Circuit Judge Raymond Lohier

 

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Olagues, a shareholder in three companies, sought disgorgement of short-swing profits under Securities Exchange Act §16(b) from investment entities controlled by Icahn (Icahn Entities). In third-party contracts Icahn sold “European style” put options based on the companies’ stock price and collected cash premiums as consideration. Because the put options were cancelled unexercised within six months of their sale, §16(b)’s implementing regulations required Icahn to disgorge the amount of the premiums paid to the companies, which he did. Second Circuit affirmed District Court’s dismissal of Olagues’ suits claiming Icahn should have also disgorged the “value” of alleged discounts received on purchases of related “American style” call options. Because open market option contracts were not comparable to the option contracts bought and sold by Icahn, Olagues did not plausibly allege the Icahn Entities received a discount on the premiums for the call options. Although the Icahn Entities acquired millions of shares upon exercise of the call options, the exercise of a fixed-price option was a “‘non-event’ for 16(b) purposes” and there was no claim the Icahn Entities sold shares at a profit within six months of buying the call options.

Circuit Judge Raymond Lohier

 

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Olagues, a shareholder in three companies, sought disgorgement of short-swing profits under Securities Exchange Act §16(b) from investment entities controlled by Icahn (Icahn Entities). In third-party contracts Icahn sold “European style” put options based on the companies’ stock price and collected cash premiums as consideration. Because the put options were cancelled unexercised within six months of their sale, §16(b)’s implementing regulations required Icahn to disgorge the amount of the premiums paid to the companies, which he did. Second Circuit affirmed District Court’s dismissal of Olagues’ suits claiming Icahn should have also disgorged the “value” of alleged discounts received on purchases of related “American style” call options. Because open market option contracts were not comparable to the option contracts bought and sold by Icahn, Olagues did not plausibly allege the Icahn Entities received a discount on the premiums for the call options. Although the Icahn Entities acquired millions of shares upon exercise of the call options, the exercise of a fixed-price option was a “‘non-event’ for 16(b) purposes” and there was no claim the Icahn Entities sold shares at a profit within six months of buying the call options.