Freeman v. Decio
United States Court of Appeals for the Seventh Circuit
584 F.2d 186 (1978)
After reporting consistent growth for years, Skyline Corporation (Skyline) reported a major loss of earnings at the end of 1972. Skyline’s stock prices fell nearly 30 percent. Shareholder Marcia Freeman (plaintiff) sued Skyline officials Arthur J. Decio, Dale Swikert, Samuel P. Mandell, and Ira J. Kaufman (defendants) for insider trading. Freeman alleged that Skyline’s financial statements for the May and August quarters were misleading. Further, Freeman claimed that the defendants sold or gave away $14 million in Skyline stock based on inside knowledge of the exaggerated earnings statements and the upcoming November quarter decline. After discovery, the parties moved for summary judgment. The district court concluded that no cause of action existed under Indiana law that would allow a derivative suit on behalf of a corporation to regain profits from insider trading, and summary judgment was granted in favor of the defendants. Freeman appealed to the United States Court of Appeals for the Seventh Circuit.
Rule of Law
Holding and Reasoning (Wood, J.)