X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

OPINION & ORDER This case is before the Court on remand. Plaintiffs Dennis Donoghue and Mark Rubenstein, shareholders of Oaktree Specialty Lending Corporation (“OCSL”), bring suit under Section 16(b) of the Securities Exchange Act of 1934, 15 U.S.C. §78p(b), to recover alleged short-swing profits obtained by a company insider, defendant Leonard M. Tannenbaum. In an earlier decision, the Court granted summary judgment to Tannenbaum, holding that no material issue of fact existed as to either prong of the “unorthodox transaction” exception to Section 16(b), as (1) Tannenbaum’s merger-related acquisition of OCSL shares was involuntary, and (2) Tannenbaum did not have access to inside information related to the merger. Dkt. 70 (“2022 Op.”), 600 F. Supp. 3d 463 (S.D.N.Y. 2022). The Second Circuit, however, vacated and remanded, holding that Tannenbaum was entitled to summary judgment as to the first prong of the unorthodox transaction exception, but that he had not carried his burden as to the second. Dkt. 74 (“2d Cir. Op.”), 2023 WL 4631963 (2d Cir. July 20, 2023). Pursuant to the Circuit’s mandate, the Court reopened discovery for the limited purpose of further developing the evidentiary record as to whether Tannenbaum had had access to inside information related to the merger. With discovery now complete, Tannenbaum again moves for summary judgment. For the reasons that follow, the Court denies the motion. I. Background1 A. Factual Background to the Merger Given the limited scope of this decision, the Court offers here only a brief summary of the underlying facts, and incorporates by reference the comprehensive factual background provided in its earlier opinion. 2022 Op. at 2-10. In October 2017, Tannenbaum sold his management interest — while retaining his significant equity interest — in two companies he founded to Oaktree Capital Management, L.P. (“Oaktree”). JSF 1. Upon the sale, the companies were rebranded as Oaktree Specialty Lending Corporation (“OSCL”) and Oaktree Strategic Income Corporation (“OCSI”). Id. As part of the deal, Tannenbaum agreed to vote his OCSL and OCSI shares “at each meeting of the stockholders…in accordance with the written instruction” of Oaktree (the “Voting Agreements”). Id. 4; see also Dkt. 63, Exs. 3-4 (full text of Voting Agreements). Three years later, on October 29, 2020, OCSL and OSCI jointly announced that OCSL would acquire 100 percent of OCSI in a stock-for-stock transaction (the “Merger”). Id. 7. Under the Merger, OCSI shareholders — like Tannenbaum — were to receive a number of shares in OCSL based on the relative net assets per share (the “Net Asset Value” or “NAV”) of each company at the time the deal closed (the “Exchange Ratio”). See id.

8-9. To use a simple example, if OCSI’s net assets per share (say, $8) were double OCSL’s ($4) at the time the deal closed, each OCSI share would be converted into OCSL shares, ensuring that each shareholder retained the same approximate “value” post-Merger. See id.

 
Reprints & Licensing
Mentioned in a Law.com story?

License our industry-leading legal content to extend your thought leadership and build your brand.

More From ALM

With this subscription you will receive unlimited access to high quality, online, on-demand premium content from well-respected faculty in the legal industry. This is perfect for attorneys licensed in multiple jurisdictions or for attorneys that have fulfilled their CLE requirement but need to access resourceful information for their practice areas.
View Now
Our Team Account subscription service is for legal teams of four or more attorneys. Each attorney is granted unlimited access to high quality, on-demand premium content from well-respected faculty in the legal industry along with administrative access to easily manage CLE for the entire team.
View Now
Gain access to some of the most knowledgeable and experienced attorneys with our 2 bundle options! Our Compliance bundles are curated by CLE Counselors and include current legal topics and challenges within the industry. Our second option allows you to build your bundle and strategically select the content that pertains to your needs. Both options are priced the same.
View Now
November 27, 2024
London

Celebrating achievement, excellence, and innovation in the legal profession in the UK.


Learn More
December 02, 2024 - December 03, 2024
Scottsdale, AZ

Join the industry's top owners, investors, developers, brokers and financiers for the real estate healthcare event of the year!


Learn More
December 11, 2024
Las Vegas, NV

This event shines a spotlight on how individuals and firms are changing the investment advisory industry where it matters most.


Learn More

Role TitleAssociate General Counsel, Global EmploymentGrade F13Reporting ToSenior Legal Counsel, Global EmploymentProgram/Tool/ Department/U...


Apply Now ›

Ryan & Conlon, LLP, is a boutique firm specializing in insurance defense. We are a small eclectic practice with a busy and fast paced en...


Apply Now ›

INTELLECTUAL PROPERTY PROSECUTION PARALEGAL - NEW JERSEY OR NEW YORK OFFICESProminent mid-Atlantic law firm with multiple regional office lo...


Apply Now ›