Feder v. Martin Marietta Corp.
United States Court of Appeals for the Second Circuit
406 F.2d 260 (1969)
Martin Marietta's (defendant) president and CEO, Bunker, was invited to join Sperry Rand's board; Martin, a Sperry shareholder, approved his taking the seat. Bunker served as a Sperry director for three months and resigned. During that time Martin acquired more Sperry stock, and four weeks after Bunker's resignation, Martin sold all of it. Feder (plaintiff), on Sperry's behalf, sued Martin for insider trading, arguing that because Martin had to approve Bunker's board seat and Bunker was Martin's president and CEO, Bunker was really acting as Martin's deputy on Sperry's board — making Martin itself a Sperry director. The district court ruled for Martin, and Feder appealed.
Whether a company that served on another company's board through a deputized director, and later resigned that board seat, may sell its stock in the other company shortly after the resignation without insider-trading liability.