Seskis and Kaplan (defendants) were directors, officers, and 12 percent shareholders of Delendo Corporation (Delendo) (defendant). Delendo had been negotiating to sell its assets to another corporation, but had to stop due to outstanding tax liabilities. After the tax claims were settled, Delendo finalized the sale and dissolved the company on July 16, 1940. Between December 1939 and May 1940, Seskis bought over 15,000 shares and sold nearly 16,000 shares. During that time Kaplan bought nearly 23,000 shares and sold over 21,000 shares. Some of the transactions were conducted on the Curb Exchange and others were private. For all but about 2,000 shares, different certificates were received for the purchases than the ones given for the sales. Shareholders Smolowe and Levy (plaintiffs) sued the defendants in district court under Securities and Exchange Act of 1934 (SEA), 15 U.S.C. § 16(b). The court concluded that Delendo was entitled to the profits from the transactions and set the award by calculating the highest profits. Seskis was ordered to pay $9,733.80, and Kaplan was ordered to pay $9,161.05. The defendants appealed to the United States Court of Appeals for the Second Circuit.