The

judgment requires Master Fund to disgorge $4,909,393 in short-swing profits for

violating section 16(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78p(b).

Master Fund contends in part that factual questions remain as to whether it was a

beneficial owners of the shares.

      Packer cross-appeals from the denial of prejudgment interest.

      We conclude that factual questions remain on the issue of Master Fund’s

beneficial ownership and therefore remand. In view of that ruling, we dismiss the

cross-appeal as moot.

                                   Thomas J. Fleming, Olsham Frome Wolosky LLP,
                                       New York, NY (Martin D. Edel, Goulston &
                                       Storrs P.C., New York, NY, David M.
                                       Zucker, Goulston & Storrs P.C., Boston, MA,
                                       on the brief), for Defendants-Appellants-
                                       Cross-Appellees William C. Martin, Raging
                                       Capital Master Fund, Ltd., and Raging
                                       Capital Management, LLC.

                                   Paul D. Wexler, New York, NY (Glenn F. Ostrager,
                                         Joshua S. Broitman, Roberto L. Gomez,
                                         Ostrager Chong Flaherty & Broitman P.C.,

                                           2
                                                 New York, NY, on the brief), for Plaintiff-
                                                 Appellee-Cross-Appellant Brad Packer.

                                         (Douglas A. Rappaport, Akin Gump Strauss
                                              Hauer & Feld LLP, New York, NY, Z. W.
                                              Julius Chen, Akin Gump Strauss Hauer &
                                              Feld LLP, Washington, DC, Alan L. Dye,
                                              Hogan Lovells US LLP, Washington, DC, for
                                              amicus curiae Managed Funds Association,
                                              in support of Defendants-Appellants-Cross-
                                              Appellees.)

JON O. NEWMAN, Circuit Judge:

        The issue on this appeal is whether the customer of a regulated investment

advisor was the beneficial owner of more than ten percent of the shares of 1-800-

Flowers.com, Inc. (“Flowers”), which were bought and sold within an interval of

six months2 (“trading period”), a transaction for which section 16(b) of the

Securities Exchange Act of 1934, 15 U.S.C. § 78p(b), requires a beneficial owner to

disgorge such short-swing profits. Appellants Raging Capital Management, LLC

(“RCM”), Raging Capital Master Fund, Ltd. (“Master Fund”), and William C.

Martin appeal from the Aug. 21, 2019, judgment of the District Court for the

Eastern District of New York (Gary R. Brown, Magistrate Judge), requiring Master

        2From April 30, 2014, to January 31, 2015. See Packer v. Raging Capital Management, LLC, No. 15-CV-
5933, 2019 WL 3936813, at *1 (E.D.N.Y. Aug. 20, 2019).

                                                    3
Fund to disgorge $4,909,393 in short-swing profits in a derivative suit brought by

Appellee Brad Packer on behalf of 1-800-Flowers.com, Inc. Packer cross-appeals

from the denial of prejudgment interest.

        We conclude that factual issues remain on the issue of whether Master Fund

was the beneficial owner of the shares, and we therefore vacate the judgment

against Master Fund and remand for further proceedings. In view of that ruling,

we dismiss Packer’s cross-appeal as moot.

                                            Background

        Understanding the complicated factual background requires identification

of four entities and several individuals:

        RCM is a Delaware limited liability company, which is a registered

investment advisor as defined by the Investment Advisers Act of 1940, 15 U.S.C.

§ 80b-2(a)(11). 3

        Master Fund is a Cayman Islands corporation, which is an investment fund

and a customer of RCM.

        Raging Capital Offshore Fund (“Offshore”) is a Cayman Islands

corporation, which is also a customer of RCM.

        3The amicus curiae brief refers to a registered investment advisor as an “investment manager.” Br.
for amicus curiae at 4.

                                                    4
       Raging Capital Fund (QP), LP (“QP”), is a Delaware limited partnership,

which is also a customer of RCM.

       Both Offshore and QP accept investments from the public and funnel these

investments to Master Fund.

       Offshore and QP are referred to in this litigation as “feeder funds.” The

feeder funds together own 100 percent of Master Fund’s “Common Shares.”

During the trading period, the feeder funds had about 143 investors and now have

about 230 investors.

       Martin holds positions in RCM, Master Fund, and Offshore, and indirectly

has a role in QP. He is the chairman, chief investment officer, and managing

member of RCM, and owns most, and possibly all, of its shares.4 Martin is also a

member of the three-member board of directors of Master Fund. During the

trading period, the other two directors of Master Fund were two Cayman Island

LLCs, DMS Fund Governance I Ltd. (“DMS I”) and DMS Fund Governance II Ltd.

(“DMS II”), characterized by Martin as “directors services firms.” Since November

       4 Packer’s statement of undisputed facts asserts that Martin has “sole ownership of RCM,” A-643,
and Martin stated in a deposition, “I am the only owner” of RCM, A- 711. However, the Defendants dispute
that Martin is the sole owner of RCM, and contend that he is the “majority owner” of RCM. A-793.

                                                   5
2015, the other two directors of Master Fund have been Don Ebanks and Wade

Kenny. 5

       Martin is also a member of the three-member board of Offshore. During the

trading period, the other two directors of Offshore were Ebanks and Kenny,

although Kenny is no longer a director.

       Martin is a limited partner of QP. The general partner of QP is RCM, which

is controlled by Martin.

       The relationship among RCM, Master Fund, Offshore, and QP is governed

by an Investment Management Agreement (”IMA”), which was executed on

November 9, 2012. Martin signed the IMA on behalf of all four parties to the

agreement. Under the terms of the IMA, RCM makes “[a]ll investment decisions”

for Master Fund, Offshore, and QP (“the Funds”), A-29, has “exclusive[] . . . control

and discretion” over purchase or sale of the Funds’ securities, A-30, and has “the

sole authority to exercise all rights, powers, privileges, and other incidents of

ownership or possession (including but not limited to, voting power) with respect

to all such securities and financial instruments held by the Master Fund,” A-29-A-

       5  In a sworn declaration, Martin states that, during the trading period, Ebanks and Kenny served
as directors of Master Fund “through” DMS I and DMS II and, since November 2015, served as directors
of Master Fund “in their individual capacities.” A-32.

                                                   6
30. By these provisions of the IMA, the Defendants contend, Master Fund has

delegated beneficial ownership of the Flowers shares to RCM.

          Especially relevant to this appeal, the termination provision of the IMA

states:

          (b) any party may terminate this Agreement effective at the close of
          business on the last day of any fiscal quarter by giving the other party
          not less than sixty-one days’ written notice; provided, however, that
          (i) unanimous consent of shareholders of the Cayman Feeder
          [Offshore] is required for the Cayman Feeder to terminate this
          Agreement under (b) of this Section 9 and (ii) unanimous consent of
          the partners of the U.S. Feeder [QP] is required for the U.S. Feeder to
          terminate this Agreement under (b) of this section 9.

A-102.

          The litigation. In October 2015, Packer filed a complaint derivatively on

behalf of Flowers against RCM, Master Fund, and Martin to obtain disgorgement

of profits resulting from a short-swing sale of Flowers stock. The Complaint

alleged that the three defendants were a group for purposes of determining

beneficial ownership and that the group had beneficial ownership of more than

ten percent of Flowers Class A common stock.6 On consent, the case was referred

to Magistrate Judge Brown. In August 2019, with respect to the alleged section

          6Because, after discovery, it became clear that Master Fund held more than ten percent of the
outstanding Flowers shares during the trading period without any grouping, see Packer, 2019 WL 3936813,
at *1, we need not consider any issue concerning grouping of shares. Whether Master Fund had beneficial
ownership of those shares remains a central issue of this appeal.

                                                  7
16(b) violation, the District Court granted the Plaintiff’s motion for summary

judgment, denied the Defendants’ motion for summary judgment, and ordered

entry of judgment against Master Fund in the amount of $4,909,395; the District

Court denied Packer’s claim for prejudgment interest. See Packer v. Raging Capital

Management, LLC, No. 15-CV-5933, 2019 WL 3936813 (E.D.N.Y. Aug. 20, 2019). 7

RCM, Master Fund, and Martin timely appealed. Packer cross-appealed from the

denial of prejudgment interest.

                                            Discussion

       Section 16(b) of the Exchange Act requires a “beneficial owner” of more than

ten percent of a company’s shares to disgorge profits obtained from a short-swing

sale. 15 U.S.C. § 78p(b). In 1991, the SEC promulgated Rule 16a-1, which—“[s]olely

for purposes of determining whether a person is a beneficial owner of more than

ten percent [of an issuer’s shares]—defined “beneficial owner” as “any person

who is deemed a beneficial owner pursuant to section 13(d) of the Act.” 17 C.F.R.

§ 240.16a-1(a)(1). In turn, Rule 13d-3 provides:

       (a) For purposes of section 13(d) . . . of the Act a beneficial owner of a
       security includes any person who, directly or indirectly, through any
       contract, arrangement, understanding, relationship, or otherwise has
       or shares:

       7  The District Court had previously denied the Defendants’ motion to dismiss the complaint. See
Packer v. Raging Capital Management, LLC, 242 F. Supp. 3d 141 (E.D.N.Y. 2017).

                                                  8
             (1) Voting power which includes the power to vote, or to direct
      the voting of, such security; and/or
             (2) Investment power which includes the power to dispose, or
      direct the disposition, of such security.

17 C.F.R. § 240.13d-3(a). Rule 13d-3 also provides that a person is deemed to be a

beneficial owner of a security if that person has the right to acquire beneficial

ownership of such security within sixty days. See 17 C.F.R. § 240.13d-3(d)(1)(i).

      In 2009, the SEC advised that if a security holder "has delegated all authority

to vote and dispose of its stock to an investment advisor” and lacks “the right

under the contract to rescind the authority granted . . . within 60 days,” the security

holder does not need to “report beneficial ownership” of the securities. See SEC

Division of Corporate Finance, Compliance and Disclosure Interpretations,

Exchange Act Sections 13(d) and 13(g) and Regulation 13D-G Beneficial

Ownership Reporting, Question 105.04 (Sept 14, 2009). 8

      In this case, the Defendants make two arguments to dispute Packer’s

contention that Master Fund was a beneficial owner of more ten percent of Flowers

shares. The first builds on the undisputed premises that RCM, as a registered

investment advisor, is an entity exempt from beneficial ownership of shares it

holds on behalf of a customer by virtue of exclusion (v) of Rule 16a-1(a)(1), 17

      8   Available at https://www.sec.gov/divisions/corpfin/guidance/reg13d-interp.htm.

                                                   9
C.F.R. § 240.161(a)(1), 9 and that Martin is a control person with respect to RCM

and exempt from beneficial ownership by virtue of exclusion (vii) of Rule 16a-

1(a)(1), 17 C.F.R. § 240.161(a)(1). 10 Then, the Defendants assert in part II(C) of the

brief that RCM’s exempt status somehow confers a derivative exempt status on

Master Fund. The District Court properly rejected what it termed the Defendants’

“inoculation theory,” stating, “There is no authority supporting the notion that an

investor [Master Fund] can derivatively benefit from the exemption enjoyed by its

registered investment advisor [RCM].” Packer, 2019 WL 3936813, at *2-*3. Nothing

in Egghead supports Master Fund's argument that the registered investment

advisor exception automatically extends to exempt all members of a group from

beneficial ownership.

        Master Fund endeavors to enlist Egghead.com, Inc. v. Brookhaven Management

Co., 340 F.3d 79 (2d Cir. 2003), in support of its exemption claims based on RCM’s

exemption. Egghead does not aid Master Fund. That decision considered a

plaintiff’s argument based on what was then exclusion (x) (now exclusion (xi)) of

        9   A registered investment advisor is not exempt from being deemed the beneficial owner of shares
held for the benefit of its customers if the shares were acquired for the purpose or effect of influencing
control of the issuer. See Rule 16a-1(a)(1)(v). Packer makes no claim that this limitation on the exemption is
applicable in this case.
          10 Exclusion (vii) exempts “[a] parent holding company or control person, provided the aggregate

amount held directly by the parent or control person, and directly or indirectly by their subsidiaries or
affiliates that are not persons specific in § 240.16a-1(a)(1)(i) through (x), does not exceed one percent of the
securities of the subject class.” 17 C.F.R. § 240.16a-1(a)(1)(vii).

                                                      10
Rule 16a-1(a)(1), 17 C.F.R. § 240.16a-1(x) (as cited in Egghead, 340 F.3d at 81 n.1).11

Exclusion (x) exempted from beneficial ownership a group, provided all its

members were exempt from beneficial ownership by virtue of the exclusions in

the first nine of the Rule’s exemptions. See Rule 16a-1(a)(1)(i)-(ix), 17 C.F.R.

§ 240.16a-1(i)-(ix). The plaintiff’s argument in Egghead was that the investment

advisor in that case could not be exempt from beneficial ownership because it was

a member of a group and all group members did not qualify for exemption under

exclusion (x). Our Court rejected the argument, ruling that an investment advisor

did not lose its exclusion (v) exemption just because it did not qualify for

exemption under exclusion (x). See Egghead, 340 F.3d at 85-86. Nothing in Egghead

supports Master Fund's argument that the registered investment advisor

exception automatically extends to exempt all members of a group from beneficial

ownership.

        The Defendants’ second argument to avoid Master Fund’s beneficial

ownership is that, by virtue of the IMA, Master Fund delegated to RCM

investment and voting authority with respect to the Flowers shares that RCM

         Exclusion (xi) in the version of the rule cited in Egghead has been eliminated and replaced with
        11

what was then exclusion (x).

                                                   11
holds for its benefit. The District Court ruled that the delegation was not effective

to preclude Master Fund’s beneficial ownership for three reasons.

      First, the District Court relied on the relationship among the parties to the

IMA. “Assuming the validity of the delegation theory, the intertwined

relationship of these parties proves fatal,” and “the delegation theory fails here

because it is undisputed that RCM, Martin, and Master Fund are not unaffiliated

parties.” Packer, 2019 WL 3936813, at *5. Second, the District Court understood the

IMA to make RCM the agent of Master Fund. “[A] review of the express terms of

the [IMA] . . . makes it patent that Master Fund authorized RCM to act as its agent

for all purposes relevant thereto.” Id. at *4 (emphasis added). Third, the District

Court deemed Martin to have the power to amend the IMA, including its

requirement of sixty-one days’ notice for termination. “Since nothing prevented

defendants from altering the agreement at will, the facts here cannot be reasonably

construed as an effective delegation.” Id. at *5. In the District Court’s view, Martin,

the person who signed the IMA for all four parties, “could, presumably, revise,

amend, or abrogate that agreement with a few strokes of a pen.” Id. at *4 n.5.

      Before considering each of these three reasons, we set forth some basic

principles concerning section 16(b). Section 16(b) imposes liability “irrespective of

                                          12
any intention on the part of such beneficial owner, director, or officer,” in entering

the transaction. 15 U.S.C. § 78p(b). As we have recognized, “[i]t imposes a form of

strict liability,” thus serving as “strong medicine for the ill Congress sought to

address.” Olagues v. Perceptive Advisors LLC, 902 F.3d 121, 125-26 (2d Cir. 2018)

(internal quotation marks omitted). “Courts have therefore ‘been reluctant to

exceed a literal, “mechanical” application of the statutory text in determining who

may be subject to liability.’” Id. at 126 (quoting Gollust v. Mendell, 501 U.S. 115, 122

(1991)). “The strict liability remedy should be employed cautiously to avoid unfair

application.” Id. It is to be applied “narrowly.” Foremost-McKesson, Inc. v. Provident

Securities Co., 423 U.S. 232, 251 (1976).

        It would not be consistent with these principles to accept the District Court’s

first reason for rejecting Master Fund’s delegation of voting and investing

authority to RCM. Although Rule 13d-3(a) includes within the definition of a

beneficial owner “any person who, directly or indirectly, through any contract,

arrangement, understanding, relationship, or otherwise has” voting or investment

authority, 17 C.F.R. § 240.13d-3(a), using generalized wording such as

“intertwined” or “not unaffiliated”12 to bring a person within the coverage of Rule

        12 The District Court quoted a leading treatise’s statement that includes the word “unaffiliated” in
relation to beneficial ownership. Packer, 2019 WL 3936813, at *5. After stating that “‘an entity is the beneficial
owner of its portfolio securities where voting and investment decisions are made by the persons who . . .

                                                       13
13d-3(a) would extend the reach of section 16(b) beyond the text of both the statute

and the rule.

        The District Court based its second reason for rejecting Master Fund’s

delegation to RCM‒an agency relationship‒on this Court’s decisions in Analytical

Surveys, Inc. v. Tonga Partners, L.P., 684 F.3d 46 (2d Cir. 2012), and Huppe v. WPCS

International, Inc., 670 F.3d 214 (2d Cir. 2012). See Packer, 2019 WL 3936813, at *3-*4.

In Tonga, as relevant here, this Court ruled that, under applicable Delaware law,

Del. Code Ann. tit. 6 § 15-301(a), a general partner (Cannell Capital), was the agent

of a limited partnership (Tonga), and that an individual (Cannell), who was the

sole managing member of the general partner, was an agent of the limited

partnership’s agent. As a result of these state-law-based agency relationships, both

the limited partnership and the limited partner’s agent were liable for a violation

are charged with making those decisions,’” the treatise adds, “‘The result may be different where the entity
delegates voting and investment authority to an unaffiliated third party and does not retain the ability to
revoke that authority within 60 days.’” Id. (quoting Peter J. Romeo & Alan L. Dye, Section 16 Treatise and
Reporting Guide, § 2.03[5][f] at 148 (5th ed. 2020)). The use of the word “may” recognizes that the statement
is only a possibility, and, more important, definitively states the governing rule that “an entity may not
remain a beneficial owner of securities, however, where it delegates voting and investment authority to a
third party and does not retain the ability to revoke that authority within 60 days.” Romeo & Dye,
§ 2.03[5][f][i]. We note that treatise co-author Dye has signed the amicus curiae brief submitted by the
Managed Fund Association in this appeal, which explains the word “unaffiliated” in the above-quoted
sentence: “[T]he term ‘unaffiliated’ in this context means a distinct legal entity, as opposed to the fund’s
general partner . . . . The Customer Fund [Master Fund] and the RIA [RCM] are ‘unaffiliated’ in the relevant
sense, given that the two are completely distinct corporate entities whose relationship is governed by strict
contractual terms.” Br. for Amicus Curiae at 26.

                                                     14
of section 16(b) by the managing member of the general partner. See Tonga, 684

F.2d at 51-52.

        Somewhat similarly, in Huppe, on which Tonga was based, this Court ruled

that, under the same Delaware law, two funds (identified as PE and QP), which

were limited partners, were each agents of general partners (unidentified limited

partnerships), and that two individuals (Marxe and Greenhouse), who were

limited partners of those general partners, were agents of the general partners’

agents. As a result, the funds were liable for section 16(b) violations by the

individuals. 670 F.3d at 221-22. 13

        In the pending case, there is no comparable state-law-based agency

relationship between Master Fund and RCM. They are both distinct corporations,

and the District Court did not rule that the corporate veil could be pierced.

        It is true that, pursuant to provisions of the IMA, Master Fund has made

RCM its agent for the specific purpose of exercising voting and investment

authority with respect to the Flowers (and any other) shares that RCM holds on

Master Fund’s behalf. That is the essence of a customer/investment advisor

        13
           As we stated in Rubenstein v. International Value Advisers, LLC, 959 F.3d 541 (2d Cir. 2020), Huppe
held only that an “insider principal cannot shed its insider status by transferring trading authority to a non-
insider agent.” Id. at 550.

                                                      15
relationship. But making an investment advisor a customer’s agent for the

specified purpose of carrying out the advisor’s traditional functions for a customer

does not make the advisor an agent for all purposes. Neither Tonga nor Huppe, nor

anything in SEC statutes, rules, or guidance, supports such a result.

      The District Court’s third reason for rejecting delegation was the Court’s

view that Martin had the power to amend the IMA. Such power, if it existed,

would allow him to eliminate the sixty-one days’ notice requirement in the

termination provision, thereby ending the delegation within sixty days of

acquiring shares and triggering application of Rule 3d-3(a) and section 16(b) to

short-swing profits. The District Court based its view of Martin’s authority to

amend the IMA on the fact that he had signed it on behalf of all four parties to the

agreement. See Packer, 2019 WL 3936813, at *4 n.5, *5.

      We do not doubt that Martin had authority to sign the IMA on behalf of all

four parties to it. Martin was the controlling person of RCM. He signed on behalf

of Master Fund pursuant to a resolution adopted by the three directors of Master

Fund explicitly authorizing any one director to sign the IMA for that corporation.

He signed on behalf of Offshore pursuant to a similar resolution adopted by

                                        16
Offshore’s board. He signed on behalf of QP as the controlling person of RCM,

which was QP’s general partner.

        Authority for an individual to sign a document on behalf of an entity,

however, does not necessarily carry with it authority to commit those entities to

making changes in, or terminating, that document. We can accept that Martin

could commit RCM to amend the IMA because he was in control of RCM. Whether

he could similarly commit Master Fund and the feeder funds is not clear at this

point. With respect to these three entities, the District Court stated, “Notably

absent from the termination provision of the agreement is a requirement that

termination requires ‘unanimous consent’ of Master Fund’s directors or

shareholders, which is an express requisite for termination of the other entities to

the agreement.” Packer, 2019 WL, at *4 n.5.

        The Court’s statement is problematic. First, with respect to Master Fund, the

absence of a unanimous consent requirement in the IMA does not mean that

Master Fund’s board has authorized Martin alone to commit Master Fund to

termination of the agreement. In fact, Martin has averred that the board of Master

Fund “was empowered to act by majority vote only.” 14 A-33. Second, with respect

        14
         Packer relies on resolutions adopted by the board of Master Fund that authorize any one director,
for example, Martin, to make changes to a group of agreements that includes the IMA. Master Fund

                                                   17
to Offshore, the termination provision requires unanimous consent of its

shareholders, but the record to date does not indicate that such consent to

termination has been given. Third, with respect to QP, the termination provision

does not require unanimous consent of its directors or shareholders; it requires

unanimous consent of its partners,15 and the record to date does not indicate that

such consent to termination has been given.

        Packer’s essential argument that Martin could commit Master Fund and the

feeder funds to termination of the IMA is that he had the power to compel all of

the required directors, partners, or shareholders of those entities to do his bidding.

He asserts, for example, that Ebanks and Kenny were not independent of Martin.

He points out that Ebanks acknowledged serving on the boards of about 200

entities, had never met Martin, participated in Master Fund’s quarterly board

meetings by telephone, and “provided no independent decision-making on

behalf of Master Fund.” Br. for Appellee at 7. Packer also cites Master Fund’s

Schedule 13G filings in June and July of 2014, stating that Master Fund

responds that this authority was limited to making changes in the proposed IMA, not the executed
agreement. And Martin has averred that Master Fund’s board can act only by majority vote. To whatever
extent this dispute becomes relevant, it is an issue to be resolved either on a renewed motion for summary
judgment on an expanded record or at trial.
         15 QP, a limited partnership, has neither shareholders nor directors.

                                                   18
acknowledged that it had shared beneficial ownership of more than ten percent

of Flowers’ common stock with RCM and Martin.

        The Defendants have responded by challenging the accuracy or significance

of Packer’s allegations. For example, Martin averred that he has “no affiliation or

relationship” with Ebanks or Kenny, the directors, along with Martin, of Master Fund

and Offshore. A-32. Martin has characterized Ebanks and Kenny as “independent

directors” of Master Fund and Offshore, acting as directors of these entities

“through” two Cayman Island directors services firms. A-32. Martin explained

that “[b]y ‘independent’ I mean directors who had no employment, financial, or

other relationship with me or RCM.” A-31. He also stated, “I have no power to

unilaterally make decisions on behalf of [Master Fund]. Rather, decisions must be

approved, at a minimum, by a majority of the board of directors.” A-33, A-737.

With respect to Master Fund’s 13G Schedules, the Defendants point out that they

disclosed the purchase and sale of the Flowers shares on those schedules, which

they describe as “reserved for institutional investors who have no plan or intent to

effect control of the issuer. See 17 C.F.R. § 240.13d-1(b).” Br. for Appellants at 5.16

         Neither side’s brief discusses the significance, if any, of the fact that the 13G Schedules described
        16

Master Fund’s “voting power” and “dispositive power” as “shared.” A-121, A-131, A-140, A-150.

                                                     19
      Packer seeks to diminish the persuasive force of some of Martin’s sworn

statements by calling them “self-serving,” Br. for Appellee at 9, which they surely

are. Evidence offered by a party to litigation is usually self-serving. That’s why

the party offers it. Whether it is credible and of sufficient persuasive force to

support a favorable finding is a matter for a fact-finder. See United States v. Scully,

877 F.3d 464, 475 (2d Cir. 2017 (“[The witness] is competent to testify . . .even if

his testimony is one-sided and self-serving.”).

      The District Court could not, on a motion for summary judgment, determine

that Martin could alter the IMA on behalf of all four entities with “strokes of a

pen.” Packer, 2019 WL 3936813, at *4 n.5. It remains to be determined as a factual

matter whether, under all the relevant circumstances, Martin is in control of

Master Fund and the feeder funds with authority to commit these entities to

altering or terminating the IMA. Whether that determination can be made on a

renewed motion for summary judgment, after the record has been expanded, or

will require a trial is a matter initially for the District Court on remand.

      For these reasons, the judgment in favor of Packer is vacated, and the case

is remanded for further proceedings. In view of this ruling, the cross-appeal from

the denial of prejudgment interest to Packer is dismissed as moot.

                                           20