Whiting v. Dow Chemical Co.

523 F.2d 680 (1975)

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Whiting v. Dow Chemical Co.

United States Court of Appeals for the Second Circuit
523 F.2d 680 (1975)

Facts

Macauley Whiting (plaintiff) was a director of the Dow Chemical Company (Dow) (defendant). Macauley’s wife, Helen Dow Whiting, was an heir to the Dow fortune and owned large amounts of Dow securities. Although Macauley and Helen formally segregated their financial accounts, they shared financial advisors and formed a common investment philosophy as to the management of their joint estates. Moreover, the lifestyle of both Macauley and Helen was primarily funded through dividend income and capital gains from Helen’s Dow securities. Helen sold a substantial number of Dow shares at approximately $55 per share. One month later, Helen loaned a portion of the proceeds of that sale to Macauley, who used it to exercise a call option to purchase a substantial number of Dow shares at approximately $24 per share. Section 16(b) of the Securities Exchange Act of 1934 (Exchange Act) required a corporate officer to remit any profits the officer gained on trades of the corporation’s securities made within six months of each other. Macauley filed suit, seeking a declaratory judgment absolving him of liability to Dow under § 16(b) relating to the two transactions. Dow counterclaimed, seeking to recover the profits realized by the Whiting family from the combined transactions. The district court found Macauley to be liable and awarded damages to Dow. Macauley appealed.

Rule of Law

Issue

Holding and Reasoning (Gurfein, J.)

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