Analytical Surveys, Inc. v. Tonga Partners, L.P., et al., No. 09-2622 (2d Cir. 2012)Annotate this Case
Defendants appealed from the district court's holding that defendants were liable to plaintiff in the total amount of $4,965,898.95 for profits earned in short-swing insider trading and from an order denying defendants' motion for reconsideration. At issue, inter alia, was the rarely-construed "debt exception" to liability under Section 16(b) of the Securities and Exchange Act of 1934, 15 U.S.C. 78p(b), and the treatment of "hybrid" derivative securities under Section 16(b). The court agreed with the district court that the acquisition of the 2004 Note was a purchase of a security for purposes of Section 16(b), that the conversion of the 2004 Note was also a Section 16(b) purchase, and that neither of these purchases came within the debt and borderline transaction exceptions to section 16(b) liability. The court further concurred that Tonga and Cannell Capital, in addition to Cannell, were subject to disgorgement of profits, and the court concluded that the district court did not abuse its discretion in denying defendants' motion for reconsideration. Accordingly, the court affirmed the judgment.
The court issued a subsequent related opinion or order on July 13, 2012.