David Colan, and Unocal Corporation v. Mesa Petroleum Co., David Colan, and Unocal Corporation v. Mesa Petroleum Co.

In this action for recovery of short-swing profits brought pursuant to section 16(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78p(b), Unocal Corporation appeals from the denial of its cross motion for summary judgment, and the order granting a motion for summary judgment in favor of Mesa Petroleum Company, Mesa Southern Company, Mesa Asset Company, CY-41, Inc., and Jack-41, Inc. (Mesa Defendants). We must decide whether an exchange by a beneficial owner of its common stock for non-convertible debt securities, in response to a self-tender offer, is a “sale” within the meaning of section 16(b) of the Securities Exchange Act of 1934. We reverse because we have concluded that an exchange of common stock for a negotiable debt security pursuant to a self-tender offer is a “sale” within section 16(b).

Unocal’s contentions on appeal can be summarized as follows:

PERTINENT FACTS

In October of 1984, Mesa Partners II was formed and began accumulating stock in Unocal. The general partners in Mesa Partners II were: (1) Mesa Asset Company, a wholly owned subsidiary of Mesa Southern Company, which is a wholly owned subsidiary of Mesa Petroleum Company; (2) Cy-41, Inc., wholly owned…