Subject:  GOLLUST v. MENDELL, Syllabus



 
    NOTE: Where it is feasible, a syllabus (headnote) will be released, as
is being done in connection with this case, at the time the opinion is
issued.  The syllabus constitutes no part of the opinion of the Court but
has been prepared by the Reporter of Decisions for the convenience of the
reader.  See United States v. Detroit Lumber Co., 200 U. S. 321, 337.
SUPREME COURT OF THE UNITED STATES


Syllabus


GOLLUST et al. v. MENDELL et al.


certiorari to the united states court of appeals for the second circuit

No. 90-659.  Argued April 15, 1991 -- Decided June 10, 1991

Section 16(b) of the Securities Exchange Act of 1934 imposes strict
liability on "beneficial owner[s]" of more than 10% of a corporation's
listed stock, and on the corporation's officers and directors, for any
profits realized from any purchase and sale, or sale and purchase, of such
stock occurring within a 6-month period.  Such "insiders" are subject to
suit "instituted . . . by the issuer, or by the owner of any security of
the issuer" in the issuer's name and behalf.  After respondent Mendell, an
owner of common stock in Viacom International, Inc. (International),
instituted a MDRV 16 (b) suit against petitioners, allegedly "beneficial
owners" of International stock, International was acquired by a shell
subsidiary of what is now called Viacom, Inc. (Viacom).  International
merged with the subsidiary, and became Viacom's wholly owned subsidiary and
sole asset.  Mendell received cash and stock in Viacom in exchange for his
International stock.  The District Court granted petitioners' motion for
summary judgment on the ground that Mendell had lost standing to maintain
the action because he no longer owned any International stock.  The Court
of Appeals reversed, holding that Mendell's continued prosecution of the
action was not barred by the statute's language or existing case law and
was fully consistent with the statutory objectives.

Held: Mendell has satisfied the statute's standing requirements.  Pp.
5-12.

    (a) Section 16(b) provides standing of signal breadth, expressly
limited only by the conditions that the plaintiff be the "owner of [a]
security" of the "issuer" at the time the suit is "instituted."  Any
"security" -- including stock, notes, warrants, bonds, debentures, puts,
and calls, 15 U. S. C. MDRV 78c(a)(10) -- will suffice to confer standing.
There is no restriction in terms of the number or percentage of shares, or
the value of any other security, that must be held.  Nor is the security
owner required to have had an interest in the issuer at the time of the
short-swing trading.  Although the security's "issuer" does not include
parent or subsidiary corporations, 15 U. S. C. MDRV 78c(a)(8), this
requirement is determined at the time the MDRV 16(b) action is
"instituted."  Congress intended to adopt the common understanding of the
word "institute" -- "inaugurate or commence; as to institute an action,"
Black's Law Dictionary 985-986 (3d ed. 1933) -- which is confirmed by its
use of the same word elsewhere to mean the commencement of an action, see,
e. g., 8 U. S. C. MDRV 1503(a).  Pp. 5-9.

    (b) A MDRV 16(b) plaintiff must, however, throughout the period of his
participation in the litigation, maintain some financial interest in the
liti gation's outcome, both for the sake of furthering the statute's
remedial purposes by ensuring that enforcing parties maintain the incentive
to litigate vigorously, and to avoid the serious constitutional question
that would arise under Article III from a plaintiff's loss of all financial
interest in the outcome of the litigation he had begun.  But neither the
statute nor its legislative history supports petitioners' argument that a
plaintiff must continuously own a security of the issuer.  Pp. 9-11.

    (c) An adequate financial stake can be maintained when the plaintiff's
interest in the issuer has been replaced by one in the issuer's new parent
corporation.  This is no less an interest than a bondholder's financial
stake, which, although more attenuated, satisfies the initial standing
requirement under the statute.  Pp. 11-12.

    (d) Here, Mendell owned a security of the issuer at the time he
instituted this MDRV 16(b) action, and he continues to maintain a financial
interest in the litigation's outcome by virtue of his Viacom stock.  P.
12.

909 F. 2d 724, affirmed.

Souter, J., delivered the opinion for a unanimous Court.

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Subject: 90-659 -- OPINION, GOLLUST v. MENDELL

 


NOTICE: This opinion is subject to formal revision before publication in
the preliminary print of the United States Reports.  Readers are requested
to notify the Reporter of Decisions, Supreme Court of the United States,
Washington, D. C. 20543, of any typographical or other formal errors, in
order that corrections may be made before the preliminary print goes to
press.
SUPREME COURT OF THE UNITED STATES


No. 90-659




KEITH R. GOLLUST, et al., PETITIONERS v. IRA L. MENDELL, etc., et al.

on writ of certiorari to the united states court of appeals for the second
circuit

[June 10, 1991]



    Justice Souter delivered the opinion of the Court.

    Section 16(b) of the Securities Exchange Act of 1934, 48 Stat. 896, 15
U. S. C. MDRV 78p(b), {1} imposes a general rule of strict liability on
owners of more than 10% of a corporation's listed stock for any profits
realized from the purchase and sale, or sale and purchase, of such stock
occurring within a 6-month period.  These statutorily defined "insiders,"
as well as the corporation's officers and directors, are liable to the
issuer of the stock for their short-swing profits, and are subject to suit
"instituted . . . by the issuer, or by the owner of any security of the
issuer in the name and in behalf of the issuer . . . ."  Ibid.

    Our prior cases interpreting MDRV 16(b) have resolved questions about
the liability of an insider defendant under the statute. {2}  This case, in
contrast, requires us to address a plaintiff's standing under MDRV 16(b)
and, in particular, the requirements for continued standing after the
institution of an action.  We hold that a plaintiff, who properly
"instituted [a MDRV 16(b) action as] the owner of [a] security of the
issuer," may continue to prosecute the action after his interest in the
issuer is exchanged in a merger for stock in the issuer's new corporate
parent.

I


    In January 1987, respondent Ira L. Mendell filed a complaint under MDRV
16(b) against petitioners in the United States District Court for the
Southern District of New York, stating that he owned common stock in Viacom
International, Inc. (International) and was suing on behalf of the
corporation.  He alleged that petitioners, a collection of limited
partnerships, general partnerships, individual partners and corporations,
"operated as a single unit" and were, for purposes of this litigation, a
"single . . . beneficial owner of more than ten per centum of the common
stock" of International.  App. to Pet. for Cert. 40a-42a.  Respondent
claimed that petitioners were liable to International under MDRV 16(b) for
approximately $11 million in profits earned by them from trading in
International's common stock between July and October 1986.  Id., at
42a-43a.  The complaint recited that respondent had made a demand upon
International and its Board of Directors to bring a MDRV 16(b) action
against petitioners and that more than 60 days had passed without the
institution of an action.

    In June 1987, less than six months after respondent had filed his MDRV
16(b) complaint, International was acquired by Arsenal Acquiring Corp., a
shell corporation formed by Arsenal Holdings, Inc. (now named Viacom, Inc.)
(Viacom) for the purpose of acquiring International.  By the terms of the
acquisition, Viacom's shell subsidiary was merged with International, which
then became Viacom's wholly owned subsidiary and only asset.  The
stockholders of International received a combination of cash and stock in
Viacom in exchange for their International stock. {3}  Id., at 40a; App.
14-26.

    As a result of the acquisition, respondent, who was a stockholder in
International when he instituted this action, acquired stock in
International's new parent corporation and sole stockholder, Viacom.
Respondent amended his complaint to reflect the restructuring by claiming
to prosecute the MDRV 16(b) action on behalf of Viacom as well as
International.  App. to Pet. for Cert. 44a.

    Following the merger, petitioners moved for summary judgment, arguing
that respondent had lost standing to maintain the action when the exchange
of stock and cash occurred, after which respondent no longer owned any
security of International, the "issuer."  The District Court held that MDRV
16(b) actions "may be prosecuted only by the issuer itself or the holders
of its securities," and granted the motion because respondent no longer
owned any International stock. {4}  App. to Pet. for Cert. 32a.  The court
concluded that only Viacom, as International's sole security holder, could
continue to prosecute this action against petitioners.  Id., at 33a.

    A divided Court of Appeals reversed.  909 F. 2d 724 (CA2 1990).  The
majority saw nothing in the text of MDRV 16(b) to require dismissal of
respondent's complaint.  "[T]he language of the statute speaks of the
`owner' of securities; but such language is not modified by the word
`current' or any like limiting expression.  The statute does not
specifically bar the maintenance of MDRV 16(b) suits by former shareholders
and Congress . . . could readily have eliminated such individuals."  Id.,
at 730.  Since the provisions of the statute were open to "interpretation,"
the court relied on the statute's remedial purposes in determining "whether
the policy behind the statute is best served by allowing the claim."  Id.,
at 728-729.  The majority concluded that the remedial policy favored
recognizing respondent's continued standing after the merger.  "Permitting
[respondent] to maintain this MDRV 16(b) suit is not barred by the language
of the statute or by existing case law, and it is fully consistent with the
statutory objectives."  {5}  Id., at 731.  The summary judgment for
petitioners was reversed.

    The dissent took issue with this analysis, finding it to be in conflict
with prior decisions of the Second Circuit and at least one other.  See
Portnoy v. Kawecki Berylco Industries, Inc., 607 F. 2d 765, 767 (CA7 1979);
Rothenberg v. United Brands Co., CCH Fed. Sec. L. Rep. MDRV 96,045 (SDNY),
aff'd mem., 573 F. 2d 1295 (CA2 1977).

    We granted certiorari, 498 U. S. --- (1991), to resolve this conflict
and to determine whether a stockholder who has properly instituted a MDRV
16(b) action to recover profits from a corporation's insiders may continue
to prosecute that action after a merger involving the issuer results in
exchanging the stockholder's interest in the issuer for stock in the
issuer's new corporate parent.

II


A


    Congress passed MDRV 16(b) of the 1934 Act to "preven[t] the unfair use
of information which may have been obtained by [a] beneficial owner,
director, or officer by reason of his relationship to the issuer."  15 U.
S. C. MDRV 78p(b).  As we noted in Foremost-McKesson, Inc. v. Provident
Securities Co., 423 U. S. 232, 243 (1976): "Congress recognized that
insiders may have access to information about their corporations not
available to the rest of the investing public.  By trading on this
information, these persons could reap profits at the expense of less well
informed investors."  Prohibiting short-swing trading by insiders with
nonpublic information was an important part of Congress' plan in the 1934
Act to "insure the maintenance of fair and honest markets," 15 U. S. C.
MDRV 78b; and to eliminate such trading, Congress enacted a "flat rule [in
MDRV 16(b)] taking the profits out of a class of transactions in which the
possibility of abuse was believed to be intolerably great."  Reliance Elec.
Co. v. Emerson Elec. Co., 404 U. S. 418, 422 (1972); see also Kern County
Land Co. v. Occidental Petroleum Corp., 411 U. S. 582, 591-595 (1973).

    The question presented in this case requires us to determine who may
maintain an action to enforce this "flat rule."  We begin with the text.
Section 16(b) imposes liability on any "beneficial owner, director, or
officer" of a corporation for "any profit realized by him from any purchase
and sale, or any sale and purchase, of any equity security of [an] issuer .
. . within any period of less than six months."  15 U. S. C. MDRV 78p(b).
A "[s]uit to recover [an insider's] profit may be instituted . . . by the
issuer, or by the owner of any security of the issuer in the name and in
behalf of the issuer . . . ."  Ibid.

    The statute imposes a form of strict liability on "beneficial
owner[s]," as well as on the issuer's officers and directors, rendering
them liable to suits requiring them to disgorge their profits even if they
did not trade on inside information or intend to profit on the basis of
such information.  See Kern County Land Co. v. Occidental Petroleum Corp.,
supra, at 595.  Because the statute imposes "liability without fault within
its narrowly drawn limits,"  ForemostMcKesson, Inc. v. Provident Securities
Co., supra, at 251, we have been reluctant to exceed a literal,
"mechanical" application of the statutory text in determining who may be
subject to liability, even though in some cases a broader view of statutory
liability could work to eliminate an "evil that Congress sought to correct
through MDRV 16(b)."  Reliance Elec. Co. v. Emerson Elec. Co., supra, at
425.

    To enforce this strict liability rule on insider trading, Congress
chose to rely solely on the issuers of stock and their security holders.
Unlike most of the federal securities laws, MDRV 16(b) does not confer
enforcement authority on the Securities and Exchange Commission.  It is,
rather, the security holders of an issuer who have the ultimate authority
to sue for enforcement of MDRV 16(b).  If the issuer declines to bring a
MDRV 16(b) action within 60 days of a demand by a security holder, or fails
to prosecute the action "diligently," 15 U. S. C. MDRV 78p(b), then the
security holder may "institut[e]" an action to recover insider short-swing
profits for the issuer.  Ibid.

    In contrast to the "narrowly drawn limits" on the class of corporate
insiders who may be defendants under MDRV 16(b), Foremost-McKesson, Inc. v.
Provident Securities Co., supra, at 251, the statutory definitions
identifying the class of plaintiffs (other than the issuer) who may bring
suit indicate that Congress intended to grant enforcement standing of
considerable breadth.  The only textual restrictions on the standing of a
party to bring suit under MDRV 16(b) are that the plaintiff must be the
"owner of [a] security" of the "issuer" at the time the suit is
"instituted."

    Although plaintiffs seeking to sue under the statute must own a
"security," MDRV 16(b) places no significant restriction on the type of
security adequate to confer standing.  "[A]ny security" will suffice, 15 U.
S. C. MDRV 78p(b), the statutory definition being broad enough to include
stock, notes, warrants, bonds, debentures, puts, calls, and a variety of
other financial instruments; it expressly excludes only "currency or any
note, draft, bill of exchange, or banker's acceptance which has a maturity
at the time of issuance of not exceeding nine months . . . ."  15 U. S. C.
MDRV 78c(a)(10); see also Reves v. Ernst & Young, 494 U. S. 56 (1990).  Nor
is there any restriction in terms of either the number or percentage of
shares, or the value of any other security, that must be held.  See Portnoy
v. Revlon, Inc., 650 F. 2d 895, 897 (CA7 1981) (plaintiff bought single
share); Magida v. Continental Can Co., 231 F. 2d 843, 847-848 (CA2)
(plaintiff owned 10 shares), cert. denied, 351 U. S. 972 (1956).  In fact,
the terms of the statute do not even require that the security owner have
had an interest in the issuer at the time of the defendant's shortswing
trading, and the courts to have addressed this issue have held that a
subsequent purchaser of the issuer's securities has standing to sue for
prior short-swing trading.  See, e. g., Dottenheim v. Murchison, 227 F. 2d
737, 738-740 (CA5 1955), cert. denied, 351 U. S. 919 (1956); Blau v.
Mission Corp., 212 F. 2d 77, 79 (CA2), cert. denied, 347 U. S. 1016
(1954).

    The second requirement for MDRV 16(b) standing is that the plaintiff
own a security of the "issuer" whose stock was traded by the insider
defendant.  An "issuer" of a security is defined under MDRV 3(a)(8) of the
1934 Act as the corporation that actually issued the security, 15 U. S. C.
MDRV 78c(a)(8), and does not include parent or subsidiary corporations. {6}
While this requirement is strict on its face, it is ostensibly subject to
mitigation in the final requirement for MDRV 16(b) standing, which is
merely that the plaintiff own a security of the issuer at the time the MDRV
16(b) action is "instituted."  Today, as in 1934, the word "institute" is
commonly understood to mean "inaugurate or commence; as to institute an
action."  Black's Law Dictionary 985-986 (3d ed. 1933) (citing cases); see
Black's Law Dictionary 800 (6th ed. 1990) (same definition); Random House
Unabridged Dictionary of the English Language 988 (2d ed. 1987) ("to set in
operation; to institute a lawsuit").  Congressional intent to adopt this
common understanding is confirmed by Congress' use of the same word
elsewhere to mean the commencement of an action.  See, e. g., 8 U. S. C.
MDRV 1503(a) ("action . . . may be instituted only within five years after
. . . final administrative denial"); 42 U. S. C. MDRV 405(g) ("Any action
instituted in accordance with this subsection shall survive notwithstanding
any change in the person occupying the office of Secretary or any vacancy
in such office").

    The terms of MDRV 16(b), read in context, thus provide standing of
signal breadth, expressly limited only by conditions existing at the time
an action is begun.  Petitioners contend, however, that the statute should
at least be read narrowly enough to require the plaintiff owning a
"security" of the "issuer" at the time the action is "instituted" to
maintain ownership of the issuer's security throughout the period of his
participation in the litigation.  See Brief for Petitioners 11.  But no
such "continuous ownership requirement," ibid., is found in the text of the
statute, nor does MDRV 16(b)'s legislative history reveal any congressional
intent to impose one.
    This is not to say, of course, that a MDRV 16(b) action could be
maintained by someone who is subsequently divested of any interest in the
outcome of the litigation.  Congress clearly intended to put "a
private-profit motive behind the uncovering of this kind of leakage of
information, [by making] the stockholders [its] policemen."  Hearings on H.
R. 7852 and H. R. 8720 before the House Committee on Interstate and Foreign
Commerce, 73d Cong., 2d. Sess., 136 (1934) (testimony of Thomas G.
Corcoran).  The sparse legislative history on this question, which consists
primarily of hearing testimony by one of the 1934 Act's drafters, merely
confirms this conclusion. {7}

    Congress must, indeed, have assumed any plaintiff would maintain some
continuing financial stake in the litigation for a further reason as well.
For if a security holder were allowed to maintain a MDRV 16(b) action after
he had lost any financial interest in its outcome, there would be serious
constitutional doubt whether that plaintiff could demonstrate the standing
required by Article III's case or controversy limitation on federal court
jurisdiction.  See Phillips Petroleum Co. v. Shutts, 472 U. S. 797, 804
(1985) (Article III requires "the party requesting standing [to allege]
`such a personal stake in the outcome of the controversy as to assure that
concrete adverseness which sharpens the presentation of issues' ") (quoting
Baker v. Carr, 369 U. S. 186, 204 (1962)); see also Valley Forge Christian
College v. Americans United for Separation of Church and State, Inc., 454
U. S. 464, 472 (1982).  Although "Congress may grant an express right of
action to persons who otherwise would be barred by prudential standing
rules," Warth v. Seldin, 422 U. S. 490, 501 (1975), "Art. III's requirement
remains: the plaintiff still must allege a distinct and palpable injury to
himself."  Ibid.  Moreover, the plaintiff must maintain a "personal stake"
in the outcome of the litigation throughout its course.  See United State
Parole Commission v. Geraghty, 445 U. S. 388, 395-397 (1980).

    Hence, we have no difficulty concluding that, in the enactment of MDRV
16(b), Congress understood and intended that, throughout the period of his
participation, a plaintiff authorized to sue insiders on behalf of an
issuer would have some continuing financial interest in the outcome of the
litigation, both for the sake of furthering the statute's remedial purposes
by ensuring that enforcing parties maintain the incentive to litigate
vigorously, and to avoid the serious constitutional question that would
arise from a plaintiff's loss of all financial interest in the outcome of
the litigation he had begun.  See Crowell v. Benson, 285 U. S. 22, 62
(1932) ("When the validity of an act of Congress is drawn in question, and
even if a serious doubt of constitutionality is raised, . . . this Court
will first ascertain whether a construction of the statute is fairly
possible by which the question may be avoided"); see also Public Citizen v.
United States Department of Justice, 491 U. S. 440, 465-466 (1989); id., at
481 (Kennedy, J., concurring in judgment).
B
    The conclusion that MDRV 16(b) requires a plaintiff security holder to
maintain some financial interest in the outcome of the litigation does not,
however, tell us whether an adequate financial stake can be maintained when
the plaintiff's interest in the issuer has been replaced by one in the
issuer's new parent.  We think it can be.

    The modest financial stake in an issuer sufficient to bring suit is not
necessarily greater than an interest in the original issuer represented by
equity ownership in the issuer's parent corporation.  A security holder
eligible to institute suit will have no direct financial interest in the
outcome of the litigation, since any recovery will inure only to the
issuer's benefit.  Yet the indirect interest derived through one share of
stock is enough to confer standing, however slight the potential marginal
increase in the value of the share.  A bondholder's sufficient financial
interest may be even more attenuated, since any recovery by the issuer will
increase the value of the bond only because the issuer may become a
slightly better credit risk.

    Thus, it is difficult to see how such a bondholder plaintiff, for
example, is likely to have a more significant stake in the outcome of a
MDRV 16(b) action than a stockholder in a company whose only asset is the
issuer.  Because such a bondholder's attenuated financial stake is
nonetheless sufficient to satisfy the statute's initial standing
requirements, the stake of a parent company stockholder like respondent
should be enough to meet the requirements for continued standing, so long
as that is consistent with the text of the statute.  It is consistent, of
course, and in light of the congressional policy of lenient standing, we
will not read any further condition into the statute, beyond the
requirement that a MDRV 16(b) plaintiff maintain a financial interest in
the outcome of the litigation sufficient to motivate its prosecution and
avoid constitutional standing difficulties.
III
    In this case, respondent has satisfied the statute's requirements.  He
owned a "security" of the "issuer" at the time he "instituted" this MDRV
16(b) action.  In the aftermath of International's restructuring, he
retains a continuing financial interest in the outcome of the litigation
derived from his stock in International's sole stockholder, Viacom, whose
only asset is International.  Through these relationships, respondent still
stands to profit, albeit indirectly, if this action is successful, just as
he would have done if his original shares had not been exchanged for stock
in Viacom.  Although a calculation of the values of the respective
interests in International that respondent held as its stockholder and
holds now as a Viacom stockholder is not before us, his financial interest
is actually no less real than before the merger and apparently no more
attenuated than the interest of a bondholder might be in a MDRV 16(b) suit
on an issuer's behalf.
    The judgment of the Court of Appeals is, accordingly, affirmed.
It is so ordered.
 
 
 
 
 
 

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1
    The text of Section 16(b) reads in full:
    "For the purpose of preventing the unfair use of information which may
have been obtained by such beneficial owner, director, or officer by reason
of his relationship to the issuer, any profit realized by him from any
purchase and sale, or any sale and purchase, of any equity security of such
issuer (other than an exempted security) within any period of less than six
months, unless such security was acquired in good faith in connection with
a debt previously contracted, shall inure to and be recoverable by the
issuer irrespective of any intention on the part of such beneficial owner,
director, or officer in entering into such transaction of holding the
security purchased or of not repurchasing the security sold for a period
exceeding six months.  Suit to recover such profit may be instituted at law
or in equity in any court of competent jurisdiction by the issuer, or by
the owner of any security of the issuer in the name and in behalf of the
issuer if the issuer shall fail or refuse to bring such suit within sixty
days after request or shall fail diligently to prosecute the same
thereafter; but no such suit shall be brought more than two years after the
date such profit was realized.  This subsection shall not be construed to
cover any transaction where such beneficial owner was not such both at the
time of the purchase and sale, or the sale and purchase, of the security
involved, or any transaction or transactions which the Commission by rules
and regulations may exempt as not comprehended within the purpose of this
subsection."  15 U. S. C. MDRV 78p(b).

    The phrase "beneficial owner, director, or officer" is defined in MDRV
16(a) as "[e]very person who is directly or indirectly the beneficial owner
of more than 10 per centum of any class of any equity security . . . which
is registered pursuant to [MDRV 12 of the 1934 Act], or who is a director
or an officer of the issuer of such security. . . ."  15 U. S. C. MDRV
78p(a).

2
    See Foremost-McKesson, Inc. v. Provident Securities Co., 423 U. S. 232
(1976) (defendant must be 10% beneficial owner before purchase to be
subject to liability for subsequent sale); Kern County Land Co. v.
Occidental Petroleum Corp., 411 U. S. 582 (1973) (binding option to sell
stock not a "sale" for purposes of MDRV 16(b)); Reliance Elec. Co. v.
Emerson Elec. Co., 404 U. S. 418 (1972) (no liability for sales by
defendant after its ownership interest fell below 10%); Blau v. Lehman, 368
U. S. 403 (1962) (partnership not liable under MDRV 16(b) for trades by
partner).

3
    International stockholders who chose not to exchange their shares under
the terms of the merger were afforded appraisal rights under Ohio law.
App. 25-26.  Respondent did not exercise his right to appraisal.

4
    Respondent also sought to sue derivatively on behalf of International.
App. to Pet. for Cert. 44a.  This "double derivative" claim was dismissed
by the District Court.  Id., at 33a.  Because of its disposition of
respondent's MDRV 16(b) claim, the Court of Appeals did not reach this
issue.  909 F. 2d 724, 731 (CA2 1990).  Although respondent now "urges upon
th[is] Court the validity of his double derivative action," Brief for
Respondent 26, this issue was not properly presented to this Court for
review and we do not reach it.

5
    The Court of Appeals observed:
    "Here plaintiff's suit was timely, and while his MDRV 16(b) suit was
pending he was involuntarily divested of his share ownership in the issuer
through a merger.  But for that merger plaintiff's suit could not have been
challenged on standing grounds.  Although we decline -- in keeping with
MDRV 16(b)'s objective analysis regarding defendants' intent -- to inquire
whether the merger was orchestrated for the express purpose of divesting
plaintiff of standing, we cannot help but note that the incorporation of
Viacom and the merger proposal occurred after plaintiff's MDRV 16(b) claim
was instituted.  Hence, the danger of such intentional restructuring to
defeat the enforcement mechanism incorporated in the statute is clearly
present."  909 F. 2d, at 731.

6
    Cf. MDRV 2(11) of the Securities Act of 1933, 15 U. S. C. MDRV 77b(11)
(definition of "issuer" for certain purposes is "any person directly or
indirectly or controlled by the issuer, or any person under direct or
indirect common control with the issuer").

7
    Petitioners have directed our attention only to a statement by Thomas
G. Corcoran, a principal drafter of the statute, at one of the hearings on
the 1934 Act.  Corcoran testified that Congress could be confident that
MDRV 16(b) would be enforced because the enactment of the statute would
"[say] to all of the stockholders of the company, `You can recover any of
this profit for your own account, if you find out that any such
transactions are going on.' "  Hearings on H. R. 7852 and H. R. 8720 before
the House Committee on Interstate and Foreign Commerce, 73d Cong., 2d.
Sess., 136 (1934).  This statement was not, of course, a complete
description of the class of plaintiffs entitled to MDRV 16(b) standing,
since "any security [holder]" may sue, not just stockholders.  15 U. S. C.
MDRV 78p(b).  Nor was it meant as a precise description of a plaintiff's
incentive to sue; the witness elsewhere made it clear that a stockholder
plaintiff (or any other security holder) would not directly receive any
recovery, but would be suing solely on the corporation's behalf:
    "The fact that the stockholders, with an interest, are permitted to sue
to recover that profit for the benefit of the company, puts anyone doing
this particular thing, in the position of taking [a] risk that somebody
with a profit motive will find try to find out."  Id., at 137 (emphasis
added).
    Corcoran's analysis does, however, demonstrate the statute's reliance
for its enforcement on the profit motive in an issuer's security holders, a
dependence that could hardly cease the moment after suit was filed.
