Document: Steinhardt v. Occam Networks, Inc., C.A. No. 5878-VCL (Del. Ch. Jan. 6, 2012)
The Delaware Court of Chancery dismissed plaintiff as a class representative and ordered him to disgorge more than $500,000 in illicit profits gained from trading on insider information obtained in the course of the class action proceedings. Plaintiff was a representative plaintiff in this action which challenged the merger of Occam Networks, Inc (“Occam”) with and into Calix, Inc. (“Calix”). Plaintiff, a stockholder of Occam, alleged that the merger price was too low and that Occam’s directors breached their fiduciary duties in approving the merger. After litigation discovery commenced, plaintiff became privy to confidential information, which lead him to believe that Occam had been overvalued and that the merger price was unlikely to change as a result of the litigation. Based on this information, plaintiff then began selling Calix shares short to exit his Occam position. By selling Calix short, plaintiff could both liquidate his Occam position and take advantage of the arbitrage spread that existed between Calix and Occam stock at the time. Consistent with prior rulings, the Court ordered plaintiff to disgorge his illicit profits.