The United States District Court for the Southern District of New York, addressing an issue of first impression, ruled that purchases and sales involving different classes of common stock possessing different voting rights can not be matched for purposes of the "short swing" profit liability provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended. Section 16(b) requires that any profit resulting from a purchase and sale (or sale and purchase) of equity securities within a six-month period by directors, officers and 10% stockholders of a public company be disgorged to the public company. In its decision, the court held that (i) the plain language of Section 16(b) requires that the purchase and sale must involve the same equity security and (ii) a significant correlation between the trading prices of the two types of equity securities does not permit a court to treat them as the same equity security when neither type of equity security was convertible, exchangeable or exercisable for the other.

Gibbons v. Malone, 10 CV 8640 (BSJ) (S.D.N.Y Aug. 8, 2011)