Packer v. Raging Capital Management, LLC

23-367-cv
Packer v. Raging Capital Management, LLC
In the
United States Court of Appeals
for the Second Circuit
A UGUST TERM 2023
A RGUED: May 6, 2024
D ECIDED: June 24, 2024
No. 23-367-cv
B RAD PACKER , derivatively on behalf of 1-800-F LOWERS .COM , INC.
Plaintiff-Appellant,
v.
R AGING CAPITAL MANAGEMENT, LLC, RAGING C APITAL MASTER
F UND, L TD., WILLIAM C. MARTIN,
Defendants-Appellees,
1-800-F LOWERS .COM, INC.,
Defendant.
Appeal from the United States District Court
for the Eastern District of New York
No. 15-cv-5933, James M. Wicks, Magistrate Judge

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Before: NEWMAN, C ABRANES , and L OHIER, Circuit Judges.
In Donoghue v. Bulldog Investors General Partnership, 696 F.3d 170
(2d Cir. 2012), we evaluated whether the plaintiff had constitutional
standing to bring a suit under Section 16(b) of the Securities Exchange
Act of 1934, which requires owners of more than ten percent of a
company’s stock (“10% beneficial owners”) to disgorge profits made
by buying and selling that company’s stock within a six-month
window. If the company does not promptly sue to recover these so-
called “short-swing” profits, a shareholder may sue the 10% beneficial
owner on the company’s behalf. We held that a violation of Section
16(b) inflicts an injury that confers constitutional standing.
This case, on appeal before us for the second time, presents the
same question as Donoghue. The United States District Court for the
Eastern District of New York (James M. Wicks, Magistrate Judge)
reached the opposite conclusion as our panel, however. It determined
that TransUnion LLC v. Ramirez, 594 U.S. 413 (2021), which elaborated
on the “concrete injury” requirement of constitutional standing,
abrogated Donoghue. The District Court thus dismissed Plaintiff-
Appellant Brad Packer’s Section 16(b) derivative suit against
Defendants-Appellees Raging Capital Management, LLC, Raging
Capital Master Fund, Ltd., and William C. Martin, reasoning that
Packer lacked constitutional standing because he did not allege a
concrete injury. Packer appealed the judgment directly to our Court,
as opposed to a District Judge, because the parties had agreed to

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Magistrate Judge jurisdiction pursuant to 28 U.S.C. § 636(c)(1).
Accordingly, we must decide whether Magistrate Judge Wicks is
correct that TransUnion abrogated our decision in Donoghue.
We disagree. TransUnion did not abrogate Donoghue, and the
District Court erred in holding that it did. First, a District Court must
follow controlling precedent—even precedent the District Court
believes may eventually be overturned—rather than preemptively
declaring that our caselaw has been abrogated. Second, TransUnion
did not cast doubt on, much less abrogate, Donoghue. To determine
whether an intangible injury is sufficiently concrete to confer
constitutional standing, TransUnion instructed courts to identify a
“close historical or common-law analogue for the[] asserted injury.”
594 U.S. at 424. In Donoghue, we had identified such an analogue for a
Section 16(b) injury: breach of fiduciary duty. Because nothing in
TransUnion undermines Donoghue, the District Court erred in
dismissing Packer’s Section 16(b) suit.
Accordingly, we REVERSE the March 13, 2023 judgment of the
District Court dismissing the action for lack of constitutional standing
and REMAND for further proceedings consistent with this opinion.
G LENN F. O STRAGER (Joshua S. Broitman,
Roberto L. Gomez, on the brief), Ostrager
Chong Flaherty & Broitman P.C., New York,
NY, and Paul D. Wexler, New York, NY, for
Plaintiff-Appellant Brad Packer.

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THOMAS J. F LEMING (Daniel M. Stone, on the
brief), Olshan Frome Wolosky LLP, New
York, NY, for Defendants-Appellees Raging
Capital Management, LLC, Raging Capital
Master Fund, Ltd., and William C. Martin.
Archith Ramkumar (Megan Barbero,
Michael A. Conley, Jeffrey A. Berger, on the
brief), Securities and Exchange Commission,
Washington, DC, for Amicus Curiae
Securities and Exchange Commission, in
support of Plaintiff-Appellant.
JOSÉ A. C ABRANES , Circuit Judge:
In Donoghue v. Bulldog Investors General Partnership, 696 F.3d 170
(2d Cir. 2012), we evaluated whether the plaintiff had constitutional
standing to bring a suit under Section 16(b) of the Securities Exchange
Act of 1934 (“Exchange Act”), which requires owners of more than ten
percent of a company’s stock (“10% beneficial owners”) to disgorge
profits made by buying and selling that company’s stock within a six-
month window.1 If the company does not promptly sue to recover
these so-called “short-swing” profits, a shareholder may sue the 10%
1 See 15 U.S.C. § 78p(b).

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beneficial owner on the company’s behalf.2 We held that a violation of
Section 16(b) inflicts an injury that confers constitutional standing.3
This case, on appeal before us for the second time, presents the
same question as Donoghue. The United States District Court for the
Eastern District of New York (James M. Wicks, Magistrate Judge)
reached the opposite conclusion as our panel, however. It determined
that TransUnion LLC v. Ramirez, 594 U.S. 413 (2021), which elaborated
on the “concrete injury” requirement of constitutional standing,
abrogated Donoghue. The Court thus dismissed Plaintiff-Appellant
Brad Packer’s Section 16(b) derivative suit against Defendants-
Appellees Raging Capital Management, LLC, Raging Capital Master
Fund, Ltd., and William C. Martin (jointly, “Appellees”), reasoning
that Packer lacked constitutional standing because he did not allege a
concrete injury.4 Packer appealed the judgment directly to our Court,
as opposed to a District Judge, because the parties had agreed to
Magistrate Judge jurisdiction pursuant to 28 U.S.C. § 636(c)(1).
2 See Donoghue v. Bulldog Invs. Gen. P’ship, 696 F.3d 170, 173 (2d Cir. 2012);
Olagues v. Icahn, 866 F.3d 70, 72 (2d Cir. 2017); see also Short-Swing Profits, BLACK ’ S
L AW DICTIONARY (11th ed. 2019) (defining “short-swing profits” as “[p]rofits made
by a corporate insider on the purchase and sale (or sale and purchase) of company
stock within a six-month period”).
3 Donoghue, 696 F.3d at 175-80.
4 Packer v. Raging Cap. Mgmt., LLC, 661 F. Supp. 3d 3, 17-18 (E.D.N.Y. 2023).

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Accordingly, we must decide whether Magistrate Judge Wicks is
correct that TransUnion abrogated our decision in Donoghue.
We disagree. TransUnion did not abrogate Donoghue, and the
District Court erred in holding that it did. First, a District Court must
follow controlling precedent—even precedent the District Court
believes may eventually be overturned—rather than preemptively
declaring that our caselaw has been abrogated. Second, TransUnion
did not cast doubt on, much less abrogate, Donoghue. To determine
whether an intangible injury is sufficiently concrete to confer
constitutional standing, TransUnion instructed courts to identify a
“close historical or common-law analogue for the[] asserted injury.”5
In Donoghue, we had identified such an analogue for a Section 16(b)
injury: breach of fiduciary duty.6 Because nothing in TransUnion
undermines Donoghue, the District Court erred in dismissing Packer’s
Section 16(b) suit.
Accordingly, we REVERSE the March 13, 2023 judgment of the
District Court dismissing the action for lack of constitutional standing
and REMAND for further proceedings consistent with this opinion.
5 TransUnion LLC v. Ramirez, 594 U.S. 413, 424 (2021).
6 Donoghue, 696 F.3d at 177-80; see also Section II.B, post.

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I. BACKGROUND
Unless otherwise noted, the relevant facts in this appeal are
undisputed. We summarize them below.
Brad Packer, a shareholder of 1-800-Flowers.com, Inc.
(“FLWS”), alleges that during a six-month period in 2014 and 2015,
Appellees bought and sold FLWS stock while they were 10% beneficial
owners of FLWS.7 After FLWS declined to sue Appellees, Packer filed
a shareholder derivative suit in the Eastern District of New York
alleging that Appellees violated Section 16(b) of the Exchange Act.
In 2020, we vacated the judgment of the District Court (Gary R.
Brown, Magistrate Judge) granting summary judgment to Packer,
holding that questions of material fact remained as to Raging Capital’s
beneficial ownership status and discussed those questions.8 On
7 Appendix (“A”) 22-24; see also A23 (Complaint alleging that “the Raging
Capital Group purchased at least 1,713,078 shares while a greater than 10%
beneficial owner between April 30, 2014 and September 30, 2014, and that the
Raging Capital Group then sold 1,580,504 shares while a greater than 10% beneficial
owner between September 30, 2014 and January 31, 2015.”). Although we assume
without deciding that Appellees were in fact 10% beneficial owners of FLWS, we
intimate no view on Appellees’ beneficial ownership status, which is a merits
question reserved for the District Court.
8 Packer v. Raging Cap. Mgmt., LLC, 981 F.3d 148, 157 (2d Cir. 2020). The
parties consented to Magistrate Judge jurisdiction for proceedings below. A6. A

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remand, the District Court (James W. Wicks, Magistrate Judge) granted
Appellees’ motion to dismiss.9 The Court reasoned that Packer lacked
constitutional standing to bring a Section 16(b) suit because Packer did
not allege that he suffered a “concrete” injury.10 The case returns to us
on appeal.
II. DISCUSSION
In reviewing de novo the District Court’s decision to dismiss for
lack of constitutional standing, we “borrow from the familiar [Federal]
Rule [of Civil Procedure] 12(b)(6) standard” to “constru[e] the
complaint in plaintiff’s favor and accept[] as true all material
allegations contained therein.”11 We have appellate jurisdiction to
review the dismissal order under 28 U.S.C. § 1291.
Magistrate Judge is a judicial officer of the United States District Courts appointed
by the judges of the District Court to assist the District Judges in performing their
duties. Because Magistrate Judges are neither nominated by the President nor
confirmed by the Senate, they are not “Judges . . . of the . . . inferior Courts” as
defined by Article III of the United States Constitution. Accordingly, their powers
are limited by statute. See 28 U.S.C. § 636. In particular, their authority to enter
judgment in civil matters requires the consent of the parties. See id. § 636(c)(1).
9 Packer, 661 F. Supp. 3d at 18.
10 Id. at 17-18.
11 Donoghue, 696 F.3d at 173.

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In Donoghue, a comprehensive and unanimous opinion for our
Court, we held that a violation of Section 16(b) of the Exchange Act
“causes injury . . . sufficient for constitutional standing.”12 The
question before us is whether the Supreme Court’s decision in
TransUnion abrogated Donoghue. We hold that it did not.
A. Article III’s Concrete Injury Requirement After TransUnion
Article III of the Constitution requires that plaintiffs establish
standing to sue in federal court.13 The Supreme Court has instructed
that, to establish Article III standing—also known as constitutional
standing—“a plaintiff must show (i) that he suffered an injury in fact
that is concrete, particularized, and actual or imminent; (ii) that the
injury was likely caused by the defendant; and (iii) that the injury
would likely be redressed by judicial relief.”14 Injuries may be
“tangible harms, such as physical harms and monetary harms,” or—
as here—“intangible harms,” such as “reputational harms, disclosure
of private information, and intrusion upon seclusion.”15
12 Id. at 180.
13 See U.S. C ONST . art. III, § 2 (limiting federal judicial power to “Cases” and
“Controversies”); TransUnion, 594 U.S. at 417.
14 TransUnion, 594 U.S. at 423.
15 Id. at 425.

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In determining whether an intangible injury is sufficiently
“concrete” to satisfy Article III, the Supreme Court, in the 2016 case
Spokeo, Inc. v. Robins, advised courts to consider “history and the
judgment of Congress,” as well as whether the injury “has a close
relationship to a harm that has traditionally been regarded as
providing a basis for a lawsuit in English or American courts.”16
Although “Congress may ‘elevate to the status of legally cognizable
injuries concrete, de facto injuries that were previously inadequate in
law,’” a statutory violation alone does not establish constitutional
standing.17
Five years later, in TransUnion LLC v. Ramirez, the Supreme
Court elaborated on Spokeo by instructing plaintiffs to identify “a
close historical or common-law analogue for their asserted injury.”18
But the analogue need not be an “exact duplicate in American history
and tradition.”19 TransUnion further held that “in a suit for damages,
the mere risk of future harm, standing alone, cannot qualify as a
16 Spokeo, Inc. v. Robins, 578 U.S. 330, 340-41 (2016).
17 Id. at 341 (alteration adopted) (quoting Lujan v. Defs. of Wildlife, 504 U.S.
555, 578 (1992)).
18 TransUnion, 594 U.S. at 424.
19 Id.

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concrete harm—at least unless the exposure to the risk of future harm
itself causes a separate concrete harm.”20
This Circuit’s approach to constitutional standing prior to
TransUnion had distinguished between “substantive” and
“procedural” rights.21 But TransUnion “eliminated the significance of
such classifications” by clarifying that whether a statute protects
against substantive or procedural harm “is of little (or no) import.”22
Instead, TransUnion underscored Spokeo’s holding that what matters
is “whether the alleged injury to the plaintiff has a ‘close relationship’
to a harm ‘traditionally’ recognized as providing a basis for a lawsuit
in American courts.”23
B. Section 16(b) and Donoghue
This is not the first time we have addressed a challenge to a
shareholder’s constitutional standing to sue under Section 16(b). We
rejected a near-identical challenge to a Section 16(b) action in 2012. In
Donoghue v. Bulldog Investors General Partnership, we categorically held
that “short-swing trading in an issuer’s stock by a 10% beneficial
20 Id. at 436.
21 See Maddox v. Bank of N.Y. Mellon Tr. Co., N.A., 997 F.3d 436, 446 (2d Cir.
2021), opinion withdrawn and superseded on reh’g, 19 F.4th 58 (2d Cir. 2021).
22 Maddox, 19 F.4th at 64 & n.2.
23 TransUnion, 594 U.S. at 424 (quoting Spokeo, 578 U.S. at 341).

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owner in violation of Section 16(b) of the Securities Exchange Act
causes injury to the issuer sufficient for constitutional standing.”24
In reaching this conclusion, we looked to the history and the
judgment of Congress, noting that the enacted purpose of Section 16(b)
is “to prevent ‘the unfair use of information which may have been
obtained by [a] beneficial owner, director, or officer by reason of his
relationship to the issuer.’”25 We explained that the “flat rule” of
Section 16(b) “impose[s] a form of strict liability” by effectively
prohibiting “an entire ‘class of transactions’ . . . ‘in which the
possibility of abuse’ of inside information ‘was believed to be
intolerably great.’”26 Its broad scope and strict liability are
prophylactic. As Judge Learned Hand observed nearly 75 years ago,
“if only those persons were liable, who could be proved to have a
bargaining advantage, the execution of [Section 16(b)] would be so
encumbered as to defeat its whole purpose.”27
24 Donoghue, 696 F.3d at 180.
25 Id. at 176 (quoting 15 U.S.C. § 78p(b)).
26 Id. at 174 (quoting Credit Suisse Sec. (USA) LLC v. Simmonds, 566 U.S. 221,
223 (2012)); id. at 176 (quoting Reliance Elec. Co. v. Emerson Elec. Co., 404 U.S. 418, 422
(1972)).
27 Id. at 176 (alteration adopted) (quoting Gratz v. Claughton, 187 F.2d 46, 50
(2d Cir. 1951) (L. Hand, Chief Judge)).

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Thus, Section 16(b) “effectively makes 10% ‘beneficial owners
[into] fiduciaries’ . . . at least to the extent of making all short-swing
transactions by such persons in the issuer’s stock ‘breaches of trust.’”28
Under the statute, 10% beneficial owners become “constructive
trustee[s] of the corporation” irrespective of “whether the statutory
fiduciaries were actually privy to inside information or whether they
traded with the intent to profit from such information.”29 In other
words, Section 16(b) imposes a “fiduciary duty” on 10% beneficial
owners, confers on securities issuers “an enforceable legal right to
expect [the fiduciary] to refrain from engaging in any short-swing
trading,” and “compensates them for the violation of that right by
allowing them to claim any profits realized from such trading.”30 “The
deprivation of this right,” we concluded, “establishes Article III
standing.”31
28 Id. at 177 (quoting Gratz, 187 F.2d at 49).
29 Id. at 179 (alteration in original) (quoting Gratz, 187 F.2d at 48); id. at 177;
see also Gratz, 187 F.2d at 49 (“[Section 16(b)] does indeed cover trading by those
who in fact have no such [inside] information, but that is true as well of dealings
between a trustee and his beneficiary: ‘A trustee with power to sell trust property
is under a duty not to sell to himself either at private sale or at auction, whether the
property has a market price or not, and whether the trustee makes a profit
thereby.’” (quoting R ESTATEMENT OF TRUSTS § 170(1) cmt. b (1935))).
30 Donoghue, 696 F.3d at 177-78.
31 Id. at 177.

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C. TransUnion Did Not Abrogate Donoghue
The District Court determined that Section 16(b) merely protects
against “speculative harm,” and found that the alleged violation did
not pass Article III muster in light of TransUnion’s holding that “risk
of harm” alone does not qualify as “concrete” harm.32 The District
Court acknowledged that Donoghue “unequivocally” held that a
violation of Section 16(b) can establish constitutional standing, but it
predicted that “the Second Circuit would likely come to the same
conclusion if presented with the opportunity to reconsider its holding”
in Donoghue.33
Presented with the “opportunity to reconsider” our holding in
Donoghue, we part ways with the District Court’s prediction, which
rested on several errors.
First, the District Court declined to follow Donoghue because it
found that “TransUnion and progeny . . . cast doubt on that controlling
precedent.”34 That is the standard by which this Court reconsiders its
own precedent.35 District Courts, by contrast, are “obliged to follow
32 Packer, 661 F. Supp. 3d at 13-18.
33 Id. at 13, 17 (hyphen omitted).
34 Id. at 14.
35 See Medunjanin v. United States, 99 F.4th 129, 135 (2d Cir. 2024).

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our precedent, even if that precedent might be overturned in the near
future.”36
Indeed, we have cautioned District Courts against preemptively
declaring that our caselaw has been abrogated by intervening
Supreme Court decisions. In United States v. Polizzi, the District Court
had concluded that intervening Supreme Court decisions had
“effectively rejected” ostensibly controlling Second Circuit caselaw.37
We repudiated the District Court’s approach, labeling it “less an
application of existing precedent than a prediction of what the
Supreme Court will hold when it chooses to address this issue in the
future.”38 As in Polizzi, the District Court should have applied
controlling precedent—Donoghue—rather than try to read the Second
Circuit’s tea leaves.
Second, the District Court compounded the error by misreading
those tea leaves. TransUnion requires “a close historical or common-
law analogue for the[] asserted injury” to support constitutional
36 United States v. Wong, 40 F.3d 1347, 1373 (2d Cir. 1994). In rare cases, a
district court can decline to follow our precedent if it concludes that an intervening
Supreme Court decision has so clearly undermined our precedent that it will almost
inevitably be overruled. See, e.g., Wojchowski v. Daines, 498 F.3d 99, 105–08 (2d Cir.
2007). This is not the rare case for the reasons discussed below.
37 United States v. Polizzi, 549 F. Supp. 2d 308, 438 (E.D.N.Y. 2008), vacated and
remanded sub nom. United States v. Polouizzi, 564 F.3d 142 (2d Cir. 2009).
38 Polouizzi, 564 F.3d at 160.

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standing.39 As Donoghue made clear, because Section 16(b) makes 10%
beneficial owners into statutory fiduciaries, a close historical or
common-law analogue to short-swing trading by a 10% beneficial
owner is breach of fiduciary duty.40 Just as a common-law fiduciary
who “deals with the trust estate for his own personal profit” must
account to the beneficiary “for all the gain which he has made,” a
statutory fiduciary who engages in short-swing trading owes its gains
to the corporation under Section 16(b).41 The deprivation of these
profits inflicts an injury sufficiently concrete to confer constitutional
standing.42 Nothing in TransUnion undermined the analogue we
identified in Donoghue.
What’s more, Article III’s historical-analogue requirement did
not originate in 2021 with TransUnion. The Supreme Court in
TransUnion merely elaborated on its 2016 decision in Spokeo Inc. v.
Robins, which directed courts “to consider whether an alleged
39 594 U.S. at 424.
40 See Section II.B, ante.
41 Barney v. Saunders, 57 U.S. (16 How.) 535, 543 (1853); see also Donoghue, 696
F.3d at 177 (quoting Gratz, 187 F.2d at 49) (drawing this analogy).
42 See Donoghue, 696 F.3d at 178 (Ҥ 16(b) . . . provid[es] the issuer, upon
breach of the fiduciary duty created by that statute, with the right to any profits
realized from the unfaithful insider’s short-swing trading. . . . [T]he issuer’s right to
profits under § 16(b) derives from breach of a fiduciary duty created by the statute
in favor of the issuer.”).

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intangible harm has a close relationship to a harm that has
traditionally been regarded as providing a basis for a lawsuit in
English or American courts.”43 And in 2018, in Klein v. Qlik
Technologies, Inc., we reaffirmed that Donoghue remained good law
after Spokeo.44
So what changed between Spokeo and TransUnion to make the
District Court believe that Donoghue had been abrogated? “[T]he
lesson from TransUnion,” the District Court wrote, “is that ‘Article III
standing requires a concrete injury even in the context of a statutory
violation.’”45 But this “lesson” derives from Spokeo, not TransUnion.46
And as we noted in Donoghue, “it has long been recognized that a
legally protected interest may exist solely by virtue of statutes creating
legal rights, the invasion of which creates standing, even though no
43 578 U.S. at 340-41; see Section II.A, ante.
44 906 F.3d 215, 220 (2d Cir. 2018) (citing Spokeo, 578 U.S. at 338, then citing
Donoghue, 696 F.3d at 175).
45 Packer, 661 F. Supp. 3d at 11 (quoting TransUnion, 594 U.S. at 426).
46 See TransUnion, 594 U.S. at 426 (“As the Court emphasized in Spokeo,
‘Article III standing requires a concrete injury even in the context of a statutory
violation.’” (quoting Spokeo, 578 U.S. at 341)).

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injury would exist without the statute.”47 The Supreme Court
reaffirmed this principle in TransUnion itself.48
Next, the District Court pointed to TransUnion’s pronouncement
that “in a suit for damages, the mere risk of future harm, standing
alone, cannot qualify as a concrete harm—at least unless the exposure
to the risk of future harm itself causes a separate concrete harm.”49 But
the District Court was mistaken in determining that Section 16(b)
protects against the risk of harm alone. Packer does not base his
standing argument on a risk of harm, nor did we rely on a risk-of-harm
theory to find constitutional standing in Donoghue.50 The concrete
injury that confers standing on Packer is, as we recognized in
Donoghue, “the breach by a statutory insider of a fiduciary duty owed
47 Donoghue, 696 F.3d at 175 (internal quotations and citation omitted).
48 TransUnion, 594 U.S. at 425 (“Congress may ‘elevate to the status of legally
cognizable injuries concrete, de facto injuries that were previously inadequate in
law.’” (quoting Spokeo, 578 U.S. at 341)).
49 Packer, 661 F. Supp. 3d at 11 (quoting TransUnion, 594 U.S. at 436)
(emphasis in TransUnion).
50 See A108, 112-13 (District Court oral argument); Packer, 661 F. Supp. 3d at
15 n.13 (“Plaintiff . . . admitted that his theory of harm . . . does not rest on a risk of
harm.”).

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to the issuer not to engage in and profit from any short-swing trading
of its stock.”51
Finally, the District Court noted that TransUnion had eliminated
the distinction—previously employed by this Circuit in evaluating
constitutional standing—between “substantive” and “procedural”
rights.52 But nothing in Donoghue turned on whether the right
conferred by Section 16(b) is substantive or procedural.
In short, “because no intervening Supreme Court decision
undermines the rationale relied on by the panel,”53 Donoghue remains
good law.
Appellees’ remaining arguments attack our rationale in
Donoghue. But “we remain bound by a prior decision of this Court until
it is overruled either by this Court sitting en banc or by the Supreme
Court, or until an intervening Supreme Court decision casts doubt on
the prior ruling such that the Supreme Court’s conclusion in a
particular case broke the link on which we premised our prior decision
or undermined an assumption of that decision.”54 Neither the
51 Donoghue, 696 F.3d at 180.
52 Packer, 661 F. Supp. 3d at 11.
53 Polouizzi, 564 F.3d at 161 (emphasis omitted).
54 Medunjanin, 99 F.4th at 135 (alterations adopted) (quotation marks and
citations omitted).

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Supreme Court nor this Court sitting en banc has overruled Donoghue,
and for the reasons set forth above, TransUnion casts no doubt on our
holding. In any event, we conclude that Appellees’ remaining
arguments, most of which Donoghue already rejected, are without
merit.55
55 Appellees contend that they cannot be considered fiduciaries because they
did not exercise control over FLWS, sit on its board of directors, or trade on inside
information. See Appellees Br. at 30, 44. In Donoghue, we explained that this line of
argument “confuses the wrongdoing that prompted the enactment of § 16(b)—
trading on inside information—with the legal right that Congress created to
address that wrongdoing—a 10% beneficial owner’s fiduciary duty to the issuer not
to engage in any short-swing trading.” 696 F.3d at 177; see also id. at 179
(Ҥ 16(b) . . . confer[s] on securities issuers a legal right . . . . It is the invasion of this
legal right, without regard to whether the trading was based on inside information,
that causes an issuer injury in fact.”). Indeed, a fiduciary’s duty at common law
“often required more than the avoidance of actual unfair dealing.” Id. at 177. To the
extent the fiduciary duty imposed on 10% beneficial owners differs from the duty
at common law, TransUnion does not require an “exact duplicate” for the violation
of a statutory right to constitute a concrete injury. 594 U.S. at 433.
Appellees further argue that breaches of fiduciary duty do not confer
constitutional standing in the absence of individual injury. See Appellees Br. at 32
(citing Kendall v. Emps. Ret. Plan of Avon Prods., 561 F.3d 112 (2d Cir. 2009)). Again,
we rejected this argument in Donoghue, reasoning that “the fiduciary obligation
created by § 16(b) is not general, but rather confers a specific right on issuers to

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Appellees acknowledge that their challenge to Packer’s
constitutional standing requires us to hold that Donoghue is no longer
good law.56 We decline the invitation. Accepting as true the
complaint’s allegation, as we must on a motion to dismiss, that
Appellees are 10% beneficial owners, Packer has established
constitutional standing to bring a Section 16(b) suit against them.
III. CONCLUSION
To summarize:
(1) Donoghue v. Bulldog Investors General Partnership, 696 F.3d 170
(2d Cir. 2012), which held that a violation of Section 16(b) of the
Securities Exchange Act inflicts an injury that confers
expect their insiders not to engage in short-swing trading.” 696 F.3d at 178
(distinguishing Kendall).
Finally, Appellees invoke Kern County Land Co. v. Occidental Petroleum Corp.,
which adopted a “pragmatic” approach to Section 16(b) for “borderline
transactions,” that is, “transactions not ordinarily deemed a sale or purchase.” 411
U.S. 582, 594-95 & n.26 (1973); see Appellees Br. at 46-48. But the question before us
is whether Packer has constitutional standing, not whether the alleged transactions
qualify as borderline. In any event, the “Kern County exception” does not apply to
Appellees’ alleged trades because no party avers that Appellees’ shares were “sold
involuntarily.” Olagues v. Perceptive Advisors LLC, 902 F.3d 121, 129 (2d Cir. 2018).
56 Oral Arg. Audio Recording at 30:14-31:28, 38:00-38:16.

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constitutional standing, remains good law.
(2) We do not suggest that Plaintiff-Appellant Brad Packer will
ultimately prevail in his lawsuit. But at this stage in the
litigation, he has adequately alleged constitutional standing to
bring a Section 16(b) suit against Appellees.
Accordingly, we REVERSE the March 13, 2023 judgment of the
District Court dismissing the action for lack of constitutional standing
and REMAND for further proceedings consistent with this opinion.

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