Second Circuit Rejects Brachycephalic Canine Fund’s Section 16(b) Defense


When it comes to challenging the status quo of securities regulation, Bulldog Investors lives up to its name.  In 2006, Bulldog’s principal, Phillip Goldstein, successfully challenged the Securities and Exchange Commission’s hedge fund rule.  Goldstein v. SEC, 451 F.3d 873 (D.C. Cir. 2006).  Later, Bulldog was less successful in challenging an enforcement action taken by the Massachusetts Secretary of State.  Bulldog Investors General Partn. v. Secretary,  953 N.E.2d 691 (2011), cert denied Bulldog Investors Gen. P’ship v. Galvin, 132 S. Ct. 2377 (2012).  See Supreme Court Fails To Bite At Bulldog and Oxfam America Sues the SEC and see Alan Parness’ article, The Bulldog Gets Muzzled” in The Blue Sky Bugle (February/March 2008).

Now, Bulldog and Mr. Goldstein have challenged the Section 16(b) on constitutional grounds.  In a novel argument, Bulldog contended that the district court was without jurisdiction to hear short-swing profit claims.   We have a federal statute (Section 16(b)) and we have a person authorized by statute to bring suit (an owner of the issuer’s security).  Assuming that the issuer either failed or refused to bring suit, on what possible grounds could the federal court lack jurisdiction to hear the case? 

Bulldog claimed that the case presented no live case or controversy because the plaintiff could not show “injury in fact”.  In other words, the plaintiff lacked what is known as constitutional standing under Article III, Section 2 of the Constitution.  As the students in my administrative law class will soon be learning, the Supreme Court requires for constitutional standing that there be “an invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical.”  Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992).  The Second Circuit would have none of this, finding that Section 16(b) “created legal rights that clarified the injury that would support standing”.  Donoghue v. Bulldog Investors Gen. P’ship, 2012 U.S. App. LEXIS 20472 (2d Cir. Oct. 1, 2012).


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