Judge Paul Engelmayer
Murdock, Dole Foods Co. Inc.'s chief executive, is beneficial owner of more than 10 percent of Dole's equity. Discussing Donoghue v. Centillium Commc'ns and Chechele v. Sperling, district court dismissed shareholder Donoghue's suit under §16(b) of the Securities Exchange Act of 1934 (SEA) alleging Murdock's realization of short-swing profits when he bought more than 4.96 million shares of Dole within six-months of an Oct. 22, 2009, Forward Purchase Agreement's (FPA) Nov. 1, 2012, settlement date. Rejecting Donoghue's argument that the FPA was a "hybrid derivative" the court found that for §16(b) purposes Murdock's sale of Dole stock occurred on Oct. 22, 2009. Murdock could not change the means for calculating the final per share price, and there was no danger he would abuse inside information to manipulate the FDA to his advantage at the time of settlement. Because the FPA did not give Murdock a conversion privilege at a price that was not fixed, it is not exempt from the definition of derivative securities. Thus Murdock's "sale" of Dole stock occurred at the FPA's Oct. 22, 2009, acquisition, not its Nov. 1, 2012, settlement. Murdock made no matching purchase within six months of Oct. 22, 2009, and is therefore not liable under §16(b).
