Case 32.2 – United States v. O’Hagan” Please respond to the following: Assess whether a securities firm will be more likely to modify its
Case 32.2 – United States v. O’Hagan” Please respond to the following:
- Assess whether a securities firm will be more likely to modify its behavior in business based upon the holding of this case. If you were employed in the securities profession, state one particular way in which you modify your approach to be transparent to both your client and the Securities and Exchange Commission.
Case 32.2 – U.S. SUPREME COURT Misappropriation Theory; United States v. O’Hagan; 521 U.S. 642, 117, S.Ct. 2199, 138 L.Ed. 2d 724, Web 1997 U.S. Lexis 4033; Supreme Court of the United States
“The misappropriation theory outlaws trading on the basis of nonpublic information by a corporate ‘outsider’ in breach of a duty owed not to a trading party, but to the source of the information.” – Justice Ginsburg
Facts: James O’Hagan was a partner in the law firm Dorsey & Whitney in Minneapolis, Minnesota, Grand Metropolitan PLC (Grand Met), a company based in London, England, hired Dorsey & Whitney to represent it in a secret tender offer for the stock of the Pillsbury Company, headquartered in Minneapolis. While this transaction was still secret, O’Hagan began purchasing call options for Pillsbury stock. Each call option gave O’Hagan the right to purchase 100 shares of Pillsbury stock at a specified price. O’Hagan continued to purchase call options for 2 months, and he became the largest holder of call options for Pillsbury stock. O’Hagan also purchase 5,000 shares of Pillsbury common stock at $39 per share. These purchases were all made while Grand Met’s proposed tender offer for Pillsbury remained secret to the public. When Grand Met publicly announced its tender offer 1 month later, Pillsbury stock increased to nearly $60 per share. O’Hagan sold his Pillsbury call options and common stock, making a profit of more than $4.3 million.
The U.S. Department of Justice charged O’Hagan with criminally violating Section 10(b) and Rule 10b-5. Because this was not a case of classic insider trading because O’Hagan did not trade in the stock of his law firm’s client, Grand Met, the government alleged that O’Hagan was liable under the misappropriation theory for trading in Pillsbury stock by engaging in deceptive conduct by misappropriating the secret information about Grand Met’s tender offer from his employer, Dorsey & Whitney, and from its client, Grand Met. The District Court found O’Hagan guilty and sentenced him to 41 months in prison. The Eighth Circuit Court of Appeals reversed, finding that liability under Section 10b and Rule 10b-5 cannot be based on the misappropriation theory. The government appealed to the U.S. Supreme Court.
Language of the U.S. Supreme Court: The “misappropriation theory” holds that a person commits fraud “in connection with” a securities transaction, and thereby violates Section 10(b) and Rule 10b-5, when he misappropriates confidential information for securities trading purposes, in breach of a duty owed to the information. Under this theory, a fiduciary’s undisclosed, self-serving use of a principal’s information to purchase or sell securities, in breach of a duty of loyalty and confidentiality, defrauds the principal of the exclusive use of that information.
The classical theory targets a corporate insider’s breach of duty to shareholders with whom the insider transacts; the misappropriation theory outlaws trading on the basis of nonpublic information by a corporate “outsider” in breach of duty owed not to a trading party, but to the source of the information. The misappropriation theory comports with Section 10(b)’s language, which requires deception “in connection with the purchase or sale of any security.”
Decision: The U.S. Supreme Court held that a defendant can be criminally convicted of violating Section 10(b) and Rule 10b-c under the misappropriation theory. The U.S. Supreme Court reversed the decision of the Court of Appeals, which had held otherwise.
“Case 36.4” Please respond to the following:
- If you were in Suders’ position and felt harassed by coworkers, who were also police officers, determine what recourse you would have under Title VII.
Case 36.4 U.S. Supreme Court Sexual Harassment; Pennsylvania State Police v. Suders; 542 U.S. 129 S.Ct. 2342 159 L.Ed. 2d 204, Web 2004 U.S. Lexis 4176 (2004); Supreme Court of the U. S.
“Essentially, Suders presents a ‘worse case’ harassment scenario, harassment ratcheted up to the breaking point.” – Justice Ginsburg
Facts: The Pennsylvania State Police (PSP) hired Nancy Drew Suders as a police communications operator for the McConnellsburg barracks. Suders’s supervisors were Sergeant Eric D. Easton, station commander at the McConnellsburg barracks, Patrol Corporal William D. Baker, and Corporal Eric B. Prendergast. Those three supervisors subjected Suders to a continuous barrage of sexual harassment that ceased only when she resigned from the force. Easton would bring up the subject of people having sex with animals each time Suders entered his office. He told Prendergast, in front of Suders, that young girls should be given instruction on how to gratify men with oral sex. Easton also would sit down near Suders, wearing Spandex shorts, and spread his legs apart. Baker repeatedly made an obscene gesture in Suders’s presence that involved grabbing his genitals and shouting out a vulgar comment inviting oral sex. Baker made this gesture as many as five to ten times per night throughout Suders’s employment at the barracks. Further, Baker would rub his rear end in front of her and remark “I have a nice ass, don’t I?”
Five months after being hired, Suders contacted Virginia Smith-Elliot, PSP’s equal opportunity officer, stating that she was being harassed at work and was afraid. Smith-Elliot’s response appeared to Suders to be insensitive and unhelpful. Two days later, Suders resigned from the force. Suders sued PSP, alleging that she had been subject to sexual harassment and constructively discharged and forces to resign. The U.S. District Court of Appeals reversed and remanded the case for trial on the merits against PSP. PSP appealed to the U.S. Supreme Court.
Language of the U.S. Supreme Court: To establish hostile work environment, plaintiffs like Suders must show harassing behavior sufficiently severe or pervasive to alter the conditions of their employment. The very fact that the discriminatory conduct was so severe or pervasive that it created a work environment abusive to employees because of their gender offends Title VII’s broad rule of work equality.
Essentially, Suders presents a “worse case” harassment scenario, harassment ratcheted up to the breaking point. Harassment so intolerable as to cause a resignation may be effected through co-worker conduct, unofficial supervisory conduct, or official company acts. Unlike an actual termination, which is always effected through an official act of the company, a constructive discharge need not be. A constructive discharge involves both an employee’s decision to leave and precipitating conduct.
Decision: The U.S. Supreme Court agreed with the U.S. Court of Appeals that Suders’s case presented genuine issues of materials fact concerning Suders’s hostile work environment and constructive discharge claims. The U.S. Supreme Court remanded the case for further proceedings consistent with its opinion.
Solution PreviewIt is most likely that the security firm will be able to change the way that they normally do business in an effort to ensure that they can be able to prevent the occurrence of such cases. It is also important to assure the different gaps in the firms that lead to an employee being able to…………………………………………..