Whittaker v. Whittaker Corp.

• Decision Date: 12 February 1981
• Docket Number: Nos. 77-2297,77-2550,s. 77-2297
• Citation: 639 F.2d 516
• Parties: , Fed. Sec. L. Rep. P 97,871 William R. WHITTAKER, on behalf of himself, and executor of the estate of Beulah Whittaker, Plaintiff-Appellee, v. WHITTAKER CORPORATION, a California Corporation, Defendant-Appellant. William R. WHITTAKER, on behalf of himself, and executor of the estate of Beulah Whittaker, Plaintiff-Appellant, v. WHITTAKER CORPORATION, a California Corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 516

639 F.2d 516

67 A.L.R.Fed. 819, Fed. Sec. L. Rep. P 97,871

William R. WHITTAKER, on behalf of himself, and executor of

the estate of Beulah Whittaker, Plaintiff-Appellee, v. WHITTAKER CORPORATION, a California Corporation,

Defendant-Appellant.

William R. WHITTAKER, on behalf of himself, and executor of

the estate of Beulah Whittaker, Plaintiff-Appellant, v. WHITTAKER CORPORATION, a California Corporation, Defendant-Appellee.

Nos. 77-2297, 77-2550.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Oct. 4, 1979.

Decided Feb. 12, 1981.

Robert E. Cooper, Gibson, Dunn & Crutcher, Los Angeles, Cal., for defendant-appellant; Martin C. Washton, Los Angeles, Cal., on brief.

William T. Bisset, Hughes, Hubbard & Reed, Los Angeles, Cal., for plaintiff-appellee; William H. Levit, Jr., Los Angeles, Cal., on brief.

Appeal from the United States District Court for the Central District of California.

Before CHAMBERS and TANG, Circuit Judges, and ORRICK, ^* District Judge.

TANG, Circuit Judge:

This case involves liability under the insider short-swing trading provisions of the Securities Exchange Act of 1934, § 16, 15 U.S.C. § 78p. The principal questions presented are whether shares nominally owned by another may be attributed to an insider for liability under § 16(b) and whether the two-year limitations period of § 16(b) may be tolled. On demand by the Whittaker Corporation (Corporation), the putative insider, William Whittaker (William), paid the amount of alleged profits from insider transactions between December 1, 1965 and December 31, 1970 (the relevant trading period). He later sought a declaratory judgment of nonliability under § 16(b) and return of the monies previously paid. The district court found William liable but also found that the statute of limitations of § 16(b) operated to cut off liability for transactions prior to January 29, 1969. We affirm the district court on the issue of William's liability, but we reverse and remand on the limitations issue.

PRELIMINARY BACKGROUND

The Whittaker Corporation is a corporation in which William Whittaker and his mother, Beulah Whittaker, owned substantial percentages of stock. William was a director and Chairman of the Board of Directors during the relevant trading period. In 1965, because of amendments broadening § 16, the Corporation became subject to § 16 of the Securities Exchange Act of 1934, 15 U.S.C. § 78p (hereinafter § 16).

Briefly, § 16(a) requires "insiders" any person who is a 10% beneficial owner of a company whose securities are registered under Since 1959 William had power of attorney from his mother Beulah to conduct business matters for her. The securities transactions involved in this case took place between December 1, 1965 and December 31, 1970. William purchased Whittaker Corporation common stock and convertible debentures for his mother's account, and within six months of such purchases, sold common stock for his own account and convertible debentures and common stock for his mother's account. None of the transactions involving securities for his mother's account were reported to the SEC as required by § 16(a). The district court determined that, because of the relationship between William and his mother, the control William had over her stock, and the benefits he realized from it, he must be deemed the beneficial owner of his mother's stock, and so should have reported the transactions under § 16(a) and was liable to the corporation under § 16(b) for profits derived from those transactions involving his mother's stock which he realized by a purchase and sale of the Corporation's securities within six months.

the Act or a director or an officer of the company to file monthly reports with the Securities and Exchange Commission (SEC) showing any changes in the person's ownership in the company. Section 16(b) declares that any profits which such person may realize by any purchase and sale of the company's securities within six months shall inure to and be recoverable by the company. Suits to recover such profits may be brought by the company or by any shareholder in a derivative suit if the company fails to do so. No such suit shall be brought more than two years after the date such profit was realized.

The Corporation asserts it did not learn of the full extent of William's total control over his mother's shares until the fall of 1970. It then compiled a list of all William's transactions in the securities of the Corporation, determined which were six-month short-swing insider trades, and computed the profit realized by William. In January 1971, the Corporation demanded payment of these realized profits plus interest.

On January 29, 1971, William paid the amount demanded, denied liability and reserved the right to bring an action to determine his liability and to seek return of the monies. William remained with the Corporation as President until November 1974 and as Chairman of the Board until January 31, 1975. On July 29, 1975, William and his mother commenced this action for a declaration of nonliability under § 16 and recovery of the money.

Trial was held before the court without a jury. The district court found that William was liable as an insider for the transactions in his mother's shares, but that the statute of limitations of § 16(b) barred recovery for all but one year of the relevant trading period. That is, only profits on transactions within two years prior to the Corporation's demand in January 1971 could be recovered. On the transactions for which the Corporation could recover, the district court computed profits realized according to the rule of "lowest price in, highest price out" within six months and awarded the Corporation pre-judgment interest. The Corporation was then ordered to pay back the balance of the money paid in 1971.

ISSUES ON APPEAL

1. Was the Corporation's notice of appeal filed timely? (Raised by William on motion to dismiss)

2. Was William the beneficial owner of his mother's shares, so that profits realized in his transactions in those shares were "profits realized by him" for § 16(b) liability? (Raised by William on cross-appeal)

3. How should the two-year limitations period of § 16(b) be construed? (Raised by the Corporation on appeal)

4. Is the "highest sales price, lowest purchase price" method for computing profits in insider trading the correct method? (Raised by William on cross-appeal)

5. Was the award of prejudgment interest on the amount of profits recovered by the Corporation incorrectly decided by the

district court? (Raised by William on cross-appeal)

I. NOTICE OF APPEAL

William has moved to dismiss the Corporation's appeal on the ground that the notice of appeal was not timely filed. The judgment of the district court was entered on April 7, 1977. The judgment included the award of costs to the plaintiffs, William and Beulah Whittaker, as the prevailing party. On April 14, 1977 defendant Corporation moved to retax costs, specifically that all parties "bear their own taxable costs pending appeal of this action." The Corporation argued that it, not the plaintiffs, should be considered the prevailing party. The motion to retax costs was denied on April 20, 1977. Having learned that William would oppose any filing of a notice of appeal as untimely on the ground that the 30-day period for filing under Fed.R.App.P. 4(a) had begun on April 7, 1977 and so had expired, the Corporation moved the district court for either 1) a determination that the motion to retax costs had extended the time for filing a notice of appeal since it was a Fed.R.Civ.P. 59(e) motion to alter or amend the judgment or 2) an extension of time for filing the notice of appeal by reason of "excusable neglect" in learning of the date of entry of judgment. The district judge rejected the excusable neglect contention but agreed the motion was a Rule 59(e) motion, even though it was denied. He ordered the Corporation's notice of appeal accepted for filing. It was filed May 18, 1977.

Failure to file a timely notice of appeal is jurisdictional; and the Court of Appeals would lack jurisdiction to review the judgment. Browder v. Director, Department of Corrections, 434 U.S. 257, 264, 98 S.Ct. 556, 561, 54 L.Ed.2d 521 (1978); Rodriguez v. Southern Pacific Transportation Co., 587 F.2d 980, 981 (9th Cir. 1978); Alexander v. Sacha, 439 F.2d 742 (9th Cir. 1971). The notice of appeal must be filed within 30 days of the entry of judgment. Fed.R.App.P. 4(a). But the running of this time is terminated by a timely filed motion under, inter alia, Fed.R.Civ.P. 59(e) (motion to alter or amend the judgment), and the 30-day time commences anew from the date such motion is decided. The Corporation's motion was filed within the 10-day time limit for Rule 59(e) motions. Its notice of appeal was filed more than 30 days from the entry of judgment, but less than 30 days from the district court's denial of its motion to retax costs. The issue then is whether the Corporation's motion is a 59(e) motion (which extends the time for appeal) or a Rule 54(d) motion which reviews the Clerk's actions regarding costs (which does not extend the time for appeal).

The Corporation styled its motion a motion to retax costs and did not recite that it was proceeding under Rule 59(e). "But nomenclature is not controlling." What is required is that the requested relief be "relief which might have been granted under Fed.R.Civ.P. 59(e)." Sea Ranch Ass'n v. California Coastal Zone Conservation Comm'n, 537 F.2d 1058, 1061 (9th Cir. 1976). Accord Mir v. Fosburg, Slip Op., at 1707, 646 F.2d 342, at 344 (9th Cir. 1980).

A motion to amend the judgment with respect to costs has been heard as a 59(e) motion where the motion was to tax costs against a different party, United States v. Crawford, 36 F.R.D. 174 (W.D.La.1964); or to delete the award of costs altogether, United States v. 2,186.63 Acres of Land, 464 F.2d 676, 677 (10th Cir. 1972);...