Fed. Sec. L. Rep. P 92,072 Harry Lewis v. William H. McAdam Sears, Roebuck and Co., and Sears Development Corporation

Appeal from the United States District Court for the Central District of California.

The appeal before us raises two questions we have not previously addressed: first, whether an issuer corporation’s cause of action against one of its directors survives after the corporation is extinguished by merger; and second, whether an individual who did not own stock in the issuer or in the surviving corporation, but who is a shareholder of the parent of the surviving corporation, has standing to initiate an action under section 16(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78p(b) (1982). We answer the first question in the affirmative, and the second in the negative, and affirm the district court.

Pursuant to a merger agreement effective on September 15, 1981, Coldwell Banker and Company acquired the First Newport Corporation by absorbing First Newport’s assets and liabilities and exchanging Coldwell Banker stock for First Newport stock. William McAdam, a member of the Board of Directors of Coldwell Banker, owned 3,300 shares of First Newport stock prior to the merger and surrendered them in return for 3,300 shares of Coldwell Banker stock.

In October 1981, Sears,…