Blau v. Ogsbury
| Decision Date | 10 February 1954 |
| Docket Number | Docket 22855.,No. 117,117 |
| Citation | 210 F.2d 426 |
| Parties | BLAU v. OGSBURY et al. |
| Court | U.S. Court of Appeals — Second Circuit |
Morris J. Levy, New York City, for plaintiff-appellant.
Harman Hawkins, New York City (Duer, Strong & Whitehead, New York City, on the brief), for defendant-appellee Florence N. Ogsbury.
Before CHASE, Chief Judge, CLARK, Circuit Judge, and GIBSON, District Judge.
This appeal arises from a defendants' judgment in an action by Isadore Blau, stockholder, to recover alleged insider short-swing profits under § 16(b) of the Securities Exchange Act of 1934, 15 U. S.C.A. § 78p(b), realized from purchase and sale of securities of the nominal defendant, Fairchild Camera and Instrument Corp., by James S. Ogsbury, deceased. Ogsbury at all times material was an officer and director of Fairchild. Under an agreement dated August 19, 1941, lasting until December 31, 1945, Ogsbury was made chief executive of the company, and as part of his compensation was given an unassignable option to purchase 10,000 shares of the company's stock at $4.50 per share, valid until the terminal date of the agreement or one year from the date of his death, whichever first occurred. Originally the option was to be exercised by mailing of notice to the company, the date of mailing to be the effective date for the transfer of title; but on August 7, 1945, the parties amended the agreement to provide for postponement of payment at Ogsbury's election, until termination of employment or six months from his death. Under the new provisions, title and stockholder rights remained in the company pending payment, though the agreement clearly specified that mailing of the notice of election would obligate Ogsbury for the purchase price.
On December 29, 1945, Ogsbury mailed to Fairchild notice of his election to purchase 10,000 shares under the option. Thereafter he postponed payment until on December 8, 1948, he tendered $45,000 and on December 13, 1948, duly received the stock. Prior to this final transaction, on July 19 and 20, 1948, he had sold 600 shares of identical stock for an average price of $27.875 per share. On these facts Blau brought action against Ogsbury's executrix and the corporation; and in the action he moved for summary judgment claiming a profit of $11,000 for the corporation's benefit on the purchase and sale of 600 shares. In a reasoned opinion Judge Bondy denied this motion and instead granted the defendants' motion for summary judgment.
Plaintiff contends that the 1948 payment for the stock was a "purchase" within § 16(b); and since it followed the July sale by less than six months, he finds a violation. We do not agree. Instead we agree with Judge Bondy that the "purchase" was consummated in 1945 when Ogsbury mailed his notice of election and thereby incurred an irrevocable liability to take and pay for the stock. Thereafter for all speculative purposes he...
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