KEITH R. GOLLUST, ET AL., PETITIONERS V. IRA L. MENDELL, ET AL.

   No. 90-659

   In The Supreme Court Of The United States

   October Term, 1990

   On Writ Of Certiorari To The United States Court Of Appeals For The
Second Circuit

   Brief For The Securities And Exchange Commission As Amicus Curiae
In Support Of Respondents

            TABLE OF CONTENTS
   Question Presented
   Interest of the Securities and Exchange Commission
   Statement
   Summary of argument
   Argument:
      Respondent's properly instituted Section 16(b) action was not
      subject to dismissal because of the issuer's post-suit merger
      A. The plain language of Section 16(b) does not support the
         dismissal of a pending action because of a post-suit merger
      B. The purposes and background of Section 16(b) indicate that
         respondent's action survives the issuer's merger
      C. Neither precedents nor the existence of other remedies
         require the dismissal of respondent's action
   Conclusion

                          QUESTION PRESENTED

   Whether, under Section 16(b) of the Securities Exchange Act of
1934, 15 U.S.C. 78p(b), a shareholder's properly instituted suit to
recover short-swing profits from an issuer's statutory insiders may be
maintained after a merger involving the issuer results in an exchange
of the plaintiff's stock for cash and stock in the issuer's new
corporate parent.

          INTEREST OF THE SECURITIES AND EXCHANGE COMMISSION

   The Securities and Exchange Commission administers and enforces the
federal securities laws, including the Securities Exchange Act of
1934, 15 U.S.C. 78a et seq. Section 16(b) of that Act, 15 U.S.C.
78p(b), provides that officers, directors, and beneficial owners of
more than 10% of an issuer's registered stock shall be liable to the
company for profits realized from "short-swing" trading in the
issuer's stock -- a purchase and sale, or sale and purchase, within
less than six months.  Section 16(b) further provides that if the
issuer refuses a demand for suit to recover such profits, "(s)uit * *
* may be instituted * * * by the owner of any security of the issuer
in the name and in behalf of the issuer." The issue in this case is
whether a shareholder's properly instituted suit under Section 16(b)
must be dismissed when, as a result of the issuer's subsequent merger,
the plaintiff is divested of his stock and receives, in exchange, cash
and stock in the issuer's new corporate parent.

   Section 16(b) plays a significant role in protecting against the
misuse of inside information in the securities markets.  Because of
the ease with which corporate insiders and major shareholders can
exploit informational advantages, Section 16(b) erects a strict,
prophylactic rule that captures short-swing profits for the benefit of
the issuer.  Because only the issuer and its security holders -- not
the SEC -- may institute actions under Section 16(b), it is
particularly important that the deterrent force of that provision not
be diluted.  /1/ Accordingly, the Commission has a strong interest in
ensuring that the effectiveness of Section 16(b) is not jeopardized by
unduly restrictive standing requirements imposed on security-owner
suits.

                               STATEMENT

   1. In January 1987, respondent Ira L. Mendell filed a complaint in
the United States District Court for the Southern District of New York
alleging that he was an owner of common stock of Viacom International
Inc. (International), and that petitioners were liable to
International for profits realized from certain transactions in
International stock under Section 16(b) of the Securities Exchange
Act, 15 U.S.C. 78p(b).  /2/ Pet. App. 4a.  Respondent's complaint
alleged that during 1986, petitioners collectively owned more than 10%
of International's common stock and had realized approximately
$11,000,000 in profits from short-swing trading.  Respondent further
alleged that in October 1986 he had made demand on International and
its directors to institute an action under Section 16(b) to recover
those profits, but suit had not been brought although more than 60
days had passed.  Pet. App. 4a-5a.

   2. In June 1987, approximately six months after the complaint was
filed, International was acquired through a merger transaction by
Arsenal Acquiring Corporation (Arsenal), a wholly owned subsidiary of
a company then called Arsenal Holdings, Inc., and now known as Viacom,
Inc. (Viacom).  Arsenal was merged into International, and
International thereby became a subsidiary of Viacom.  As part of this
transaction, the shares owned by public shareholders of International
were exchanged for a combination of cash and stock in Viacom.
Accordingly, respondent, who was a shareholder of International when
this action was instituted, became a shareholder of Viacom,
International's new parent and sole shaerholder.  Respondent amended
this complaint in response to the restructuring to allege a Section
16(b) action in behalf of Viacom as well as International.  Pet. App.
5a, 31a-32a, 39a-45a;  J.A. 27-28, 30-31.

   Following the merger, petitioners moved for summary judgment,
arguing that respondent lacked standing under Section 16(b) because he
no longer owned International securities.  The district court granted
the motion, stating that "(s)uits to disgorge ill-gotten gains under
Section 16(b) may be prosecuted only by the issuer itself or the
holders of its securities";  because respondent "no longer owns any
International securities, he may not sue under Section 16(b)." Pet.
App. 32a.  /3/

   3. The court of appeals reversed, concluding that respondent did
not lose his standing under Section 16(b) by virtue of the merger in
this case.  The court began by noting that Section 16(b) is a remedial
law that should be construed to fulfill Congress's purpose to prevent
the exploitation of inside information by certain corporate insiders.
Pet. App. 7a-10a.  In light of the provision's background, the court
stated that "(w)here differing constructions of Section 16(b)'s terms
are possible," the issue "whether a plaintiff has standing to bring
suit is, in part, determined by whether the policy behind the statute
is best served by allowing the claim." Id. at 9a, 12a.

   Here, the court found, the policy expressed in Section 16(b) favors
respondent's standing.  Because of the merger transaction, there were
no public shareholders of International;  only its parent corporation
held International stock.  Observing that it is "unrealistic" to rely
on an issuing corporation to sue its insiders, the court found that to
"leav(e) insiders to police themselves" is contrary to Section 16(b)'s
objectives because it would thwart the "private shareholder
enforcement purpose" underlying the provision.  Pet. App. 13a-14a.

   The court rejected petitioners' contention that the statutory
language requires that a security holder lose standing if he ceases to
hold his securities during the pendency of the action.  In the court's
view, the language of the statute requires no such result;  it
"speakds of the 'owner' of securities(,) but such language is not
modified by the word 'current' or any like limiting expression." Pet.
App. 15a.  If Congress had intended to bar the maintenance of suits
following the issuer's merger, the court noted, it could easily have
done so.  Ibid.  The court also distinguished precedents holding that
particular plaintiffs lacked standing when they were not current
shareholders;  in none of those cases had the plaintiff filed suit
while holding the issuer's shares and later exchanged them for stock
in the issuer's new parent.  Id. at 15a-17a.  Finally, the court noted
that if petitioners' construction were accepted, it would open the
door to "international restructuring" of a corporation in order to
defeat a pending Section 16(b) claim instituted by a security holder.
That result, the court stated, "would undercut the function Congress
planned to have shareholders play in policing such actions." Id. at
17a.  /4/

                          SUMMARY OF ARGUMENT

   The court of appeals correctly held that respondent did not lose
standing to maintain this action under Section 16(b) because of the
post-suit merger in this case.  The proposed standing restriction
advocated by petitioners -- that a security owner must continuously
hold his shares throughout the suit -- finds no support in the
statutory language, would thwart the enforcement mechanism
underpinning Section 16(b), and would introduce unwarranted anomalies
into the application of the statute.

   A. Section 16(b) creates a strict-liability rule that profits
realized by statutory insiders from short-swing trading in the
issuer's stock shall be disgorged to the issuer;  it further provides
that "(s)uit to recover such profit may be instituted * * * by the
owner of any security of the issuer." 15 U.S.C. 78p(b).  Respondent
satisfied the requirements of the statute by "institut(ing)" this
action as an owner of the issuer's common stock;  nothing in the text
of the statute suggests that respondent was later divested of standing
because of the issuer's post-suit merger.  Indeed, the principle that
statutory standing relates to the moment that the plaintiff files suit
is suit is quite familiar to the law.

   B. The purposes and background of Section 16(b) confirm that there
is no unstated "continuous ownership" requirement implicit in the
statute.  The paramount purpose served by Section 16(b) is to prevent
statutory insiders from reaping short-swing profits in situations
posing a risk of abuse, and to ensure that a wide pool of public
security holders is available to perform a policing function.  It
would frustrate that purpose to allow insiders to evade their Section
16(b) liability because of the fortuity of a post-suit merger, in
which the plaintiff's securities are exchanged for stock in the
issuer's new corporate parent.

   It would be particularly inappropriate to borrow a
continuous-ownership requirement from the law of shareholder
derivative actions;  Section 16(b) consistently departs from that
model in the direction of easing restrictions on security-holder
suits.  Any concerns about the adequacy of a post-merger plaintiff's
interest in prosecuting suit can be addressed under well-established
mootness principles;  there is no need to import those principles into
Section 16(b) to reach the anomalous result that respondent, who
concedely has an adequate interest under Article III, loses his right
to prosecute a properly instituted case.

   C. Neither precedents nor the possibility of other remedies for
insider trading justifies summarily ousting respondent from court.
Although this Court's cases reflect a careful approach to the
imposition of liability under Section 16(b), those cases do not
suggest that standing principles under this remedial law should be
construed narrowly.  Nor are other possible legal remedies, with more
complex elements of proof, adequate substitutes for the independent
right provided by Section 16(b).

   Finally, the few lower court cases that have articulated a
"continuous ownership" requirement have done so in distinguishable
contexts;  no case involved a shareholder who properly instituted suit
only to have his stock later exchanged in a business combination for
stock in the issuer's new parent.  Because respondent properly
instituted this action as a shareholder of the issuer, and his
financial interest continued following the post-suit merger, this
action may be maintained under Section 16(b).

                               ARGUMENT

   RESPONDENT'S PROPERLY INSTITUTED SECTION 16(b) ACTION WAS NOT
SUBJECT TO DISMISSAL BECAUSE OF TEH ISSUER'S POST-SUIT MERGER

   A. The Plain Language Of Section 16(b) Does Not Support The
Dismissal Of A Pending Action Because Of A Post-Suit Merger

   The issue in this case is whether Section 16(b) imposes a
"continuous ownership" requirement on a shareholder suing for the
recovery of short-swing profits.  Petitioners contend that the answer
is "yes," such that a properly instituted Section 16(b) action must be
dismissed where a post-suit merger divests the shareholder of his
stock.  In our view, the language of the statute renders that
contention untenable.  Although petitioners repeatedly urge (Pet. Br.
14, 19, 21, 25, 26, 41) that the "plain," "clear," "unambiguous," and
"straightforward" language of the statute compels a "continuous
ownership" requirement, exactly the opposite is true.  The statutory
language is satisfied when an action is "instituted * * * by the owner
of any security of the issuer," as was this action;  the statute says
nothing -- plainly or otherwise -- about dismissing a plaintiff's suit
after a merger involving the issuer exchanges the plaintiff's
securities for stock in the issuer's new parent.

   1. Section 16(b) is the only provision in the original Securities
Exchange Act of 1934 that specifically addresses the problem of
insider trading.  It provides that a director, officer, or principal
shareholder must disgorge to the issuing corporation "any profit
realized by him from any purchase and sale, or any sale and purchase,
of any equity security of such issuer * * * within any period of less
than six months." 15 U.S.C. 78p(b).  Section 16(b) was enacted "(f)or
the purpose of preventing the unfair use of information which may have
been obtained by (a statutory insider) * * * by reason of his
relationship to the issuer." Ibid.  Congress framed Section 16(b) as a
"flat rule" to prevent the exploitation of inside information by the
designated insiders.  Reliance Elec. Co. v. Emerson Elec. Co., 404
U.S. 418, 422 (1972);  see S. Rep. No. 1455, 73d Cong., 2d Sess. 55-68
(1934);  S. Rep. No. 792, 73d Cong., 2d Sess. 9 (1934).

   Because of the difficulty of proving that an insider used inside
information in his trading, Section 16(b) applies strict-liability
principles.  It deprives the insider of his short-swing profits,
regardless of his intent or actual possession of inside information.
See Kern County Land Co. v. Occidental Petroleum Corp., mechanism of
Section 16(b) is equally simple.  The Commission is not empowered to
use the disgorgement under Section 16(b);  instead, Congress elected
to rely exclusively on private actions brought by the issuer, or by a
security holder of the issuer, seeking disgorgement of the short-swing
profits.

   To determine the requirements for security owners to sue under
Section 16(b), "the starting point * * * is the language of the
statute itself." Consumer Product Safety Comm'n v. GTE Sylvania, Inc.,
447 U.S. 102, 108 (1980);  Landreth Timber Co. v. Landreth, 471 U.S.
681, 685 (1985);  Pennsylvania Dep't of Public Welfare v. Davenport,
110 S. Ct. 2126, 2130 (1990).  The language authorizing security owner
suits under Section 16(b) states:

      Suit * * * may be instituted * * * 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 suit within sixty days
      after request or shall fail diligently to prosecute the same
      thereafter.

15 U.S.C. 78p(b).  Although petitioners purport to find in this
language a "continuous ownership" requirement mandating that a
security owner keep his securities throughout the life of a suit, the
words simply do not say that.  Section 16(b) empowers a security owner
to "institute()" an action;  it does not impose any requirements that
apply to the security owner's status after instituting suit.  It
follows that the provision is satisfied whenever, as here, the
security owner owns his shares when the suit is initiated.
Petitioners simply gloss over the actual language of the statute in
insisting that it requires continuous ownership as a condition of
standing.  /5/

   When Congress wanted to address the particular times at which a
person must be a security "owner" for purposes of Section 16(b), it
was capable of doing so with precision, as it did with respect to a
beneficial owner defendant.  Section 16(b) provides that a beneficial
owner is not subject to disgorgement under the statute unless he is a
10% owner "both at the time of the purchase and sale, or the sale and
purchase, of the security involved." 15 U.S.C. 78p(b).  Likewise, if
Congress had wanted to require a security owner plaintiff to be a
shareholder "both at the time of instituting an action and during the
entire period it is maintained," Congress easily could have said so.
/6/

   2. It is hardly a novelty that Section 16(b) does not require
dismissal of an action because of a post-suit merger where the
plaintiff had standing to sue at the moment the action was instituted;
 that approach to statutory standing is deeply rooted in the law.  For
example, in diversity cases, this Court has consistently held, from
the early part of the 19th century to the present, that "if
jurisdiction exists at the time an actino is commenced, such
jurisdiction may not be divested by subsequent events."
Freeport-McMoRan, Inc. v. K N Energy, Inc., No. 90-655 (Feb. 19, 1991)
(per curiam), slip op. 2 (holding that subsequent addition of
nondiverse party did not destroy diversity jurisdiction).  /7/ The
same principle applies to jurisdictional amount-in-controversy, even
if the plaintiff "by stipulatino, by affidavit, or by amendment of his
pleadings, reduces the claim below the requisite amount, this does not
deprive the district court of jurisdiction." St. Paul Mercury
Indemnity Co. v. Red Cab Co., 303 U.S. 283, 2292 (1938).

   In keeping with that tradition, Congress made it sufficient for
standing under Section 16(b) that an action be "instituted" by the
owner of any security.  See Yourd, Trading in Securities by Directors,
Officers and Stockholders:  Section 16 of the Securities Exchange Act,
38 Mich. L. Rev. 133, 156 & n.74 (1939) ("Section 16(b) permits suit
'by the owner of any security of the issuer' without regard to the
time of acquisition of such security.  * * * Presumably, ownership of
the security at the time that suit is instituted is all that is
required under section 16(b).").  /8/ The term "institute," then as
now, refers to the commencement of a proceeding.  A contemporary legal
dictionary readily available to the 73d Congress defined "institute"
to mean:  "To inaugurate or commence;  as to institute an action."
Black's Law Dictionary 985-986 (3d ed. 1933) (citing cases).  /9/
Numerous federal statutes reflect the same usage.  /10/

   In light of that background, the "plain meaning" of Section 16(b)
is not that a plaintiff must beem some requirement of "continuous
ownership" not expressed in the statute.  Rather, it is sufficient to
establish standing for purposes of the provision's text if a security
owner has properly instituted the action.  /11/

   B. The Purposes And Background Of Section 16(b) Indicate That
Respondent's Action Survives The Issuer's Merger

   Not only does a "continuous ownership" requirement rewrite the
language of Section 16(b), it also conflicts with "the design of the
statute as a whole and * * * its object and policy." /12/ Imposing
such a requirement would undermine Congress's paramount objective in
enacting Section 16(b) by removing the class of plaintiffs Congress
expected to serve as the primary enforcers.  It would be particularly
inappropriate to borrow the "continuous ownership" requirement from
the law of shareholder derivative actions, because Congress carefully
departed from that model to make it easier for security owners to sue.
 And, a "continuous ownership" requirement is not compelled by
standing principles developed under Article III.

   1. The background of Section 16(b) supports a broad construction of
security holder standing.  Section 16(b) emerged from detailed
examination of the securities markets in the wake of the 1929 stock
market crash.  The problem of corporate executives and major
stockholders abusing their access to inside information was singled
out as a particular source of concern for the integrity of the
securities markets.

      Among the most vicious practices unearthed at the hearings
      before the subcommittee was the flagrant betrayal of their
      fiduciary duties by directors and officers of corporations who
      used their positions of trust and the confidential information
      which came to them in such positions, to aid them in their
      market activities.  Closely allied to this type of abuse was the
      unscrupulous employment of inside information by large
      stockholders who, while not directors and officers, exercised
      sufficient control over the destinies of their companies to
      enable them to acquire and profit by information not available
      to others.

S. Rep. No. 1455, 73d Cong., 2d Sess. 55 (1934).  To remedy those
abuses, and to restore investor confidence that corporate managers
would fulfill their "responsibilities as trustees for their
corporations," H.R. Rep. No. 1383, 73d Cong., 2d Sess. 13 (1934),
Congress enacted Section 16(b).

   Not only the general policy of the provision, but its specific
features reveal a purposeful effort to grant standing to security
holders in an expansive fashion.  First, although short-swing profits
recovered under Section 16(b) flow into issuers' treasuries, Congress
did not rely on issuers alone, or even primarily, to enforce the
provision.  Rather, recognizing that issuers were unlikely to take
action against their executives and major shareholders, Congress
decided to harness the energies of security owners.  /13/ The
statute's primary reliance on security holders is manifested in the
fact that if the issuer, after demand, refuses to bring the action, or
commences it but fails to pursue it vigorously, a security holder has
the right to step in and institute suit.  /14/ And Section 16(b)
presupposes that there will be a substantial pool of public security
holders available to do so;  its requirements apply only to companies
with securities registered under Section 12 of the Act, 15 U.S.C. 78l,
which, in general, includes securities traded on an exchange or in the
over-the-counter market.

   Second, Congress did not limit the possible plaintiffs under
Section 16(b) to stockholders;  rather, the class of plaintiffs is
broadly defined to include owners of "any security" of the issuer;
thi includes, for example, holders of warrants, bonds, or other debt
securities.  /15/ 15 U.S.C. 78c(a)(10);  see Reves v. Ernst & Young,
110 S. Ct. 945, 948-949 (1990).  The inclusion of debt holders
underscores Congress's purpose to rely chiefly on a broad class of
public security holders as the vehicle for enforcement for Section
16(b);  it would not have been necessary to include a corporation's
creditors if a direct benefit to investors were the motive of the
provision.  Congress's expansive definition of the plaintiff class to
include all security owners underscores its design to cast as wide a
net as possible to ensure effective and vigorous private enforcement.
/16/

   Third, the Commission is not authorized to sue under Section 16(b).
 Consequently, if statutory insiders are protected from
security-holder claims by the issuer's post-suit merger, the statute
will frequently go unenforced.  A rule that eliminates public
shareholders as possible plaintiffs under Section 16(b) undercuts the
policy of the provision to remove short-swing profits in cases "in
which the possibility of abuse was believed to be intolerably great."
Reliance Elec. Co. v. Emerson Elec. Co., 404 U.S. 418, 422 (1972).

   Because it would eliminate the favored class of persons on which
Congress intended to rely for the enforcement of Section 16(b),
petitioners' narrow rule of standing cannot be reconciled with the
policy of the statute.  It is no answer to observe that a post-merger
issuer may, as here, still have one shareholder with technical
standing to sue -- its new corporate parent.  Congress evidenced a
healthy skepticism about the willingness of corporate executives to
enforce Section 16(b), as demonstrated by its refusal to give
corporations veto power over whether a shareholder can proceed under
Section 16(b).  That viewpoint has been borne out by experience.  As
the court of appeals observed, relying on issuers to sue statutory
insiders "can be expected to secure the same results as * * * when a
fox guards a chicken coop." Pet. App. 14a.  /17/

   The danger is particularly acute in mergers and acquisitions.
Those transactions, by their nature, tend to cause short-range price
fluctuations that insiders can exploit through their easy access to
advance knowledge.  Commentators have agreed that without suits by
public holders of securities, Section 16(b) will frequently go
unenforced in that situation.  See ABA, Committee on Federal
Regulation of Securities, Report of the Task Force on Regulation of
Insider Trading, Part II:  Reform of Section 16, 42 Bus. Law. 1087,
1134 (1987) (restrictive standing rules "effectively insulate()
conduct plainly prohibited by section 16(b) * * *, since after a
friendly merger the 'parent' of the phantom subsidiary is unlikely to
prosecute a section 16(b) action against the acquired company's former
officers and directors");  P. Romeo, Comprehensive Section 16 Outline
70 (E.P. Executive Press, Inc. June 1989) (restrictions on shareholder
suits following a merger "shield defendants of the acquired entity
from short-swing liability in the vast majority of mergers, since the
only party with standing to sue after the merger ordinarily is the
surviving corporation, which usually has no interest in seeking
recovery under Section 16(b)").  Moreover, if petitioners' approach
became the law, it would invite corporations to engage in "intentional
restructuring to defeat the enforcement mechanism incorporated in the
statute." Pet. App. 17a.  /18/

   Against the evidence that a "continuous ownership" rule would
frustrate the remedial policies furthered by the statute, petitioners
muster a scrap of legislative history, taken out of context, in which
they find tangential support.  Petitioners note (Br. 16) that during
the legislative hearings Thomas G. Corcoran, a spokesman for the
drafters, remarked that Section 16(b) would be enforced by
"stockholders" who have an "interest" and "a private-profit motive" to
recover for their "own account." National Securities Exchange -- H.R.
7852:  Hearings Before the House Comm. on Interstate and Foreign
Commerce, 73d Cong., 2d Sess. 136-138 (1934).

   Those comments, however, do not address the standing requirements
applicable to plaintiffs, let alone endorse petitioners' concept of
"continuous ownership";  rather, they responded to concerns that it
would be difficult to enforce a proposed prohibition (later dropped
from the bill) against corporate insiders passing confidential tips to
others.  Even petitioners do not appear to take Corcoran's remarks as
a literal description of Section 16(b) standing requirements, because
Corcoran referred only to "stockholder" plaintiffs, while Sectino
16(b) allows suits by bondholders, warrant holders, and other security
holders.  See p. 14, supra.  And if Corcoran's remarks were read to
contemplate that plaintiffs must have a personal profit motive, that
requirement is fully satisfied in this case.  Respondent instituted
his actino while a stockholder of the issuer (International), and,
through a business restructuring, became a shareholder of its
corporate parent (Viacom).  Because Viacom is the sole shareholder of
International, and International is the parent company's only asset,
Pet. App. 5a, respondent now stands to profit from the success of this
action in much the same way as if he had never been divested of his
original shares.

   2. The derivative action analogy does not apply to Section 16(b).
Examination of the source of the continuous ownership requirement
further undermines its application to Section 16(b).  The requirement
stems from shareholder derivative actions governed by Federal Rule of
Civil Procedure 23.1.  As one court has noted, the requirement,
"although not expressly stated in the rule, has been inferred from its
language." Lewis v. Chiles, 719 F.2d 1044, 1047 & n.1 (9th Cir. 1983)
(continuous ownership requirement flows from Rule 23.1's provision
that the plaintiff must "fairly and adequately represent the interests
of the shareholders * * * similarly situated").  /19/ It reflects the
equitable nature of the derivative action, in which the shareholder
"step(s) into the corporation's shoes * * * to seek in its right the
restitution he could not demand in his own." Ibid., quoting Cohen v.
Beneficial Indus. Loan Corp, 337 U.S. 541, 548 (1949).  It also
acknowledges that the shareholder's interest is in enhancing the value
of his stock by obtaining a recovery payable to the corporation.
Lewis v. Knutson, 699 F.2d 230, 238 (5th Cir. 1983);  Kauffman v.
Dreyfus Fund, Inc., 434 F.2d 727, 735-736 (3d Cir. 1970), cert.
denied, 401 U.S. 974 (1971);  Papilsky v. Berndt, 466 F.2d 251, 255
(2d Cir.), cert. denied, 409 U.S. 1077 (1972).

   But neither Rule 23.1 nor the principles governing derivative
actions are applicable here.  Section 16(b) creates a "primary right"
in security holders and is not controlled by the requirements of Rule
23.1.  /20/ For example, the key counterpart of the "continuous
ownership" requirement in a derivative action is the "contemporaneous
ownership" requirement -- that the shareholder must have owned his
shares at the time of the transaction challenged by the lawsuit.  See
Fed. R. Civ. P. 23.1;  Hawes v. Oakland, 104 U.S. 450, 461 (1882);
Bangor Punta Operations, Inc. v. Bangor & A. R.R., 417 U.S. 703, 708
n.3 (1974).  That restriction, however, has no applicatio to Section
16(b);  the owner of a security may institute suit "without
qualification." /21/ Moreover, while a plaintiff must qualify as a
"shareholder" (an owner of equity stock) to bring a derivative action
under Rule 23.1, any "security owner" (debt or equity) may institute
an action under Section 16(b).  And, in a shareholder derivative
action, directors may refuse a demand for suit, and, in many cases, if
their decision "represents an honest business judgment * * *, then a
derivative action may not be maintained." 7C C. Wright, A. Miller & M.
Kane, Federal Practice and Procedure Section 1831, at 98 (2d ed.
1986).  But under Section 16(b), security owners may institute actions
notwithstanding the directors' refusal or demand or objection to suit.
 See Burks v. Lasker, 441 U.S. 471, 484 n.13 (1979).

   These distinctions are revealing.  Not only does Section 16(b)
depart from the derivative model, it does so consistently in the
directino of liberalizing a security owner's ability to sue.
Petitioners, however, would invoke derivative principles to achieve
the opposite effect -- to constrain a security owner's suit under
Section 16(b).  Br. 18.  Indeed, petitioners' approach would be even
more limiting of security owner suits than the traditional law
governing shareholder derivative actions.

   While the general rule is that a derivative action must be
dismissed when the plaintiff's stock is taken by a merger, courts have
recognized exceptions to the continuous ownership rule in that
setting, /22/ particularly where, as happened here, the plaintiff's
interest is exchanged for stock in the new corporate parent.  /23/
Because the federal securities laws were intended to improve on the
protections available under other sources of law, see Herman & MacLean
v. Huddleston, 459 U.S. 375, 389 (1983), it would be especially
inappropriate to imply a standing limitation under Section 16(b) that
is more restrictive than the practice in conventional derivative
actions.

   3. Article III considerations do not mandate a continuous ownership
requirement.  That Section 16(b) does not require dismissal of a
properly instituted suit because of a subsequent merger of the issuer
does not mean that post-suit events are irrelevant.  But petitioners
are wide of the mark in contending (Br. 18-19) that a
continuous-ownership requirement is "compelled" by this Court's
standing jurisprudence under Article III.

   An action under Section 16(b), like any action, can be mooted
within the meaning of Article III by subsequent events.  See United
States Parole Comm'n v. Geraghty, 445 U.S. 388, 404 (1980).  But the
prospect of mootness somewhere on the horizon does not require that
every statute be interpreted to oust from court every plaintiff whose
claim might become moot.  See Gwaltney of Smithfield, Ltd. v.
Chesapeake Bay Found., Inc., 484 U.S. 49, 66-67 (1987) (holding that a
citizen suit under the Clean Water Act can go forward based on a
continuing violation alleged to exist at the time of suit, subject to
dismissal under Article III if the case becomes moot).  Indeed, the
facts of this case demonstrate that "continuous ownership" is not an
indispensable condition to ensuring that a live case or controversy
persists after a merger.  Respondent's stock in International was
exchanged not only for cash, but also for an equity interest in
International's new parent.  That interest indisputably gives
respondent a live stake in the outcome -- his pecuniary interest.
/24/ The same will be true in any stock-for-stock merger.  Simply
because some post-merger plaintiffs might lose their standing does not
justify reading the statute to oust all post-merger plaintiffs from
suit -- particularly where the effect is to insulate short-swing
profits from the recapture remedy envisioned by the statute.

   C. Neither Precedents Nor The Existence Of Other Remedies Requires
The Dismissal Of Respondent's Action

   In attacking respondent's standing, petitioners rely heavily on
this Court's cases considering liability (not standing) issues under
Section 16(b), the prospect of remedies under other provisions (whose
elements are more difficult to prove than the elements of Section
16(b)), and decisions of lower courts embracing a continuous ownership
requirement (in distinguishable situations).  None of those
considerations justifies the dismissal of respondent's action.

   1. Petitioners contend that this Court's prior decisions support a
narrow interpretation of Section 16(b)'s provisions.  Br. 24 & n.10.
But those prior cases consider the scope of liability under Section
16(b), not the standing of security owners to prosecute suite.  /25/
Because the statute "imposes strict liability upon substantially all
transactions occurring within the statutory time period, regardless of
the intent of the insider or the existence of actual speculation,"
Reliance Elec., 404 U.S. at 422, the Court has sought "to apply the
statute only when its application would serve its goals," Kern County,
411 U.S. at 595, that is, when "the particular type of transaction
involved is one that gives rise to speculative abuse." Reliance Elec.,
404 U.S. at 424 n.4.

   Here, however, as the case comes to this Court, it must be assumed
that petitioners' transactions expose them to liability under Section
16(b);  the only issue is whether the statute must be interpreted in a
post-merger setting to destroy the opportunity of a public security
holder to enforce petitioners' liability.  Whatever reasons may
support a strict analysis of the recapture rule of Section 16(b) in
the liability setting, there is no reason to construe the statute
restrictively in delimiting a plaintiff's standing to seek the
statutory remedy where the effect would be to shield insiders not just
from disgorgement, but even from having a court examine their
liability on the merits.

   2. Petitioners also argue that the availability of other remedies
makes it unnecessary to grant standing to shareholders like
respondent.  Br. 32-34.  But those alternative remedies cannot
substitute for Section 16(b);  they all involve significant procedural
or other hurdles that Section 16(b) was enacted to surmount.

   As petitioners note (Br. 33-34), other remedies under the federal
securities law address the problem of insider trading.  But the scope
of Section 16(b) "is not affected by whether alternative sanctions
might inhibit the abuse of insider information." Foremost-McKesson,
Inc. v. Provident Securities Co., 423 U.S. 232, 255 (1976).  /26/
Moreover, the principal antifraud provisions, Section 10(b) of the
Securities Exchange Act, 15 U.S.C. 78j(b), and Rule 10b-5, 17 C.F.R.
240.10b-5, require a showing of scienter, see Ernst & Ernst v.
Hochfelder, 425 U.S. 185 (1976), and those provisions -- like other
antifraud remedies -- require a showing of actual possession of
nonpublic information.  See, e.g., 15 U.S.C. 78t-1(a);  17 C.F.R.
240.14e-3.  Section 16(b), in contrast, requiers no showing of intent
or actual possession.  As many courts have noted, Section 16(b) is
expressly designed to avoid complex problems of proof.  See, e.g.,
Blau v. Lamb, 363 F.2d 507, 516 (2d Cir. 1966) ("the section's success
as a deterrent (is) rooted in its simplicity and relatively automatic
operation"), cert. denied, 385 U.S. 1002 (1967);  2 L. Loss,
Securities Regulation 1043 (2d ed. 1961) (noting simplicity of the
elements under Section 16(b)).

   The simplicity of Section 16(b) also contrasts with the litigation
obstacles awaiting plaintiffs attempting the other remedies offered by
petitioners (Br. 32-33):  a derivative action for breach of fiduciary
duty, or a suit to enjoin or annul a merger on the ground that it was
effected for an improper purpose.  A derivative claim alleging breach
of fiduciary duty is circumscribed by the procedural restrictions of
Fed. R. Civ. P. 23.1, and may be vulnerable to dismissal based on the
directors' business judgment.  And a private action to enjoin a merger
not only entails a substantial showing on the equitable factors needed
for an injunction, but also places the burden on the plaintiff to
establish an improper purpose for the merger.  Clearly, those actions
would not fill the gap created by petitioners' cramped construction of
Section 16(b).

   3. Finally, petitioners contend that a line of cases in the lower
courts has adopted the continuous-ownership principle, and that any
other rule produces unworkable results.  Br. 14-15, 34-41.  Neither
contention is persuasive.

   a. The few lower court decisions cited by petitioners involved
significantly different facts than are presented here;  their
discussion of the implications of mergers for shareholder standing
must be read in that context.  As the Second Circuit pointed out, in
two of the cases cited by petitioners, the plaintiffs had never held
stock in the issuer, but simply held stock in the issuer's parent.
Pet. App. 15a-16a, citing Untermeyer v. Valhi, Inc., 665 F. Supp. 297
(S.D.N.Y. 1987), aff'd mem., 841 F.2d 1117, aff'd on reh'g, 841 F.2d
25 (2d Cir.) (per curiam), cert. denied, 488 U.S. 868 (1988), and
Lewis v. McAdam, 762 F.2d 800 (9th Cir. 1985) (per curiam).  Courts
have been unwilling to allow an action under Section 16(b) be
instituted by a person who never was a security owner of the issuer.
/27/ But that principle does not apply here;  respondent instituted
this action while a shareholder of International, the undisputed
issuer of stock in which petitioners made short-swing profits.

   The Second Circuit also noted that in two other cases denying
standing, the plaintiffs had been cashed-out by a merger, and
therefore lacked a continuing financial interest in the suit.  Pet.
App. 16a, citing Rothenberg v. United Brands Co., (1977-78) Fed. Sec.
L. Rep. (CCH) Paragraph 96,045 (S.D.N.Y.), aff'd mem., 573 F.2d 1295
(2d Cir. 1977);  Portnoy v. Kawecki Berylco Indus., Inc., 607 F.2d 765
(7th Cir. 1979).  In contrast, this case does not involve a cash-out
merger;  respondent exchanged his stock in part for stock in the new
parent, and therefore retains a financial interest in the action
similar to what he held at the outset of suit.  /28/

   b. Nor does according standing to respondent introduce anomalies
into the enforcement of Sectino 16(b);  quite the contrary is the
case.  If International had merged into another corporation and
respondent's stock had been exchanged for stock in the surviving firm,
there would be no doubt that respondent, as a shareholder of the
surviving firm, would have standing to continue his Section 16(b)
action.  Cf. Newmark v. RKO Gen., Inc., 425 F.2d 348, 352 n.4 (2d
Cir.) (shareholders of the surviving firm in a merger are "proper
parties to bring an action" under Section 16(b) based on trading in
the stock of the merger partner), cert. denied, 400 U.S. 854 (1970);
Morales v. Lukens, Inc., 593 F. Supp. 1209, 1211 n.1 (S.D.N.Y. 1984).
/29/ But under petitioners' view, the same shareholder loses his
standing if the acquiring company, instead of merging the issuer into
itself, forms a wholly owned shell subsidiary and merges it into the
issuer.  Despite the different corporate formalities, the substance of
those two types of business combinations is identical.  To allow
standing in one case, but to deny it in the other, is to exalt the
formal use of a corporate subsidiary over the real nature of the
transactions.  /30/

                      * * * * *

   Respondent properly instituted this action as a shareholder of the
issuer, and his financial interest in the action continued following
the issuer's merger.  Rather than ordering this action to be dismissed
because of post-suit events that did not impair respondent's concrete
interest in proceeding, the court of appeals properly held that
petitioners' Section 16(b) liability should be determined on the
merits.

                              CONCLUSION

   The judgment of the court of appeals should be affirmed.

   Respectfully submitted.

   JOHN G. ROBERTS, JR.

      Acting Solicitor General /31/

   MICHAEL R. DREEBEN

      Assistant to the Solicitor General

   JAMES R. DOTY

      General Counsel

   PAUL GONSON

      Solicitor

   JACOB H. STILLMAN

      Associate General Counsel

   THOMAS L. REISENBERG

      Assistant General Counsel

   BRIAN F. MCNALLY

      Attorney Securities and Exchange Commission

   MARCH 1991

   /1/ The SEC does enforce the reporting requirements of Section
16(a) (see 15 U.S.C. 78p(a), 78u), under which statutory insiders must
report to the Commission their transactions in the issuer's stock,
and, pursuant to its rulemaking powers, e.g., 15 U.S.C. 78c(b)
(authority to define "technical, trade, accounting and other terms");
15 U.S.C. 78p(b) (power to exempt certain transactions from Section
16(b));  15 U.S.C. 78w(a)(1) (general rulemaking authority), has
promulgated rules to implement Section 16(a) and (b).  See 56 Fed.
Reg. 7242 (Feb. 21, 1991) (to be codified in scattered sections of 17
C.F.R.).

   /2/ The text of Section 16(b) is set forth in the appendix to this
brief.

   /3/ The court also rejected respondent's argument that he had
standing as a Viacom shareholder to assert a "double derivative"
action under Section 16(b).  Pet. App. 33a.  That issue was not
reached by the court of appeals.  Id. at 18a.

   After the district court granted summary judgment, but before it
entered a judgment of dismissal, respondent purchased a subordinated
note issued by International, and moved, pursuant to Fed. R. Civ. P.
60(b), to vacate the judgment on the basis that he had standing under
Section 16(b) as a noteholder.  J.A. 35-36.  The district court denied
the motion, finding that the applicable standards under Rule 60(b)
were not satisfied.  Pet. App. 36a-38a.  The court of appeals affirmed
that ruling.  Id. at 18a-19a.

   /4/ Judge Milton Pollack, sitting by designation, dissented,
arguing that the majority's ruling conflicted with the terms of the
statute, Second Circuit precedent, and decisions of other courts of
appeals.  Pet. App. 20a-29a.

   /5/ Petitioners effectively acknowledge that point when, in quoting
the statute, they state (Pet. Br. 15) that their "continuous
ownership" principle is "implicit" in Section 16(b).  To justify their
claim that the statute implicitly means something it does not say,
petitioners observe that Section 16(b) grants standing to a
shareholder to institute an action not only if the issuer fails to
bring the action in the first place, but also if the issuer "fail(s)
to prosecute it diligently." From this, they infer that a security
owner must possess his interest throughout the action.  But the
statute's grant of standing to a security owner to "institute()" a
Section 16(b) action if the issuer fails to pursue it diligently does
not suggest (implicitly or otherwise) that a security owner suit, once
instituted, is subject to dismissal if a merger converts the security
owner's interest into stock in a new parent.  Rather, it demonstrates
Congress's chief reliance on security owners (not issuers) to
prosecute Section 16(b) actions.  See p. 14, infra.

   /6/ Cf. Russello v. United States, 464 U.S. 16, 23 (1983) ("(W)here
Congress includes particular language in one section of a statute but
omits it in another section of the same Act, it is generally presumed
that Congress acts intentionally and purposely in the disparate
inclusion or exclusion.");  General Motors Corp. v. United States, 110
S. Ct. 2528-2532 (1990);  International Org. for Masters v. Brown, No.
89-1330 (Feb. 20, 1991), slip op. 9 n.10.

   /7/ The Court cited for this proposition Mollan v. Torrance, 22
U.S. (9 Wheat.) 537, 539 (1824) ("(T)he jurisdiction of the Court
depends upon the state of things at the time of the action brought,
and * * * after vesting, it cannot be ousted by subsequent events.");
Clarke v. Mathewson, 37 U.S. (12 Pet.) 164, 171 (1838);  and Wichita
R.R. v. Public Util. Comm'n, 260 U.S. 48, 54 (1922) ("Jurisdiction
once acquired * * * is not divested by a subsequent change in the
citizenship in the parties.").

   /8/ Yourd's observation was made in the context of rejecting the
application of the "contemporaneous ownership" rule to Section 16(b),
see p. 19, infra, but the same reasoning applies to the "continuous
ownership" rule advocated by petitioners.

   /9/ The same definition appears in the current Black's Law
Dictionary 800 (6th ed. 1990), as well as in general dictionaries,
see, e.g., Random House Unabridged Dictionary of the English Language
(2d ed. 1987) ("institute v., * * * 3. to set in operation;  to
institute a lawsuit.").

   /10/ See, e.g., 2 U.S.C. 288k(a) ("any action or proceeding pending
or to be instituted");  8 U.S.C. 1503(a) ("action may be instituted
only within five years after final administrative denial of such
right").  Indeed, Congress has employed the word "instituted" when
emphasizing that an action once filed is not subject to dismissal by
particular post-suit events.  See 42 U.S.C. 405(g) ("Any action
instituted in accordance with this subsection shall survive
notwithstanding any change in the person accupying the office of
Secretary or any vacancy in such office.").

   /11/ Because respondent instituted this action while a security
owner of the issuer, this case does not present the question whether a
security holder has standing to sue if his shares were divested by a
merger before he had time to file a complaint under Section 16(b).
For example, an insider's sale that gives rise to Section 16(b)
liability may occur simultaneously with a merger that divests all
public shareholders of their stock;  in that setting, no shareholder
would be able to institute an action before ceasing to be an owner
(particularly given the 60-day demand period).  The issue there is
whether Section 16(b)'s authorization of security owner suits
encompasses suit by a former shareholder in order to prevent
frustration of the statutory purpose.  Cf. Blau v. Oppenheim, 250 F.
Supp. 881, 886 (S.D.N.Y. 1966) (shareholders of a parent corporation
whose subsidiary acquired the assets of a defunct issuer had standing
to sue under Section 16(b) because "(t)o deny them the right to
maintain suit would serve to defeat the purpose of the law").  This
case also does not present the question whether the SEC by rulemaking
could define "owner" to include, among other persons, such a former
security owner.  See note 30, infra.

   /12/ "In determining the meaning of the statute, we look not only
to the particular statutory language, but to the design of the statute
as a whole and to its object and policy." Crandon v. United States,
110 S. Ct. 997, 1001 (1990);  Grogan v. Garner, 111 S. Ct. 654, 659
n.13 (1991).

   /13/ Issuers may also lack the incentive to pursue claims under
Section 16(b) because the recovery is not compensatory in nature;  the
issuer has not experienced any out-of-pocket loss to spur its interest
in pursuing a monetary remedy.

   /14/ Pellegrino v. Nesbit, 203 F.2d 463, 467 (9th Cir. 1953);
Cramer v. General Tel. & Elec. Corp., 582 F.2d 259, 276 n.22 (3d Cir.
1978) (dicta), cert. denied, 439 U.S. 1129 (1979).

   /15/ See Cook & Feldman, Insider Trading Under the Securities
Exchange Act, 66 Harv. L. Rev. 385, 411 (1953) ("(D)ebenture holders,
bondholders, and presumably even a bank holding a promissory note may
undertake the litigation.").

   /16/ In accordance with that policy, courts have held that security
holders need not have a substantial interest to maintain an action;
one or two shares will do.  See, e.g., Portnoy v. Revlon, Inc., 650
F.2d 895, 897 (7th Cir. 1981);  Pellegrino v. Nesbit, 203 F.2d 463,
466 (9th Cir. 1953) (intervenor).  The courts have also held that a
particular plaintiff's reasons for suing are irrelevant.  See Magida
v. Continental Can Co., 231 F.2d 843, 847-848 (2d Cir.), cert. denied,
351 U.S. 972 (1956).

   /17/ See, e.g., Lewis v. McAdam, 762 F.2d 800, 802 (9th Cir. 1985)
(parent corporation, Sears, rejected a demand to sue the insiders
under Section 16(b) because "it would be unseemly and contrary to
Sears' best interests to seek recovery" of amount paid to insiders by
Sears' subsidiary in a tender offer);  Untermeyer v. Valhi, Inc., 665
F. Supp. 297, 298 (S.D.N.Y. 1987) (parent attempted to conceal, after
a merger, a statutory insider's short-swing transaction, and agreed to
indemnify him against Section 16(b) liability), aff'd mem., 841 F.2d
1117, aff'd on reh'g, 841 F.2d 25 (2d Cir.), cert. denied, 488 U.S.
868 (1988).  That a handful of Section 16(b) cases have reached this
Court in which post-merger issuers were the plaintiffs does not
support petitioners' optimistic hypothesis (Br. 32) that enforcement
will be adequate without public security holders.  In any even,
Congress did not share that view.

   /18/ Petitioners suggest (Br. 32) that other remedies are adequate
to deal with the prospect of restructuring to evade Section 16(b)
liability, but that assurance is not comforting in light of the
substantial hurdles that those other remedies entail.  See p. 24,
infra.

   /19/ See Lewis, 719 F.2d at 1047 n.1 (citing cases illustrating
that this language "served as an anchor for the concept that ownership
must extend throughout the life of the litigation").  No comparable
language, of course, appears in Section 16(b).

   /20/ Dottenheim v. Murchison, 227 F.2d 737, 738 (5th Cir. 1955)
(Section 16(b) does not create a "secondary or derivative" right and
is not subject to procedural requirements of a derivative action),
cert. denied, 351 U.S. 919 (1956);  Benisch v. Cameron, 81 F. Supp.
882, 884 (S.D.N.Y. 1948) (Section 16(b) "was primarily intended as an
instrument of a statutory policy of which the general public is the
ultimate beneficiary.  Congress did not intend procedural restriction
(applicable to derivative lawsuits) to hamper such policy.");  Pet.
App. 11a ("The standing requirements for shareholder derivative suits
are not applicable to a Section 16(b) plaintiff.").

   /21/ See Blau v. Mission Corp., 212 F.2d 77, 79 (2d Cir.), cert.
denied, 347 U.S. 1016 (1954);  Dottenheim v. Murchison, 227 F.2d at
740 & n.4;  Benisch v. Cameron, 81 F. Supp. at 883-885.  See also 13
W. Fletcher, Cyclopedia of the Law of Private Corporations Sections
5981.2, at 232 & n.2 (rev. perm. ed. 1984).

   /22/ For example, Delaware law allows the plaintiff's action to
continue "(1) where the merger itself is the subject of a claim of
fraud;  and (2) where the merger is in reality a reorganization which
does not affect plaintiff's ownership of the business enterprise."
Lewis v. Anderson, 477 A.2d 1040, 1046 n.10 (Del. 1984).  See
generally D. DeMott, Shareholder Derivative Actions:  Law and Practice
Section 4:03, at 38-43 (1987 & Supp. 1990);  Note, Survival of Rights
of Action After Corporate Merger, 78 Mich. L. Rev. 250 (1979)
(concluding that shareholders of corporation merged out of existence
should be entitled to prosecute derivative actions when necessary to
achieve equitable result).

   /23/ See Gaillard v. Natomas Co., 173 Cal. App. 3d 410, 418, 219
Cal. Rptr. 74, 79 (1985) (allowing shareholder to continue her
derivative action because her action was pending at the time of the
merger, her financial interest in the suit endured, and dismissal
would give "free reign to corporate pilfering" by virtue of a merger
that management had arranged);  Alford v. Shaw, 327 N.C. 526, 398
S.E.2d 445, 448-451 (1990) (refusing to dismiss derivative action
where shareholder's stock was exchanged in a merger).

   /24/ As one court explained in similar circumstances, "(t)he fact
that a merger occurred here does not preclude Gaillard (plaintiff)
from having a pecuniary interest in the outcome.  Gaillard will, in
fact, benefit from a favorable judgment.  As a shareholder of Diamond
(the new parent) she has a proprietary interest in the corporation in
which the sole shareholder of Natomas (the original corporation in
which she owned stock).  Thus, any benefit to Natomas by a damages
award will increase the value of Natomas' stock." Gaillard v. Natomas
Co., 173 Cal. App. 3d at 418, 219 Cal. Rptr. at 79 (discussing
derivative claim).

   /25/ See Blau v. Lehman, 368 U.S. 403 (1962) (a partnership that
traded in the issuer's stock was not liable under Section 16(b) simply
because one partner was a director of the issuer);  Reliance Elec.,
404 U.S. at 418 (sales occurring after the defendant had reduced his
ownership to 9.96% did not give rise to liability under Section
16(b));  Kern County, 411 U.S. at 596-604 (a binding option to sell
post-merger securities, posing no risk of speculative abuse, was not a
"sale" under Section 16(b));  Foremost-McKesson, Inc. v. Provident
Securities Co., 423 U.S. 232 (1976) (the defendant must be a 10%
beneficial owner before his purchase of securities exposes him to
liability under Section 16(b)).

   /26/ Although the Court in Foremost-McKesson, Inc., 423 U.S. at
255, stated that alternative "sanctions alleviate concern that
ordinary investors are unprotected against actual abuses of insider
information in transactions not covered by Section 16(b)," that
reasoning has no application here, where the challenged transactions
are presumptively covered by Section 16(b).

   /27/ As the courts below noted, Pet. App. 12a-13a, 32a, there is
one longstanding exception to that principle, reflected in the
decision in Blau v. Oppenheim, 250 F. Supp. 881 (S.D.N.Y. 1966).
There, the director of an issuer allegedly realized short-swing
profits before the issuer sold its assets to a subsidiary of another
firm, merged into it, and then ceased to exist.  A shareholder of the
parent then brought suit under Section 16(b), and the court upheld the
action, concluding that the term "issuer" in the statute embraced the
parent company as well as the successor-in-interest to the defunct
issuer.  Id. at 884-888.  That holding responded to the need to
provide redress where the policy of the statute would otherwise be
defeated.  Id. at 886.  The Oppenheim rule and its construction of the
term "issuer," however, are not before the Court;  unlike in
Oppenheim, respondent was a shareholder of the issuer when he brought
suit.  Pet. App. 13a.

   /28/ The force of Portnoy as a precedent is also weakened by an
additional factor:  the plaintiff in that case expressly disclaimed
any reliance on "the possibility (raised by the court) that the
language of Section 16(b) (that the suit may be 'instituted' by a
shareholder of the issuer) could be read to mean that the plaintiff
only be a shareholder at the time he filed the action." 607 F.2d at
767 n.4.  Petitioners also cite (Br. 37) Staffin v. Greenberg, 509 F.
Supp. 825, 840 (E.D. Pa. 1981), where the district court simply
followed Portnoy and Rothenberg in the cash-out merger setting without
independent analysis;  the court of appeals affirmed on other grounds,
672 F.2d 1196, 1207 (3d Cir. 1982).

   /29/ the standing of shareholders in that situation is consistent
with the rule that when an issuer is dissolved upon merging into
another corporation, the surviving corporation acquires a right to
enforce the former issuer's Section 16(b) claims.  See Western Auto
Supply Co. v. Gamble-Skogmo, Inc., 348 F.2d 736, 739-741 (8th Cir.
1965), cert. denied, 382 U.S. 987 (1966);  American Standard, Inc. v.
Crane Co., 510 F.2d 1043, 1061 n.35, 1062 (2d Cir. 1974), cert.
denied, 421 U.S. 1000 (1975).

   /30/ Petitioners also contend (Br. 27-29) that the SEC's rulemaking
efforts to define the term "owner of any security of the issuer"
suggest that there are practical obstacles in construing the statute
to affirm respondent's standing.  But under any of the SEC's
formulations (as well as the statute itself), respondent could have
pursued this action;  the issues on which the SEC requested comment
concerned whether other plaintiffs should also have standing.  See
Ownership Reports and Trading by Officers, Directors and Principal
Stockholders, Exchange Act Release No. 26333 (Dec. 2, 1988), (1988-89
Transfer Binder) Fed. Sec. L. Rep. (CCH) Paragraph 84,343, at 89,620
(proposing definition of owner that would encompass "a beneficial
owner of securities of the issuer at the time of suit," or a "former
beneficial owner who was compelled to dispose of the securities
because of a business combination");  Ownership Reports and Trading by
Officers, Directors and Principal Stockholders, Exchange Act Release
No. 27148 (Aug. 18, 1989), (1989 Transfer Binder) Fed. Sec. L. Rep.
(CCH) Paragraph 84,439, at 80,397 (reproposing narrower definition
that continued to encompass plaintiffs like respondent, and requesting
comment on whether standing should be extended to, among others,
"security holders who have notified the issuer of a short-swing
transaction, but are compelled to surrender their securities because a
business combination during the 60 days that the statute requires
security holders to wait before instituting suit").  In light of the
Court's grant of certiorari, the Commission determined not to define
the term "owner" under Section 16(b) at this time.  Ownership Reports
and Trading by Officers, Directors and Principal Stockholders,
Exchange Act Release No. 28869 (Feb. 8, 1991), at 87-88.

   /31/ The Solicitor General is disqualified in this case.

   APPENDIX