the joint beneficial ownership of common stock of Revco.
On March 14, 1994, Magten and Embry filed Amendment No. 7 to schedule 13D, reporting a collective beneficial ownership of 7,409,137 shares of Revco common stock which represented approximately 14.8% of the approximately 50,530,000 shares of the common stock of Revco believed to be outstanding on January 31, 1994. Of this amount, 7,143,174 shares of common stock were owned by the Magten Advisory Clients.
On June 6, 1994, Revco issued additional shares to holders of its common stock pursuant to a distribution of rights governed by a Prospectus (the "Offering"). Pursuant to the terms of the Prospectus, each holder of Common Stock was to receive .305 transferable rights for each share of Common Stock he or she held. Each right gave the holder the right to purchase one share of common stock at $ 14.00 before July 7, 1994. The offering also contained an "Oversubscription Privilege" whereby each holder who exercised all rights distributed to it could subscribe at the Subscription Price for additional Underlying Shares up to a maximum number of shares equal to twice the number of shares Purchased by such rights holder.
On July 15, 1994, Magten and Embry filed Amendment 8 to the Schedule 13D. As later modified by Amendment 9, it appears that on July 7, 1994, Magten and Embry acquired additional shares of Revco pursuant to the offering. In total, Magten and Embry acquired a beneficial interest in a additional 2,380,128 Revco shares at $ 14 per share at a total cost of $ 33,321,792. Of this amount the Magten Advisory Clients acquired 2,259,797 shares at a total cost of $ 31,637,158.
The Complaint alleges that Magten and Embry had beneficial ownership collectively of 9,936,267 shares of Revco common stock constituting approximately 15% of the shares outstanding as of July 13; the Magten Advisory Clients own 14.4% of the shares outstanding.
A series of sales are reported by the Magten Advisory Clients between July 13, 1994 and February 16, 1995. These include a sale made on July 26, 1994 and ending with a sale made on January 3, 1995. The total number of shares sold by them during this time was 1,587,877 shares, ranging in price per share from $ 18 to $ 24.212. At the end of the period, Magten and Embry owned 11.1% of Revco's stock.
The Complaint alleges that Magten, Embry and the Magten Advisory Clients, are a "group" owning more than 10% of the shares of Revco and are therefore subject to the restrictions of Section 16. It is further alleged that Magten and Embry are liable for the profits generated on the Magten Advisory Clients' trades in Revco stock "to the extent of their pecuniary interest in those shares as defined in S.E.C. Rule 16a-1(a)(2)."
A. Standards For Summary Judgment
A motion for summary judgment may be granted only when there is no genuine issue of material fact remaining for trial and the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(c); Rodriguez v. Sweeney, 72 F.3d 1051, 1995 WL 753997 (2d Cir. Dec. 19, 1995); Silver v. City Univ., 947 F.2d 1021, 1022 (2d Cir. 1991). " The trial court's task at the summary judgment motion stage of the litigation is carefully limited to discerning whether there are any genuine issues of material fact to be tried, not to deciding them." Gallo v. Prudential Residential Servs., Ltd. Partnership, 22 F.3d 1219, 1224 (2d Cir. 1994). "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). The moving party bears the burden of proving that no genuine issue of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986); Brady, 863 F.2d 205, 210; Pittston Warehouse Corp. v. American Motorists Ins. Co., 715 F. Supp. 1221, 1224 (S.D.N.Y. 1989), aff'd, 954 F.2d 62 (2d Cir. 1992).
Summary judgment is viewed "as an integral part of the Federal rules as a whole, which are designed 'to secure the just, speedy and inexpensive determination of every action.'" Celotex, 477 U.S. at 327 (citations omitted). Once the moving party has met its burden of coming forward with evidence to show that no material fact exists for trial, the non-moving party must do more than "simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986); see also Anderson, 477 U.S. at 252 ("the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact").
B. The Offering was Pro-Rata and Thus Exempt from Section 16 of the Act
Section 16(b) provides in pertinent part that:
For the purpose of preventing the unfair use of information which may have been obtained by such beneficial owner, director, or officer by reason of his relationship to the issuer, any profit realized by him from any purchase and sale, or any sale and purchase, of any equity security of such issuer (other than an exempted security) within any period of less than six months ... shall inure to and be recoverable by the issuer. This subsection shall not be construed to cover ... any transaction or transactions which the Commission by rules and regulations may exempt as not comprehended within the purpose of this subsection.