CBI Industries, Inc. v. Horton
United States Court of Appeals for the Seventh Circuit
895 F.2d 1152 (7th Cir. 1990)
CBI director Horton (defendant), co-trustee and contingent remainderman of a trust for his children, sold CBI stock and within six months caused the trust to repurchase similar stock at a lower price, netting the trust a $25,000 profit that reduced the amount Horton might eventually need to give his children if he ever received the trust's remainder; CBI (plaintiff) sued under Section 16(b) to recover the profit, arguing the transaction benefited Horton both emotionally and financially, and the trial court awarded CBI the full $25,000. Horton appealed, arguing the profit was realized by the trust, not by him personally.
Whether profit generated by a trust benefiting an insider's children, in which the insider holds only a contingent remainder interest, constitutes profit "realized by" the insider for purposes of Section 16(b) short-swing profit liability.