The opinion of the court was delivered by: HAIGHT
MEMORANDUM OPINION AND ORDER
This is an action brought by an individual shareholder of Gould Investors Trust (the "Trust") on its behalf (although the Trust is a nominal defendant) against three individuals for profits allegedly realized in short-swing sales and purchases in violation of Section 16(b) of the Securities Exchange Act of 1934 (the "Act"), 15 U.S.C. § 78p(b). The Trust is joined as a defendant because of its failure to bring this action upon plaintiff's demand. There being no dispute as to the facts in this action, both sides have moved for summary judgment pursuant to Rule 56(a) & (b), Fed.R.Civ.P., based on their respective positions as to whether two particular transactions were "purchases" or "sales" within the meaning of the Act. Having determined that the facts as presented are sufficient to determine the legal contentions herein, this Court finds, for the reasons stated in this Opinion, that the plaintiff is entitled to a judgment in the amounts indicated against the individual defendants Stuart S. Gould ("Stuart") and N. Jay Gould ("Jay"). The complaint against the individual Nathan Kupin is hereby dismissed, however, because any profits he might have realized have been paid back to the Trust. Thus plaintiff does not oppose the dismissal. This Court has jurisdiction and proper venue under Section 27 of the Act, 15 U.S.C.A. § 78aa (1971); see Blau v. Lamb, 363 F.2d 507, 512 (2d Cir. 1966), cert. denied, 385 U.S. 1002, 17 L. Ed. 2d 542, 87 S. Ct. 707 (1967).
The following represent the relevant facts as stipulated to by all parties to this action.
1. The Trust is a Massachusetts trust whose shares of Beneficial Interest ("Securities") are listed for public trading on the American Stock Exchange in the City of New York, a "National Exchange" within the meaning of Section 16(a) of the Act, and are registered pursuant to Section 12 of the said Act. By reason of such listing and registration, transactions in the Securities of the Trust engaged in by officers, directors or beneficial owners of more than 10% of a class of Gould Securities ("insiders") are subject to the proscriptions and prohibitions of Section 16(b) of the Act.
2. At all times relevant hereto, the defendants were insiders of the Trust as follows:
Name Position Held From To
Stuart (S. Gould) Trustee 7/1/70 Present
Chairman, Bd. of
Trustees 7/70 7/75
Committee 2/75 Present
Jay (Gould) Trustee 7/70 2/75
Vice President 7/70 2/75
3. The position of "Trustee" in the organizational structure of the Trust is substantially equivalent to the position of director in a corporation.
4. On or about April 24, 1974, the defendants agreed in writing to purchase, in a private transaction, the following quantities of Securities of the Trust from third parties:
Name Quantity Cost/Share
Stuart (S. Gould) 3923 $10
Jay (Gould) 3923 $10
The purchase price was paid through delivery to the Sellers of the personal notes of the respective purchasers.
5. On or about June 7, 1974, Jay requested Stuart to assume the responsibilities of Jay under the purchase agreement of April 24, 1974, to take the number of shares allocated thereunder to Jay and to pay the notes of Jay delivered as consideration for such shares as the notes came due. Stuart, who is the father of Jay, agreed to do so. Such agreement is not evidenced by any writing subscribed by the defendants, but is acknowledged by both of them to have taken place. Jay filed with the Securities and Exchange Commission a contemporaneous Form 4 reporting the disposition of the said 3923 shares as a "Private Sale" consummated on June 7, 1974 at a price of $10 per share. Stuart filed with the Securities and Exchange Commission a contemporaneous Form 4 reporting the acquisition of the said 3923 shares as a "Private Purchase" consummated on June 7, 1974 at a price of $10 per share.
6. On or about March 12, 1975, prior to the due date of any note delivered as consideration to the sellers, Jay and Stuart agreed that Jay would reassume his obligation to take 1962 shares and his obligation to pay the notes relative thereto when due and that Stuart would be relieved of those obligations.
7. On or about April 1, 1975, prior to the due date of any note delivered as consideration to the sellers, Jay and Stuart agreed that Jay would reassume his obligation to take an additional 1963 shares and his obligation to pay the notes relative thereto when due and that Stuart would be relieved of those obligations.
8. Jay and Stuart filed with the Securities and Exchange Commission contemporaneous Forms 4 reporting the disposition by Stuart as "Private Seller" and the acquisition of Jay as "Private Purchaser" consummated on March 12, 1975 and April 1, 1975 at prices of $10 per share. Thereafter in June of 1976 amendments to the said Forms 4 for the months of March, 1975 and April, 1975 were filed.
9. Defendant Stuart at times relevant to this action, purchased inter alia, the following Securities of the Trust:
Date Quantity Cost/Share
10/23/74 2000 $4.50
12/13/74 100 4.25
12/20/74 500 4.00
12/31/74 100 3.50
1/6/75 100 3.25
1/9/75 1000 3.25
1/20/75 100 4.25
5/9/75 100 4.25
5/14/75 100 4.25
5/23/75 100 4.25
6/6/75 100 4.25
6/18/75 100 4.00
6/25/75 200 3.87
6/27/75 100 4.00
7/7/75 100 4.00
9/8/75 100 4.00
Defendant Stuart purchased additional Securities of the Trust at times relevant to this action, all such purchases at a cost per share higher than that paid for the above listed Securities. Plaintiff makes no claim of liability with respect to such other transactions.
10. Defendant Jay, at times relevant to this action, purchased the following Securities of the Trust:
Date Quantity Cost/Share
7/17/74 100 6-7/8
9/6/74 100 6-1/2
9/27/74 700 6
10/15/74 300 5-1/2
10/16/74 100 5-1/2
Defendant Jay purchased or acquired interests in additional Securities at times relevant to this action. Plaintiff makes no claim of liability with respect to such other transactions.
11. Plaintiff is a shareholder of the Trust, having become such on April 9, 1976. Plaintiff was not a shareholder of said Trust at the time of the violations complained of.
Summary judgment is warranted in an action only where the parties' submissions "show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The burden such a standard places on the movant is a substantial one. See Heyman v. Commerce and Industry Insurance Co., 524 F.2d 1317 (2d Cir. 1975). Nevertheless, the courts have recognized the propriety of such a disposition in Section 16(b) actions where the parties do not contest the facts. See Newmark v. RKO General, Inc., 425 F.2d 348 (2d Cir.), cert. denied, 400 U.S. 854, 27 L. Ed. 2d 91, 91 S. Ct. 64 (1970); Lewis v. Realty Equities Corp., 373 F. Supp. 829, 831 (S.D.N.Y. 1974) (Lewis I); but see Colby v. Klune, 178 F.2d 872 (2d Cir. 1949). In this action all the material facts are agreed upon by the parties and many of the legal issues beyond dispute, if not expressly conceded. The defendants do not contest the alleged applicability of Section 16(b) on the grounds that they were not "officers" and thus "insiders" within the meaning of the Act. Stuart was a trustee and either chairman of the Executive Committee or chairman of the Board of Trustees at all times from 1970 until the commencement of this action. Jay was both a trustee and Vice President during every transaction for which he faces potential liability. Thus it is clear both defendants were "insiders". See Ross v. Licht, 263 F. Supp. 395, 409 (S.D.N.Y. 1967).
It is also clear from the statutory language and held valid thereafter in the courts that the Act applies to both purchases following sales and sales following purchases (if within the six-month period). See Kern County Land Co. v. Occidental Corp., 411 U.S. 582, 591, 36 L. Ed. 2d 503, 93 S. Ct. 1736 (1973); Morales v. Mapco, Inc., 541 F.2d 233, [1976-1977 Transfer Binder] CCH Fed. Sec. L. Rep. para. 95,704 at 90,453 (10th Cir. 1976); Ohio Drill & Tool Co. v. Johnson, [1973-1974 Transfer Binder] CCH Fed. Sec. L. Rep. P 94,596 at 96,102 (6th Cir. 1974); Bershad v. McDonough, 428 F.2d 693, 696 (7th Cir. 1970), cert. denied, 400 U.S. 992, 27 L. Ed. 2d 440, 91 S. Ct. 458 (1971); Sonics International, Inc. v. Johnson, [1974-1975 Transfer Binder] CCH Fed. Sec. L. Rep. P 95,087 at 97,858 (N.D.Tex. 1975).
Plaintiff's action is based on the contention that the arrangement on June 7, 1974 was a "sale" from Jay to Stuart of the subject Securities. Such a finding would render any purchases by Jay within six months of said sale (in this case, those being from July to October 1974) covered by the statute. Plaintiff's claim against Stuart, on the other hand, hinges on the position that the agreements of March 12, 1975 and April 1, 1975 constituted sales by Stuart to Jay, thus subjecting Stuart's purchases between October 23, 1974 and September 8, 1975, to the provisions of the Act. The defendants question only the alleged "sales", not the purchases.
The question of liability thus is reduced, au fond, to whether the arrangement between Stuart and Jay on June 7, 1974 and the reciprocal transfers a year later were "sales" for the respective defendants, for Section 16(b) purposes. If so, the profits realized from these purchases made by each within six months, of whichever transactions were "sales" for the particular defendant, are subject to surrender to the Trust.
provides, inter alia, that an "insider" must surrender to the issuer all profits realized "from any purchase and sale, or any sale and purchase, of any equity security of such issuer . . . within any period of less than six ...