Responsibilities for Offerings of Securities

Topics: Insider trading, Fiduciary, Stock Pages: 18 (6642 words) Published: April 29, 2013
WARDLAW, Circuit Judge:
J. Thomas Talbot, a member of the board of directors of Fidelity National Financial, Inc., a Delaware corporation, traded on confidential information about the impending acquisition of LendingTree, Inc., which he received in his capacity as a Fidelity director. We must decide whether Talbot can be held liable under § 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5, promulgated thereunder, for misappropriating information from Fidelity, in the absence of a fiduciary duty of confidentiality owed to LendingTree by Fidelity or Talbot when he executed the trades. We hold that Talbot can be held liable, under the circumstances here, but that a genuine issue of material fact exists as to the issue of materiality. We therefore reverse and remand the district court's grant of summary judgment in favor of Talbot. I. FACTUAL AND PROCEDURAL BACKGROUND

A. Facts
J. Thomas Talbot is a businessman and attorney who, for the past thirty years, has served as a director on the boards of several companies. In April 2003, Talbot sat on the Board of Directors (the "Board") of Fidelity National Financial, Inc. ("Fidelity"), a publicly traded Delaware corporation and national title insurance company. Fidelity owned approximately a 10 percent interest in LendingTree, Inc. ("LendingTree"), an online lending and realty services exchange, which is publicly traded on the NASDAQ National Market System. On April 18 or 19, 2003, LendingTree's CEO, Douglas Lebda, informed Brent [ 530 F.3d 1088 ]|

Bickett, Fidelity's Vice President, that negotiations were proceeding for a third party to acquire LendingTree. Lebda informed Bickett because, "as a significant shareholder of [LendingTree], we knew that [Fidelity] would need to ultimately consent to a transaction, if it happened." Although Lebda did not state the name of the potential acquirer, Lebda indicated that the "majority of the [LendingTree] Board was in favor of the transaction," that the acquirer "was not a competitor of Fidelit[y's]," and that Bickett "would need to keep this information confidential." Lebda explained that "the net share price was in the $14 to $15 range" but did not recall discussing "whether Fidelity would make a profit as a result of the acquisition." Bickett testified during his deposition that Lebda did not inform him that the information was confidential, but that Bickett "had an understanding that [the] information was confidential information." Bickett then relayed this information to William Foley, Fidelity's CEO. On April 22, 2003, Fidelity held its quarterly board meeting, which Talbot attended. Toward the end of the four- or five-hour meeting, Foley presented to the Board the information from Bickett for a Board discussion as to whether Fidelity should agree to refrain from selling its LendingTree stock during the pendency of the transaction and also "agree to [vote Fidelity's] shares in favor of the transaction." Foley told the Board the "exciting information" that "Lending Tree was going to be acquired." Foley also informed the Board that "[w]e didn't know who the acquirer was at that time because [LendingTree] would not disclose it to us," but that Fidelity "would make about $50 million on the transaction." According to Terry Christensen, another Board member, Foley informed the Board that Fidelity's stock in LendingTree "would be acquired at a very attractive price," between $16 and $18, which represented a 23-39 percent increase over LendingTree's closing price of $12.97 per share on April 22, 2003. Talbot remembered the meeting differently, declaring that, although he could "not recall the exact words spoken... some person or company might be interested in acquiring LendingTree, Inc.... and [Fidelity] would benefit if the transaction occurred." The response from the Board at the meeting was positive. According to Foley, "everyone said ... it sounds like a great...
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