Petition for Writ of Certiorari — Walet v. Jefferson Lake Sulphur Co.

EUGENE H. WALET, JR.,

Petitioner,

PETITION OF EUGENE H. WALET, JR.,

FOR WRIT OF CERTIORARI

and

BRIEF IN SUPPORT OF PETITION.

JAMES G. SCHILLIN,

Attorney for Petitioner.

Ss ͤ —

ae

SUBJECT INDEX

PAGE

Petition for Writ of Certiorari 1

Affidavit of Petitioner 15

Brief in Support of Petition for Certiorari i 3

Opinion Below 2

Jurisdietion 1

Federal Statute Involved 7

Statement of Case 2

Specifications of Error 8

Argument 8

Conclusion 13

INDEX OF AUTHORITIES

Atcheson Topeka & Santa Fe Railway v. Railroad

Commissioner, 283 U.S. 380, 392-8, 51 S. Ct.

523, 75 L. Ed. 1128

Bender v. Pfaff, 282 U.S. 127, 51 S. Ct. 64, 74 L.

Ed. 252

Consolidated Fingineer Corp. v. Nesbit, 102 F. Supp.

112

Fernandez v. Wiener, 326 U.S. 340, 66 S. Ct. 178,

98 L. Ed. 116

Jefferson Lake Sulphur Co. v. Eugene H. Walet, Jr.,

104 F. Supp. 20

Lockheed v. Rathman, 106 F. Supp. 810 -_....-..

Poe v. Seaborn, 282 U.S. 101, 51 S. Ct. 58, 60, 75

L. Ed. 239

Rattner v. Lehmann, 193 F. (2) 564, 566 5

Shaw v. Dreyfus, 172 F. (2) 143

Truncle v. Blumberg, 80 F. Supp. 387

Succession of Wiener, 203 La. 649, 14 So. (2) 475.

Eugene H. Walet, Jr. v. Jefferson Lake Sulphur Co.,

204 F. (2) 433.

Wisner v. Wisner, 338 U.S. 655, 70 S. Ct. 398, 94

1), Oe. Se ha

STATUTES CITED

Securities Exchange Act of 1934, Section 16 (b), 15

USCA 78 p. (b) :

217324

IN THE

Supreme Court of the United States

OCTOBER TERM, 1952

No.

EUGENE H. WALET, JR.,

Petitioner,

versus

JEFFERSON LAKE SULPHUR COMPANY,

Respondent.

PETITION OF EUGENE H. WALET, IR.,

FOR WRIT OF CERTIORARI.

To the Honorable the Supreme Court of the

United Statés:

Now comes Eugene H. Walet, Jr., a citizen of the

United States, residing in the Parish of Orleans, State

of Louisiana, and respectfully petitions this Honorable

Court to grant a writ of certiorari to the Circuit Court

of Appeals for the Fifth Circuit, to remove therefrom,

for review here, the record in the cause therein pending,

number 14,175, wherein petitioner is the appellant and

respondent, Jefferson Lake Sulphur Company, is =

and shows:

(1)

That this Court has jurisdiction under Section 1254,

Title 28 USCA.

2

(2)

That petitioner is now, and has been, for the past

two years President and a Director of respondent cor-

poration; that respondent filed this action against peti-

tioner in the United States District Court for the Eastern

District of Louisiana (New Orleans Division), and re-

covered iudgment for $36,677.79 and costs, under the

provisions of Section 16 (b) of the Securities Exchange

Act of 1934 (15 USCA 78 p. (b); the opinion of the

District Court is reported in 104 F. Supp. 20; that of

the Fifth Circuit in 202 F. (2) 433; rehearing was

denied on April 4, 1953.

(3)

The facts, which have been fully stipulated (R. 11-

20, R. 46-49), show that at all material times petitioner

was subject to the community property law of Louisiana,

and his wife had an absolute, vested, proprietary interest

in one-half of all the stock purchased, and profits made,

in his name.

(4)

Petitioner purchased, between April 20, 1950 and

May 9, 1950 2400 shares of respondent’s stock for $18,-

704.00; he sold 2400 shares between August 16, 1950 and

November 8, 1950 for $42,573.48, thus making a profit,

according to respondent’s contention, of $23,869.48 which,

when decreased according to petitioner’s contention, by

the fifty per cent thereof belonging to his wife, results

in petitioner having made a profit of $11,934.74 (R.

12-14).

| (5)

Petitioner sold, between November 8, 1950

and

vember 24, 1950, an additional 1200 shares of stock

$32,008.31. This stock was represented by certificates

which he owned for some time, considerably longer than

six months. However, in order to show a further profit

respondent has included 1200 treasury shares acquired

from it under an option contract, and for which 1200

treasury shares petitioner paid directly to respondent the

sum of $16,512.00. Although petitioner has not sold

these 1200 option shares, and he may ultimately sell

them at a loss, he is nevertheless charged with an addi-

tional profit of $15,496.31, which when added to

$28,869.48, swpra, makes a total asserted liability of

$39,365.79. This sum was concededly reduced to $36,-

677.79, the amount of the judgment rendered against

petitioner, for the reason that the complaint used as a

base the actual cost to petitioner of the 1200 shares of

option stock rather than the market value thereof at

the date of the accrual of the option. (R. 37).

(6)

Petitioner shows that, under no circumstances, can

his liability extend beyond 1200 shares, to-wit:

Shares involved 3600

Deduct treasury (option) share 1200

Deduct one-half owned by wife

(7)

The questions ;-ssented and the reasons relied upon

for the allowance of this writ are as follows:

I.

This Court should review Section 16 (b) of. the

“a

4

Securities Exchange Act of 1934 from the standpoint of

(a) the application which the Lower Courts have made

of said Section, particularly where the facts, as here,

demonstrate that not only was no damage suffered, but

where it was impossible for any damage to result to any

stockholder or any person whatsoever, as well as (b) to

correct the inequities and injustices flowing from the

arbitrary and inflexible interpretation being placed upon

the statute by the Lower Courts, contrary to congres-

sional intent.

II.

It is the well settled law of Louisiana, to be followed

in the Federal Courts, that, under the community prop-

erty system of Louisiana, petitioner's wife has an abso-

lute vested proprietary interest in one-half of the stock

involved in this complaint, and the profits resulting from

the sale thereof, which profits the statute does not pur-

port to reach; that to otherwise construe the statute

would deprive petitioner’s wife of her property without

due process of law in contravention of the Fifth Amend-

ment of the Constitution of the United States (R. 14).

III.

There is no necessity, in order to vindicate the Fed-

eral policy announced by the statute, to destitute peti-

tioner's wife of her property, and the statute does not

purport to do so. The ‘authorities relied upon by the

Courts below that, under certain circumstances State law

must yield to Federal statutory policy, have not the

remotest application to this case.

IV.

The Circuit Court of Appeals completely ignores the

5

fact that one of the contentions of petitioner was not

even an issue before the Trial Judge, having been raised

for the first time by stipulation after the case reached

the Court of Appeals, viz., that the treasury (option)

stock is exempt from the operation of Sections 16 (a)

and (b) by a specific rule of the Securities Exchange

Commission. Respondent agreed the Court of Appeals

should pass on the contention (R. 48).

V.

The Circuit Court of Appeals perpetuates the fol-

lowing flagrant errors committed by the Trial J udge:

(a) That petitioner sold stock within six months

after he acquired the treasury (option) stock,

although respondent has judicially admitted

that this option stock is still in the possession

of petitioner and his wife (R. 15-16) (R. 27).

(b) That “treasury stock by the very fact of its

purchase and issuance ceases to be such and

becomes outstanding or non-treasury stock,”

although it is conceded that petitioner has

had no transaction in such treasury (option)

stock except to acquire same. Obviously this

stock did not become “outstanding or non-

treasury stock” until after it came into the

possession of petitioner and his wife, and it

is in their possession at this very moment,

petitioner never having disposed of it since

he acquired it under his option (R. 26, 53).

(e) In treating these treasury shares, acquired

by petitioner under his option, as coming

within the definition of “equity shares,” al-

though treasury shares are expressly excluded

by the statute from the operation of Section

16 (b) (R. 26, 53).

me

oan

VI.

The Circuit Court of Appeals has ignored every

principle of equity in giving sweeping approval to the

opinion of the Trial Judge, failing to even recognize the

erroneous findings of fact although such findings are

contrary to the unqualified admissions of respondent.

IN THE

Supreme Court of the United States

OCTOBER TERM, 1952

No. Bee

EUGENE H. WALET, JR.,

versus

JEFFERSON LAKE SULPHUR COMPANY,

BRIEF IN SUPPORT OF APPLICATION

FOR WRIT OF CERTIORARI.

May It Please the Court:

FEDERAL STATUTE INVOLVED

“15 USCA 78 f. (b), Sec. 16 (b) of Securities

Exchange Act of 1984.

“¢(h) For the purpose of preventing the

unfair use of information which may have been

obtained by such beneficial owner, director, or

1Treasuty (option shares involved here are specially exempted

from Sec. 16 as by 2 EC. Regulation, infra.

8

irrespective of any intention on the part of such

beneficial owner, director, or officer in entering

into such transaction of holding the security pur-

chased or of not repurchasing the security sold

for a period exceeding six months. Suit to re-

cover such profit may be instituted at law or in

equity in any court of competent jurisdiction by

the issuer, or by the owner of any security of

the issuer in the name and in behalf of the issuer

if the issuer shall fail or refuse to bring such

suit within sixty days after request or shall fail

diligently to prosecute the same thereafter; but

no such suit shall be brought more than two years

after the date such profit was realized. This sub-

section shall not be construed to cover any trans-

action where such beneficial owner was not such

both at the time of the purchase and sale, or the

sale and purchase, of the security involved, or any

transaction or transactions which the Commission

by rules and regulations may exempt as not com-

prehended within the purpose of this subsection.’ ”

ASSIGNMENTS OF ERROR

We shall argue the points in their numerical order

as stated in the petition, and assign as error the failure

of the Circuit Court of Appeals to affirm the contentions

of Appellant, to-wit:

I

This Court has never, during the twenty years this

statute has been in operation, given plenary review to

Section 16 (b), and during that long period the inferior

Federal Courts have given an arbitrary and inflexible

interpretation to this Section, resulting in penalizing

these officers and directors far beyond the intent of

Congress when the statute was passed. In the instant

case, with reference to the treasury (option) stock, every

principle of equity and justice is ignored. While Sec-

9

tion 16 (b) makes immaterial the intention of the di-

rector, at the time he enters into the transaction, not to

violate the statute, the stipulation of respondent, in the

instant case, concedes that there has been no violation

of the statute. Irrespective of what the legislative his-

tory of this statute indicates option privileges played

in the abuses sought to be corrected by Section 16 (b),

it is admitted as a fact in this case that every trans-

action was executed in the utmost good faith (R. 18),

resulted from no inside information, and no damage

was sustained by any person whatsoever, nor could any

damage be sustained by any person with regard to this

treasury (option) stock. These treasury (option) shares

were not purchased from another shareholder or from

a member of the general public, but were taken out of

its treasury by the corporation itself and delivered to

petitioner under an option agreement (R. 18).

The Courts below refused to recognize and apply

such equitable principles as were enforced in Consoli-

dated Engineer Corp. v. Nesbit, 102 F. Supp. 112, and

Lockheed v. Rathman, 106 F. Supp. 810, although both

eases bear striking resemblance to the case-at-bar, so

far as the option stock is concerned.

II.

The statute is aimed solely at the profits inuring

to the benefit of the officer or director and not to those

profits belonging to his wife. The holding by the Cir-

cuit Court of Appeals that petitioner’s wife must lose

her profits because petitioner is the head and master of

the community, and accountable for its management, is

directly contrary to the established rule of property in 7

Louisiana which holds that the law's investiture of the

10

husband with broad powers of management and control

by no means negatives the wife’s present interest as

co-owner. (Succession of Wiener, 203 La. 649, 14 80.

(2) 475; Bender v. Pfaff, 282 U.S. 127, 51 8. Ct. 64,

74 L. Ed. 252; Fernandez v. Wiener, 326 U.S. 340, 66

8. Ct. 178, 98 L. Ed. 116; Poe v. Seaborn, 282 U.S. 101,

51 S. Ct. 58, 60, 75 L. Ed. 239.) Respondent judicially

admits only one-half is husband’s property (R. 14).

III.

Federal intention to disrupt local property system

is never implied (Atcheson, Topeka & Santa Fe Railway

v. Railroad Commissioner, 283 U.S. 380, 392-8, 51 S. Ct.

523, 75 L. Ed. 1128). In Wisner v. Wisner, 338 US.

655, 70 S. Ct. 398, 94 L. Ed. 424, relied upon below,

the Federal Government provided the fund which made

the insurance proceeds possible; a liberal policy toward

the insured service man and his named beneficiary was

everywhere evident in the comprehensive statutory policy ;

the statute provided that the insured “shall have the

right to designate the beneficiary, and the right at all

times to change the beneficiary,” and that no person

should have a vested right to any of the proceeds. There

is no such comparable subject-matter embodied in the

instant legislation, which aims only to reach the profits

realized by the person named in the statute, and not

those realized by his partner or his wife.

The instant statute does not pretend to define who

owns the shares or the profits therefrom. That is a

matter for purely local law. There is no conflict here

between the Federal policy and the State law. Each re-

mains invidlate within its own sphere. The husband

loses his property if he comes within reach of the statute;

the wife retains hers because the statute does not pur-

11

port to touch her. The Cireuit Court of Appeals in

Rattner v. Lehmann, 193 F. (2) 564, 566, which is not

even mentioned in the opinions below, did no violence

to Federal poliey when it maintained the integrity ef

the property interest of the other partners in condemn-

ing only the profits of the partner who came within the

language of the statute.

| IV.

The Securities and Exchange Commission on Janu-

ary 13, 1935 issued the following regulation (Rule X-16

A-4, Release No. 79):

“The following securities shall be exempted

securities for the purposes of Section 16 (a) and

16 (b):

“Securities reacquired by or for account

of the issuer and held by it or for its ac-

count.

The treasury (option) shares involved in this case

are precisely “securities reacquired by * * * the issuer

and held by it * * * (R. 14-18, R. 46-49).

This contention was raised in the Court of Appeals,

and results from a stipulation filed in that Court. (R.

46-49). The point was not before the Trial Judge, yet

the Circuit Court of Appeals gave no consideration what-

ever to this contention of petitioner. We strongly urge

V.

(a) The Trial Judge found (R. 26) that peti-

tioner had sold stock within six months after he acquired

the treasury (option) stock. Petitioner acquired this

treasury (option) stock on November 29, 1950 (R. 14),

and his last sale of any stock was on November 24, 1950

4.

R *

12

(R. 13). The option stock is still in his possession. The

Court of Appeals paid no attention to our complaint on

this score.

(b) Petitioner's contention in this respect cannot

be successfully controverted by the holding of both Lower

Courts that, after it came into petitioner’s possession,

it was no longer treasury stock. It was concededly

treasury stock which he acquired, and it is the act of

acquiring same which respondent admits is the basis of

liability so far as these 1200 treasury (option) shares

are concerned, not the sale of said stock after he ac-

quired it. Respondent has matched 1200 shares sold by

petitioner with the 1200 treasury (option) shares ac-

quired under his option, which acquisition superseded

his last sale on November 24, 1950, supra.

(c) We assert that “treasury shares” are not

within the prohibition of Section 16 (b) because that

section applies only to “equity securities,” and the defi-

nition of “equity securities,” Section 3 (a) (11), does not

embrace “treasury shares.” Under Section 3 (a) (10)

the term “treasury stock” is embraced in the definition

of the term “security,” but Congress seems to have ex

industria, omitted “treasury shares” from the definition

of “equity shares“.

VI.

It is significant that the instant suit is brought by

the corporation itself, and it is noteworthy that peti-

tioner’s plea of estoppel (R. 6, et seg.; R. 14 et seq.) is

leveled at the conduct of the corporation itself. Re-

Fp pondent has placed itself in the highly inequitable posi-

of having impelled petitioner to enter into an option

tract, stemming from respondent’s desire to reward

13

a faithful executive officer, and having thus induced

petitioner to act, respondent now seeks to profit, not

from the sale by petitioner of these shares, but from

the mere acquisition of them by him. We regretfully

say that such conduct is, in effect, tantamount to pre-

tending, in one breath, to compensate petitioner for

admittedly extraordinary services over and beyond the

call of duty (R. 15), and in the next breath, invoking a

harsh and arbitrary statute which, praiseworthy as it

may be when properly applied, should not be used against

this petitioner, in view of special circumstances of this

case and the factual issues decided in his favor by the

stipulation.

The exercise of this particular option privilege can-

not be said to reasonably come within the reach of the

statute or the evil sought to be corrected thereby. Against

the corporation itself petitioner should be permitted to

exercise his option promptly, within the six-month period

if he so desires, if he is to exercise it at all. Unless he

could acquire the option stock, with the tax benefits in-

tended by respondent, the option privilege did not have

the value held out to petitioner, in which latter event

lack of good faith should be attributed to respondent

(Shaw v. Dreyfus, 172 F. (2) 143; Trunele v. Blumberg,

80 F. Supp. 387).

(8)

Petitioner avers that the decisions of the Trial

Court, and the Circuit Court of Appeals are erroneous,

in that said Courts have decided a most important ques-

tion of local community property law directly in conflict

with the applicable State Court decisions, and have de-

cided an important question of Federal statutory law

in a way untenable and in conflict, not alone with the

14

general weight of authority, but with fundamental prin-

ciples of equity and justice so often recognized and

maintained by this Court.

(9)

That these questions should be finally and authori-

tatively adjudged by this Honorable Court upon and

after a full presentation to this Court of the merits of

said questions on the part of petitioner and respondent.

WHEREFORE, petitioner prays that a writ of

certiorari may be issued out of and under the seal of

this Court, directed to the United States Circuit Court

of Appeals for the Fifth Circuit, commanding the said

Court to certify and send this Court a full and complete

transcript of the record and all proceedings of the said

Circuit Court of Appeals in said case therein numbered,

14,175, entitled Eugene H. Walet, Jr., Appellant, vs.

Jefferson Lake Sulphur Company, Appellee, to the end

that said case may be reviewed and determined by this

Court as provided in Section 1254, Title 28 USCA, and

applicable statutes, and that your petitioner may have

such other further relief or remedy in the premises as

this Honorable Court may deem appropriate and in con-

formity with law, and that the judgment of the said

Circuit Court of Appeals be reversed by this Honorable

15

STATE OF LOUISIANA

PARISH OF ORLEANS

CITY OF NEW ORLEANS

PERSONALLY CAME AND APPEARED BE-

FORE ME, the undersigned Notary Public duly com-

missioned and qualified in and for the Parish of Orleans,

State of Louisiana, EUGENE H. WALET, JR., who,

being duly sworn, deposes and says:

That he is petitioner herein; that he is a resident

of the Parish of Orleans, State of Louisiana; that he

has read the foregoing petition and all the facts con-

tained therein are true and correct; and that, as to

those facts made on information and belief, deponent

verily believes them to be true.

(s) EUGENE H. WALET, JR.

Petitioner.

Sworn to and subscribed

before me this 15th day

of June, 1953.

(s) MICHAEL M. IRWIN

Notary Public

FILED

JUL 2 7 1953

IN THE HAROLD B. WILLEY,

Supreme Court of the United States

OCTOBER TERM, 1953

N

N \

Y

No. 140

JEFFERSON LAKE SULPHUR COMPANY,

Respondent.

RESPONDENT IN PETITION FOR

CERTIORARI

Regulation:

INDEX

A—The Scope of Section 16(b) ...............

B—Relation of State Law to the Federal Statute

C—Regulations of the Securities and Exchange

RINNE ied aie ee heey bh ook eae

TABLE OF AUTHORITIES.

Cases:

Bender vs Pfaff, 282 US 127 (1930) ............

Burnett vs Harmel, 287 US 103 (1932) ......

Consolidated Engineering Corporation vs Nesbit,

102 FS 112 (SD Calif.-1951) ............

Gratz vs Claughton, 187 F2d 46 (CA 2-1951), cert.

GO, DOR: Fie es oe ha oa ͤ kK se awe

Lyeth vs Hoey, 305 US 188 (1938) ............

Morgan vs Commissioner, 309 US 78 (1940)....

Pellegrino vs Nesbit, 203 F2d 463 (CA 9-1953)

Smolowe vs Delendo Corporation, 136 F2d 231

(CA 2-1943), cert. den., 320 US 751

United States vs Pelzer, 321 US 399 (1941) ....

Wissner vs Wissner, 338 US 655 (1950) ........

Statute:

Securities Exchange Act of 1934,

Section 3(12), 15 USC 78c(12) ............

Section 16(b), 15 USC 78p(b) ............

Section 23, 15 USC 78w

ere ee „„ „%%% „„ „„ „„ „„ „„

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1953

No. 140

— —

EUGENE H. WALET, IR.,

Petitioner,

versus

JEFFERSON LAKE SULPHUR COMPANY,

Respondent.

— —

JOINDER OF RESPONDENT IN PETITION FOR

CERTIORARI

This is an action under section 16(b) of the Securities

Exchange Act of 1934* to recover profits realized by an

officer (petitioner) of plaintiff corporation (respondent)

through “short swing” trading in respondent’s shares.

All facts have been stipulated. Respondent concedes

that all transactions of petitioner in respondent’s shares

were effected in the utmost good faith and without benefit

of any “inside information”.

115 USC 78p(b).

2

Insisting that the decision below is correct, and con-

testing petitioner’s contentions as to the correctness of

——— nevertheless joins in the pend-

ing petitionfor_certiorari, because the action involves

questions of national importance and incipient inter-circuit

conflict as to the scope of the federal statute involved,

as to the interrelation of that statute and local laws in

community-property states, and as to the effect of

regulations of the Securities and Exchange Commission,

all of which should be settled authoritatively by this

court.

A

The Scope of Section 16(b)

The decision below is the third by the federal appel-

late courts (in the Second and Fifth Circuits) giving the

broadest application and scope to section 16(b) in order

to effectuate its purposes.“

The crucial questions decided in all three cases are (1)

that actual good faith on the part of the corporate officer

involved is immaterial to determination of his liability

to account for “short-swing” profits; and (2) that it is im-

material whether the shares purchased and the shares

sold within any six-month period were represented by the

same certificates.

Recently, serious doubt has been cast, by a district court

decision in California,’ on the nation-wide authority of the

appellate decisions on these important questions.

| 2The other two are Smolowe vs Delendo Corporation, 186 F2d 231

(CA 2-1948), cert. den., 320 US 751, and Gratz vs Claughton, 187

Fed 46 (CA 2-1951), cert. den., 341 US 920.

onsolidated ering Corporation vs Nesbit, 102 FS 112 (SD

Calif.-1951).

3

On April 1, 1953, the Court of Appeals for the Ninth

Circuit, reversing the district court’s order refusing per-

mission to a shareholder of the plaintiff corporation to in-

tervene for the purpose of appealing the California de-

cision, recognized that that decision presents a substan-

tial, novel and important question of law”, that “this is

the first instance of a court’s holding that a corporation

may be estopped to impose sanctions upon insiders who

have traded in that corporation’s securities”, and that the

decision is in direct confict with the one here under con-

sideration.* —

It is submitted that this clear, and perhaps otherwise

irremediable, conflict on questions of such moment war-

rants attention and resolution by this court.

Relation of State Law to the Federal Statute

In 1930, this court decided, il Bender vs Pfaff, that in

community-property states, state law may tative-

ly determine to whom income is taxable under the federal

income tax law.

Since that decision, however, there has been a decided

trend toward uniformity in application of the federal tax

statutes regardless of the vagaries of local law.®

„ — 5 by 8 — or ll stan the

withi — 1

re Root bi aloe ve Nesbit, 208° 724 463, 461,

469

2 a B ne yg 5 3 US 103 [& eth vs Hoey,

„ urnet vs

308.08 188 (1938); Morgan vs Commissioner, 00 US 7 78 (1940);

States vs Pelzer, 312 US 399 (1941).

4

In 1950, this court decided that the policy of a federal

statute (the National Service Life Insurance Act) must

prevail over local community-property laws in cases of

direct conflict.’

In the present case, the Court of Appeals has decided

that local community-property laws cannot affect the uni-

form operation of a federal statute (the Securities Ex-

change Act of 1934), even in the absence of direct con-

flict.

It is submitted that the importance of maintaining this

constant trend away from the rule of Bender vs Pfaff,

and toward uniformity in operation of a federal law of

such widespread application, also warrants this court’s

express recognition and affirmance.

C

Regulations of the Securities and Exchange Commission

When petitioner's transactions in respondent's shares

were effected, the following regulation of the Securities

and Exchange Commission was in effect:

The following securities shall be exempted

securities for the purposes of section 16(a) and

16(b) of the (Securities Exchange) act (of 1934):

* * * *

3 vs 3 2 Us 655 (1950).

| eg dual Exchange Act of 1934. 15 USC 78e (12),

5

“(d) Securities reacquired by or for account

of the issuer and held by it or for its account.“

Some of petitioner’s transactions involved his acquisi-

tion of treasury shares of respondent. Petitioner contends

that, under the quoted regulation, his transactions in these

shares should not have been included in computing the

profits recoverable by respondent herein.“

Pursuant to representations by the Securities and Ex-

change Commission in its brief filed as amicus curiae, the

Court of Appeals tacitly decided that the quoted regula-

tion is inapplicable because the treasury shares acquired

by respondent ceased to be treasury shares at the moment

of his acquisition thereof.

It is submitted that while that decision is correct, the

significant issue of the proper construction of the regula-

tion, and particularly of the weight to be accorded to the

Commission’s interpretation of its own regulations, should

also be decided by this court.

CONCLUSION.

For these reasons, respondent respectfully joins in the

petition for certiorari.

EBERHARD P. DEUTSCH,

Attorney for Respondent.

July, 1953.

917 CFR 240.16a-4. This regulation has since been amended.

10 Section 16(b) has no application to exempted securities.