BLAU V. LEHMAN
368 U.S. 403 (1962)
NATURE OF THE CASE: Blau (P) appealed a decision that found only Thomas (D) liable for
violations of Section 16(b) and not Lehman (D), the partnership.
FACTS: Blau (P), a stockholder in Tide Water Associated Oil Company, brought this action
under 16 (b) 1 to recover 'short swing' profits. Lehman Brothers (D) is a partnership
engaged in investment banking, securities brokerage and in securities trading for its own
account, and Joseph A. Thomas (D) is a partner of Lehman Brothers and a director of Tide
Water. P alleged that Thomas (D) represent Lehman's (D) interests as a director on the Tide
Water Board. While representing the interests of Lehman Brothers (D), Thomas (D) advised and
caused Lehman Brothers (D), to purchase and sell 50,000 shares of . . . stock of Tide Water,
realizing profits thereon which did not inure to and [were] not recovered by Tide Water.'
The evidence was in conflict to the charges of deputization and wrongful use of 'inside'
information by Lehman Brothers (D). Thomas (D) never discussed the operating details of
Tide Water affairs with any member of Lehman Brothers (D). Lehman (D) had bought the Tide
Water securities without consulting Thomas (D) and wholly on the basis of public
announcements by Tide Water that common shareholders could thereafter convert their shares
to a new cumulative preferred issue.
The District Court refused to render a judgment or against Lehman (D) or Thomas (D)
individually, for the $ 98,686.77 profits which it determined that Lehman Brothers had
realized. It did hold Thomas (D) liable for $3,893.41 for his proportionate share of Lehman
(D) profits. Everybody appealed. The Supreme Court eventually granted certiorari.
ISSUE:
RULE OF LAW:
HOLDING AND DECISION:
LEGAL ANALYSIS:
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