Reliance Electric Co. v. Emerson Electric Co.

Emerson Electric Co. (Emerson) (plaintiff) bought 13.2 percent of Dodge Manufacturing Co. (Dodge) stock, which then merged into Reliance Electric Co. (Reliance) (defendant). To avoid handing over all its profits under § 16(b) of the Securities Exchange Act, which targets short-swing trading by owners of more than 10 percent of a company's stock, Emerson sold enough shares to drop just below the 10 percent line, paid over those first-sale profits as required, and then sold its remaining shares at a further profit without paying that second batch over. Reliance demanded the second sale's profits too, and Emerson sought a declaratory judgment that it owed nothing more. The district court found Emerson liable for the second sale's profits, but the court of appeals reversed in Emerson's favor, and Reliance appealed.