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GAF Corp. v. Milstein

United States Court of Appeals for the Second Circuit

453 F.2d 709 (1971)

Facts

By pooling their shares of convertible preferred stock issued by the GAF Corporation (plaintiff), Morris Milstein and his three children (defendants) amassed a 10.25 percent stake in GAF. The Milsteins leveraged that stake to maneuver GAF into buying a company in which the Milsteins were heavily invested. Thereafter, the Milsteins made no further purchases of GAF securities. GAF sued the Milsteins for failing to file, or falsifying, the identity-disclosure statements required by § 13(d) of the Securities Exchange Act of 1934 (Exchange Act), as added by the Williams Act. The Milsteins’ GAF purchases clearly met § 13(d)’s threshold requirement for purchases made within a 12-month period and conveying beneficial ownership in at least 10 percent of a single class of corporate securities. However, the Milsteins contended that § 13(d)’s disclosure requirements explicitly applied only to purchases by a single natural person or by single artificial entities such as the partnerships or syndicates listed in § 13(d)(3) of the Exchange Act, and not to purchases made by four individuals acting together only by informal agreement. The federal district judge agreed with the Milsteins and dismissed GAF’s case. GAF appealed to the Second Circuit.

Rule of Law

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Issue

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Holding and Reasoning (Kaufman, J.)

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