Kern County Land Company v. Occidental Petroleum Corporation
United States Supreme Court
411 U.S. 582 (1973)
Occidental (defendant) bought 500,000 shares of Old Kern stock (exceeding 10 percent ownership) after a failed merger attempt, then acquired roughly 380,000 more shares; Old Kern responded by pursuing a merger with Tenneco instead, under which Occidental would exchange its Old Kern shares for Tenneco stock, prompting Occidental to separately negotiate an option to trade its Old Kern shares for Tenneco preference stock, which it exercised within six months of first exceeding 10 percent ownership. After the Old Kern-Tenneco merger closed, New Kern (plaintiff) sued Occidental under § 16(b), arguing both the Tenneco stock exchange and the option agreement were "sales" requiring Occidental to disgorge its profits; the district court agreed, but the court of appeals reversed, and the Supreme Court granted certiorari.
Whether the purchase and sale of corporate stock within a six-month period by an entity owning more than 10 percent of the corporation is a "sale" under § 16(b) of the Securities Exchange Act of 1934 without proof of actual abuse of insider information.