Court Dismisses Short-Swing Trading Claim Against Kramer Levin Client Rajat Gupta

On December 23, 2011, Judge Jed S. Rakoff of the federal district court in Manhattan issued an order granting the motion made by Kramer Levin on behalf of its client Rajat K. Gupta to dismiss in all respects and with prejudice the complaint brought against him by James Mercer (with written opinion to follow explaining the court’s reasons for the order). Mercer, a shareholder of The Goldman Sachs Group Inc., brought this derivative action on behalf of Goldman Sachs pursuant to Section 16(b) 0f the Securities Exchange Act of 1934, alleging that Mr. Gupta had realized short-swing trading profits from the trading in Goldman stock by Galleon Funds founded by Raj Rajaratnam based on inside information purportedly tipped by Mr. Gupta to Mr. Rajaratnam and seeking disgorgement by Mr. Gupta of such supposed profits. In the motion, Kramer Levin argued that Section 16(b) does not per force make tipper-tippee conduct a violation of the statute and that the complaint failed to allege plausibly that Mr. Gupta was the beneficial owner of, and realized profits from, any Goldman shares traded by the Galleon Funds.