Blau v. Lehman

368 U.S. 403 (1962)

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Nature of the Case

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Facts

Blau (P), a stockholder in Tide Water Associated Oil Company, brought this action under §16 (b) 1 to recover 'short swing' profits. Lehman Brothers (D) is a partnership engaged in investment banking, securities brokerage and securities trading for its own account, and Joseph A. Thomas (D) is a partner of Lehman Brothers and a director of Tide Water. P alleged that Thomas (D) represent Lehman's (D) interests as a director on the Tide Water Board. While representing the interests of Lehman Brothers (D), Thomas (D) advised and caused Lehman Brothers (D), to purchase and sell 50,000 shares of . . . stock of Tide Water, realizing profits thereon which did not inure to and [were] not recovered by Tide Water.' The evidence was in conflict to the charges of deputization and wrongful use of 'inside' information by Lehman Brothers (D). Thomas (D) never discussed the operating details of Tide Water affairs with any member of Lehman Brothers (D). Lehman (D) had bought the Tide Water securities without consulting Thomas (D) and wholly on the basis of public announcements by Tide Water that common shareholders could thereafter convert their shares to a new cumulative preferred issue.

The District Court refused to render a judgment or against Lehman (D) or Thomas (D) individually, for the $ 98,686.77 profits which it determined that Lehman Brothers had realized. It did hold Thomas (D) liable for $3,893.41 for his proportionate share of Lehman (D) profits. Everybody appealed. The Supreme Court eventually granted certiorari.