Joseph Mona v. Microbot Medical, Inc.

An elderly man’s retirement savings are now in peril because a company was found to have Article III standing to maintain an action against him for the disgorgement RI QHDUO\ D KDOIPLOOLRQ GROODUV RI VKRUWVZLQJ SURÀWV under Section 16(b) of the Securities Exchange Act of 1934 (“Section 16(b)”) even though it did not allege or suffer actual injury because of his trading activity in its stock and despite that he indisputably was a faultless, XQVRSKLVWLFDWHGVKDUHKROGHUWKDWKDGQRDIÀOLDWLRQZLWK it and no inside information. This imminent threat results from a scheme perpetrated by a cadre of attorneys to solicit repeat “investors” for the purpose of engaging in an ongoing enterprise of Section 16(b) litigation against unsuspecting victims. Not only does Section 16(b) effectively strip a corporate board of its business judgment to decline to bring a disgorgement action when demanded by any purported shareholder, as occurred in this case, it also does not include the continuous and contemporaneous ownership requirements applicable in typical shareholder derivative actions. The consequence is that a plaintiff can purchase a company’s securities after alleged short-swing trades solely to bring a Section 16(b) action. That is the situation here. The question presented is: Whether an issuing corporation that neither alleged nor suffered actual injury has Article III standing to maintain an action for the disgorgement of short-swing SURÀWVDVGHÀQHGE\&RQJUHVVDQGDULVLQJIURPWKHPHUH violation of Section 16(b).