Daniel H Tabak
Partner, New York
Daniel H Tabak
Partner, New York
Daniel H. Tabak has experience in commercial litigation, bankruptcy litigation, complex securities litigation, appellate work, and professional liability. His practice focuses on complex commercial disputes with an emphasis on litigation and arbitration involving the financial industry. Dan also has extensive experience representing parties in bankruptcy and bankruptcy litigation, including representing Hulk Hogan in the bankruptcy cases of Gawker and its founder.
Dan has been recognized over the last nine years by The Legal 500’s U.S. guide in its securities litigation, commercial litigation, and general commercial disputes categories, with clients describing Dan as an “incredibly smart,” “first rate trial lawyer” who is “bright, attentive and creative” and possesses a “unique ability to quickly get up to speed on a complicated set of legal and factual issues.” Super Lawyers has recognized Dan on its annual New York Metro Super Lawyers list for business litigation each year since 2014, and has named him one of the top 100 lawyers in the New York metropolitan. He has also been recognized as a Litigation Star by Benchmark Litigation. Dan is a former member of Law360‘s editorial advisory board for its legal ethics coverage and of the New York City Bar Professional Responsibility Committee. He is chair of the firm’s Pro Bono Committee, a former co-chair of its Ethics Committee, and a member of the firm’s Diversity and Inclusion Committee.
Dan is a graduate of Columbia Law School, where he was a James Kent Scholar and a Harlan Fiske Stone Scholar. He is also a graduate of Harvard College, where he was a John Harvard Scholar and a Harvard College Scholar. Prior to joining the firm, he was a litigation associate at Simpson Thacher & Bartlett. He also served as a law clerk to the Honorable Allyne R. Ross of the U.S. District Court for the Eastern District of New York.
Daniel H. Tabak has experience in commercial litigation, bankruptcy litigation, complex securities litigation, appellate work, and professional liability. His practice focuses on complex commercial…
Education
Columbia Law School (J.D., 1995); Harvard College (A.B., cum laude, 1992)
Bar Admissions
New York State; New Jersey State; U.S. District Courts for the Southern and Eastern Districts of New York; United States District Court for the District of New Jersey; U.S. Court of Appeals for the Second and Tenth Circuits
Activities and Affiliations
Treasurer, Harvard Hillel
Member, New York City Bar Association (Former member of the Committee on Professional Responsibility)
Member, American Bar Association
Member, American Bankruptcy Institute
Former Member, Law360's Editorial Advisory Board for Legal Ethics Coverage
Commercial Litigation
Obtained summary judgment for major broker-dealer against both plaintiff and third party defendant in breach of contract case resulting from family dispute over account ownership as well as Second Circuit affirmance of judgment.
Represent a major broker in defense of fraudulent conveyance claims resulting from customer’s criminal actions.
Obtained dismissal of all claims against major radio personality resulting from telephone call aired on radio.
Successfully represented a major broker-dealer in purported class action resulting from network outage.
Represent creditor in asserting fraudulent conveyance claims against lenders that received security interests and liens from affiliate of borrower.
Represented a private equity fund in finder’s fee dispute, resulting in a favorable settlement.
Successfully represented marketer of weather-related accessories in litigation and arbitration regarding post-merger earn-out dispute.
Represented a real estate development company in a series of lawsuits regarding a $940 million lease.
Represented a major investment bank in defending against tortious interference and conspiracy claims brought by oil and gas company. Following the firm’s successful motion to transfer the case, plaintiffs voluntarily withdrew all claims.
Represented energy company in obtaining dismissal of purported class action alleging multi-billion dollar breach of contract and tort claims and in appeal of dismissal.
Read MoreBankruptcy and Bankruptcy Litigation
Represented Hulk Hogan in bankruptcies of Gawker and its founder resulting in favorable settlement.
Represented family member in adversary proceedings brought by trustee in highly-publicized Ponzi scheme.
Represent investment fund in defending subsequent transfer claims brought by Madoff Trustee.
Successfully represented insider purchaser in purchase of debtors’ assets in bankruptcy.
Represent brokerage firm in defending fraudulent conveyance claims brought by victims of fraudster who transferred funds to brokerage account.
Represent creditor in asserting fraudulent conveyance claims against lenders that received security interests and liens from affiliate of borrower.
Represent brokerage firm in adversary proceeding regarding transfers from Madoff feeder fund.
Read MoreSecurities and Derivative Litigation and Investigations
Obtained dismissal and subsequent Second Circuit affirmance of Section 16(b) litigation against major investment bank in case of first impression.
Successfully represented major broker in obtaining voluntary dismissal of both request for injunctive relief and complaint alleging securities law violations after filing opposition to temporary restraining order.
Represent broker-dealers in arbitration of customer disputes.
Obtained voluntary dismissal of securities class action claims against pension fund trustee following filing of motion to dismiss brief.
Represented bank in class certification discovery of $50 billion class action lawsuit.
Read More
Mark Cohen is once again recognized as a Leading Partner in both Securities Litigation and Corporate Investigations & White-Collar Crime: Advice to Individuals.
The 2024 guide also recognizes Lawrence T. Gresser, Jonathan Abernethy, Jason Brown, S. Gale Dick, Christian Everdell, Jeffrey Lang, Alisa Lu, Melissa Maxman, Douglas Pepe, John Roberti, Daniel Tabak, and Ronald Wick as recommended lawyers.
This 17th edition of The Legal 500 United States guide, which identifies the “true superstars of the profession,” involved a detailed assessment of various factors, including work conducted by law firms over the past 12 months and historically; experience and depth of teams; and client feedback.
Founded in 2002, Cohen & Gresser’s New York office serves as the firm’s headquarters. Our New York attorneys are particularly strong in complex litigation, investigations, and transactions. The firm’s Washington, D.C. office handles a range of commercial litigation and regulatory enforcement actions, with a focus on domestic and foreign antitrust issues.
Since its inception in 2008, Benchmark Litigation has been the only publication on the market to focus exclusively on litigation in the United States.
Super Lawyers named C&G cofounder Mark S. Cohen one of the Top 10 lawyers in the New York metropolitan area. Partners Jonathan S. Abernethy and Karen H. Bromberg have also been named to the Super Lawyers list of the Top 100 lawyers in the New York metropolitan area. Additionally, Karen has been recognized as one of the Top 50 women lawyers within the same region.
Super Lawyers and Rising Stars are annual lists of outstanding lawyers who have attained a high degree of peer recognition and professional achievement. Only 5 percent of the lawyers in each state are selected as Super Lawyers, and only 2.5 percent are selected as Rising Stars.
The C&G lawyers recognized on the New York Metro Super Lawyers list are:
- Jonathan S. Abernethy, Criminal Defense: White Collar
- Kwaku Andoh, Mergers & Acquisitions
- Luke Appling, Civil Litigation: Defense
- Elizabeth Bernhardt, Business Litigation
- Colin C. Bridge, Criminal Defense: White Collar
- Karen H. Bromberg, Intellectual Property
- Jason Brown, Criminal Defense: White Collar
- Joanna K. Chan, Securities Litigation
- Mark S. Cohen, Business Litigation
- S. Gale Dick, Business Litigation
- Christian R. Everdell, Criminal Defense: White Collar
- Robert J. Gavigan, Mergers & Acquisitions
- Lawrence T. Gresser, Business Litigation
- Oliver S. Haker, Business Litigation
- Johannes Jonas, Mergers & Acquisitions
- Nicholas J. Kaiser, Real Estate
- Jeffrey I. Lang, Civil Litigation: Defense
- David F. Lisner, Business Litigation
- Ellen Paltiel, General Litigation
- Douglas J. Pepe, Business Litigation
- Matthew V. Povolny, Business Litigation
- Nathaniel P. T. Read, Business Litigation
- Bonnie J. Roe, Securities & Corporate Finance
- Stephen M. Sinaiko, Business Litigation
- Mark Spatz, Civil Litigation: Defense
- C. Evan Stewart, Securities Litigation
- Daniel H. Tabak, Business Litigation
- Scott D. Thomson, Business Litigation
- Alexandra Wald, Business Litigation
The C&G lawyers recognized on the New York Metro Rising Stars list are:
- Sharon L. Barbour, Criminal Defense: White Collar
- Randall W. Bryer, Business Litigation
- Shannon A. Daugherty, Business Litigation
- Drew S. Dean, General Litigation
- Jesse Greenwald, Criminal Defense: White Collar
- Christine M. Jordan, General Litigation
- William Kalema, Business Litigation
- Sri Kuehnlenz, Civil Litigation: Defense
- Marvin J. Lowenthal, Criminal Defense: White Collar
- Barbara K. Luse, Criminal Defense: White Collar
- Benjamin Zhu, General Litigation
The guide highlights C&G’s “elite group of practitioners” and use of advanced machine learning techniques and notes that the firm “handle[s] cases that are every bit as complex and challenging as big, national law firms.” Commentators noted that the firm “punches way above its weight” in litigation and investigation matters.
C&G Co-Founder Mark S Cohen is one of only two lawyers in the United States to be recognized as a “Leading Lawyer” in both Securities Litigation: Defense and Corporate Investigations and White-Collar Criminal Defense. Commentary from The Legal 500 recognizes Mark as a “top-tier advocate” who is “at the top of the profession” and “can litigate with the best of them.”
For the first time, C&G’s Antitrust practice has been recognized in Antitrust: Civil Litigation/Class Actions: Defense for its handling of class action cases concerning allegations of cartel behavior, monopolization, and other exclusionary conducts. The Legal 500 cites the leadership of Melissa H Maxman and the addition of “heavyweight” lawyer John Roberti as key reasons for the practice’s recognition.
C&G is again recognized in the Advice to Individuals and Advice to Corporates categories of the Corporate Investigations and White-Collar Criminal Defense section. The Legal 500 commentary notes that the practice is led by “partners with deep experience who obtain excellent results for clients” and is “well placed to handle transatlantic cases” with offices in New York, Paris, and London, and has “particular expertise in financial crime, antitrust enforcement, public corruption, and tax issues.”
The guide has also recognized C&G once again in the General Commercial Disputes category, praising the practice for showing the “discipline and focus necessary to win a case.” Testimonials from the guide highlight the team’s ability to “handle large and complex matters” with “experienced people, good judgment,” and “better use of technology.”
For the 10th consecutive year, C&G has been recognized in the Securities Litigation: Defense category for the firm’s “expertise in the financial services sector” and “recognized trial expertise” in cross-border and domestic securities litigation and enforcement proceedings. The Legal 500 emphasizes the team’s “strong practitioners” and “attentiveness to clients” in the 2022 guide.
Recognized Practices:
- Antitrust: Civil Litigation/Class Actions: Defense
- Corporate Investigations and White-Collar Criminal Defense: Advice to Individuals
- Corporate Investigations and White-Collar Criminal Defense: Advice to Corporates
- General Commercial Disputes
- Securities Litigation: Defense
Antitrust: Civil Litigation/Class Actions: Defense
- Melissa H Maxman
- John Roberti
- Ronald F Wick
- Jonathan S Abernethy
- Jason Brown
- Mark S Cohen
- S Gale Dick
- Jeffrey I Lang
- Melissa H Maxman
- Reggie Schafer
- Mark S Cohen
- S Gale Dick
- Lawrence T Gresser
- Melissa H Maxman
- Daniel H Tabak
- Jonathan S Abernethy
- Mark S Cohen
- S Gale Dick
- Lawrence T Gresser
The Legal 500 analyzes the capabilities of law firms across the world. Its rankings “highlight the practice area teams who are providing the most cutting edge and innovative advice to corporate counsel.”
Super Lawyers ranks outstanding lawyers who have attained a high degree of peer recognition and professional achievement. Only five percent of the lawyers in each state are selected as Super Lawyers, and only 2.5 percent are selected as Rising Stars.
Super Lawyers
Jonathan S Abernethy: Criminal Defense: White Collar
Kwaku Andoh: Mergers & Acquisitions
Elizabeth Bernhardt: Business Litigation
Thomas E Bezanson: Personal Injury – Products: Defense
Colin C Bridge: Criminal Defense: White Collar
Karen H Bromberg: Intellectual Property
Jason Brown: Criminal Defense: White Collar
Joanna K Chan: Securities Litigation
Mark S Cohen: Business Litigation
S Gale Dick: Business Litigation
Christian R Everdell: Criminal Defense: White Collar
Lawrence T Gresser: Business Litigation
Oliver S Haker: Business Litigation
Johannes Jonas: Mergers & Acquisitions
Nicholas J Kaiser: Real Estate
Jeffrey I. Lang: Business Litigation
Melissa H Maxman: Antitrust Litigation
Ellen Paltiel: General Litigation
Nathaniel P T Read: Business Litigation
Bonnie J Roe: Securities & Corporate Finance
Stephen M Sinaiko: Business Litigation
C Evan Stewart: Securities Litigation
Daniel H Tabak: Business Litigation
Scott D Thomson: Business Litigation
Alexandra Wald: Business Litigation
Ronald F Wick: Antitrust Litigation
Rising Stars
Luke Appling: Civil Litigation
Sharon L Barbour: Criminal Defense: White Collar
Drew S Dean: General Litigation
William Kalema: Business Litigation
Sri Kuehnlenz: Civil Litigation
Winnifred A Lewis: Securities Litigation
Marvin J Lowenthal: Criminal Defense: White Collar
Barbara K Luse: Criminal Defense: White Collar
Matthew V Povolny: Business Litigation
Benjamin Zhu: Criminal Defense: White Collar
- Corporate Investigations and White Collar Criminal Defense: Advice to Individuals
- Corporate Investigations and White Collar Criminal Defense: Advice to Corporates
- General Commercial Disputes
- Securities Litigation: Defense
- Corporate Investigations/White Collar
- Corporate Investigations/White Collar – Advice to Individuals
- General Commercial Disputes
- Securities Litigation Defense
For the seventh consecutive year, Cohen & Gresser has been ranked as a recommended New York law firm by Benchmark Litigation. In addition to the firm’s ranking, Mark S Cohen, Lawrence T Gresser, and Daniel H Tabak were all individually recognized in the publication’s 2019 guide.
- Corporate Investigations/White Collar – Advice to Corporates
- Corporate Investigations/White Collar – Advice to Individuals
- General Commercial Disputes
- Securities Litigation Defense
For the sixth consecutive year, Cohen & Gresser has been ranked as a recommended New York law firm by Benchmark Litigation. In addition to the firm’s ranking, partners Mark S Cohen, Lawrence T Gresser, and Daniel H Tabak were all individually recognized in the publication’s 2018 guide.
Defunct gossip website Gawker will soon start paying $20 million it owes to shareholders — including founder Nick Denton — court proceedings revealed Wednesday. This action follows a jury's decision last March to award Hulk Hogan $140 million in his invasion of privacy suit against Gawker. C&G's Daniel H Tabak was counsel for Mr. Hogan during these proceedings.
- "Gawker to Start Paying $20M Owed to Shareholders, Founder Nick Denton," New York Daily News.
- "Gawker Founder Nick Denton to Leave Bankruptcy," The Wall Street Journal.
Daniel H Tabak is leading the team representing Hulk Hogan in the bankruptcy case against Gawker and Nick Denton. The following news outlets provided coverage:
The Legal 500 United States ranked Cohen & Gresser for its achievements in securities litigation in its recently released 2015 guide. The guide notes Cohen & Gresser’s “extraordinary team of attorneys, who present cases in the best and most efficient manner practicable.” Partners Mark S. Cohen, Lawrence T Gresser, S Gale Dick, C Evan Stewart, and Daniel H Tabak were also noted as “impressive” attorneys in this field. The Legal 500 offers nationwide rankings by reviewing the strengths and strategies of law firms across the country. Founded in 1987, Legalease, publisher of the Legal 500 directories, is a leader in the provision of legal market information, offering authoritative and in-depth analysis and commentary across a broad portfolio of publications, spanning directories, magazines, journals, textbooks, and online. The Legal 500 U.S. 2015 Guide offers nationwide rankings by reviewing the strengths and strategies of law firms across the country.
The Legal 500 United States ranked Cohen & Gresser for its achievements in securities litigation in its recently released 2014 guide. Legal 500 noted that the firm is "young and nimble," naming Mark S Cohen as the leader of a team of "experienced lawyers who work at a more palatable price than competing firms." Lawrence T Gresser and Daniel H Tabak are also recommended in light of their successful dismissal of a short swing profits case for Goldman Sachs, and C Evan Stewart was highlighted in the report as an "incredible trial lawyer with big case experience."
Law360's coverage of the recent Second Circuit ruling which affirmed Wednesday that Goldman Sachs Group Inc. won't have to disgorge nearly $2 million in short-swing trade profits of Leap Wireless International Inc. derivatives, finding Goldman wasn't a statutory Leap insider when it purchased the options in question.
In the year since the Packer district court decision was issued, a consensus of other district courts had come out the opposite way and concluded that TransUnion did not abrogate Second Circuit precedent on the requirements for Article III standing in the Section 16(b) context. The U.S. Securities and Exchange Commission (“SEC”) appeared as an amicus curiae in the Packer appeal to argue that affirming the Packer district court “would eviscerate Section 16(b)” because “few, if any plaintiffs, would be able to demonstrate standing, contrary to Congress’s intent to create a broad cause of action.”[2]
The Second Circuit’s reversal settles uncertainty in Section 16(b) cases that had emerged since the initial Packer decision and gives Section 16(b) plaintiffs the green light to pursue claims (at least in the Second Circuit) unless and until the Supreme Court takes up the question.
Section 16(b) Short-Swing Liability
Congress enacted Section 16(b) in 1934 in response to widespread concern that insiders who “may have [had] access to information about their corporations not available to the rest of the investing public” were able to move quickly in and out of that corporation’s securities and “reap profits at the expense of less well informed investors.”[3]
Once enacted, Section 16(b) created a pathway to require statutory insiders to disgorge the profits they made from short-swing trading. The statute defines insiders as officers, directors and 10% beneficial owners of the corporation.[4] And it defines short-swing trading as the purchase and sale of securities of the corporation at issue when such purchase and sale were made within a six-month period.[5]
One feature of Section 16(b) is particularly relevant here: Section 16(b) does not confer enforcement authority on the SEC but instead “recruits the issuer” or “its security holders” as its “policemen.”[6] Specifically, Section 16(b) permits two types of plaintiffs to pursue relief: (1) the issuer of the security that was traded and (2) a shareholder of that issuer, but only in the event that the issuer fails or refuses to bring the suit within 60 days of a request by that shareholder.[7] Permitting a shareholder plaintiff to bring a Section 16(b) claim in these circumstances recognizes that a company may be conflicted in pursuing claims against its own insiders.
Article III Standing in Section 16(b) Actions
Article III of the Constitution limits federal courts to the adjudication of “cases” and “controversies.” To meet the Article III requirement of a case or controversy, a plaintiff must demonstrate standing by showing “(i) that he suffered an injury in fact that is concrete, particularized, and actual or imminent; (ii) that the injury was likely caused by the defendant; and (iii) that the injury would likely be redressed by judicial relief.”[8] The first requirement of Article III standing—concrete injury-in-fact—ensures that “a litigant [has] a direct stake in the controversy and prevents the [federal] judicial process from becoming no more than a vehicle for the vindication of the value interests of concerned bystanders.”[9]
Congress conferred exclusive jurisdiction on the federal courts to hear Section 16(b) claims.[10] Accordingly, if a federal court holds that a Section 16(b) plaintiff does not have Article III standing for failure to show an injury-in-fact (or otherwise), that plaintiff could not then bring the same claim in state court.
A. Second Circuit Law Under Bulldog
The Second Circuit’s leading case on assessing Article III standing and its injury-in-fact requirement for Section 16(b) claims—which predates the Supreme Court’s TransUnion decision—had been Donoghue v. Bulldog Investors General Partnership.[11]
The Second Circuit in Bulldog affirmed a judgment in favor of the shareholder plaintiff, rejecting the defendants’ argument that the plaintiff could not demonstrate any injury to the issuer resulting from that trading.[12] Bulldog explained that Section 16(b)
confer[s] on securities issuers a legal right, one that makes 10% beneficial owners constructive trustees of the corporation with a fiduciary duty not to engage in short-swing trading of the issuer’s stock …. It is the invasion of this legal right, without regard to whether the trading was based on inside information, that causes an issuer injury in fact and that compels our recognition of plaintiff’s standing to pursue a § 16(b) claim here.[13]
Bulldog acknowledged that “[w]hile this particular legal right might not have existed but for the enactment of § 16(b), Congress’s legislative authority to broaden the injuries that can support constitutional standing is beyond dispute.”[14] With this in mind, the Second Circuit drew upon an analogy developed by Judge Learned Hand in a 1951 Second Circuit decision between the harm redressed by Section 16(b) and that redressed by the claim of breach of trusts at common law:
Judge Hand observed that “[n]obody is obliged to become a director, an officer, or a ‘beneficial owner’; just as nobody is obliged to become the trustee of a private trust; but, as soon as he does so, he accepts whatever are the limitations, obligations and conditions attached to the position, and any default in fulfilling them is as much a ‘violation’ of law as though it were attended by the sanction of imprisonment.”
Thus, pursuant to § 16(b), when a stock purchaser chooses to acquire a 10% beneficial ownership stake in an issuer, he becomes a corporate insider and thereby accepts “the limitation[]” that attaches to his fiduciary status: not to engage in any short-swing trading in the issuer’s stock. At that point, injury depends not on whether the § 16(b) fiduciary traded on inside information but on whether he traded at all.[15]
B. The TransUnion Decision
In 2021, TransUnion expanded on prior Supreme Court precedent that had rejected the theory that Article III standing automatically exists where a statute provides for the plaintiff’s standing. As the Supreme Court explained, “we cannot treat an injury as ‘concrete’ for Article III purposes based only on Congress’s say-so.”[16] Congress may “‘elevate’ harms that ‘exist’ in the real world before Congress recognized them to actionable legal status, [but] it may not simply enact an injury into existence.”[17]
Under TransUnion (and certain of its predecessor decisions), federal courts have an independent obligation to decide whether a plaintiff has suffered a concrete harm under Article III even if that plaintiff has statutory standing to sue. [18] What that inquiry requires depends on the type of harm at issue. “[T]raditional tangible harms,” such as when “a defendant has caused physical or monetary injury to the plaintiff”—will “readily qualify.”[19] On the other hand, TransUnion explained, “[v]arious intangible harms can also be concrete. Chief among them are injuries with a close relationship to harms traditionally recognized as providing a basis for lawsuits in American courts. Those include, for example, reputational harms, disclosure of private information, and intrusion upon seclusion.”[20]
The Supreme Court’s application of this principle to the allegations of intangible harm in TransUnion is illustrative: The plaintiffs had brought a class action under the Fair Credit Reporting Act, with some plaintiffs asserting that misleading versions of their credit reports were provided to third-party businesses and others asserting that their credit files contained misleading alerts that were not disseminated to any third parties.[21] The Court held that the first category of plaintiffs, those whose misleading reports were disclosed, had Article III standing because they alleged a concrete injury analogous to the harm associated with the tort of defamation.[22] The second category of plaintiffs, whose credit files were not disseminated to third parties, lacked Article III standing because their claims based on the “retention of information lawfully obtained, without further disclosure” were not analogous to traditional harms.[23]
C. The District Court’s Decision in Packer
The complaint in Packer alleges that the defendants were 10% beneficial owners of a class of 1-800-Flowers.com, Inc. (“1-800-Flowers”) common stock and that they made both purchases and sales of 1-800-Flowers within a six-month period. [24] Packer, another holder of 1-800-Flowers common stock, brought suit on behalf 1-800-Flowers seeking disgorgement of the short-swing profits.[25]
The district court in Packer held that Bulldog did not survive TransUnion, reasoning that
the notion in Bulldog that a violation of Section 16(b) alone sufficiently confers Article III standing upon the issuing corporation or derivative shareholder without more, cannot co-exist with TransUnion’s pronouncement that a statutory violation and a cause of action alone are insufficient to support Article III standing without a showing of concrete harm to the plaintiff. In that respect, Bulldog cannot be squared with TransUnion and TransUnion controls.[26]
The district court acknowledged that for “intangible harms,” the “bedrock of the concrete injury inquiry is whether the alleged injury has a close relationship to a harm ‘traditionally’ recognized as providing a basis for a lawsuit in American court.”[27]
As to Packer’s claim, the court concluded that because Packer failed “to point to or articulate any actual reputational harm” or other “actual injury allegations” accruing to 1-800-Flowers, Packer lacked Article III standing under TransUnion.[28]
The Second Circuit’s Decision in Packer
Packer appealed the district court decision. In addition to the parties’ briefs, the SEC filed an amicus brief in support of plaintiff’s position that standing exists. The Second Circuit heard argument on May 6, 2024, and defendants-appellees conceded at the argument that they would necessarily lose if TransUnion did not abrogate Bulldog.
The Second Circuit issued its decision reversing the district court on June 24, 2024. The Second Circuit identified “several errors” with the district court’s decision.[29]
First, the Second Circuit held TransUnion did not abrogate Bulldog because Bulldog’s analysis of the harm in Section 16(b) cases correctly identified, as TransUnion and its predecessors required, “‘a close historical or common-law analogue for the[] asserted injury’ to support constitutional standing.”[30] As the Second Circuit explained:
Just as a common-law fiduciary who deals with the trust estate for his own personal profit must account to the beneficiary for all the gain which he has made, a statutory fiduciary who engages in short-swing trading owes its gains to the corporation under Section 16(b). The deprivation of these profits inflicts an injury sufficiently concrete to confer constitutional standing.[31]
Second, although both the Second Circuit and district court acknowledged that plaintiff Packer did “not base his standing argument on a risk of harm,”[32] the district court suggested that “some courts have framed the concrete harm associated with a Section 16(b) violation as grounded in the risk of harm,” which, in its view, was insufficient under TransUnion.[33] The Second Circuit dispelled any notion that Section 16(b) standing was dependent on a risk of harm theory, explaining that the “concrete injury that confers standing on Packer is, as we recognized in [Bulldog], ‘the breach by a statutory insider of a fiduciary duty owed to the issuer not to engage in and profit from any short-swing trading of its stock.’”[34]
The Second Circuit noted that defendants-appellees’ remaining arguments attacked Bulldog itself, which the Circuit was bound to follow unless vacated en banc or by the Supreme Court. It nonetheless addressed a few of those arguments, including the argument that the defendants-appellees in the Packer case specifically could not be fiduciaries “because they did not exercise control over [the issuer], sit on its board of directors, or trade on inside information.”[35] The Second Circuit in Packer embraced Bulldog’s response to this argument: While Section 16(b) may have been enacted to combat trading on inside information, the legal right enacted to remedy that wrong—imposing a fiduciary duty on 10% shareholders, irrespective of their actual access to information, to eschew any short swing trading—was broader.[36]
Takeaways from the Second Circuit’s Packer Ruling
The Second Circuit’s ruling in Packer should not cause shockwaves among federal courts, particularly because the vast majority of courts addressing the standing issue in the year since the district court decision in Packer have held that TransUnion and Bulldog are reconcilable and that plaintiffs have constitutional standing to assert Section 16(b) claims.[37] However, as the SEC noted, the ramifications of the potential adoption of the Packer district court’s conclusion were possibly huge because requiring a plaintiff to allege “actual reputational harm” flowing from a Section 16(b) breach (as the district court in Packer had) “would undercut Congress’s purpose by making actions to recover short-swing profits almost impossible.”[38]
For Section 16(b) plaintiffs, the Second Circuit will remain a popular venue to file their claims, as they will be assured of getting past the standing question (absent an en banc hearing or Supreme Court intervention) and venue is often present as a result of listing on a New York-based exchange. For Section 16(b) defendants, while the standing argument will not work in the Second Circuit (again, absent en banc or Supreme Court intervention), the remaining toolkit for the procedural and merits-based defense against Section 16(b) claims is otherwise unchanged.
Endnotes:
[1] Packer ex rel. 1-800-Flowers.Com, Inc. v. Raging Cap. Mgmt., LLC, No. 23-367, --- F.4th ----, 2024 WL 3092561 (2d Cir. June 24, 2024) (“Packer Appellate Decision”) (citing TransUnion LLC v. Ramirez, 594 U.S. 413 (2021)).
[2] Br. of the SEC, Amicus Curiae, in Supp. of Pl.-Appellant at 9, Packer ex rel. 1-800 Flowers.com, Inc. v. Raging Cap. Mgmt., LLC, No. 23-367 (2d. Cir. filed June 29, 2023) (ECF No. 50) (“SEC Amicus Br.”).
[3] Foremost-McKesson, Inc. v. Provident Sec. Co., 423 U.S. 232, 243 (1976); see also Kern Cnty. Land Co. v. Occidental Petroleum Corp., 411 U.S. 582, 608 (1973) (“The congressional investigations that led to the enactment of the Securities Exchange Act revealed widespread use of confidential information by corporate insiders to gain an unfair advantage in trading their corporations’ securities.”).
[4] 15 U.S.C. § 78p(b).
[5] Id.
[6] Donoghue v. Bulldog Invs. Gen. P’ship, 696 F.3d 170, 174 (2d Cir. 2012) (citing 15 U.S.C. § 78p(b)).
[7] 15 U.S.C. § 78p(b).
[8] TransUnion, 594 U.S. at 423.
[9] United States v. Students Challenging Regul. Agency Procs. (SCRAP), 412 U.S. 669, 687 (1973).
[10] 15 U.S.C. § 78aa(a).
[11] 696 F.3d 170 (2d Cir. 2012).
[12] Id. at 172.
[13] Id. at 179 (cleaned up).
[14] Id.
[15] Id. at 177 (quoting Gratz v. Claughton, 187 F.2d 46, 49 (2d Cir. 1951)) (emphasis and alterations in original).
[16] TransUnion, 594 U.S. at 426 (internal citation omitted).
[17] Id. (internal citation omitted).
[18] Id.
[19] Id. at 425.
[20] Id. (internal citations omitted).
[21] Id. at 432–34.
[22] Id. at 432–33.
[23] Id. at 433–39.
[24] Packer District Court Decision, 661 F. Supp. 3d at 8.
[25] Id. at 8 & 13 n.10
[26] Id. at 17 (emphasis in original).
[27] Id. at 10.
[28] Id. at 14.
[29] Packer Appellate Decision, 2024 WL 3092561, at *4-7. In addition to its substantive analysis, the Second Circuit held that it was error for the district court in Packer to “preemptively declar[e] that our caselaw has been abrogated by intervening Supreme Court decisions,” rather than follow binding precedent until it has been overturned, except in “rare case[s]” unlike the one at hand. Id. at *4-5 & n.36. The Second Circuit further noted that TransUnion’s requirement of a concrete injury for constitutional standing even in the context of a statutory violation derived from an earlier Supreme Court decision, Spokeo Inc. v. Robins, 578 U.S. 330, 340-41 (2016), and that the Second Circuit had already reaffirmed Bulldog after Spokeo, in Klein v. Qlik Technologies, Inc., 906 F.3d 215, 220 (2d Cir. 2018). Packer Appellate Decision, 2024 WL 3092561, at *5.
[30] Id. at *5 (quoting TransUnion, 594 U.S. at 424) (alteration in original).
[31] Id. (internal quotations and citations omitted).
[32] Id. at *6; Packer District Court Decision, 661 F. Supp. 3d at 15 n.13.
[33] Packer District Court Decision, 661 F. Supp. 3d at 13.
[34] Packer Appellate Decision, 2024 WL 3092561, at *6.
[35] Id. at *6 n.55.
[36] Id. The Second Circuit also noted that TransUnion did not require that the statutory right “exact[ly] duplicate” its common-law analogue, so this broadening was not improper. Id. (quoting TransUnion, 594 U.S. at 433).
[37] See, e.g., Roth v. Armistice Cap., LLC, No. 1:20-CV-08872 (JLR), 2024 WL 1313817, at *10 (S.D.N.Y. Mar. 27, 2024) (Rochon, J.) (holding that plaintiff has standing because “breach of trust, by itself, is a concrete intangible injury”); Augenbaum v. Anson Invs. Master Fund LP, No. 22-CV-249 (AS), 2024 WL 263208, at *4 (S.D.N.Y. Jan. 24, 2024) (Subramanian, J.) (holding that Section 16(b) violations “are breaches of trust, which satisfies TransUnion’s search for a traditional injury” (cleaned up)); Microbot Med., Inc. v. Mona, No. 19-CV-3782 (GBD)(RWL), 2024 WL 564176, at *6 (S.D.N.Y. Jan. 30, 2024) (Lehrburger, M.J.) (“Microbot incurs a concrete injury while deprived of the constructive trust’s holdings. Microbot therefore has Article III standing.”), report and recommendation adopted, No. 19-CV-3782 (GBD)(RWL), 2024 WL 964594 (S.D.N.Y. Mar. 5, 2024) (Daniels, J.) (“Because Bulldog determined that § 16(b) plaintiffs suffer concrete harm analogous to the common law injury of breach of trust, Bulldog is compatible with TransUnion’s requirement that a plaintiff has suffered a harm with “a close historical or common-law analogue.” (cleaned up)); Avalon Holdings Corp. v. Gentile, No. 18-CV-7291 (DLC), 2023 WL 4744072, at *6 (S.D.N.Y. July 25, 2023) (Cote, J.) (“[T]he Second Circuit in Bulldog analyzed the harm suffered by a § 16(b) plaintiff and reasoned that it was akin to the common law injury of breach of trust arising from the 10% beneficial owner’s fiduciary duty to the issuer.”); Safe & Green Holdings Corp. v. Shaw, No. 23-CV-2244 (DLC), 2023 WL 5509319, at *2 (S.D.N.Y. Aug. 25, 2023) (Cote, J.) (incorporating Avalon); Revive Investing LLC v. Armistice Cap. Master Fund, Ltd., No. 20-CV-02849 (CMA)(SKC), 2023 WL 5333768, at *8 (D. Colo. Aug. 18, 2023) (“The Court finds that a harm suffered by a Section 16(b) plaintiff is analogous to the common law injury of breach of trust.”).
One decision, Avalon Holdings Corp. v. Gentile, noted that the plaintiff’s “pleadings describe dramatic fluctuations in stock prices caused by the defendants’ trading and illegally obtained profits accruing to the defendants in the millions of dollars,” which established “the concrete harm that Congress elevated to a legally cognizable injury.” 2023 WL 4744072, at *6.
We identified only one decision that followed the Packer district court and concluded that a Section 16(b) plaintiff had no standing. Forte Biosciences, Inc. v. Camac Fund, LP, No. 3:23-CV-2399-N, 2024 WL 2946584, at *3 (N.D. Tex. June 11, 2024). This decision from outside of the Second Circuit (where Bulldog is not binding) did not contain any reasoning, stating only that “Forte does not plead any injury to itself from the alleged section 16(b) violation.” Id. (citing the Packer District Court Decision and TransUnion).
[38] SEC Amicus Br. at 25.
In this C&G Client Alert, Daniel H Tabak, Randall W Bryer and Christine M Jordan explore the background of the amendment and the recent case law interpreting the revised Bankruptcy Code section. The authors conclude with practical advice for defendants amid the continued uncertainty.
- What are the common issues arising in the corporate bankruptcy and insolvency process in today’s market, and how will those issues complicate bankruptcy litigation?
- How have recent court rulings impacted the corporate bankruptcy litigation space, and how are these issues likely to affect parties going forward?
- What are the most significant factors in reaching as positive an outcome as possible for all parties involved in a bankruptcy dispute?