On March 14, 2025, Judge John P. Cronan of the United States District Court for the Southern District of New York granted summary judgment in favor of defendants in an action brought under Section 16(b) of the Securities Exchange Act against a broker-dealer and its CEO.  Clarus Corp. v. HAP Trading, LLC, —F. Supp. 3d—, 2025 WL 833453 (S.D.N.Y. 2025).  Plaintiff Clarus Corporation (“Clarus”) alleged that defendants’ so-called “packaged trades” for Clarus securities generated insider short‑swing profits in violation of Section 16(b) of the Exchange Act.  Addressing a question of first impression, the Court held that the transactions at issue fell within the exception in Section 16(d) for purchases and sales of securities incident to a dealer’s involvement in over-the-counter (“OTC”) market making.

On March 12, 2018, the United States Court of Appeals for the Fifth Circuit affirmed the dismissal of a shareholder’s claims to recover on behalf of Dynegy, Inc. (“Dynegy”) alleged short-swing profits from insiders in violation of Section 16(b) of the Securities Exchange Act of 1934 (“Exchange Act”). Jordan v. Flexton, et al., No. 17-20346 (5th Cir. Mar. 12, 2018). Plaintiff alleged that defendants, Dynegy’s officers, received short-swing insider trading profits from a series of dispositions of equity securities that violated Section 16(b) because the dispositions occurred less than six months after they received the equity securities. Plaintiff maintained that the purchases were not exempt under SEC Rule 16b-3(e) because they were neither pre-approved nor automatic. The district court dismissed the action and held that the transactions were exempt under Rule 16b-3(e). On appeal, the Fifth Circuit affirmed the dismissal on the ground that plaintiff failed to allege facts showing that the dispositions were discretionary or were not pre-approved.

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On August 3, 2017, the United States Court of Appeals for the Second Circuit affirmed the dismissal of a “short-swing” trading suit brought by a shareholder in Herbalife, Ltd., Hologic Inc., and Nuance Communications, Inc. (the “Companies”), against investment entities controlled by Carl C. Icahn (“Icahn” and the “Icahn Entities”), that sought disgorgement of certain consideration the Icahn Entities allegedly received in violation of Section 16(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and regulations promulgated thereunder.  Olagues v. Icahn et al., No. 16‐1255‐cv (2d Cir. Aug. 3, 2017).  Plaintiff acknowledged that the Icahn Entities disgorged premiums on certain put options that were cancelled unexercised within six months of their sale, as required by Section 16(b), but alleged that the Icahn Entities should have also disgorged the “value” of alleged discounts that Icahn received on purchases of related call options.  In affirming the district court’s decision, the Second Circuit ruled that plaintiff failed to state a plausible claim for additional disgorgement by the Icahn Entities.  

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On November 3, 2016, the United States Court of Appeals for the Second Circuit affirmed the dismissal of a “short-swing” trading suit brought against the lead underwriters in connection with Facebook, Inc.’s initial public offering (“IPO”).  In re: Facebook Inc., IPO Sec., No. 14-3800 (2nd Cir. Nov. 3, 2016).  The Second Circuit held that standard lock-up agreements in an IPO between lead underwriters and pre-IPO shareholders are not alone sufficient to render those parties a “group” under Section 13(d) of the Securities Exchange Act of 1934 (the “Exchange Act”), and therefore those parties were not subject to disgorgement pursuant to Section 16(b) of the Exchange Act.  Plaintiff had sought to hold the defendants liable under Section 16(b) for disgorgement of short-swing profits received in connection with their sales and purchases of shares in Facebook’s IPO. 

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