I blogged last month about a magistrate judge’s report in Microbot Medical v. Alliance Investment Management recommending that the district judge grant judgment on the pleadings to Microbot, the issuer, in its action for $484,614 in short-swing profits realized by an insider who argued as a defense that Microbot had fraudulently induced him to buy and sell its common stock. Yesterday the district judge adopted the magistrate’s report and recommendation and entered judgment for Microbot.
The district judge’s opinion doesn’t add anything new to the 16(b) analysis described in the earlier blog. It does contain an interesting footnote, though. The magistrate had said that, while Section 16(b) imposes a draconian remedy, it is up to the legislative branch, not the courts, to address its sometimes harsh results. The insider apparently took issue with the idea that Congress is capable of taking action. Here is an excerpt from footnote 8 of the opinion:
Magistrate Judge Lehrburger appropriately acknowledges Section 16(b)’s ” ‘harsh,’ and ‘Draconian’ strict liability regime” but the question of whether the outcome here is “wise and just” is best left to the Legislative Branch. . . . Defendant urges this Court to “address the unjust outcome” because there is “a split between the Congress and the Senate which has resulted in, for at least two years, an almost complete and total breakdown of the system in which laws have been amended and or passed.” . . . Defendant, however, fails to cite support for this assertion. Indeed, the 116th Congress enacted 344 laws, which disproves Defendant’s assertion. See Library of Congress – 116th Congress (2019-2020) . . .”
-Alan Dye, Section16.net March 31, 2021