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Chemical Fund v. Xerox Corp.
United States Court of Appeals for the Second Circuit
377 F.2d 107 (1967)
In December 1962, Chemical Fund (defendant) owned 2.36 percent of Xerox Corporation’s (plaintiff) common stock and $1,486,000 of the total $15,072,400 debentures. To improve its investment, Chemical Fund began selling its common stock and using the money to purchase debentures. In November 1963, Xerox redeemed Chemical Fund’s debentures into common stock. At that time, Chemical Fund held over 10 percent of the outstanding debentures and received $17,180.75 shares of common stock, which was about 2.7 percent of the total common-stock shares. The conversion resulted in a profit of $153,972.43. Xerox filed an action against Chemical Fund to receive the profit pursuant to the Securities Exchange Act of 1934. In response, Chemical Fund argued that the act was not applicable and counterclaimed to receive the earned profits. The district court granted Xerox’s request for summary judgment and awarded Xerox the profit. Chemical Fund appealed.
Rule of Law
Holding and Reasoning (Lumbard, C.J.)
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