The opinion of the court was delivered by: JOYNER
The Securities and Exchange Commission ("SEC") has brought this federal question action against Defendants H.F. and Marguerite Lenfest for alleged violations of Section 10(b) of the Securities and Exchange Act of 1934, (the "1934 Act"), as codified at 15 U.S.C. § 78j (West 1992), and Rule 10b-5 promulgated thereunder. Defendant Marguerite Lenfest has filed this summary judgment motion pursuant to Fed. R. Civ. P. 56(c), claiming that she is not an insider of the company whose stock she allegedly traded and therefore cannot be held liable under Section 10(b). We disagree with defendant's contention and accordingly, we deny summary judgment.
During the periods at issue in this lawsuit, LCI was owned 50% by various members of the Lenfest family, and 50% by Liberty Media Corporation ("Liberty"), another cable business for which Mr. Lenfest serves on the Board of Directors. Liberty received its interest in LCI from Tele-Communications, Inc. ("TCI"), a third cable related business.
On October 6, 1993, Mr. Lenfest, by virtue of his position as a member of Liberty's Board of Directors, became aware of an impending merger between Liberty and TCI that would then result in the combined entity's merger with Bell Atlantic Corporation ("Bell Atlantic"). Mr. Lenfest, and all others at the Liberty Board of Directors' meeting, were cautioned not to trade in any of the three affected companies.
The following day, there were press reports of the possible TCI/Liberty merger but Mr. Lenfest did not confirm or deny them despite inquiries from employees of LCI. Nevertheless, he did reveal this nonpublic highly confidential information to his wife while on a trip later that day. He also told her about the possible merger with Bell Atlantic describing it as the "largest merger in history." By October 8th, there was a press release announcing the imminence of the TCI/Liberty transaction and for the next three or four days, there was also publicity about the possibility of a major telephone company investing in the TCI/Liberty merger, references most likely to Bell Atlantic.
On October 10, 1993 Mrs. Lenfest asked her son, Chase Lenfest to purchase either Liberty or TCI stock for one of her investment accounts, for which he was manager. Chase Lenfest then asked his father which stock, Liberty or TCI, he thought would make a better purchase. Mr. Lenfest replied that he thought that TCI would make the better purchase and Chase Lenfest subsequently purchased TCI stock for himself and his mother.
Two days later, the proposed TCI/Liberty/Bell Atlantic merger was publicly announced.
In support of her summary judgment motion, defendant's central argument is that Mrs. Lenfest cannot be held liable for insider trading because she was not an insider of either Liberty or TCI.
We reject defendant's argument and hold that defendant may nevertheless be held liable for violations of Section 10b.
A. Summary Judgment Standard
Federal Rule of Civil Procedure 56(c) authorizes the court to grant summary judgment if there is no genuine issue of material fact. In deciding a summary judgment motion, the court is constrained to draw all reasonable inferences in favor of the non-moving party. Gans v. Mundy, 762 F.2d 338, 340 (3d. Cir. 1985). If a reasonable jury could find in favor of the non-moving party, summary judgment will not be granted. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). Rather, the summary judgment standard requires the moving party to show that the case is so one-sided that it should prevail as a matter of law. Id. at 252. Nevertheless, the non-moving party must raise more than a scintilla of evidence in order to overcome a summary judgment motion. Williams v. Borough of West ...