author: MR. Justice Marshall Mr. Justice Douglas,

text:
    SECURITIES AND EXCHANGE COMMISSION v. MEDICAL COMMITTEE FOR HUMAN RIGHTS
    No. 70-61.
    Argued November 10, 1971
    Decided January 10, 1972

      Solicitor General Griswold argued the cause for petitioner. With him on the briefs were Daniel M. Friedman, William Terry Bray, Philip A. Loomis, Jr., David Ferber, and Richard E. Nathan.

      Roberts B. Owen argued the cause for respondent. With him on the brief was Michael Boudin.

      Roger S. Foster and Charles R. Halpern filed a brief for the Project on Corporate Responsibility as amicus curiae urging affirmance.
   MR. Justice Marshall

delivered the opinion of the Court.

The Medical Committee for Human Rights acquired by gift five shares of stock in Dow Chemical Co. In March 1968, the Committee’s national chairman wrote a letter to the company expressing concern over its policy with respect to the production and sale of napalm. The letter also requested that there be included in the company’s proxy statement for 1968 a proposal to amend Dow’s Certificate of Incorporation to prohibit the sale of napalm unless the purchaser gives reasonable assurance that the napalm will not be used against human beings. Dow replied that the proposal was too late for inclusion in the 1968 proxy statement and for discussion at that year’s annual meeting, but that it would be reconsidered the following year.

In an exchange of letters with Dow in 1969, the Committee indicated its belief that it had a right under Rule 14a-8 of the Securities and Exchange Commission, 17 CFR § 240.14a-8 (1970) (promulgated pursuant to § 14 (a) of the Securities Exchange Act of 1934, 48 Stat. 895, as amended, 15 U. S. C. § 78n (a)), to have its proposal included in the company’s proxy statement for consideration by all shareholders. On February 7, 1969, Dow responded that it intended to omit the proposal (somewhat modified) from the 1969 statement under the authority of subsections of the SEC Rule relied on by the Committee that permitted omission of shareholder proposals under two sets of circumstances:

§ 240.14a-8 (c) (2) — “If it clearly appears that the proposal is submitted by the security holder primarily for the purpose of enforcing a personal claim or redressing a personal grievance against the issuer or its management, or primarily for the purpose of promoting general economic, political, racial, religious, social or similar causes”; or
§ 240.14a-8 (c) (5) — “If the proposal consists of a recommendation or request that the management take action with respect to a matter relating to the conduct of the ordinary business operations of the issuer.”

The Committee requested that Dow's decision be reviewed by the staff of the SEC. On February 18, 1969, the Chief Counsel for the Division of Corporation Finance wrote both Dow and the Committee to inform them that “this Division will not recommend any action to the Commission if this proposal is omitted from the management’s proxy material.” App. 21. The SEC Commissioners granted a request by the Committee that they review the Division’s decision and affirmed it. App. 43. The Committee then sought and obtained review of the Commission’s decision in the United States Court of Appeals for the District of Columbia Circuit.

On July 8, 1970, the Court of Appeals held that the decision of the SEC was reviewable under § 25 (a) of the Securities Exchange Act of 1934, 15 U. S. C. § 78y (a); that while review of Dow’s decision was clearly available in district court, reviéw of the SEC’s decision could also be obtained in a court of appeals; that the validity of the Commission’s determination was extremely dubious, especially in light of its failure to state reasons supporting its conclusion; and that the case should be remanded to the Commission for reconsideration and a statement of reasons. 139 U. S. App. D. C. 226, 432 F. 2d 659. The Commission petitioned for review here, and we granted certiorari on March 22, 1971. 401 U. S. 973.

Events have taken place, subsequent to the decision by the court below, and some subsequent to our decision to grant certiorari, that require that we dismiss this case on the ground that it has now become moot. In January 1971, the Medical Committee again submitted its napalm resolution for inclusion in Dow’s 1971 proxy-statement. This time Dow acquiesced in the Committee’s request and included the proposal. At the annual stockholder’s meeting in May 1971, Dow’s shareholders voted on the Committee’s proposal. Less than 3% of all voting shareholders supported it, and pursuant to Rule 14a-8 (c)(4) (i), 17 CFR § 240.14a-8 (c) (4) (i), Dow may exclude the same or substantially the same proposal from its proxy materials for the next three years. We find that this series of events has mooted the controversy.

Respondent argues that it will continue to urge the adoption of the proposal and its inclusion in proxy statements, and that it is likely that Dow will reject inclusion in the future as it has in the past. It is true that in permitting the proposal to be included in the 1971 proxy statement Dow stated that it adhered to its opinion that the proposal might properly be omitted and that its inclusion was without prejudice to future exclusion. However, this does not create the controversy that is necessary for us to retain jurisdiction to decide the merits. Whether or not the Committee will actually resubmit its proposal or a similar one in 1974 is purely a matter of conjecture at this point, as is whether or not Dow will accept it. If Dow were likely to repeat its allegedly illegal conduct, the case would not be moot. See Walling v. Helmerich & Payne, 323 U. S. 37, 43 (1944); United States v. W. T. Grant Co., 345 U. S. 629, 632-633 (1953). However, in light of the meager support the proposal attracted, we can only speculate that Dow will continue to include the proposal when it again becomes eligible for inclusion, rather than to repeat this litigation. Thus, we find that "the allegedly wrongful behavior could not reasonably be expected to recur." United States v. Phosphate Export Assn., 393 U. S. 199, 203 (1968). The case is therefore moot.

“[I]t is well settled that federal courts may act only in the context of a justiciable cáse or controversy.” Benton v. Maryland, 395 U. S. 784, 788 (1969). “Our lack of jurisdiction to review moot cases derives from the requirement of Article III of the Constitution under which the exercise of judicial power depends upon the existence of a case or controversy.” Liner v. Jafco, Inc., 375 U. S. 301, 306 n. 3 (1964); cf. Doremus v. Board of Education, 342 U. S. 429, 434 (1952).

Accordingly, the judgment of the Court of Appeals is vacated and the case is remanded to that court for dismissal.

MR. Justice Powell and Mr. Justice Rehnquist took no part in the consideration or decision of this case.

Mr. Justice Douglas,

dissenting.

With all respect, I must dissent from the judgment of the Court that this case has become moot because the Dow Chemical Co. acquiesced in the decision of the Court of Appeals below. The underlying dispute in this case is essentially a private one, between Dow and the Medical Committee for Human Rights, though it has large public overtones. In 1969, Dow refused to submit to its shareholders the Medical Committee’s proposal that Dow amend its corporate charter to forbid the manufacture of napalm. Dow refused again in 1970. Only in 1971, after the decision of the Court of Appeals now under review, did Dow permit such a proposal to be submitted for a vote. In doing so, however, Dow resolutely affirmed its right to reject the proposal at any future time.

This gratuitous conduct did not, in my view, moot the controversy. “Mere voluntary cessation of allegedly illegal conduct does not moot a case.” United States v. Phosphate Export Assn., 393 U. S. 199, 203. If it could, then a defendant would always be “free to return to his old ways.” United States v. W. T. Grant Co., 345 U. S. 629, 632.

But it is said that because of the poor showing made by the proposal when finally submitted, Dow could refuse to resubmit it for three years under SEC proxy rules not at issue in this case. Ante, at 406. The Court suggests that it is “purely a matter of conjecture” that the proposal will again be submitted at the expiration of this period, and that Dow will attempt again to reject it. The Court seems to think that Dow’s best strategy, given the proposal’s poor showing, is to let it go to a vote, rather than undertake protracted litigation. Ibid.

This assumption, however, is not only baseless, it is irrelevant. In Grant, supra, an antitrust violation was charged because of an interlocking directorate. In response to the suits, the interlocking directors resigned, and defendant companies represented to the court their intention not to revive the interlock. We disposed of this argument in summary fashion. “Such a profession does not suffice to make a case moot.” Id., at 633. Here, Dow has not even made the minimal representation we rejected in Grant, nor is it likely to do so.

This is not a controversy that could not arise again for decades, Golden v. Zwickler, 394 U. S. 103, or a controversy whose decision could have no possible future effect on the parties, Atherton Mills v. Johnston, 259 U. S. 13. Dow has for the past four years fought tooth and nail its obligation to include this shareholder proposal. While “[a] case might become moot if subsequent events made it absolutely clear that the allegedly wrongful behavior could not reasonably be expected to recur,” Phosphate Export Assn., supra, at 203, that is hardly the situation here.

While this litigation is not formally between Dow and the Medical Committee, but between the SEC and the Medical Committee, it does involve a whole panoply of substantive and procedural rights in connection with a corporation’s obligation to include shareholder proposals in proxy materials. The modern super-corporations, of which Dow is one, wield immense, virtually unchecked, power. Some say that they are “private governments,” whose decisions affect the lives of us all. The philosophy of our times, I think, requires that such enterprises be held to a higher standard than that of the “morals of the marketplace” which exalts a single-minded, myopic determination to maximize profits as the traditional be-all and end-all of corporate concern. The “public interest in having the legality of the practices settled, militates against a mootness conclusion.” Grant, supra, at 632.

There is no reason to assume Dow’s antipathy to the inclusion of this shareholder proposal will be any less in 1974 than it is today. Perhaps Dow will adopt the advice given to it by the Court. But it is just as likely to decide its superior financial position makes continued litigation the preferable alternative, which may now be conducted under proxy rules more favorable to corporate management than are the present rules.

This case now joins a growing list of monuments to the present Court’s abdication of its constitutional responsibility to decide cases properly within its jurisdiction. See, e. g., Picard v. Connor, ante, p. 270, at 278 (Douglas, J., dissenting); North Carolina v. Rice, ante, p. 244, at 248 (Douglas, J., dissenting statement); McClanahan v. Morauer & Hartzell, ante, p. 16, at 17 (Douglas, J., dissenting). Once again, I dissent.

       See also Walling v. Helmerich & Payne, 323 U. S. 37, where we held that a case involving the legality of “split-day contracts” under the Fair Labor Standards Act was not rendered moot by the defendant company’s abandonment of the contracts during the litigation. "Despite respondent’s voluntary cessation of the challenged conduct, a controversy between the parties over the legality of the split-day plan still remains. . . . Respondent has consistently urged the validity of the split-day plan and would presumably be free to resume the use of this illegal plan were not some effective restraint made.” Id., at 43.
      The vitality of this controversy was recognized by the Solicitor General, himself, virtually to the moment of oral argument. While he has abruptly reversed his position, the force of his prior argument remains undiminished. Citing the above quotation from Walling, he said:
      “The same reasoning [as that of the Walling Court] applies to the dispute between respondent and Dow over whether the latter is required to distribute to its shareholders the Committee’s proposal. Dow continues to insist that it is not required to distribute the proposal, and even if it does so this year [1971] and the proposal is defeated, Dow may reject it in future years.” First Reply Brief for Petitioner 5.

       See generally Note, 84 Harv. L. Rev. 700 (1971).

       See generally Note, 84 Harv. L. Rev. 835 (1971).

       See, e. g., Miller, Toward the “Techno-Corporate” State? — An Essay in American Constitutionalism, 14 Vill. L. Rev. 1 (1968); J. Galbraith, The New Industrial State (1967); A. Berle, Economic Power and the Free Society (1957).

       A. Berle has suggested, for example, that
      “The recession of 1956 was in part due to the fact that the three principal automobile manufacturers, General Motors, Ford, and Chrysler, sold 8 million cars in the previous year. The National

        City Bank Economic Review estimated the 'normal’ market for cars at the time at 6 million. The following year the motorcar companies sold only 4 million cars, and, naturally, purchased far less from their suppliers of raw materials, glass, et cetera. The effect on employment was severe.” The Three Faces of Power 31 n. 2 (1967).

       In this regard, it should be noted that the SEC has recently proposed amendments to its proxy rules which might strengthen Dow’s hand. The new rules would permit a company to refuse to submit for a shareholder vote any proposal which, inter alia,

      “(ii) consists of a recommendation, request or mandate that action be taken with respect to any matter, including a general economic, political, racial, religious, social or similar cause, that is not significantly related to the business of the issuer or is not within the control of the issuer.” Proposed amendment to Rule 14a-8 (c)(2), Securities Exchange Act Release No. 9432, Dec. 22, 1971.
      There is substantial sentiment, however, for a more liberal approach to shareholder proxy proposals than is evidenced by the current, much less the proposed, rules. Senator Muskie, for example, introduced a bill in the last Congress, entitled the “Corporate Participation Act,” which would have, inter alia, barred exclusion of a shareholder proposal “on the ground that such proposal may involve economic, political, racial, religious, or similar issues, unless the matter or action proposed is not within the control of the issuer.” S. 4003, § 2, 91st Cong., 2d Sess. For the view that a corporation should be required to include any shareholder proposal which is a “proper subject” for shareholder action under applicable state law, see Chisum, Napalm, Proxy Proposals and the SEC, 12 Ariz. L. Rev. 463 (1970). See also Note, 84 Harv. L. Rev. 700 (1971).


source: Caselaw Access Project

author: Per Curiam. Mr. Justice Douglas,

license: Public Domain

text:
    DIFFENDERFER et al. v. CENTRAL BAPTIST CHURCH OF MIAMI, FLORIDA, INC., et al.
    No. 70-47.
    Argued December 6, 1971
    Decided January 10, 1972

      Leo Pfeffer argued the cause for appellant Diffen-derfer. With him on the brief were Richard Yale Feder, Irma Robbins Feder, and Melvin L. Wulf. Howard J. Hollander argued the cause and filed a brief for appellant Paul.

      Charles M. Whelan argued the cause for appellee Central Baptist Church of Miami. With him on the brief were Herbert S. Sawyer, Karl B. Block, Jr., and William R. Consedine.

      Franklin C. Salisbury and Noel H. Thompson filed a brief for Protestants and Other Americans United for Separation of Church and State as amicus curiae urging reversal. Robert L. Shevin, Attorney General of Florida, pro se, filed a memorandum.
   Per Curiam.

This is an action for a declaratory judgment that Florida Stat. § 192.06 (4) (1967) violates the First Amendment to the Constitution of the United States insofar as it authorizes a tax exemption for church property used, inter alia, as a commercial parking lot, and for an injunction requiring appropriate state and local officials to assess and collect taxes against such property. It is brought by citizens and taxpayers of Dade County, Florida, where the property in question is located. The crux of their complaint is that state aid in the form of a tax exemption for church property used primarily for commercial purposes amounts not only to an establishment of the one religion aided, but also to an inhibition on the free exercise of other religions. A three-judge District Court, convened pursuant to 28 U. S. C. §§ 2281, 2284, upheld the validity of the statute as applied to the property involved herein, 316 F. Supp. 1116 (1970), and plaintiffs appealed to this Court. 28 U. S. C. § 1253. We noted probable jurisdiction on March 1, 1971. 401 U. S. 934.

The Central Baptist Church of Miami, Florida, Inc., is the owner of nearly a full square block of land in downtown Miami which is occupied by church buildings and an offstreet parking lot. The parking facilities are utilized by numerous persons pursuing a variety of church activities. These facilities are also used as a commercial parking lot every day except Sunday. At the time this suit was instituted and decided in the District Court, Fla. Stat. § 192.06 (4) provided for exemption from taxation of:

“All houses of public worship and lots on which they are situated, and all pews or steps and furniture therein, every parsonage and all burying grounds not owned or held by individuals or corporations for speculative purposes, tombs and right of burial . . . .”

Prior to the decision of the District Court, the Florida Supreme Court had held, in a case involving the same property as is involved here, that church parking lots retain their full tax exemption under state law even though they may be used for commercial as well as church purposes. Central Baptist Church v. Dade County, 216 So. 2d 4 (1968). This led to the constitutional challenge in the District Court.

At its 1971 Regular Session, the Florida Legislature repealed § 196.191 (the 1969 successor to § 192.06) and enacted new legislation, approved June 15, 1971, effective December 31, 1971, which provides, in relevant part, that church property is exempt from taxation only if the property is used predominantly for religious purposes and only “to the extent of the ratio that such predominant use bears to the non-exempt use.” Fla. Stat. § 196.192 (2).

We must review the judgment of the District Court in light of Florida law as it now stands, not as it stood when the judgment below was entered. Hall v. Beals, 396 U. S. 45, 48 (1969); United States v. Alabama, 362 U. S. 602, 604 (1960); cf. Thorpe v. Housing Authority, 393 U. S. 268, 281-282 (1969); Hines v. Davidowitz, 312 U. S. 52, 60 (1941). It is clear that the church parking lot that was the subject of the taxpayers’ complaint is no longer fully exempt from taxation. If, in fact, it can be demonstrated that the lot is predominantly used for nonreligious purposes, it will receive no exemption whatever. “The case has therefore lost its character as a present, live controversy of the kind that must exist if we are to avoid advisory opinions on abstract propositions of law.” Hall v. Beals, supra, at 48.

This is not a case that is “capable of repetition, yet evading review,” Southern Pacific Terminal Co. v. ICC, 219 U. S. 498, 515 (1911), nor is it the kind of case that may produce irreparable injury if not decided immediately, see, e. g., Moore v. Ogilvie, 394 U. S. 814 (1969) ; Gray v. Sanders, 372 U. S. 368 (1963). The only relief sought in the complaint was a declaratory judgment that the now repealed Fla. Stat. § 192.06 (4) is unconstitutional as applied to a church parking lot used for commercial purposes and an injunction against its application to said lot. This relief is, of course, inappropriate now that the statute has been repealed.

Because it is possible that appellants may wish to amend their complaint so as to demonstrate that the repealed statute retains some continuing force or to attack the newly enacted legislation, rather than remanding the case to the District Court for dismissal as is our usual practice when a case has become moot pending a decision by this Court, United States v. Munsingwear, Inc., 340 U. S. 36, 39, and n. 2 (1950), we vacate the judgment of the District Court and remand the case to the District Court with leave to the appellants to amend their pleadings. Bryan v. Austin, 354 U. S. 933 (1957).

Judgment will be entered accordingly.

Mr. Justice Powell and Mr. Justice Rehnquist took no part in the consideration or decision of this case.

Mr. Justice Douglas,

dissenting.

The extent to which a State may constitutionally authorize a tax exemption for church-owned property used primarily for commercial purposes is a question of substantial national importance, and is squarely presented by appellants’ challenge to Fla. Stat. § 192.06 (4) in this case. The Court says, however, that the controversy over the exemption awarded appellee church is moot, appellants having asked only for declaratory relief as to the unconstitutionality of § 192.06 (4), which section was replaced by new legislation, effective December 31, 1971, that substantially narrowed the authorized exemption. Fla. Stat. § 196.192.

I am not as eager as is the Court to hold moot a case on appeal which is justiciable in every respect save for an intervening change in the underlying law. It does not necessarily follow that there is no longer a live controversy between these parties, even if we assume, arguendo, that the new statute satisfies all of appellants’ constitutional objections to the old one. Here, appellants argue that should their appeal prevail, the church will be liable for three years’ back property taxes, pursuant to Fla. Stat. § 193.23, now § 193.092. If this is so, the controversy would appear vital despite the repeal of § 192.06 (4). Cf. Powell v. McCormack, 395 U. S. 486; Bond v. Floyd, 385 U. S. 116. See also Note, 83 Harv. L. Rev. 1672 (1970).

Appellees contest this interpretation of state tax law, arguing from state court decisions that state or local taxing authorities would be estopped from asserting ap-pellee church’s liability for back taxes. Neither side, however, can point to a definitive interpretation of the precise point of state law at issue.

In my view, this situation lends itself to the Florida procedures by which this Court and other federal appellate courts may certify unresolved questions of Florida law to the State Supreme Court for decision. If a declaration that § 192.06 (4) was unconstitutional would result in tax liability to appellee church, then this case is surely not moot. We have the opportunity to ask the Florida Supreme Court for a definitive answer to this question. I would take advantage of it.

       Fla. Stat. § 193.092 reads, in pertinent part:
      “(1) When it shall appear that an ad valorem tax might have been lawfully assessed or collected upon any property in the state, but that such tax was not lawfully assessed or levied, and has not been collected for any year within a period of three years next preceding the year in which it is ascertained that such tax has not been assessed, or levied, or collected, then the officers authorized shall make the assessment of taxes upon such property in addition to the assessment of such property for the current year . . . .”

       See, e. g., City of Naples v. Conboy, 182 So. 2d 412 (Fla. 1965); Coppock v. Blount, 145 So. 2d 279 (Fla. App. 1962). Appellants, however, construe these cases to hold that back taxation may be estopped on equitable principles only when there are “special circumstances” involved. Appellants contend that the present situation involves no such “special circumstances” that would justify an estoppel under these cases.

       Certification is authorized by Fla. Stat. §25.031 (1969):
      “The supreme court of this state may, by rule of court, provide that, when it shall appear to the supreme court of the United States, to any circuit court of appeals of the United States, or to the court of appeals of the District of Columbia, that there are involved in any proceeding before it questions or propositions of the laws of this state, which are determinative of the said cause, and there are no clear controlling precedents in the decisions of the supreme court of this state, such federal appellate court may certify such questions or propositions of the laws of this state to the supreme court of this state for instructions concerning such questions or propositions of state law, which certificate the supreme court of this state, by written opinion, may answer.”
      The implementing rule is Fla. App. Rule 4.61. We have used this statute before, noting that it demonstrates “rare foresight” on the part of the Florida Legislature. Clay v. Sun Ins. Office, 363 U. S. 207, 212.


author: Me, Justice Stewart Mr. Justice Douglas,

text:
    RELIANCE ELECTRIC CO. v. EMERSON ELECTRIC CO.
    No. 70-79.
    Argued November 10-11, 1971
    Decided January 11, 1972

      Thomas P. Mulligan argued the cause for petitioner. With him on the briefs were Patrick J. Amer, Stephen J. Bums, and Kenneth S. Teasdale.

      Albert E. Jenner, Jr., argued the cause for respondent. With him on the brief were Wesley G. Hall, R. H. McRoberts, and Thomas C. Walsh.

      Walter P. North argued the cause for the Securities and Exchange Commission as amicus curiae. With him on the briefs were Solicitor General Griswold, Samuel Huntington, Philip A. Loomis, Jr., and Jacob H. Stillman.

      Whitney North Seymour and John A. Guzzetta filed a brief for Gulf & Western Industries, Inc., as amicus curiae.

   Me, Justice Stewart

delivered the opinion of the Court.

Section 16 (b) of the Securities Exchange Act of 1934, 48 Stat. 896, 15 U. S. C. § 78p (b), provides, among other things, that a corporation may recover for itself the profits realized by an owner of more than 10% of its shares from a purchase and sale of its stock within any six-month period, provided that the owner held more than 10% “both at the time of the purchase and sale.” In this case, the respondent, the owner of 13.2% of a corporation’s shares, disposed of its entire holdings in two sales, both of them within six months of purchase. The first sale reduced the respondent’s holdings to 9.96%, and the second disposed of the remainder. The question presented is whether the profits derived from the second sale are recoverable by the Corporation under § 16 (b). We hold that they are not.

I

On June 16, 1967, the respondent, Emerson Electric Co., acquired 13.2% of the outstanding common stock of Dodge Manufacturing Co., pursuant to a tender offer made in an unsuccessful attempt to take over Dodge. The purchase price for this stock was $63 per share. Shortly thereafter, the shareholders of Dodge approved a merger with the petitioner, Reliance Electric Co. Faced with the certain failure of any further attempt to take over Dodge, and with the prospect of being forced to exchange its Dodge shares for stock in the merged corporation in the near future, Emerson, following a plan outlined by its general counsel, decided to dispose of enough shares to bring its holdings below 10%, in order to immunize the disposal of the remainder of its shares from liability under § 16 (b). Pursuant to counsel’s recommendation, Emerson on August 28 sold 37,000 shares of Dodge common stock to a brokerage house at $68 per share. This sale reduced Emerson’s holdings in Dodge to 9.96% of the outstanding common stock. The remaining shares were then sold to Dodge at $69 per share on September 11.

After a demand on it by Reliance for the profits realized on both sales, Emerson filed this action seeking a declaratory judgment as to its liability under § 16 (b). Emerson first claimed that it was not liable at all, because it was not a 10% owner at the time of the purchase of the Dodge shares. The District Court disagreed, holding that a purchase of stock falls within § 16 (b) where the purchaser becomes a 10% owner by virtue of the purchase. The Court of Appeals affirmed this holding, and Emerson did not cross-petition for certiorari. Thus that question is not before us.

Emerson alternatively argued to the District Court that, assuming it was a 10% stockholder at the time of the purchase, it was liable only for the profits on the August 28 sale of 37,000 shares, because after that time it was no longer a 10% owner within the meaning of § 16 (b). After trial on the issue of liability alone, the District Court held Emerson liable for the entire amount of its profits. The court found that Emerson’s sales of Dodge stock were “effected pursuant to a single predetermined plan of disposition with the overall intent and purpose of avoiding Section 16 (b) liability,” and construed the term “time of . . . sale” to include “the entire period during which a series of related transactions take place pursuant to a plan by which a 10%' beneficial owner disposes of his stock holdings ” 306 F. Supp. 588, 592.

On an interlocutory appeal under 28 U. S. C. § 1292 (b), the Court of Appeals upheld the finding that Emerson “split” its sale of Dodge stock simply in order to avoid most of its potential liability under § 16 (b), but it held this fact irrelevant under the statute so long as the two sales are “not legally tied to each other and [are] made at different times to different buyers . . . .” 434 F. 2d 918, 926. Accordingly, the Court of Appeals reversed the District Court’s judgment as to Emerson’s liability for its profits on the September 11 sale, and remanded for a determination of the amount of Emerson’s liability on the August 28 sale. Reliance filed a petition for certiorari, which we granted in order to consider an unresolved question under an important federal statute. 401 U. S. 1008.

II

The history and purpose of § 16 (b) have been exhaustively reviewed by federal courts on several occasions since its enactment in 1934. See, e. g., Smolowe v. Delendo Corp., 136 F. 2d 231; Adler v. Klawans, 267 F. 2d 840; Blau v. Max Factor & Co., 342 F. 2d 304. Those courts have recognized that the only method Congress deemed effective to curb the evils of insider trading was a flat rule taking the profits out of a class of transactions in which the possibility of abuse was believed to be intolerably great. As one court observed:

“In order to achieve its goals, Congress chose a relatively arbitrary rule capable of easy administration. The objective standard of Section 16 (b) imposes strict liability upon substantially all transactions occurring within the statutory time period, regardless of the intent of the insider or the existence of actual speculation. This approach maximized the ability of the rule to eradicate speculative abuses by reducing difficulties in proof. Such arbitrary and sweeping coverage was deemed necessary to insure the optimum prophylactic effect.” Bershad v. McDonough, 428 F. 2d 693, 696.

Thus Congress did not reach every transaction in which an investor actually relies on inside information. A person avoids liability if he does not meet the statutory definition of an “insider,” or if he sells more than six months after purchase. Liability cannot be imposed simply because the investor structured his transaction with the intent of avoiding liability under § 16 (b). The question is, rather, whether the method used to “avoid” liability is one permitted by the statute.

Among the “objective standards” contained in § 16 (b) is the requirement that a 10% owner be such “both at the time of the purchase and sale ... of thé security involved.” Read literally, this language clearly contemplates that a statutory insider might sell enough shares to bring his holdings below 10%, and later — but still within six months — sell additional shares free from liability under the statute. Indeed, commentators on the securities laws have recommended this exact procedure for a 10% owner who, like Emerson, wishes to dispose of his holdings within six months of their purchase.

Under the approach urged by Reliance, and adopted by the District Court, the apparent immunity of profits derived from Emerson’s second sale is lost where the two sales, though independent in every other respect, are “interrelated parts of a single plan.” 306 F. Supp., at 592. But a “plan” to sell that is conceived within six months of purchase clearly would not fall within § 16 (b) if the sale were made after the six months had expired, and we see no basis in the statute for a different result where the 10% requirement is involved rather than the six-month limitation.

The dissenting opinion, post, at 442, reasons that “the 10% rule is based upon a conclusive statutory presumption that ownership of this quantity of stock suffices to provide access to inside information,” and that it thus “follows that all sales by a more-than-10% owner within the six-month period carry the presumption of a taint, even if a prior transaction within the period has reduced the beneficial ownership to 10% or below.” While there may be logic in this position, it was clearly rejected as a basis for liability when Congress included the proviso that a 10% owner must be such both at the time of the purchase and of the sale. Although the legislative history affords no explanation of the purpose of the proviso, it may be that Congress regarded one with a long-term investment of more than 10% as more likely to have access to inside information than one who moves in and out of the 10% category. But whatever the rationale of the proviso, it cannot be disregarded simply on the ground that it may be inconsistent with our assessment of the “wholesome purpose” of the Act.

To be sure, where alternative constructions of the terms of § 16 (b) are possible, those terms are to be given the construction that best serves the congressional purpose of curbing short-swing speculation by corporate insiders. But a construction of the term “at the time of . . . sale” that treats two sales as one upon proof of a pre-existing intent by the seller is scarcely in harmony with the congressional design of predicating liability upon an “objective measure of proof.” Smolowe v. Delendo Corp., supra, at 235. Were we to adopt the approach urged by Reliance, we could be sure that investors would not in the future provide such convenient proof of their intent as Emerson did in this case. If a “two-step” sale of a 10% owner’s holdings within six months of purchase is thought to give rise to the kind of evil that Congress sought to correct through § 16 (b), those transactions can be more effectively deterred by an amendment to the statute that preserves its mechanical quality than by a judicial search for the will-o’-the-wisp of an investor’s “intent” in each litigated case.

III

The Securities and Exchange Commission, participating as amicus curiae, argues for an interpretation of the statute that both covers Emerson’s transaction and preserves the mechanical quality of the statute. Seizing upon a fragment of legislative history — a brief exchange between one of the principal authors of the bill and two members of the Senate Committee during hearings on the bill — the Commission suggests that the sole purpose of the requirement of 10%' ownership at the time of both purchase and sale was to exclude from the statute’s coverage those persons who became 10% shareholders “involuntarily,” as, for example, by legal succession or by a reduction in the total number of outstanding shares of the corporation. The effect of such an interpretation would be to bring within § 16 (b) all sales within six months by one who has gained the position of a 10%' owner through voluntary purchase, regardless of the amount of his holdings at the time of the sale. We cannot accept such a construction of the Act.

In the first place, we note that the SEC’s own rules undercut such an interpretation. Recognizing the interrelatedness of § 16 (a) and § 16 (b) of the Act, the Commission has used its power to grant exemptions under § 16 (b) to exclude from liability any transaction that does not fall within the reporting requirements of § 16 (a). A 10% owner is required by that section to report at the end of each month any changes in his holdings in the corporation during that month. The Commission has interpreted this provision to require a report only if the stockholder held more than 10% of the corporation’s shares at some time during the month. Thus, a 10% owner who, like Emerson, sells down to 9.96% one month and disposes of the remainder the following month, would presumably be exempt from the reporting requirement and hence from § 16 (b) under the SEC’s own rules, without regard to whether he acquired the stock “voluntarily.”

But the SEC’s argument would fail even if it were not contradicted by the Commission’s own previous construction of the Act. As we said in Blau v. Lehman, 368 U. S. 403, 411, one “may agree that . . . the Commission present [s] persuasive policy arguments that the Act should be broadened ... to prevent 'the unfair use of information’ more effectively than can be accomplished by leaving the Act so as to require forfeiture of profits only by those specifically designated by Congress to suffer those losses.” But we are not free to adopt a construction that not only strains, but flatly contradicts, the words of the statute.

The judgment is

Affirmed.

Mr. Justice Powell and Mr. Justice Rehnquist took no part in the consideration or decision of this case.

Mr. Justice Douglas,

with whom Mr. Justice Brennan and Mr. Justice White concur,

dissenting.

On June 16, 1967, Emerson Electric Co., in an attempt to wrest control from the incumbent management, acquired more than 10%> of the outstanding common stock of Dodge Manufacturing Co. Dodge successfully resisted the take-over bid by means of a defensive merger with petitioner, Reliance Electric Co. Emerson then sold the shares it had accumulated, within six months of their purchase, for a profit exceeding $900,000.

Because this sale purportedly comprised two “independent” transactions, the first of which reduced Emerson’s holdings to 9.96% of the outstanding Dodge common stock, the Court today holds that the profit from the second transaction is beyond the contemplation of § 16 (b) of the Securities Exchange Act. So Emerson need not account to the corporation for these gains. In my view, this result is a mutilation of the Act, contrary to its broad remedial purpose, inconsistent with the flexibility required in the interpretation of securities legislation, and not required by the language of the statute itself.

I

Section 16 (b) is a “prophylactic” rule, Blau v. Lehman, 368 U. S. 403, 413, whose wholesome purpose is to control the insiders whose access to confidential information gives them unfair advantage in the trading of their corporation’s securities.

The congressional investigations which led to the enactment of the Securities Exchange Act unearthed convincing evidence that disregard by corporate insiders of their fiduciary positions was widespread and pervasive. Indeed,

“the flagrant betrayal of their fiduciary duties by directors and officers of corporations who used their positions of trust and the confidential information which came to them in such positions, to aid them in their market activities,”

was reported by the Senate subcommittee charged with the investigation to be “[a]mong the most vicious practices unearthed at the hearings.” S. Rep. No. 1455, 73d Cong., 2d Sess., 55 (1934). The subcommittee did not limit its attack to directors and officers.

“Closely allied to this type of abuse was the unscrupulous employment of inside information by large stockholders who, while not directors and officers, exercised sufficient control over the destinies of their companies to enable them to acquire and profit by information not available to others.” Ibid.

Despite its flagrantly inequitable character, the most respected pillars of the business and financial communities considered windfall profits from “sure-thing” speculation in their own company’s stock to be one of the usual emoluments of their position. Cook & Feldman, Insider Trading Under the Securities Exchange Act, 66 Harv. L. Rev. 385, 386 (1953); 10 SEC Ann. Rep. 50 (1944). These abuses were perpetrated by such ostensibly reliable men and institutions as Richard Whitney, President of the New York Stock Exchange, Albert H. Wiggin and the Chase National Bank, of which he was the chief executive officer, and Charles E. Mitchell and the National City Bank, of which he was Chairman of the Board.

Section 16 (b) was drafted to combat these “predatory operations,” S. Rep. No. 1455, supra, at 68, by removing all possibility of profit from those short-swing insider trades occurring within the statutory period of six months. The statute is written broadly, and the liability it imposes is strict. Profits are forfeit without proof of an insider’s intent to gain from inside information, and without proof that the insider was even privy to such information. Feder v. Martin Marietta Corp., 406 F. 2d 260, 262 (CA2).

II

Today, however, in the guise of an "objective” approach, the Court undermines the statute. By the simple expedient of dividing what would ordinarily be a single transaction into two parts — both of which could be performed on the same day, so far as it appears from the Court’s opinion — a more-than-10% owner may reap windfall profits on 10% of his corporation’s outstanding stock. This result, “ ‘plainly at variance with the policy of the legislation as a whole,’ ” United States v. American Trucking Assns., 310 U. S. 534, 543, is said to be required because Emerson, owning only 9.96%, was not a “beneficial owner” of more than 10%. within the meaning of § 16 (b) “at the time of” the disposition of this block of Dodge stock.

If § 16 (b) is to have the “optimum prophylactic effect” which its architects intended, insiders must not be permitted so easily to circumvent its broad mandate. We should hold that there was only one sale — a plan of distribution conceived “at the time” Emerson owned 13.2% of the. Dodge stock, and implemented within six months of a matching purchase. Moreover, in the spirit of the Act we should presume that any such “split-sale” by a more-than-10% owner was part of a single plan of disposition for purposes of § 16 (b) liability.

This construction of “the sequence of relevant transactions,” Bershad v. McDonough, 428 F. 2d 693, 697 (CA7), is not foreclosed by any language in the statute. The statutory definitions of such terms as “purchase,” “sale,” “beneficial owner,” “insider,” and “at the time of” are not, as one might infer from the Court’s opinion, objectively defined words with precise meanings.

“ ‘Whatever the terms “purchase” and “sale” may mean in other contexts,’ they should be construed in a manner which will effectuate the purposes of the specific section of the [Securities Exchange] Act in which they are used. SEC v. National Securities, Inc., 393 U. S. 453, 467.” Id., at 696.

Mr. Justice Stewart, while on the Court of Appeals, explained the manner appropriate for the construction of the statutory definitions in the context of § 16 (b):

“Every transaction which can reasonably be defined as a purchase will be so defined, if the transaction is of a kind which can possibly lend itself to the speculation encompassed by Section 16 (b).” Ferraiolo v. Newman, 259 F. 2d 342, 345 (CA6).

Applying this salutary approach toward the statutory definitions, the courts have reasoned that, because of the opportunities for abuse inhering in his position, a director must account both for purchases made shortly before his appointment, Adler v. Klawans, 267 F. 2d 840 (CA2), and for sales made shortly after his resignation, Feder v. Martin Marietta Corp., supra. “Options,” which played such a large role in the manipulative practices disclosed during the 1930’s, are not ordinarily thought to be “purchases” or “sales” of the underlying commodity; yet, because of the opportunity for abuse inherent in the device, courts have held that an option can be a “sale,” when granted, within the meaning of § 16 (b). Bershad v. McDonough, supra. But, in order to bring the underlying transaction within the six-month limitation of § 16 (b), an option was also held to be a “purchase” when exercised. Booth v. Varían Associates, 334 F. 2d 1 (CA1). Similarly, where there was an opportunity for the abuse of inside information, a conversion of debentures into common stock was held to be a “sale”; Park & Tilford v. Schulte, 160 F. 2d 984 (CA2); but where there was no such opportunity, a similar conversion was held not to be. Blau v. Lamb, 363 F. 2d 507 (CA2).

The common thread running through the decisions is that whether we approach the problem of this case as a question of “beneficial ownership” at the time of the second transaction, or as a question whether the two transactions were one “sale,” it “is not in any event primarily a semantic one, but must be resolved in the light of the legislative purpose — to curb short swing speculation by insiders.” Ferraiolo v. Newman, supra, at 344.

Until today, the federal courts have been almost universally faithful to this philosophy, “even departing where necessary from the literal statutory language.” Feder v. Martin Marietta Corp., supra, at 262. Thus, a tender offer, although it may justifiably be described as a series of discrete purchases, has been treated as a single purchase. Abrams v. Occidental Petroleum, 323 F. Supp. 570, 579 (SDNY), rev’d on other grounds, 450 F. 2d 157 (CA2). And, in order to prevent a construction of the statute whereby

“it would be possible for a person to purchase a large block of stock, sell it out until his ownership was reduced to less than 10%, and then repeat the process, ad infinitum,”

the phrase “at the time of the purchase and sale,” on which the Court places such heavy reliance, was defined to mean “simultaneously with” purchase, and “just prior to” sale. Stella v. Graham-Paige Motors, 104 F. Supp. 957, 959 (SDNY). As one commentator noted, this holding

“necessitates a logical inconsistency insofar as the phrase ‘at the time of purchase and sale’ is treated as meaning the moment after purchase and the moment before sale.” Recent Developments, 57 Col. L. Rev. 287,289.

Yet, as in the present case, “the discrepancy seems slight in view of the broader statutory policies involved.” Ibid.

Thus, should the broadly remedial statutory purpose of § 16 (b) require it, the literal language of the statute would not preclude an analysis in which the two transactions herein at issue are treated as part of a single "sale."

III

The potential for abuse of inside information in the present case is self-evident. Equally obvious is the fact that the modern-day insider is no less prone than his counterpart of a generation ago to succumb to the lure of insider trading where windfall profits are in the offing. Indeed, in a survey of “reputable” businessmen, 42% of those responding indicated they would themselves trade on inside information, and 61% believed that the “average” executive would do likewise. Thus, it would appear both that § 16 (b) was directed at such conduct as is herein at issue and that the protection § 16 (b) affords is as necessary today as it was when the statute was enacted.

Despite the fact that the decision below strikes at the vitals of the statute, the Court says it must be affirmed because to treat “two sales as one upon proof of a pre-existing intent by the seller” detracts from the “mechanical quality” of the statute and is “scarcely in harmony with the congressional design of predicating liability upon an 'objective measure of proof.’ ” Ante, at 425.

This “mechanical quality,” however, is illusory.

“There is no rule so 'objective’ ('automatic’ would be a better word) that it does not require some mental effort in applying it on the part of the person or persons entrusted by law with its application.” Blau v. Lamb, supra, at 520.

Thus, the deterrent value of § 16 (b) depends not so much on its vaunted “objectivity” as on its “thoroughgoing” qualities.

“We must suppose that the statute was intended to be thoroughgoing, to squeeze all possible profits out of stock transactions, and thus to establish a standard so high as to prevent any conflict between the selfish interest of a fiduciary officer, director, or stockholder and the faithful performance of his duty.” Smolowe v. Delendo Corp., 136 F. 2d 231, 239 (CA2).

Insiders have come to recognize that “in order not to defeat [§ 16 (b)’s] avowed objective,” federal courts will resolve “all doubts and ambiguities against insiders.” Blau v. Oppenheim, 250 F. Supp. 881, 884-885.

Moreover, courts have not shirked this responsibility simply because, as here, such a resolution may require a factual inquiry. In Blau v. Lehman, supra, this Court said that on an appropriate factual showing, an investment banking firm might be forced to disgorge profits made from short-swing trades in the stock of a corporation on whose board a partner of the firm was “deputized” to sit. Id., at 410. In Colby v. Klune, 178 F. 2d 872 (CA2), cited by the majority, the court permitted a factual inquiry into the possibility that an individual might be a “de facto” officer or director, although not formally labeled as such. Virtually all courts faced with § 16 (b) problems now inquire into the opportunity for abuse inherent in a particular type of transaction, in order to see if applying the statute would serve its purposes. See, e. g., Bershad v. McDonough, supra; Blau v. Max Factor & Co., 342 F. 2d 304 (CA9); Booth v. Varian Associates, supra; Ferraiolo v. Newman, supra. And, even under the narrow approach of the majority, I presume it would still be open, in cases like this one, to inquire whether the ostensibly separate sales are “legally tied.” It follows that the necessity of a factual inquiry is no bar to the application of the statute to the present case.

It is beyond question, of course, that a prime concern of the statute was that a requirement of positive proof of an insider’s “intent” would render the statute ineffective. Insofar as the District Court’s approach appears to place the burden on the plaintiff to demonstrate the existence of a “plan of distribution,” it is justifiably open to criticism. The broad sweep of § 16 (b) requires that a minimal burden be placed on putative plaintiffs.

But this goal — elimination of proof problems — is subsidiary to the statute’s main aim — curbing insider speculation. Whatever “mechanical quality” the statute possesses, it was intended to ease the plaintiff’s burden, not to insulate the insider’s profits.

Thus, we should not conclude, as does the majority, that there is no enforceable way to combat the potential for sharp practices which inheres in the “split-sale” scheme.

“[T]he 'objective’ or 'rule of thumb’ approach need not compel a court to wink at the substantial effects of a transaction which is rife with potential sharp practices in order to preserve the easy application of the short-swing provisions under Section 16 (b). Certainly the interest of simple application of the prohibitions of Section 16 (b) does not carry so far as to facilitate evasion of that provision’s function by formalistic devices.” Bershad v. McDonough, supra, at 697 n. 5.

A series of sales, spaced close together, is more than likely part of a single plan of disposition. Plain common sense would indicate that Emerson’s conduct in the present case had probably been planned, even if there were no confirmation in the form of an admission. It is statistically probable that any series of sales made by a beneficial owner of more than 10%, within six months, in which he disposes of a major part of his holdings, would be similarly connected.

We, therefore, should construe the statute as allowing a rebuttable presumption that any such series of dispositive transactions will be deemed to be part of a single plan of disposition, and will be treated as a single “sale” for the purposes of § 16 (b) , Because the burden would be on the defendant, not the plaintiff, such a rule would operate with virtually the same less-than-perfectly automatic efficiency that the statute now does, and it would comport far more closely with the statute’s broad, remedial sweep than does the approach taken by the Court.

Such a rule would not, moreover, import questions of “intent” into the statutory scheme. Any factual inquiry would involve only an objective analysis of the circumstances of the various dispositions in the series, applying the “various tests” established by the cases “to determine whether a transaction, objectively defined, falls within or without the terms of the statute.” Ante, at 424 n. 4.

Only if a beneficial owner carried an affirmative burden of proof — that his series of dispositive transactions was not of a type that afforded him an opportunity for speculative abuse of his position as an insider — should we say that he was not such a beneficial owner “at the time of . . . sale.”

IV

The Court suggests two additional factors militating against Emerson’s liability under § 16 (b). First, the Court implies that it is contrary to the SEC’s own rules. This argument rests on the power given to the SEC by § 16 (b) to exempt from its scope those transactions that are “not comprehended within the purpose” of the section. Pursuant to this authority, the SEC has promulgated Rule 16ar-10, providing that transactions not required to be reported under § 16 (a) are exempt from § 16 (b) as well.

The SEC’s reporting requirements are contained in “Form 4.” Until recently, this Form required insiders— officers, directors, and more-than-10% owners — only to report transactions occurring in a calendar month in which they met the formal requirements to be denominated such an insider. Emerson sold down to 9.96% in August, then sold out in September. Presumably, it did not have to report the September sale on Form 4, and thus, by operation of Rule 16a-10, the September sale is argued to be exempt from the operations of § 16 (b) as well.

Inasmuch as the SEC’s power to promulgate such a rule is not “a matter solely within the expertise of the SEC and therefore beyond the scope of judicial review,” Greene v. Dietz, 247 F. 2d 689, 692 (CA2), this argument loses substantially all its force after Feder v. Martin Marietta Corp., supra. There, the court held, in the face of the identical argument that Rule 16a-10 was invalid, insofar as it operated through Form 4 to exempt transactions by ex-directors from liability under § 16 (b). The court reasoned that the limitation of the reporting requirement to the calendar month in which a transaction occurred was “an arbitary . . . [and] unnecessary loophole in the effective operation of the statutory scheme,” id., at 269, because it required reporting of some transactions 30 days after an ex-director’s resignation, but insulated others taking place the very next day.

Form 4 did, however, extend § 16 (b) liability to at least some transactions occurring after resignation.

“Therefore, inasmuch as Form 4, a valid exercise of the SEC’s power, has already extended § 16 (b) to cover, in part, an ex-director’s activities, a less arbitrarily defined reporting requirement for ex-directors is but a logical extension of § 16 (b) coverage, would be a coverage in line with the congressional aims, and would afford greater assurance that the lawmakers’ intent will be effectuated.” Ibid.

This analysis is equally applicable to the reporting requirements of ex-10 % owners.

Second, the Court analogizes Emerson’s “plan” to a sale “conceived” during the six-month period but not made until after the expiration of the statutory limitation. The Court incorrectly assumes that such a sale could not fall within § 16 (b). If the “conception” were sufficiently concrete to be construed as a “contract to sell,” or an “option,” there would indeed be liability. Cf. Bershad v. McDonough, supra. In any event, the analogy fails because the purposes of the six-month rule are different from the purpose of the 10% rule.

The six-month limitation is based on Congress’ estimation that beyond this time period, normal market fluctuations sufficiently deter attempts to trade on inside information. Blau v. Max Factor Co., supra, at 308. Thus, it is consistent with the statutory scheme to permit an insider to “plan” a sale within the six-month period that will not take place until six months have passed from a matching purchase.

But the 10% rule is based upon a conclusive statutory presumption that ownership of this quantity of stock suffices to provide access to inside information. Newmark v. RKO General, Inc., 425 F. 2d 348 (CA2). The rationale of the six-month rule implies that such information will be presumed to be useful during that length of time. It follows that all sales by a more-than-10% owner within the six-month period carry the presumption of a taint, even if a prior transaction within the period has reduced the beneficial ownership to 10% or below.

V

In sum, neither the statutory language nor the purposes articulated by the majority justify the result reached today. Rather than deprive § 16 (b) of vitality in the course of a vain search for a nonexistent purity of operation, we should reverse the judgment of the Court of Appeals and remand the case for further proceedings.

       Section 16 (b) provides:
      “For the purpose of preventing the unfair use of information which may have been obtained by such beneficial owner, director, or officer by reason of his relationship to the issuer, any profit realized by him from any purchase and sale, or any sale and purchase, of any equity security of such issuer (other than an exempted security) within any period of less than six months . . . shall inure to and be recoverable by the issuer, irrespective of any intention on the part of such beneficial owner, director, or officer in entering into such transaction of holding the security purchased or of not repurchasing the security sold for a period exceeding six months. . . . This subsection shall not be construed to cover any transaction where such beneficial owner was not such both at the time of the purchase and sale, or the sale and purchase, of the security involved, or any transaction or transactions which the Commission by rules and regulations may exempt as not comprehended within the purpose of this subsection.” 15 U. S. C. §78p (b).
      The term “such beneficial owner” refers to one who owns “more than 10 per centum of any class of any equity security (other than an exempted security) which is registered pursuant to section 12 of this title.” Securities Exchange Act of 1934, § 16 (a), 15 U. S. C. §78p (a).

       The Court of Appeals for the Second Circuit has held that an exchange of shares in one corporation for those of another pursuant to a merger agreement constitutes a “sale” within the meaning of § 16 (b). Newmark v. RKO General, Inc., 425 F. 2d 348, 354.

       “[A] person who owns 15 percent and wants to sell down to 5 percent should sell 5-plus percent in one transaction and then, after he becomes a holder of slightly less than 10 percent, sell out the remainder.” 2 L. Loss, Securities Regulation 1060 (2d ed. 1961).
      “[T]he intention of the language was to exclude the second sale in a case where 10% is purchased, 5% sold within three months and the remaining 5% a month later. This latter construction of the Act is, it is believed, the only safe one to rely upon.” Seligman, Problems Under the Securities Exchange Act, 21 Va. L Rev. 1, 20 (1934).

       See, e. g., Adler v. Klawans, 267 F. 2d 840 (one who is a director at the time of sale need not also have been a director at the time of purchase). In interpreting the terms "purchase" and "sale," courts have properly asked whether the particular type of transaction involved is one that gives rise to speculative abuse. See, e. g., Bershad v. McDonough, 428 F. 2d 693 (granting of an option to purchase constitutes a "sale"). And in deciding whether an investor is an "officer" or "director" within the meaning of § 16 (b), courts have allowed proof that the investor performed the functions of an officer or director even though not formally denominated as such. Colby v. Klune, 178 F. 2d 872, 873; cf. Feder v. Martin Marietta Corp., 406 F. 2d 260, 262-263. The various tests employed in these cases are used to determine whether a transaction, objectively defined, falls within or without the terms of the statute. In no case is liability predicated upon "considerations of intent, lack of motive, or improper conduct" that are irrelevant in § 16 (b) suits. Blau v. Oppenheim, 250 F. Supp. 881, 887.

       That exchange was as follows:
      “Senator Carey. Suppose this stock passed to an estate, and the estate had to raise money?
      “Mr. Corcoran. I do not think, in that case, sir, the statute would apply.
      “Senator Kean. Why not?
      “Senator Carey. The estate is the beneficiary.
      “Mr. Corcoran. I do not believe it would. Certainly the intention was that it should not apply to that sort of a situation.” Hearings on Stock Exchange Practices before the Senate Committee on Banking and Currency pursuant to S. Res. 84, 56, and 97, 73d Cong., 1st and 2d Sess., pt. 15, p. 6558. It was sometime after this exchange that the bill was revised to add the exemptive provision.

       SEC Rule 16a-10, 17 CFR § 240.16a-10.

       Form 4, Securities Exchange Act Release No. 6487 (Mar. 9, 1961).

       15 U. S. C. § 78p (b):
      “For the purpose of preventing the unfair use of information which may have been obtained by such beneficial owner, director, or officer by reason of his relationship to the issuer, any profit realized by him from any purchase and sale, or any sale and purchase, of any equity security of such issuer (other than an exempted security) within any period of less than six months, unless such security was acquired in good faith in connection with a debt previously contracted, shall inure to and be recoverable by the issuer, irrespective of any intention on the part of such beneficial owner, director, or officer in entering into such transaction of holding the security purchased or of not repurchasing the security sold for a period exceeding six months. Suit to recover such profit may be instituted at law or in equity in any court of competent jurisdiction by the issuer, or by the owner of any security of the issuer in the name and in behalf of the issuer if the issuer shall fail or refuse to bring such suit within sixty days after request or shall fail diligently to prosecute the same thereafter; but no such suit shall be brought more than two years after the date such profit was realized. This subsection shall not be construed to cover any transaction where such beneficial owner was not such both at the time of the purchase and sale, or the sale and purchase, of the security involved, or any transaction or transactions which the Commission by rules and regulations may exempt as not comprehended within the purpose of this subsection.”

       “Next comes the everlasting problem of protecting the fellow on the outside from the insider .... That is, the problem of protecting the stockholder — and every fellow who buys into the market is a stockholder — who does not know as much about the company as the fellow on the inside. . . . [T]he poor little fellow does not know what he is getting into, and it is just as important in preventing unwarranted and destructive speculation, to have the fellow on the outside protected from the fellow on the inside who is an officer or director of the corporation or a pool with inside information, as it is not to let the little fellow buy too much stock by setting the margins too low.” Hearings on H. R. 7852 and H. R. 8720 before the House Committee on Interstate and Foreign Commerce, 73d Cong., 2d Sess., 85 (1934) (testimony of Thomas Corcoran).

       One particularly glaring example concerned two brothers whose ownership of a little over 10% of a company’s stock gave them a controlling interest. Just before the company voted to omit a dividend, the brothers disposed of their holdings for about $16,000,000. When news of the dividend omission became public a short time later, they repurchased an equivalent amount of stock for about $7,000,000, showing a profit of some $9,000,000 on the short-swing deal. S. Rep. No. 792, 73d Cong., 2d Sess., 9 (1934).
      Much of the insider abuse involved participation in so-called “pools,” which were dummy accounts in a corporation’s stock established to buy and sell, at the same time, and at a frenetic pace. By so churning the account, it was often possible to engineer a false impression of immense activity in the stock, and to arrange spectacular, but artificial, price rises. One pool bought and sold almost 1,500,000 shares of RCA stock in a single seven-day period in 1929, at a net profit to its members of almost $5,000,000. S. Rep. No. 1455, 73d Cong., 2d Sess., 32-33, 47 (1934). Another famous pool involved the stock of the American Commercial Alcohol Co. During the summer of 1933, eight insiders and their associates reaped a profit of $300,000 on an investment of $62,000. A third pool, in the stock of the Fox Film Corporation, made $2,000,000 in five months. This pool was notable for the extent to which large stockholders participated. Id., at 55-68. During 1929, over 100 stocks listed on the New York Stock Exchange were subjects of pools. Id., at 32. Insider participation in these pools was ubiquitous. See generally F. Pécora, Wall Street Under Oath (1939).

       See SEC, Report on Investigation in the Matter of Richard Whitney Pursuant to Section 21 (a) of the Securities Exchange Act of 1934 (Nov. 1, 1938).

       See Pecora, supra, n. 3, at 131-188.

        Id., at 70-130.

       The six-month period is, as Mr. Corcoran said during the hearings on the bill, a "crude rule of thumb," Hearings on Stock Exchange Practices before the Senate Committee on Banking and Currency pursuant to S. Res. 84, 56, and 97, 73d Cong., 1st and 2d Sess., pt. 15, p. 6557. It represents a balance struck between the need to deter short-swings based on inside information and a desire to avoid unduly inhibiting long-term corporate investment. S. Rep. No. 792, 73d Cong., 2d Sess., 6. Six months was hit upon, presumably, on the view that "where the insider is obliged to hold the original security . . . for longer than six months . . . market fluctuations are likely to wipe out his profits." Comment, 117 U. Pa. L. Rev. 1034, 1054 (1969).

       “This approach maximized the ability of the rule to eradicate speculative abuses by reducing difficulties in proof. Such arbitrary and sweeping coverage was deemed necessary to insure the optimum prophylactic effect.” Bershad v. McDonough, 428 F. 2d 693, 696 (CA7).
      It is somewhat anomalous that the majority relies on a feature of the statutory scheme designed to broaden its scope in order to insulate from the operation of the statute a device by which the goals of the statute can be largely frustrated.

       See Twentieth Century Fund, Stock Market Control 114 — 118 (1934).

       Baumhart, How Ethical Are Businessmen?, Harv. Bus. Rev., July-Aug. 1961, p. 6, at 16. The survey had posed the following hypothetical:
      “What would you do if ... as a director of a large corporation, you learned at a board meeting of an impending merger with a smaller company? Suppose this company has had an unprofitable year, and its stock is selling at a price so low that you are certain it will rise when news of the merger becomes public knowledge.” Id., at 7.

       Such an inquiry might well be extensive. The following commentary, aimed at the Court of Appeals decision below, applies with equal force to the majority’s approach:
      “Even if the statute could be construed as allowing an exception for a severed sale of the final 9.9 percent of stock otherwise within section 16 (b), when are sales to be found separate and independent? The Emerson decision provides no guidelines. All it says is: ‘The factual question as to whether a particular sale is a separate and independent sale is a matter for decision under the peculiar facts' of the particular case. In this regard each case must stand or fall on its own facts.’ What facts? What of separate sales to the same vendee? How separate must the parties be — different companies, different corporations, different entities? Must there be an interval between the sales? How long? If Emerson is to be followed, would the question be not so much how discreet [sic] the sales are as how discreet counsel has been? The inquiry seems to lead away from the legislative intent that all potential violators be held to the full sanctions of section 16 (b).” Recent Decisions, 5 Ga. L. Rev. 584, 590 (footnote omitted).

       Such a presumption is not a novel suggestion in the interpretation of securities legislation. The Securities Act of 1933, 48 Stat. 74, as amended, 15 U. S. C. § 77a et seq., for example, requires that public securities offerings be registered with the SEC. § 5, 15 U. S. C. § 77e. But registration is not required of stock sold in a so-called “private placement.” §4(2), 15 U. S. C. § 77d (2). The purchaser of such stock, however, cannot avoid the registration requirements when he resells it unless his original purchase was not made “with a view to . . . distribution.” §2 (11), 15 U. S. C. § 77b (11). The difficulties inherent in determining this elusive “view,” see 1 L. Loss, Securities Regulation 665-687 (2d ed. 1961), have prompted the suggestion that there be a rebuttable presumption that a sale made within two years of purchase indicates the original purchase was made with a view to distribution. 4 id., at 2652 (Supplement to 2d ed. 1969); see also The Wheat Report, Disclosure to Investors 165 (CCH 1969).
      A similar rebuttable presumption applies in the case of a “controlling person” (as defined in Rule 405, 17 CFR § 230.405 (f)). Such a person need not register his sales under the 1933 Act if in any six-month period they amount to no more than 1% of the issuer’s outstanding stock. Rule 154, 17 CFR §230.154. But, “if a plan exists to effect a series of sales during successive 6 months’ periods, such sales cannot be considered in the category of routine trades but must be deemed a distribution not exempted by the rule.” Securities Act Release No. 4818, 31 Fed. Reg. 2545 (1966).
      Different policies, of course, underlie the 1933 and 1934 Acts. Yet, the above-described provisions of the 1933 Act, like § 16 (b) in the 1934 Act, are aimed at deterring certain transactions because of their inherent opportunities for abuse. The 1933 Act presumptions are based on a judgment that a short-term series of sales is statistically likely to reflect an “intent” to engage in a public distribution without registration. The presumption I would apply in the case of § 16 (b) is justified by a similar statistical likelihood that a series of dispositive transactions, like Emerson’s, undertaken within six months of a matching purchase, was pursuant to a “plan of disposition.”

       It is conceded that Emerson could not meet such a burden in the present case. In general, an insider could perhaps defeat the presumption of a plan by showing “changed circumstances” similar to those required to avoid registration requirements under the private offering exemption of the 1933 Act. See 1 Loss, Securities Regulation, supra, at 665-673; 4 id., at 2646-2654 (1969).

       In response to the Feder case, the SEC amended its rules to require disclosure of all transactions by directors and officers within six months prior to their appointment and for six months after their resignations. Rule 16a-1, 17 CFR § 240.16a-l (d), (e) (as amended, Sept. 30, 1969). Thus, the restrictive reporting requirements relied upon by the majority apply only to beneficial owners, itself an arbitrary distinction.


author: Mr. Justice Stewart Mr. Justice Blackmun,

text:
    UNITED STATES v. TUCKER
    No. 70-86.
    Argued November 11, 1971
    Decided January 11, 1972

      Allan A. Tuttle argued the cause for the United States. On the brief were Solicitor General Griswold, Assistant Attorney General Wilson, Richard B. Stone, Beatrice Rosenberg, and Mervyn Hamburg.

      William A. Reppy, Jr., by appointment of the Court, post, p. 935, argued the cause for respondent. With him on the brief was William A. Norris, by appointment of the Court, 403 U. S. 930.
   Mr. Justice Stewart

delivered the opinion of the Court.

In 1953 the respondent, Forrest S. Tucker, was brought to trial in a federal district court in California upon a charge of armed bank robbery. He pleaded not guilty. Four female employees of the bank were called as witnesses for the prosecution, and they identified the respondent as the robber. He testified in his own behalf, denying participation in the robbery and offering an alibi defense. To impeach the credibility of his testimony, the prosecution was permitted on cross-examination to ask him whether he had previously been convicted of any felonies. He acknowledged three previous felony convictions, one in Florida in 1938, another in Louisiana in 1946, and a third in Florida in 1950. At the conclusion of the trial the jury returned a verdict of guilty. In the ensuing sentencing proceeding the District Judge conducted an inquiry into the respondent’s background, and, the record shows, gave explicit attention to the three previous felony convictions the respondent had acknowledged. The judge then sentenced him to serve 25 years in prison — the maximum term authorized by the applicable federal statute, 18 U. S. C. § 2113(d).

Several years later it was conclusively determined that the respondent’s 1938 conviction in Florida and his 1946 conviction in Louisiana were constitutionally invalid. This determination was made by the Superior Court of Alameda County, California, upon that court’s finding in a collateral proceeding that those convictions had resulted from proceedings in which the respondent had been unrepresented by counsel, and that he had been “neither advised of his right to legal assistance nor did he intelligently and understandingly waive this right to the assistance of counsel.”

Thereafter the respondent initiated the present litigation. Proceeding under 28 U. S. C. § 2255, he filed a motion in the Federal District Court in which he had been convicted in 1953, claiming that introduction at the 1953 trial of evidence of his prior invalid convictions had fatally tainted the jury’s verdict of guilt. Upon consideration of the motion, the District Judge agreed that “the use of the constitutionally invalid prior convictions on cross-examination for impeachment purposes was error,” but found that the error was harmless beyond a reasonable doubt, in view of the overwhelming trial evidence that the respondent had been guilty of the bank robbery. Tucker v. United States, 299 F. Supp. 1376. See Chapman v. California, 386 U. S. 18; Harrington v. California, 395 U. S. 250.

On appeal, the Court of Appeals for the Ninth Circuit agreed that it had been “firmly proved that the evidence of prior convictions did not contribute to the verdict obtained and that, with respect to the verdict of guilty, the error in receiving such evidence was therefore harmless beyond a reasonable doubt.” It went on, however, to find that there was “a reasonable probability that the defective prior convictions may have led the trial court to impose a heavier prison sentence than it otherwise would have imposed.” Accordingly, the appellate court affirmed the refusal to vacate the conviction, but remanded the case to the District Court for resentencing “without consideration of any prior convictions which are invalid under Gideon v. Wainwright, 372 U. S. 335.” 431 F. 2d 1292, 1293, 1294. The Government came here with a petition for a writ of certiorari, which we granted. 402 U. S. 942.

The Government asks us to reverse the judgment of the Court of Appeals insofar as it remanded this case to the District Court for resentencing. It argues that a federal district judge has wide and largely unreviewable discretion in imposing sentence, and that in exercising that discretion his relevant inquiry is not whether the defendant has been formally convicted of past crimes, but whether and to what extent the defendant has in fact engaged in criminal or antisocial conduct. Further, the Government argues, in view of other detrimental information about the respondent possessed at the time of sentencing by the trial judge, it is highly unlikely that a different sentence would have been imposed even if the judge had known that two of the respondent’s previous convictions were constitutionally invalid. Accordingly, the Government concludes that to now remand this case for resentencing would impose an “artificial” and “unrealistic” burden upon the District Court.

It is surely true, as the Government asserts, that a trial judge in the federal judicial system generally has wide discretion in determining what sentence to impose. It is also true that before making that determination, a judge may appropriately conduct an inquiry broad in scope, largely unlimited either as to the kind of information he may consider, or the source from which it may come. United States v. Trigg, 392 F. 2d 860, 864; Davis v. United States, 376 F. 2d 535, 538; Cross v. United States, 354 F. 2d 512, 514; United States v. Doyle, 348 F. 2d 715, 721; United States v. Magliano, 336 F. 2d 817, 822; Fed. Rule Crim. Proc. 32 (a) (2). See Williams v. New York, 337 U. S. 241; North Carolina v. Pearce, 395 U. S. 711, 723. The Government is also on solid ground in asserting that a sentence imposed by a federal district judge, if within statutory limits, is generally not subject to review. Gore v. United States, 357 U. S. 386, 393. Cf. Yates v. United States, 356 U. S. 363.

But these general propositions do not decide the case before us. For we deal here, not with a sentence imposed in the informed discretion of a trial judge, but with a sentence founded at least in part upon misinformation of constitutional magnitude. As in Townsend v. Burke, 334 U. S. 736, “this prisoner was sentenced on the basis of assumptions concerning his criminal record which were materially untrue.” Id., at 741. The record in the present case makes evident that the sentencing judge gave specific consideration to the respondent’s previous convictions before imposing sentence upon him. Yet it is now clear that two of those convictions were wholly unconstitutional under Gideon v. Wainwright, 372 U. S. 335.

We need not speculate about whether the outcome of the respondent’s 1938 and 1946 prosecutions would necessarily have been different if he had had the help of a lawyer. Such speculation is not only fruitless, but quite beside the point. For the real question here is not whether the results of the Florida and Louisiana proceedings might have been different if the respondent had had counsel, but whether the sentence in the 1953 federal case might have been different if the sentencing judge had"known that at least two of the respondent’s previous convictions had been unconstitutionally-obtained.

We agree with the Court of Appeals that the answer to this question must be “yes.” For if the trial judge in 1953 had been aware of the constitutional infirmity of two of the previous convictions, the factual circumstances of the respondent’s background would have appeared in a dramatically different light at the sentencing proceeding. Instead of confronting a defendant who had been legally convicted of three previous felonies, the judge would then have been dealing with a man who, beginning at age 17, had been unconstitutionally imprisoned for more than ten years, including five and one-half years on a chain gang. We cannot agree with the Government that a re-evaluation of the respondent’s sentence by the District Court even at this late date will be either “artificial” or “unrealistic.”

The Gideon case established an unequivocal rule “making it unconstitutional to try a person for a felony in a state court unless he had a lawyer or had validly waived one.” Burgett v. Texas, 389 U. S. 109, 114. In Burgett we said that “[t]o permit a conviction obtained in violation of Gideon v. Wainwright to be used against a person either to support guilt or enhance punishment for another offense ... is to erode the principle of that case.” Id., at 115. Erosion of the Gideon principle can be prevented here only by affirming the judgment of the Court of Appeals remanding this case to the trial court for reconsideration of the respondent’s sentence.

The judgment is affirmed.

Mr. Justice Powell and Mr. Justice Rehnquist took no part in the consideration or decision of this case.

Mr. Justice Blackmun,

with whom The Chief Justice joins,

dissenting.

The Court’s opinion, of course, is a fine and acceptable exposition of abstract law. If I felt that it fit Tucker’s case, I would join it. The Court, however, fails to mention and to give effect to certain facts that, for me, are controlling:

1. At his armed bank robbery trial in May 1953 Tucker was no juvenile. He was 32 years of age and was represented by counsel. A reading of his trial testimony discloses that he was very knowledgeable indeed. Tucker testified on cross-examination at that trial not only as to the fact of three prior state felony convictions, but, as well, as to his engaging in the proscribed conduct underlying two of those convictions. He stated flatly (a) that in 1938 he broke into a garage and took a man’s automobile, and (b) that in 1946 he broke into a jewelry store at night. He also acknowledged that, while waiting for transportation to prison in Florida after the third conviction, he escaped and went to California using an assumed name. Thus, wholly apart from formal convictions, Tucker conceded criminal conduct on his part on three separate prior occasions.

2. The judge who presided at Tucker’s pre-Gideon trial for armed bank robbery in 1953 was the Honorable George B. Harris of the United States District Court for the Northern District of California. After Tucker’s conviction by a jury Judge Harris imposed the 25-year maximum sentence prescribed by 18 U. S. C. §§ 2113 (a) and 2113 (d). Despite the interim passage of 16 years, Tucker’s present petition, filed pursuant to 28 U. S. C. § 2255, also came before the very same Judge Harris, then Chief Judge of the Northern District. The judge denied relief on the ground that the error in the use, for impeachment purposes, of two constitutionally invalid prior convictions was harmless beyond a reasonable doubt (a) because the issue of guilt or innocence was not at all close, (b) because Tucker’s testimony “had been successfully impeached by prior inconsistent statements made to the Federal Bureau of Investigation agents, and by rebuttal testimony which. demonstrated that portions of [his] testimony [were] improbable and untrue,” and (c) because his “testimony was successfully impeached, and in fact, demolished by additional items.” 299 F. Supp. 1376, 1378 (ND Cal. 1969). As to all this, on the issue of guilt, the Court of Appeals agreed, 431 F. 2d 1292, 1293 (CA9 1970), and this Court today does not rule otherwise.

Chief Judge Harris’ § 2255 ruling translates for me into something completely inescapable, namely, that in 1953, wholly apart from the 1938 and 1946 convictions, he would have imposed the 25-year maximum sentence anyway. Surely Judge Harris, of all people, is the best source of knowledge as to the effect, if any, of those two convictions in his determination of the sentence to be imposed. Yet the Court speculates that, despite his identity and despite his obvious disclaimer, Judge Harris might have been influenced in his sentencing by the fact of the two prior convictions, rather than by the three criminal acts that Tucker himself acknowledged.

On remand the case presumably will go once again to Judge Harris, and undoubtedly the same sentence once again will be imposed. Perhaps this is all worthwhile and, if so, I must be content with the Court’s disposition of the case on general principles. I entertain more than a mild suspicion, however, that this is an exercise in futility, that the Court is merely marching up the hill only to march right down again, and that it is time we become just a little realistic in the face of a record such as this one.

I would reverse the judgment of the Court of Appeals insofar as it remands the case to the District Court for resentencing.

       An FBI agent was present at the sentencing proceeding. The District Judge began the proceeding by stating, “I would like to have the Agent’s testimony with respect to the prior convictions.”
      The agent testified, in relevant part, as follows: “As the defendant said, when he was a juvenile, I believe it was in 1938, he received a ten-year sentence in Florida. . . .
      “. . . He said there was five years and four months on the chain gang. . . . and he said he actually served two years beyond that. . . .
      “In 1950 Mr. Tucker was sentenced to a five year term in the State of Florida, for, I believe it was burglary, and on January the 5, 1951, while in custody in the hospital, he escaped.
      “In 1946 he was convicted in the State of Louisiana on a felony charge and given a term of 4 years.
      “. . . I believe it was a burglary.”

       The decision of the Superior Court of Alameda County is unreported, but the accuracy of that court’s determination is not questioned. See In re Tucker, 64 Cal. 2d 15, 409 P. 2d 921; Tucker v. Craven, 421 F. 2d 139.

       See n. 1, supra.

       The respondent's convictions occurred years before the Gideon case was decided, but the impact of that decision was fully retroactive. Pickelsimer v. Wainwright, 375 U. S. 2.

       It is worth pointing out, however, that to make the contrary assumption, i. e., that the prosecutions would have turned out exactly the same even if the respondent had had the assistance of counsel, would be to reject the reasoning upon which the Gideon decision was based:
      “[R]eason and reflection require us to recognize that in our adversary system of criminal justice, any person haled into court, who is too poor to hire a lawyer, cannot be assured a fair trial unless counsel is provided for him. . . . That government hires lawyers to prosecute and defendants who have the money hire lawyers to defend are the strongest indications of the widespread belief that lawyers in criminal courts are necessities, not luxuries.” 372 U. S., at 344.

       The constitutional validity of the respondent’s third conviction — in Florida in 1950 — has not been determined. The Government states in its brief that it has been informed by the clerk of the Criminal Court of Records of Dade County, Florida, that the respondent had counsel at that trial. The respondent’s brief states that the respondent has advised his present counsel that at the 1950 Florida proceeding he specifically asked the judge to appoint counsel for him because of his indigence and that the request was denied.

       See n. 1, supra.

       As noted above, at 445, and emphasized in the dissenting opinion, the trial judge, in ruling upon the respondent’s present § 2255 motion, held that the wrongful use of the invalid previous convictions to impeach the respondent’s testimony at the 1953 trial was harmless error, in view of the overwhelming evidence that he was guilty of the bank robbery. But the respondent’s guilt of that offense hardly “translates” into an “inescapable” assumption that the trial judge would have imposed a maximum 25-year prison sentence if he had known that the respondent had already been unconstitutionally imprisoned for more than 10 years. It would be equally callous to assume, now that the constitutional invalidity of the respondent’s previous convictions is clear, that the trial judge will upon reconsideration “undoubtedly” impose the same sentence he imposed in 1953.

       “Q. You were convicted in Florida, were you not?
      “A. Yes, I was.
      “Q. For what?
      “A. Automobile theft, breaking and entering.
      “Q. What do you mean ‘automobile theft, breaking and entering'?
      “A. It boils down to this, I was 17 years old, broke into a man’s garage, took his automobile, went joy riding in it, received a ten year sentence for it.
      “Q. At the age of 17 you received a ten year sentence?
      “A. Yes.
      “Q. When was that?
      “A. 1938.
      “Q. You broke into a place and stole a car?
      “A. Yes.
      “Q. What kind of car did you steal?
      “A. '36 Ford.
      “Q. Tell us about your other convictions.
      “A. 1946 I broke into a jewelry store.
      “Q. Where?
      “A. New Orleans.
      “Q. Night or day?
      “A. Night.” Trial Transcript 161-162.

       “Q. Why did you use the name of Rick Bellew, if you did ?
      “A. Because I was a fugitive from Florida.
      “Q. You were a what?
      "A. A fugitive.
      “Q. A fugitive from what?
      “A. I had been sentenced to a term in Florida for the third conviction that you just brought up, and while waiting transportation to prison I was given a chance to — nobody was watching me, and I walked off down there and came out to California.
      “Q. Where did you walk away from?
      “A. I was having my appendix removed in the hospital . . . Trial Transcript 166.
      "... [H]e found me guilty and subsequently I escaped and came out here. . . Sentencing Transcript 230.