U.S. Court of Appeals for the Second Circuit
Expiration of Purchase
Roth v. The Goldman Sachs Group, Inc., et al.
Judges Winter, Cabranes and Livingston
Background: The plaintiff sought to hold the defendants liable for failing to disgorge “short-swing profits” as required by Section 16(b) of the Securities Exchange Act. The defendant owned over 10 percent of the disputed equity shares. The defendants were statutory insiders when they wrote call options but when the same options expired less than six months later.
Ruling: The Second Circuit affirmed. The court held that a call-option’s expiration within six months of its writing constitutes a purchase, but that the defendants were not statutory insiders at the time of the purchase, the defendants were not required to disgorge any profits.
Glenn Ostrager of Ostrager Chong Flaherty & Broitman for the plaintiff-appellant; Lawrence T. Gresser of Cohen & Gresser for the defendants-appellees