RECENT DEVELOPMENTS SECURITIES REGULATION: SECTION 16(b) SHORT-SWING PROFIT LIABILITY

In Feder v. Martin Marietta Corp.' the Court of Appeals for the Second Circuit found Martin Marietta Corporation liable under Section 16(b) of the Securities and Exchange Act of 19342 for shortswing profits realized on the sale of stock of Sperry Rand Corporation, purchased while Martin Marietta's president was on the Sperry board of directors and sold after he resigned that directorship. Martin Marietta had purchased 700,000 shares of Sperry Rand during the period from December 14, 1962, through April 29, 1963, on which date Martin Marietta's president, George Bunker, was named to Sperry Rand's board of directors. Until Bunker's resignation on August 1, 1963, Martin Marietta accumulated an additional 101,300 shares. Thereafter Martin Marietta sold all of its Sperry Rand stock between August 29, 1963 and September 6, 1963. The plaintiff shareholder subsequently commenced a derivative action on behalf of Sperry Rand alleging that Bunker was deputized by, or represented, Martin Marietta during his Sperry Rand directorship and that Martin Marietta's resulting "director" status obligated it to return to Sperry Rand the short-swing profit realized on the sale of the 101,300 shares which had been purchased during the Bunker/Martin Marietta directorship. The district court found that Martin Marietta had not deputized Bunker to represent its interests on Sperry Rand's board of directors,3 but the Second Circuit reversed, finding the district court conclusion "clearly erroneous" with regard to the facts and inferences concerning Bunker's deputization. Moreover, the court