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United States District Court, Northern District of Illinois, E.D

June 20, 1983


The opinion of the court was delivered by: Decker, District Judge.


Plaintiff, David Colan ("Colan"), a security holder of Prudential-Bache Securities Inc. ("Prudential-Bache"), has brought this action on behalf of Prudential-Bache for recovery of shortswing profits realized by defendant First City Financial Corporation Ltd. ("First City") allegedly in violation of section 16(b) of the Securities Exchange Act of 1934 ("the Act"), 15 U.S.C. § 78p(b).*fn1 Colan asserts that First City earned approximately $8,000,000.00 in profits from its trading in the stock of the Bache Group Inc. ("Bache"). Currently pending is First City's motion for summary judgment.

I. Factual Background.

The circumstances giving rise to this action are as follows.*fn2 On March 21, 1979, the Bel Companies*fn3 began purchasing the common stock of Bache, reporting in a Schedule 13D statement filed with the SEC on that same date that "[s]ince the Corporations intend to consider seeking to acquire control of the Issuer their position cannot be considered solely that of a passive investor." By late June, 1979, the Bel Companies had become the beneficial owners of 7.8% of Bache's outstanding common stock.

On September 13, 1979, Samuel Belzberg ("Belzberg") met with Harry A. Jacobs ("Jacobs"), Chairman of Bache, and H. Virgil Sherrill ("Sherrill"), the President and director of Bache. According to Amendment No. 4 to the Bel Companies' Schedule 13D, dated October 4, 1979, Belzberg indicated that he was interested in increasing his investment in Bache to between 20% and 25% of the latter's outstanding common stock. In a letter from Bache's Board of Directors to Belzberg, dated September 24, 1979, and attached as an exhibit to Amendment No. 4, Jacobs stated:

    "The Board of Directors agree that an increase in
  ownership by you of Bache shares would be contrary to
  the interests of Bache and its shareholders."

Despite this letter, the Bel Companies continued purchasing Bache stock and by late June, 1980, they owned 8.2% of the outstanding common stock.

On July 14, 1980, the Bel Companies sold all their common stock, amounting to 778,700 shares, to First City "in order to realign the investment within the corporate group on more satisfactory business terms." See Schedule 13D, filed with the SEC on July 23, 1980, at 7-8.

On July 15 and 16, 1980, First City purchased 115,600 shares of Bache common stock, which boosted its holdings to over 10%, of Bache's outstanding common stock. Additional purchases soon led to holdings of approximately 16.8%.

According to a Request by Bache for an Investigation and Public Hearings and an Order Prohibiting Purchases Pending Hearings ("the Request"), filed with the Attorney General of the State of New York, Belzberg, at a December 16, 1980, meeting with Jacobs, indicated a desire to be elected to the Bache Board and to be allowed to designate another member of the Board. Bache understood this to be an attempt by Belzberg to "take over Bache," Request, at 1, and to "influenc[e] the control" of Bache. Id. at 17. In response to this perceived attempt, Bache sought an order from the New York Attorney General prohibiting First City and the Belzberg family from purchasing any additional shares of Bache. Bache asserted in the Request, in part, that the Belzberg family had "embark[ed] on an aggressive market purchase program without disclosing detailed information about themselves, their plans or even the terms of the bid, . . . compell[ing] Bache shareholders to speculate about these factors while forcing them to make an important investment decision[,]" Id. at 13-14. The Request also stated that the charged parties had "actively solicit[ed] shares of Bache through a variety of methods in furtherance of their takeover bid and, accordingly, are in violation of the New York Act [the New York Security Takeover Disclosure Act, N.Y.BUS.CORP.LAW § 1601 (Consol. 1982)] for making such a bid without making the required disclosure." Id. at 16.

By February 18, 1981, First City had increased its holdings to approximately 22.6% of Bache's outstanding common stock. Amendment No. 2 to Bache's Schedule 14D-9, filed with the SEC on April 2, 1981, indicates that it was soon after these additional purchases that Bache contacted The First Boston Corporation ("First Boston") in an effort to locate a purchaser of the entire company. On March 3, 1981, First Boston approached The Prudential Insurance Company of America ("Prudential") concerning the latter's possible acquisition of Bache. Bache and Prudential engaged in discussions concerning the possible acquisition, while at the same time Bache also met with First Boston to examine other potential acquirers. Belzberg asserts in an affidavit filed in support of First City's motion that neither First City nor its representatives participated in or were informed of Bache's negotiations with Prudential.

On March 18, 1981, Prudential offered to acquire all of Bache's outstanding common stock for $32 per share through a cash tender offer to be followed by a second step cash merger. On that same day, the Bache Board approved acceptance of Prudential's offer, and the agreement was announced publicly on March 19. In recommending acceptance of the first step cash tender offer, Bache stated in its Schedule 14D-9, at 4, dated March 20, that

  "the Company [Bache] was mindful of the continuing
  market purchases by First City . . . which posed a
  threat that it would gain control of the Company,
  leaving minority stockholders who would not have the
  opportunity to receive a price for their shares as
  high as that offered by [Prudential]."

This same statement was repeated in the proxy materials distributed to Bache shareholders and recommending approval of the second step cash merger.

On March 23, 1981, Pru Holdings Inc. ("Pruho"), a wholly-owned subsidiary of Prudential, commenced a tender offer for all of the outstanding Bache common stock at a price of $32 per share. Pursuant to this tender offer, Pruho acquired approximately 70% of Bache's outstanding common stock. At a special meeting of Bache shareholders held on June 11, 1981, the merger of Pruho and Bache was approved despite the fact that First City voted all of its shares against the merger. On June 12, pursuant to the terms of the merger, the 2,440,975 shares of Bache stock owned by First City were converted into the right to receive $32 per share in cash.

II. Legal Contentions of the Parties.

The legal contentions of the parties can be briefly summarized. Plaintiff Colan alleges that the conversion by First City of its Bache shares into the right to receive $32 per share in cash on June 12, 1981 was a "sale" of an equity security within the meaning of section 16(b) of the Act. Because First City was the beneficial owner of more than 10% of Bache's outstanding common stock at all times within six months of June 12, 1981, Colan concludes that the profits earned by First City from the conversion of such shares constitute short-swing profits by an insider and therefore are recoverable by Prudential-Bache under section 16(b).

In support of its motion for summary judgment, First City contends that the conversion of its Bache stock into cash, pursuant to the merger which it opposed, was not a "sale" within the meaning of section 16(b).

III. Kern County, Its Progeny and the Pragmatic Approach.

Two identifiable analytical approaches for dealing with section 16(b) issues have been developed by the courts. As noted in Oliff v. Exchange International Corp., 669 F.2d 1162, 1165 (7th Cir. 1980), under the objective approach, a court must determine whether the transactions and the involved party fall within the literal and broadly remedial requirements of section 16(b). If so, the inquiry ends, liability attaches and profits must be returned. Id. In an orthodox transaction, beneficial owners of more than 10% of a corporation's stock are presumed to have access to inside information and to have acted on the basis of such information by engaging in a short-swing transaction. Allis-Chalmers Manufacturing Co. v. Gulf & Western Industries, Inc., 527 F.2d 335, 347 (7th Cir. 1975), cert. denied, 423 U.S. 1078, 96 S.Ct. 865, 47 L.Ed.2d 89 (1976).

In Kern County Land Co. v. Occidental Petroleum Corp., 411 U.S. 582, 93 S.Ct. 1736, 36 L.Ed.2d 503 (1973), the Supreme Court developed a "pragmatic," or subjective, approach to questions of section 16(b) liability in cases involving certain "unorthodox" transactions. Under this approach, a court must determine whether an "unorthodox" or "borderline" transaction — that is, one not ordinarily thought of as a sale or purchase but arguably within the broad statutory definition*fn4 — comes within the reach of section 16(b) by inquiring "whether the transaction may serve as a vehicle for the evil which Congress sought to prevent — the realization of short-swing profits based upon access to inside information. . . ." Kern County, 411 U.S. at 594, 93 S.Ct. at 1744 (footnote omitted).

In Kern County itself, purchases within the scope of section 16(b) occurred when defendant Occidental acquired more than 10% of the stock of Old Kern, the target company, as a result of a tender offer. While the offer was in effect, Old Kern engineered a defensive merger with Tenneco, involving an exchange of all shares of Old Kern stock for shares of Tenneco stock. Occidental attempted to block the proposed merger, but eventually dropped its efforts after negotiating certain option arrangements with Tenneco.*fn5 At a meeting of Old Kern shareholders to vote on the merger, Occidental did not vote its shares but indicated that, had it done so, it would have voted in favor of the merger. Once the merger was closed, all Old Kern shareholders, including Occidental, became irrevocably entitled and committed to exchange their Old Kern holdings for Tenneco preferred stock. Id. at 584-89, 93 S.Ct. at 1739-41.

The Supreme Court held that this exchange did not constitute a "sale" within section 16(b). In so ruling, the Court placed great emphasis on two factors: (1) the involuntary nature of the exchange; and (2) the absence of the possibility of speculative abuse of insider information.*fn6 With regard to the first factor, the Court observed that the merger was not arranged by Occidental, but was sought by Old Kern to frustrate Occidental's attempts to gain control of Old Kern. Furthermore, once the merger was approved, Occidental had no real alternative concerning the disposition of its Old Kern shares. While it could have sold the shares before the merger was closed, such an act would have subjected Occidental to prima facie section 16(b) liability. Kern County, 411 U.S. at 599-600, 93 S.Ct. at 1747. With regard to the second factor, the Court noted that while Occidental was a statutory insider at the time it extended the tender offer, its clear adversarial posture vis-a-vis Old Kern's management afforded little possibility of access to inside information by virtue of its stock ownership. Id. at 598-99, 93 S.Ct. at 1746-47.

Kern County has been interpreted and applied in two decisions highly relevant to the case at bar. In American Standard, Inc. v. Crane Co., 510 F.2d 1043 (2d Cir. 1974), cert. denied 421 U.S. 1000, 95 S.Ct. 2397, 44 L.Ed.2d 667 (1975), defendant began purchasing large quantities of the common stock of Westinghouse Air Brake Company ("Air Brake"). Air Brake declined Crane's proposals for a merger and, instead, engineered a defensive merger with Standard. Crane, which at this point owned in excess of 10% of Air Brake's outstanding stock, then made a tender offer for the shares of Air Brake. This tender offer failed, and the Air Brake-Standard merger was approved. Pursuant to the terms of this merger, Crane exchanged its Air Brake common shares for the preferred shares of Standard. Crane eventually sold these shares, obtaining a profit of approximately $10,000,000.00. American Standard, 510 F.2d at 1047-49.

The Second Circuit found that the two factors highlighted by the Supreme Court in Kern County were also present in American Standard. Crane's exchange was involuntary, since it was essentially powerless to control the course of events in light of the opposition by Standard's management. There existed an atmosphere of hostility, rendering it unlikely that Crane would have access to insider information by virtue of its greater than 10% ownership. Id. at 1054. As summarized by the court:

    "We believe that Kern County holds the defensive
  merger situation to be sui generis in terms of §
  16(b) liability. The implication is that the status
  of a defeated tender offeror affords no presumption
  of abuse of confidential information by virtue of
  relationship to the issuer. By status it is
  accordingly not `presumed to be an insider who will
  receive information regarding the company before it
  is made public.' . . . The adversary stance also
  rebuts the presumption of control."

Id. at 1053 (citation omitted).

Although Crane in American Standard continued to attempt to defeat the Air Brake-Standard merger, whereas Occidental in Kern County gave up the fight in the face of Old Kern's proposed merger with Tenneco, the Second Circuit held that this difference did not alter the basic similarity between the two transactions. Id. The court thus found that Crane's exchange of shares was not a "sale" and would not subject it to section 16(b) liability for short-swing profits. Id. at 1055.

Presented with facts quite similar to those in the instant action, the court in Heublein, Inc. v. General Cinema Corp., 559 F. Supp. 692 (S.D.N.Y. 1083), discussed and applied the principles promulgated in Kern County. There, General Cinema began purchasing substantial quantities of the common stock of plaintiff's predecessor, Old Heublein, in an apparent attempt to acquire control of Old Heublein.*fn7 As part of an effort to resolve the expected contest for control, the Chief Executive Officer of Old Heublein approached executives at General Cinema concerning a possible "asset swap" of the Old Heublein stock owned by General Cinema for part of Old Heublein's wine business. During the course of these discussions, Old Heublein provided General Cinema with information, not available to the general public, concerning its wine business. Negotiations broke down, however, and General Cinema continued to purchase Old Heublein stock. The latter then commenced discussions with B.J. Reynolds concerning a possible merger. B.J. Reynolds subsequently extended a tender offer, the offer was completed and the merger of Old Heublein and B.J. Reynolds was approved despite the fact that General Cinema voted all its shares against the merger. Heublein, 559 F. Supp. at 695.

At the outset of its well-reasoned opinion, the court noted that the transaction at issue was indeed "unorthodox" as that term was defined in Kern County. It found that a pragmatic inquiry was justified because the transaction was "a forced exchange of securities pursuant to a merger, [and] is simply not a `garden variety' sale." Id. at 698. The court then analyzed the circumstances giving rise to the action in terms of the two factors highlighted in Kern County. The Heublein court first noted that once the merger was agreed upon by Old Heublein and B.J. Reynolds, General Cinema was "utterly powerless to influence subsequent events," Id. at 699, since Old Heublein had the necessary votes regardless of the position adopted by General Cinema. The court further observed that once the merger was approved, General Cinema, like Occidental in Kern County, had no viable alternative as to the future of its Old Heublein shares; an open-market sale at that point would have resulted in prima facie liability under section 16(b). Id.; see also Kern County, 411 U.S. at 599-600, 93 S.Ct. at 1747.

After concluding that the exchange of shares by General Cinema was involuntary, and that it therefore satisfied the first prong of the Kern County test, the Heublein court then analyzed the possibility for speculative abuse by General Cinema. The court noted that the principal distinction between the case before it and both Kern County and American Standard was that General Cinema had never made a formal tender offer. Despite this distinction, the court stated, in language highly relevant to the case at bar:

  "The important question . . . is whether General
  Cinema's position as an `unwelcome investor,' . . .
  afforded it access to inside information in a manner
  that raised the potential for speculative abuse,
  which was lacking in Kern County and American
  Standard. Although the question is not free of doubt,
  I conclude that an unwelcome investor who is forced
  to exchange his stock pursuant to a merger arranged
  by the issuer to rid itself of the investor's threat
  to obtain control should be treated for purposes of §
  16(b) liability in the same manner as a defeated
  tender offeror who must make a similar exchange after
  losing the battle to a white knight. Such
  transactions simply do not give rise to a potential
  for speculative abuse."

Heublein, 559 F. Supp. at 702 (footnote omitted). While the court found troublesome the asset swap discussions between Old Heublein and General Cinema, it emphasized that the non-public information disclosed was not "material" and that the unwavering hostility between the two companies made it quite unlikely that General Cinema, by its status as an insider, would have had access to inside information. Id. at 703-04. The second prong of the Kern County test having been satisfied, the court concluded that General Cinema's exchange of Old Heublein stock for B.J. Reynolds stock was not a "sale" under section 16(b). Id. at 705.*fn8

  IV. Applicability of Kern County and its Progeny to the Case at

Colan offers several arguments in support of his claim that the principles espoused in Kern County and its progeny are inapplicable to the case at bar. First Colan contends that First City's conversion of its Bache stock into the right to receive $32 per share in cash was not an unorthodox transaction. Second, he argues that even assuming that the conversion qualifies as an unorthodox transaction, First City's receipt of cash rather than securities for its Bache shares distinguishes the instant case from Kern County. Third, Colan claims that First City's disposition of its Bache shares was voluntary. Finally, plaintiff asserts that First City had access to inside information.

A. The Unorthodox. Nature of the Transaction.

Despite Colan's protestations to the contrary, it is clear that a pragmatic analysis is justified in this case. The transaction which plaintiff wishes to classify as a "sale" — a forced exchange of securities pursuant to a merger — is plainly not the type of garden variety sale to which the literal and broadly remedial requirements of section 16(b) apply. See Heublein, 559 F. Supp. at 698. Indeed, the Supreme Court in Kern County expressly mentioned "exchanges pursuant to mergers" as an example of an unorthodox transaction. See Kern County, 411 U.S. at 593, n. 24, 93 S.Ct. at 1744, n. 24: see also note 5, supra. Characterizing the instant transaction as unorthodox in nature is entirely consistent with the Court's directive in Kern County that section 16(b) should serve to prevent short-swing speculation based on inside information, without reaching other conduct not giving rise to the potential for such abuse. See Kern County, 411 U.S. at 593-94, 93 S.Ct. at 1744.*fn9

Plaintiff's reliance on Tyco Laboratories, Inc. v. Cutler-Hammer, Inc., 490 F. Supp. 1 (S.D.N.Y. 1980), in support of his claim that the instant transaction is not unorthodox in nature is clearly misplaced. There, Tyco, a 10% beneficial owner of the outstanding stock of Cutler-Hammer, sold its entire holdings to Eaton Corporation within six months of some of its purchases for cash and other consideration. Tyco contended that "the existence of a `control contest type of situation' render[ed] the transaction . . . `unorthodox' within the meaning of Kern County. . . .", Tyco, 490 F. Supp. at 6, a claim which the court rejected. In contrast to Kern County, American Standard, Heublein and the case at bar, however, the statutory insider in Tyco chose the party to whom it sold its holdings of the issuer's stock, as well as the terms and timing of the sale. There was no evidence before the Tyco court of a selection by the issuer of a white knight with whom the issuer could merge in order to counter a perceived takeover bid. Tyco, therefore, involves a sharply different factual scenario than that presented here.

B. Receipt of Cash by First City.

Colan's contention that First City's receipt of cash, rather than securities, for its Bache shares renders this case distinguishable from the Kern County line of cases merits little discussion. Plaintiff has failed to offer any concrete reason for distinguishing this action on the basis of the consideration received upon disposition, and the court fails to find any. As First City correctly notes, the critical issue is not the form of the consideration but rather the nature of the disposition itself: was the disposition involuntary, and did the entire transaction, when viewed in its entirety, provide the opportunity for speculative abuse? It is these fundamental questions to which the court now turns.

C. The Involuntary Nature of the Transaction.

An exchange pursuant to a merger is "involuntary" where the unsuccessful party has an "utter inability . . . to control the course of events." American Standard, 510 F.2d at 1054. This standard, the first prong of the Kern County test, has been satisfied in the case at bar.

Once the merger of Bache and Prudential was agreed upon by the Boards of the respective companies, First City was powerless to influence the subsequent course of events. Whether First City approved or opposed the merger was completely irrelevant, for while Bache needed the consent of its shareholders, its management had all the necessary votes without the acquiescence of First City. Indeed, the merger was approved by Bache's shareholders despite the negative vote by First City of all of its shares. Furthermore, the facts reveal unequivocally that the conversion of Bache stock into the right to receive $32 per share occurred pursuant to the express terms of the merger between Bache and Prudential. The merger was not engineered by First City, but was specifically designed to frustrate the attempts by the Belzberg family to obtain control of Bache.

In this fashion, the decisions in Kern County and Heublein are squarely on point. In Kern County, the Old Kern-Tenneco merger was approved by a majority of Old Kern shareholders despite the fact that Occidental failed to vote its shares either for or against the merger.*fn10 The Court's finding that the exchange of Occidental's Old Kern stock for Tenneco stock was involuntary was grounded on the fact that Occidental was simply in no position to affect the outcome of the vote. Kern County, 411 U.S. at 599, 93 S.Ct. at 1747. Similarly, in Heublein, the management of Old Heublein had the votes necessary to obtain approval of the Old Heublein-Reynolds despite the negative votes of General Cinema. Because General Cinema's votes were without significance, the court found the company lacking any means to influence subsequent events. Heublein, 559 F. Supp. at 699.

Finally, once the Prudential-Bache merger was approved, First City, like Occidental in Kern County and General Cinema in Heublein, was left with no real choice as to the future of its Bache shares. A voluntary open-market sale of those shares would have resulted in prima facie liability under section 16(b). See Kern County, 411 U.S. at 600, 93 S.Ct. at 1747; Heublein, 559 F. Supp. at 699.

Thus, precisely because First City's votes were entirely without significance, the court concludes that defendant's subsequent conversion of Bache stock into the right to receive $32 per share must be deemed involuntary.*fn11

  D. Access to Inside Information and the Possibility of
     Speculative Abuse.

The first prong of the Kern County test having been satisfied, the remaining question is whether there existed the possibility of speculative abuse of inside information by First City. As set forth in detail in Part I, supra, First City was clearly perceived as an undesirable and unwelcome investor by the Bache management. Indeed, the uncompromising hostility between the parties is plainly illustrated by the Bache Board's September 24, 1979, response to Belzberg, its Request filed with the New York Attorney General and its characterization of First City's actions in the proxy materials distributed to shareholders.*fn12

Of course, the fact that First City did not make a formal tender offer distinguishes this action from Kern County and American Standard. This court, however, agrees with the reasoning of Judge Connor in Heublein that the principles set forth in Kern County and adopted in American Standard need not be restricted to instances where there has been a formal tender offer. First City was clearly perceived as an unwelcome investor, and was forced to convert its shares pursuant to a merger engineered by Bache to eliminate the threat by the Belzberg family to obtain control. Under such circumstances, First City should be viewed in precisely the same manner as both Occidental in Kern County and Crane in American Standard — as a defeated tender offerer who must make an exchange "after losing the battle to a white knight." Heublein, 559 F. Supp. at 702.

Colan contends that the possibility of access to inside information is demonstrated by "meetings between Samuel Belzberg . . . and either or both of Harry A. Jacobs, Jr. . . . and H. Virgil Sherrill . . . [which] occurred in May, 1979, September, 1979, October, 1980, and December, 1980." Plaintiff's Memorandum in Opposition to First City Financial Corporation Ltd's Motion for Summary Judgment, at 7. Plaintiff argues that "it is a question of fact as to what constitutes inside information and whether the possibility of speculative abuse existed." Id. at 8 (emphasis in original).

Upon careful analysis, Colan's argument falls far short of raising a genuine issue of material fact. The extreme hostility, detailed in Part I, supra, that characterized the relationship between Bache and First City belies any claim that there existed potential for speculative abuse. Beyond the naked assertion that certain meetings took place, Colan has simply failed to present anything in connection with First City's acquisition of Bache stock pursuant to its pattern of purchases to indicate either the possibility of inside information being available to First City by virtue of its stock ownership or the potential for its speculative abuse of such information.

V. Colan's Request for Discovery.

Colan's final argument in opposition to First City's motion is that defendant is not entitled to summary judgment until he has had an opportunity to conduct discovery on the meetings between First City and Bache. Plaintiff has filed an affidavit pursuant to Fed.R.Civ.P. 56(f),*fn13 requesting that he be allowed to take the depositions of Belzberg, Jacobs, Sherrill and other unidentified witnesses. He also seeks notes taken by Jacobs after the latter's December 16, 1980, meeting with Belzberg.

It is well established that a plaintiff's entitlement to discovery prior to a ruling on a motion for summary judgment is not unlimited, and may be denied when the record demonstrates that the requested discovery is not likely to produce the facts necessary to defeat the motion. See, e.g., First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968) (limitations on general pre-trial discovery and denial of further Rule 56(f) discovery not improper as additional discovery would merely amount to a fishing expedition); Paul Kadair, Inc. v. Sony Corp. of America, 694 F.2d 1017, 1029-30 (5th Cir. 1983) (Rule 56(f) request properly denied when additional discovery is unlikely to produce necessary facts); Contemporary Mission, Inc. v. United States Postal Service, 648 F.2d 97, 107 (2d Cir. 1981) (same). A "bare assertion" that the evidence supporting a plaintiff's allegation is in the hands of the defendant is insufficient to justify a denial of a motion for summary judgment under Rule 56(f). Contemporary Mission, 648 F.2d at 107. Rule 56(f) cannot be utilized to defeat a motion for summary judgment "where the result of a continuance to obtain further information and discovery would be wholly speculative . . ." 6 J. Moore, Moore's Federal Practice ¶ 56.24 at 56-1438 (2d ed. 1982) (footnote omitted).

In light of these principles and the undenied facts in the record, there is little likelihood of Colan obtaining through additional discovery, any information useful in disposing of the issues presented here. With regard to plaintiff's request for Jacobs' notes of the December 16, 1980, meeting, the court observes that the notes, together with an affidavit by Jacobs attesting to their accuracy, were submitted by Bache to the New York Attorney General in February, 1981, as an exhibit to its Request and are therefore a matter of public record. Most importantly, however, the court finds it highly unlikely that Colan's discovery request, if granted, would produce any significant probative evidence of access to inside information and potential for speculative abuse in refutation of the factual background established thus far. Accordingly, Colan will not be allowed to engage in an open-ended search with the hope of fortuitously discovering some unknown evidence of speculative abuse.

VI. Conclusion.

For the reasons stated above, First City's motion for summary judgment is granted. The transaction at issue does not, as a matter of law, represent the type of "evil which Congress sought to prevent — the realization of short-swing profits based upon access to inside information. . . ." Kern County, 411 U.S. at 594, 93 S.Ct. at 1744 (footnote omitted). The cause is ordered dismissed.

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