Court Opinion

ID: 8876341
Source: CourtListenerOpinion
Date Created: 2022-11-26 19:10:34.961443+00
Date Added: 2024-06-11T17:06:22.148287
License: Public Domain

BLACKMUN, Circuit Judge
(dissenting) :
Having been a member of the majority in Western Auto Supply Co. v. Gamble-Skogmo, Inc., 348 F.2d 736 (8 Cir. 1965), cert. denied 382 U.S. 987, 86 S.Ct. 556, 15 L.Ed.2d 475, I feel obliged respectfully to dissent. While that case and this one are factually different, I suspect that the results are philosophically inconsistent. I also wonder whether our decision in Gamble-Skogmo might not, in part at least, have prompted Judge Nordbye to decide oppositely in the two cases at the trial level.
The majority seem to concede that the conversion here “falls within the literal boundaries of the Act” and “can be read into a literal interpretation of the § 16(b) [§ 3(a) (13) and (14)] language of ‘otherwise acquire’ and ‘otherwise dispose of’ ”. Further, I bear in mind the inescapable, facts here (a) that these plaintiff-directors voted for the call of the preferred; (b) that they voted for the increase in common dividend effective shortly thereafter; (c) that their increments of ownership in the corporation after the conversion were exactly the same as they would have been had they sold their preferred on the open market and forthwith used the proceeds of that sale to purchase common on the market; and (d) that in the latter situation, with the ensuing sale of common, no one would or could dispute the applicability of § 16(b) and the consequent liability of the plaintiffs. These facts, it seems to me, add up to the possibility of misuse of inside information. And this mere possibility suffices.
My own reaction is that either the statute means what it literally says or that it does not; that if the Congress intended to provide additional exceptions, it would have done so in clear language; and that the recognized purpose and aim of the statute are more consistently and protectively to be served if the statute is construed literally and objectively rather than non-literally and subjectively on a case-by-case application. The latter inevitably is a weakening process.
However, with the Second Circuit now clearly withdrawing from Judge Clark’s broad measure of § 16(b) as expressed in Park & Tilford, Inc. v. Schulte, 160 F.2d 984 (2 Cir. 1947), cert. denied 332 U.S. 761, 68 S.Ct. 64, 92 L.Ed. 347, the Courts of Appeals, other than the Third Circuit’s 6-2 en banc majority in Heli-Coil Corp. v. Webster, 352 F.2d 156 (3 Cir. 1965), appear now to prefer to follow the ad hoe path. The Supreme Court ultimately may say that that view is to be preferred. At least, Mr. Justice Stewart’s attitude is apparent from his authorship of the opinion in Ferraiolo v. Newman, 259 F.2d 342 (6 Cir. 1958), cert. denied 359 U.S. 927, 79 S.Ct. 606, 3 L.Ed.2d 629. Until the Supreme Court does so state, however, I must, in good conscience, adhere to my literal and objective construction preference.
I confess that my persuasion has been deeply shaken by the Security and Ex*539change Commission’s recent about-face with its amendment of its Rule 16b-9, 17 C.F.R. 240.166-9, and its announced position that from and after February-17, 1966, a conversion of this kind is outside the statute and not touched by it, but that these plaintiffs’ particular conversions, effected prior to that date, are within the statute and subject to its consequences. I am not entirely sure that Congress, by the subsection’s final sentence, meant to give the Commission the power so to legislate at will by abruptly changing the reach of the statute which it had regarded otherwise for over a generation, or that, if it did, such delegated authority is not vulnerable to attack, or that the announced new rule is consistent with the statute anyway. But these are issues which we need not now decide.
Perhaps the Supreme Court one day soon will tell us how these somewhat conflicting approaches to § 16(b) by the Courts of Appeals are to be resolved. In the meantime, I would affirm.