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Gollust v. Mendell

United States Supreme Court
501 U.S. 115 (1991)


Facts

Ira L. Mendell (plaintiff) was a shareholder of Viacom International, Inc. (Viacom). Mendell alleged that a group of partnerships and corporations (Gollust) (defendants) were effectively a single entity that beneficially owned over 10 percent of International’s stock. Mendell claimed the defendants engaged in short-swing trading in violation of Securities and Exchange Act of 1934 (SEA), 15 U.S.C. § 16(b) and realized profits of $11 million. Mendell made a demand on International’s board, but it refused to sue. Mendell filed a derivative suit on International’s behalf in the United States District Court for the Southern District of New York. Subsequently, Arsenal Acquiring Corp., a shell company for Arsenal Holdings, Inc. (renamed Viacom, Inc.) (Viacom) acquired International. Under the merger, Mendell and other International shareholders were given cash and Viacom stock for their International shares. Mendell amended his complaint and added Viacom as a real party in interest. The defendants motioned for summary judgment on the ground that Mendell no longer owned stock from the “issuer” and had lost standing to sue. The motion was granted, and the United States Court of Appeals for the Second Circuit reversed. Gollust petitioned the United States Supreme Court for certiorari, which was granted.

Rule of Law

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Holding and Reasoning (Souter, J.)

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