Blau v. Lehman
United States Supreme Court
368 U.S. 403 (1962)
Lehman Brothers partner Thomas (defendant) sat on the board of Tide Water Associated Oil Company while Lehman itself profited nearly $100,000 from short-swing trades in Tide stock. Tide shareholder Blau (plaintiff) sued derivatively under § 16(b) of the Securities Exchange Act to recover Lehman's profits, arguing Thomas acted as Lehman's deputy using inside information. The trial court found Lehman was not liable as a director but held Thomas personally liable for his own share of the profits; the Second Circuit affirmed, and the Supreme Court granted certiorari.
Whether, under SEA § 16(b), a partnership is deemed a "director" of a corporation and made to disgorge short-swing trading profits merely because one of its partners sits on the corporation's board.