Dreiling

Section 16(b) of the Exchange Act bars corporate insiders, such as directors, from profiting on short-swing trades, defined as the purchase and sale of stock within a six-month period. 15 U.S.C. § 78p(b). Rule 16b — 3(d), promulgated by the Securities and Exchange Commission (“SEC”), exempts an insider from § 16(b) liability when the transaction takes place with the issuer and is specifically approved by the issuer’s board of directors or majority of shareholders. 17 C.F.R. § 240 .16b-3(d).

Thomas Dreiling, a shareholder in InfoSpace, Inc., alleges that American Express Travel Related Services (“TRS”) violated Section 16(b) by engaging in a short-swing trade in InfoSpace stock. Dreiling claims TRS was an insider, specifically a “director by deputization,” because a TRS executive officer sat on the InfoSpace board during the trade. The district court dismissed Dreiling’s complaint, concluding that Rule 16b — 3(d) exempted TRS from liability because the InfoSpace board approved the stock grant to insider TRS.

On appeal, Dreiling argues that the SEC lacked the authority to promulgate Rule 16b-3(d) or, in the alternative, that Rule 16b-3(d) can not apply to TRS because the InfoSpace…