Court Opinion

ID: 9650972
Source: CourtListenerOpinion
Date Created: 2023-08-23 15:58:48.832204+00
Date Added: 2024-06-11T18:12:28.128674
License: Public Domain

CLARK, Circuit Judge
(dissenting).
While these are obviously borderline cases, yet they must be decided in their logical setting in the light of what has gone before in the construction of the statute. And unless we are to say rather arbitrarily that, since we must stop somewhere in a generous interpretation of the Congressional purpose, we shall stop right here, I do not think that this is a good place to draw the line. For the differences between these transactions and those already determined to be within the statute do not seem to me sufficient either logically or practically to justify a distinction here. Under the statute the term “security” includes the “right to subscribe to or purchase” stock, “buy” and “purchase” each include a contract “to buy, purchase, or otherwise acquire,” and “sale” and “sell” each include a contract “to sell or otherwise dispose of” a security. 15 U.S.C.A. § 78c(a) (10), (13), (14). And “contract” is broad enough to1 include an “executed acquisition.” Park & Tilford, Inc. v. Schulte, 2 Cir., 160 F. 2d 984, 987, certiorari denied Schulte v. Park & Tilford, Inc., 332 U.S. 761, 68 S.Ct. 64. 'fhe statutory language is therefore inclusive enough to reach these transactions.
When we turn to the purpose of the legislation, to wring the profit out of short-swing transactions by insiders, I should think this same result was indicated. If ■these transactions are without the scope of the Act, we have an area of considerable inducement to the insider to play for the short swing. When, indeed, the insider is a person of ample means and large public interests (as “insiders” I fancy are prone to be), then the inducements here may be as substantial as, if not more so than, in the more prosaic cases heretofore decided. If one has at hand so ready a means of recompensing faithful personal service at home or in the office, or of making the ties of personal loyalty of company executive officers yet stronger than before, or, indeed —though this case is not before us — of remembering bountifully one’s favorite charities, I should think the necessity of doing so only through the use of the stock itself, instead of the money which might be realized therefrom, was one which could be accepted with considerable tranquility. So inside advance knowledge of an approaching issue of stock with grant of share-rights might point to the retention of stock already owned or the purchase of more, while the ordinary investor remains ignorant of the attractive possibilities about to open before him. In this instance, in fact, the gain is directly in money received on sale of the rights; if care must be taken to avoid direct subscription to the st6ck followed by sale — since that is within the statute under Park & Tilford, Inc. v. Schulte, supra — yet that means simply a quicker return on a smaller investment. In all these instances the principle seems to me the same; the insider has an obvious and attractive advantage over others, unless all are held to be within the statute.
Of course computation of the amount of profit may be slightly more difficult than in the cases of direct purchase and sale. But I cannot see that it presents any insuperable difficulties. It seems to me but the ordinary task of valuing the security at its fair market price at the crucial dates of its acquisition and disposition. I would reverse and remand for that purpose here.