Kern County Land Company v. Occidental Petroleum Corporation

After unsuccessfully seeking to merge with Kern County Land Company (Old Kern), Occidental Petroleum Company (Occidental) (defendant) purchased 500,000 shares of Old Kern stock, which represented more than 10 percent of Old Kern stock. Occidental then acquired approximately 380,000 additional shares of Old Kern. Old Kern took certain measures to frustrate Occidental’s takeover attempt, including entering into merger discussions with Tenneco, Inc. (Tenneco). Under the proposed merger, Occidental would exchange its Old Kern shares for Tenneco stock. In response, Occidental negotiated an option with Tenneco to purchase all of the Tenneco preference stock in exchange for its Old Kern stock. The option was exercised by Occidental within six months of the acquisition of more than 10 percent ownership of Old Kern. The Old Kern-Tenneco merger closed, and a new corporation (New Kern) (plaintiff) was formed. New Kern filed suit against Occidental under § 16(b) of the Securities Exchange Act of 1934 (Act), 15 U.S.C. § 78p(b), alleging that the Occidental-Tenneco option agreement and the Old Kern-Tenneco stock exchange were “sales” within § 16(b), requiring Occidental to surrender its realized profits. The district court granted New Kern’s motion for summary judgment. Occidental appealed. The court of appeals reversed and ordered summary judgment in favor of Occidental. The United States Supreme Court granted certiorari.