Way back in March 2012, the Supreme Court dealt with a New Deal-era law (section 16(b) of the Securities Exchange Act) that bars "short-swing profits" on a purchase and sale (or sale and purchase) (a) of a public company's equity security, (b) within a six-month period, (c) by an "insider" of the company. The Court held, 8-0, that the two-year limit on how long you can wait to sue on behalf of the company to recover the short-swing profits runs out in . . . two years. Post here.

Last week, the Second Circuit did something almost as easy. It ruled that a purchase-and-sale that took place within five days ran afoul of section 16(b) and thus required Tonga Partners (the insider that bought and sold equity in Analytical Surveys, Inc., during that five-day period) to fork over to ASI the $5 million difference between the purchase price and the sale price. Analytical Surveys, Inc. v. Tonga Partners, L.P., No. 09-2622-cv (2d Cir. June 4, 2012).

Tonga Partners urged that the way it went about buying the shares in ASI — by using ASI's default on a convertible promissory note to force ASI to convert $1.7 million owing on the note into $6.7 million worth of ASI stock, which Tonga sold on the open market – fell within a section 16(b) safe harbor for "debt previously contracted". The district court said no, and so did the Second Circuit. The safe harbor applies only when the insider gets stock automatically as a result of a then-due debt — not, as in the case of Tonga, when the insider declares a default and opts to get shares in lieu of the now-mature debt, the panel said.

The odd thing? The court took a long time — almost 29 months from oral argument to issuance of its opinion. A rare delay by a diligent court.