352 F.Supp. 1081 (E.D.Mich. 1973), Civ. A. 32106, Champion Home Builders Co. v. Jeffress

Docket Nº:Civ. A. 32106
Citation:352 F.Supp. 1081
Party Name:Champion Home Builders Co. v. Jeffress
Case Date:January 11, 1973
Court:United States District Courts, 6th Circuit
 
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Page 1081

352 F.Supp. 1081 (E.D.Mich. 1973)

CHAMPION HOME BUILDERS CO., a Michigan corporation, Plaintiff,

Joseph L. Kramer and Beatrice F. Kramer, Intervenors-Plaintiffs,

v.

Etson B. JEFFRESS, Defendant.

Civ. A. No. 32106.

United States District Court, D. Michigan

Jan. 11, 1973

Freud, Markus, Slavin & Mountain, Scholl, Jenkins, Robinson & Stieg, Detroit, Mich., for plaintiff.

Robert Newman, Parr, Doherty, Polk & Sargent, Robert Block, Pomerantz, Levy, Haudek & Block, New York City, for defendant.

MEMORANDUM OPINION AND ORDER

JOINER, District Judge.

The case now before this court presents us with the acquisition of one corporation (Concord Mobile Homes) by another (Champion Home Builders). That acquisition was accomplished via a purchase of 100% of the Concord stock, owned by Etson B. Jeffress, in exchange for 13% of Champion's stock. Mr. Jeffress was made a director of Champion subsequent to the sale. The major shareholders, including defendant, later sold as a part of a public offering portions of their holdings, pursuant to a previous agreement, selling proportional amounts in order to maintain the status quo.

This suit is brought by Champion at the instigation of two shareholders, the Kramers, to recover the profits that defendant

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Jeffress is alleged to have made through these activities; the claim is made under § 16(b) of the Securities Exchange Act of 1934 (prohibiting "short-swing" profit-taking) [15 U.S.C.A. § 78p(b)]. The Kramers have been declared by the court to be intervenor-plaintiffs for the reason that the other directors of the corporation were involved in the challenged transactions.

Section 16(b) of the Act [15 U.S.C.A. § 78p(b)] provides that for the purpose of preventing the unfair use of information which may have been obtained, a person such as the defendant (a director or one who is a beneficial owner of more than 10% of the securities) who sells any of the securities, the beneficial ownership of which he has acquired within a period of six months from the time of the sale, is liable to the issuer of the securities for the profits realized on the sale of such securities.

Intervenor-plaintiffs' motion for summary judgment asserts that defendant sold the stock he acquired in the exchange within six months of its acquisition, thereby violating the provisions of § 16(b), and asks that the defendant be held liable for these transactions. Defendant has filed a cross-motion for summary judgment. In open court the parties agreed that the matter of liability was before the court for decision on the depositions, affidavits and exhibits submitted to the court.

There is no question as to the date of sale of the stock by Jeffress. It was September 12, 1968. The problem in this case is determining when Jeffress acquired "beneficial ownership" of the shares sold. Was it or was it not within the six month period prescribed by the statute?

DATE OF "BENEFICIAL OWNERSHIP"

On February 17, 1968, a "handshake" agreement to exchange stock was entered into by Jeffress and Gerald Grenier and Henry George, Treasurer and President of Champion respectively, subject only to approval of the Champion Board of Directors. A...

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