Bershad v. McDonough
United States Court of Appeals for the Seventh Circuit
428 F.2d 693 (1970)
- Written by Daniel Clark, JD
Facts
Bernard McDonough (defendant) and his wife bought over 10 percent of the common stock in the Cudahy Company of Phoenix, Arizona (Cudahy) shortly before McDonough was elected chairman of Cudahy’s board. Four months after the purchase, McDonough and his wife sold a call option on the majority of their shares to Smelting Refining Mining Company (Smelting). The call was immediately exercisable, and the premium would offset Smelting’s purchase price were Smelting to exercise the option. Moreover, the McDonoughs placed the shares in escrow and turned their voting rights over to Smelting while the call was open. Several months later, and less than six months after the McDonoughs’ initial purchase, Smelting exercised the option. John Bershad (plaintiff), a Cudahy shareholder, sued McDonough under § 16(b) of the Securities Exchange Act of 1934 (Exchange Act). The district court granted summary judgment in favor of Bershad. McDonough appealed.
Rule of Law
Issue
Holding and Reasoning (Cummings, J.)
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