The opinion of the court was delivered by: WYATT
This is a motion by the Securities and Exchange Commission (the Commission or SEC) for summary judgment against defendant Magnuson on the second claim in the complaint (there called "second cause of action"). Fed. R. Civ. P. 56(a). The motion is said to be for "partial summary judgment", a form of words not used in the Rule and the accuracy of which, as applied to this motion, may be questionable. 6 Moore's Federal Practice (2d ed.) 2745-2762.
The motion is supported by affidavits of Richard E. Nathan, sworn to April 19 and May 24, 1968; of John J. Benvegar, sworn to April 19, 1968 (with exhibits attested by Charles A. Moore); and of Charles A. Moore, sworn to May 23, 1968. The motion is opposed by affidavits of defendant Magnuson, sworn to May 13, 1968 and of Robert Newman, sworn to May 29, 1968.
The motion must be granted.
The second claim in the complaint is directed against defendant Magnuson only. The averments are that the stock of Hecla Mining Company (Hecla), a Washington corporation, has been at all relevant times registered on a national securities exchange (meaning that the exchange itself was registered as a "national securities exchange" under Section 6 of the Securities Exchange Act of 1934 (15 U.S.C. § 78f; the "1934 Act") and that a "registration" was effective as to the Hecla stock under Section 12 of the 1934 Act (15 U.S.C. § 78 l)); that Magnuson was a director of Hecla; that during five months in 1963 and during January and February 1964 Magnuson had 15 transactions in Hecla stock (which meant a "change" in his "ownership") which he failed to report as required by Section 16(a) of the 1934 Act (15 U.S.C. § 78p(a)); that he finally reported these transactions on December 30, 1964 after he knew that the Commission was investigating him; and that in October 1963 Magnuson filed a report as to a transaction by him in Hecla stock in September 1963 and that such report was false. The Commission asks for an injunction against any future violation by Magnuson of Section 16(a) of the 1934 Act.
The second claim against Magnuson is made under Section 21(e) of the 1934 Act (15 U.S.C. § 78u(e)) authorizing the Commission to bring such an action and authorizing the Court "upon a proper showing" to grant without bond a permanent or temporary injunction.
Section 16(a) of the 1934 Act requires, among other things, that directors of a corporation which has stock registered on a national securities exchange must file certain statements with the exchange and with the Commission. In the context of the case at bar, the first statement required is of the number of shares of stock of the corporation of which the director is the "beneficial owner". This must be filed within ten days after he became a director. Thereafter, in any calendar month in which there is any change in his ownership of stock of the corporation, the director must file a statement indicating all changes in ownership of the stock and the number of shares owned at the end of that month. The word "report" and the word "reports" are sometimes used hereafter to refer to the statement or statements required by Section 16(a) to be filed. The word "file" in the statute clearly means delivery to the Commission and where a statement is sent by mail it is not filed until received by the Commission. This is also made plain by the rules of the SEC. 17 CFR § 240.0-3.
The rules of the SEC require that the initial statement of ownership by a director be filed on Form 3 and that monthly statements of changes of ownership be filed on Form 4. These forms are printed and supplied by the SEC with detailed instructions. These instructions as to Form 4 include directions that the "exact date" be stated and that statements are not deemed filed until "actually received by the Commission or exchange". At all relevant times defendant Magnuson was thoroughly familiar with these rules, forms, and instructions.
The facts are not subject to dispute.
Magnuson is a certified public accountant living in Wallace, Idaho. At all relevant times he was a director of Hecla, a mining corporation, the stock of which was registered on the American Stock Exchange, a national securities exchange.
Lucky Friday Silver-Lead Mines Company ("Lucky") was also a mining corporation and Magnuson was at all relevant times a director of Lucky. The shares of Lucky were at all relevant times registered on the American Stock Exchange, a national securities exchange.
Magnuson became a director of Hecla on July 22, 1960. He was thus required to file on or before August 1 a statement of all Hecla shares owned by him (as used herein "shares" refers to shares of Hecla). The report was filed on September 29, 1960 (almost two months late); it showed 1000 shares as owned.
On August 2, 1961, Magnuson sold 900 shares. He was required to file a report by September 11, 1961. The report was filed on February 11, 1963 (one year and five months late); it showed 100 shares then owned. The report was filed after notice from the SEC that it had discovered evidence of the transaction.
On December 17, 18 and 19, 1962, Magnuson bought 300, 100 and 100 shares, respectively. A report was required to be filed by January 10, 1963. He filed the report on January 21, 1963, showing 600 shares then owned.
On January 4, 1963, Magnuson bought 100 shares but filed no report as required by Section 16(a) until nearly two years later under circumstances to be described.
(References to dates hereafter, when no year is given, are to the year 1963.)
On May 20, Magnuson filed a report showing purchases by him of 200 Hecla shares on April 29, 100 shares on April 30, and 900 shares owned at the end of April 1963. The report was late because required to be filed by May 10. The report was false in that Magnuson owned at least 1000 shares at the end of January 1963.
In June, Magnuson, as "custodian under the Idaho Uniform Gifts to Minors Act for the benefit of his children", sold short 600 shares in three transactions. Such transactions are required to be reported by the director because beneficial ownership, for purposes of Section 16(a), includes ownership as a trustee where the beneficiaries are members of the immediate family of the director. 17 CFR § ...