19-2703 (L)
`Packer v. Raging Capital Management
`
`UNITED STATES COURT OF APPEALS
`FOR THE SECOND CIRCUIT
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`August Term 2020
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`Argued: August 17, 2020
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`Decided: November 23, 2020
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`V.
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`Docket Nos. 19-2703, 19-2852
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`- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
`BRAD PACKER, DERIVATIVELY ON BEHALF OF 1-800-FLOWERS.COM, INC.,
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` Plaintiff - Appellee-Cross-Appellant,
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`
`
`
` RAGING CAPITAL MANAGEMENT, LLC, RAGING CAPITAL MASTER FUND, LTD.,
`WILLIAM C. MARTIN,
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` Defendants - Appellants-Cross-Appellees,
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` 1-800-FLOWERS.COM, INC.,
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` Defendant.
`- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
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`Before: NEWMAN, POOLER Circuit Judges.1
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`Appeal and cross-appeal from a judgment of the Eastern District of New
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`York (Gary R. Brown, Magistrate Judge), granting summary judgment in favor of
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`1 Circuit Judge Peter W. Hall, originally a member of this panel, is currently unavailable. The appeal
`is being decided by the remaining members of the panel, who are in agreement. See 2d Cir. IOP E(b).
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`1
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`

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`Brad Packer in a derivative suit on behalf of 1-800-Flowers.com, Inc. against
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`Raging Capital Master Fund, Ltd. (”Master Fund”). The District Court ruled that
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`Master Fund was the beneficial owner of more than ten percent of the shares of 1-
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`800-Flowers, Inc., which were bought and sold within a period of six months. The
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`judgment requires Master Fund to disgorge $4,909,393 in short-swing profits for
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`violating section 16(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78p(b).
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`Master Fund contends in part that factual questions remain as to whether it was a
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`beneficial owners of the shares.
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`Packer cross-appeals from the denial of prejudgment interest.
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`We conclude that factual questions remain on the issue of Master Fund’s
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`beneficial ownership and therefore remand. In view of that ruling, we dismiss the
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`cross-appeal as moot.
`
` Thomas J. Fleming, Olsham Frome Wolosky LLP,
`New York, NY (Martin D. Edel, Goulston &
`Storrs P.C., New York, NY, David M.
`Zucker, Goulston & Storrs P.C., Boston, MA,
`on the brief), for Defendants-Appellants-
`Cross-Appellees William C. Martin, Raging
`Capital Master Fund, Ltd., and Raging
`Capital Management, LLC.
`
`
`Paul D. Wexler, New York, NY (Glenn F. Ostrager,
`Joshua S. Broitman, Roberto L. Gomez,
`Ostrager Chong Flaherty & Broitman P.C.,
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`
`
`2
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`

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`New York, NY, on the brief), for Plaintiff-
`Appellee-Cross-Appellant Brad Packer.
`
`
`
`(Douglas A. Rappaport, Akin Gump Strauss
`Hauer & Feld LLP, New York, NY, Z. W.
`Julius Chen, Akin Gump Strauss Hauer &
`Feld LLP, Washington, DC, Alan L. Dye,
`Hogan Lovells US LLP, Washington, DC, for
`amicus curiae Managed Funds Association,
`in support of Defendants-Appellants-Cross-
`Appellees.)
`
`
`
`
`JON O. NEWMAN, Circuit Judge:
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`
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`The issue on this appeal is whether the customer of a regulated investment
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`advisor was the beneficial owner of more than ten percent of the shares of 1-800-
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`Flowers.com, Inc. (“Flowers”), which were bought and sold within an interval of
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`six months2 (“trading period”), a transaction for which section 16(b) of the
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`Securities Exchange Act of 1934, 15 U.S.C. § 78p(b), requires a beneficial owner to
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`disgorge such short-swing profits. Appellants Raging Capital Management, LLC
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`(“RCM”), Raging Capital Master Fund, Ltd. (“Master Fund”), and William C.
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`Martin appeal from the Aug. 21, 2019, judgment of the District Court for the
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`Eastern District of New York (Gary R. Brown, Magistrate Judge), requiring Master
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`2 From April 30, 2014, to January 31, 2015. See Packer v. Raging Capital Management, LLC, No. 15-CV-
`5933, 2019 WL 3936813, at *1 (E.D.N.Y. Aug. 20, 2019).
`3
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`

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`Fund to disgorge $4,909,393 in short-swing profits in a derivative suit brought by
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`Appellee Brad Packer on behalf of 1-800-Flowers.com, Inc. Packer cross-appeals
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`from the denial of prejudgment interest.
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`
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`We conclude that factual issues remain on the issue of whether Master Fund
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`was the beneficial owner of the shares, and we therefore vacate the judgment
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`against Master Fund and remand for further proceedings. In view of that ruling,
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`we dismiss Packer’s cross-appeal as moot.
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`Background
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`
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`Understanding the complicated factual background requires identification
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`of four entities and several individuals:
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`
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`RCM is a Delaware limited liability company, which is a registered
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`investment advisor as defined by the Investment Advisers Act of 1940, 15 U.S.C.
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`§ 80b-2(a)(11).3
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`
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`Master Fund is a Cayman Islands corporation, which is an investment fund
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`and a customer of RCM.
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`
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`Raging Capital Offshore Fund (“Offshore”)
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`is a Cayman Islands
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`corporation, which is also a customer of RCM.
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`3 The amicus curiae brief refers to a registered investment advisor as an “investment manager.” Br.
`for amicus curiae at 4.
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`4
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`Raging Capital Fund (QP), LP (“QP”), is a Delaware limited partnership,
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`which is also a customer of RCM.
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`Both Offshore and QP accept investments from the public and funnel these
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`investments to Master Fund.
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`Offshore and QP are referred to in this litigation as “feeder funds.” The
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`feeder funds together own 100 percent of Master Fund’s “Common Shares.”
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`During the trading period, the feeder funds had about 143 investors and now have
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`about 230 investors.
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`Martin holds positions in RCM, Master Fund, and Offshore, and indirectly
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`has a role in QP. He is the chairman, chief investment officer, and managing
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`member of RCM, and owns most, and possibly all, of its shares.4 Martin is also a
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`member of the three-member board of directors of Master Fund. During the
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`trading period, the other two directors of Master Fund were two Cayman Island
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`LLCs, DMS Fund Governance I Ltd. (“DMS I”) and DMS Fund Governance II Ltd.
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`(“DMS II”), characterized by Martin as “directors services firms.” Since November
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`4 Packer’s statement of undisputed facts asserts that Martin has “sole ownership of RCM,” A-643,
`and Martin stated in a deposition, “I am the only owner” of RCM, A- 711. However, the Defendants dispute
`that Martin is the sole owner of RCM, and contend that he is the “majority owner” of RCM. A-793.
`5
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`2015, the other two directors of Master Fund have been Don Ebanks and Wade
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`Kenny.5
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`Martin is also a member of the three-member board of Offshore. During the
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`trading period, the other two directors of Offshore were Ebanks and Kenny,
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`although Kenny is no longer a director.
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`Martin is a limited partner of QP. The general partner of QP is RCM, which
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`is controlled by Martin.
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`The relationship among RCM, Master Fund, Offshore, and QP is governed
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`by an Investment Management Agreement (”IMA”), which was executed on
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`November 9, 2012. Martin signed the IMA on behalf of all four parties to the
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`agreement. Under the terms of the IMA, RCM makes “[a]ll investment decisions”
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`for Master Fund, Offshore, and QP (“the Funds”), A-29, has “exclusive[] . . . control
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`and discretion” over purchase or sale of the Funds’ securities, A-30, and has “the
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`sole authority to exercise all rights, powers, privileges, and other incidents of
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`ownership or possession (including but not limited to, voting power) with respect
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`to all such securities and financial instruments held by the Master Fund,” A-29-A-
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`5 In a sworn declaration, Martin states that, during the trading period, Ebanks and Kenny served
`as directors of Master Fund “through” DMS I and DMS II and, since November 2015, served as directors
`of Master Fund “in their individual capacities.” A-32.
`6
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`30. By these provisions of the IMA, the Defendants contend, Master Fund has
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`delegated beneficial ownership of the Flowers shares to RCM.
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`Especially relevant to this appeal, the termination provision of the IMA
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`states:
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`(b) any party may terminate this Agreement effective at the close of
`business on the last day of any fiscal quarter by giving the other party
`not less than sixty-one days’ written notice; provided, however, that
`(i) unanimous consent of shareholders of the Cayman Feeder
`[Offshore] is required for the Cayman Feeder to terminate this
`Agreement under (b) of this Section 9 and (ii) unanimous consent of
`the partners of the U.S. Feeder [QP] is required for the U.S. Feeder to
`terminate this Agreement under (b) of this section 9.
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`A-102.
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`The litigation. In October 2015, Packer filed a complaint derivatively on
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`behalf of Flowers against RCM, Master Fund, and Martin to obtain disgorgement
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`of profits resulting from a short-swing sale of Flowers stock. The Complaint
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`alleged that the three defendants were a group for purposes of determining
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`beneficial ownership and that the group had beneficial ownership of more than
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`ten percent of Flowers Class A common stock.6 On consent, the case was referred
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`to Magistrate Judge Brown. In August 2019, with respect to the alleged section
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`6 Because, after discovery, it became clear that Master Fund held more than ten percent of the
`outstanding Flowers shares during the trading period without any grouping, see Packer, 2019 WL 3936813,
`at *1, we need not consider any issue concerning grouping of shares. Whether Master Fund had beneficial
`ownership of those shares remains a central issue of this appeal.
`7
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`

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`16(b) violation, the District Court granted the Plaintiff’s motion for summary
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`judgment, denied the Defendants’ motion for summary judgment, and ordered
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`entry of judgment against Master Fund in the amount of $4,909,395; the District
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`Court denied Packer’s claim for prejudgment interest. See Packer v. Raging Capital
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`Management, LLC, No. 15-CV-5933, 2019 WL 3936813 (E.D.N.Y. Aug. 20, 2019).7
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`RCM, Master Fund, and Martin timely appealed. Packer cross-appealed from the
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`denial of prejudgment interest.
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`Discussion
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`Section 16(b) of the Exchange Act requires a “beneficial owner” of more than
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`ten percent of a company’s shares to disgorge profits obtained from a short-swing
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`sale. 15 U.S.C. § 78p(b). In 1991, the SEC promulgated Rule 16a-1, which—“[s]olely
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`for purposes of determining whether a person is a beneficial owner of more than
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`ten percent [of an issuer’s shares]—defined “beneficial owner” as “any person
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`who is deemed a beneficial owner pursuant to section 13(d) of the Act.” 17 C.F.R.
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`§ 240.16a-1(a)(1). In turn, Rule 13d-3 provides:
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`(a) For purposes of section 13(d) . . . of the Act a beneficial owner of a
`security includes any person who, directly or indirectly, through any
`contract, arrangement, understanding, relationship, or otherwise has
`or shares:
`
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`7 The District Court had previously denied the Defendants’ motion to dismiss the complaint. See
`Packer v. Raging Capital Management, LLC, 242 F. Supp. 3d 141 (E.D.N.Y. 2017).
`8
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`(1) Voting power which includes the power to vote, or to direct
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`the voting of, such security; and/or
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`(2) Investment power which includes the power to dispose, or
`direct the disposition, of such security.
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`17 C.F.R. § 240.13d-3(a). Rule 13d-3 also provides that a person is deemed to be a
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`beneficial owner of a security if that person has the right to acquire beneficial
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`ownership of such security within sixty days. See 17 C.F.R. § 240.13d-3(d)(1)(i).
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`In 2009, the SEC advised that if a security holder "has delegated all authority
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`to vote and dispose of its stock to an investment advisor” and lacks “the right
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`under the contract to rescind the authority granted . . . within 60 days,” the security
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`holder does not need to “report beneficial ownership” of the securities. See SEC
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`Division of Corporate Finance, Compliance and Disclosure Interpretations,
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`Exchange Act Sections 13(d) and 13(g) and Regulation 13D-G Beneficial
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`Ownership Reporting, Question 105.04 (Sept 14, 2009).8
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`In this case, the Defendants make two arguments to dispute Packer’s
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`contention that Master Fund was a beneficial owner of more ten percent of Flowers
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`shares. The first builds on the undisputed premises that RCM, as a registered
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`investment advisor, is an entity exempt from beneficial ownership of shares it
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`holds on behalf of a customer by virtue of exclusion (v) of Rule 16a-1(a)(1), 17
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`8 Available at https://www.sec.gov/divisions/corpfin/guidance/reg13d-interp.htm.
`9
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`C.F.R. § 240.161(a)(1),9 and that Martin is a control person with respect to RCM
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`and exempt from beneficial ownership by virtue of exclusion (vii) of Rule 16a-
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`1(a)(1), 17 C.F.R. § 240.161(a)(1).10 Then, the Defendants assert in part II(C) of the
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`brief that RCM’s exempt status somehow confers a derivative exempt status on
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`Master Fund. The District Court properly rejected what it termed the Defendants’
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`“inoculation theory,” stating, “There is no authority supporting the notion that an
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`investor [Master Fund] can derivatively benefit from the exemption enjoyed by its
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`registered investment advisor [RCM].” Packer, 2019 WL 3936813, at *2-*3. Nothing
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`in Egghead supports Master Fund's argument that the registered investment
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`advisor exception automatically extends to exempt all members of a group from
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`beneficial ownership.
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`Master Fund endeavors to enlist Egghead.com, Inc. v. Brookhaven Management
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`Co., 340 F.3d 79 (2d Cir. 2003), in support of its exemption claims based on RCM’s
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`exemption. Egghead does not aid Master Fund. That decision considered a
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`plaintiff’s argument based on what was then exclusion (x) (now exclusion (xi)) of
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`9 A registered investment advisor is not exempt from being deemed the beneficial owner of shares
`held for the benefit of its customers if the shares were acquired for the purpose or effect of influencing
`control of the issuer. See Rule 16a-1(a)(1)(v). Packer makes no claim that this limitation on the exemption is
`applicable in this case.
`10 Exclusion (vii) exempts “[a] parent holding company or control person, provided the aggregate
`amount held directly by the parent or control person, and directly or indirectly by their subsidiaries or
`affiliates that are not persons specific in § 240.16a-1(a)(1)(i) through (x), does not exceed one percent of the
`securities of the subject class.” 17 C.F.R. § 240.16a-1(a)(1)(vii).
`10
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`Rule 16a-1(a)(1), 17 C.F.R. § 240.16a-1(x) (as cited in Egghead, 340 F.3d at 81 n.1).11
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`Exclusion (x) exempted from beneficial ownership a group, provided all its
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`members were exempt from beneficial ownership by virtue of the exclusions in
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`the first nine of the Rule’s exemptions. See Rule 16a-1(a)(1)(i)-(ix), 17 C.F.R.
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`§ 240.16a-1(i)-(ix). The plaintiff’s argument in Egghead was that the investment
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`advisor in that case could not be exempt from beneficial ownership because it was
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`a member of a group and all group members did not qualify for exemption under
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`exclusion (x). Our Court rejected the argument, ruling that an investment advisor
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`did not lose its exclusion (v) exemption just because it did not qualify for
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`exemption under exclusion (x). See Egghead, 340 F.3d at 85-86. Nothing in Egghead
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`supports Master Fund's argument that the registered investment advisor
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`exception automatically extends to exempt all members of a group from beneficial
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`ownership.
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`The Defendants’ second argument to avoid Master Fund’s beneficial
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`ownership is that, by virtue of the IMA, Master Fund delegated to RCM
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`investment and voting authority with respect to the Flowers shares that RCM
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`11 Exclusion (xi) in the version of the rule cited in Egghead has been eliminated and replaced with
`what was then exclusion (x).
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`11
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`holds for its benefit. The District Court ruled that the delegation was not effective
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`to preclude Master Fund’s beneficial ownership for three reasons.
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`
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`First, the District Court relied on the relationship among the parties to the
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`IMA. “Assuming the validity of the delegation theory, the
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`intertwined
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`relationship of these parties proves fatal,” and “the delegation theory fails here
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`because it is undisputed that RCM, Martin, and Master Fund are not unaffiliated
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`parties.” Packer, 2019 WL 3936813, at *5. Second, the District Court understood the
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`IMA to make RCM the agent of Master Fund. “[A] review of the express terms of
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`the [IMA] . . . makes it patent that Master Fund authorized RCM to act as its agent
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`for all purposes relevant thereto.” Id. at *4 (emphasis added). Third, the District
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`Court deemed Martin to have the power to amend the IMA, including its
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`requirement of sixty-one days’ notice for termination. “Since nothing prevented
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`defendants from altering the agreement at will, the facts here cannot be reasonably
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`construed as an effective delegation.” Id. at *5. In the District Court’s view, Martin,
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`the person who signed the IMA for all four parties, “could, presumably, revise,
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`amend, or abrogate that agreement with a few strokes of a pen.” Id. at *4 n.5.
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`Before considering each of these three reasons, we set forth some basic
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`principles concerning section 16(b). Section 16(b) imposes liability “irrespective of
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`12
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`

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`any intention on the part of such beneficial owner, director, or officer,” in entering
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`the transaction. 15 U.S.C. § 78p(b). As we have recognized, “[i]t imposes a form of
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`strict liability,” thus serving as “strong medicine for the ill Congress sought to
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`address.” Olagues v. Perceptive Advisors LLC, 902 F.3d 121, 125-26 (2d Cir. 2018)
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`(internal quotation marks omitted). “Courts have therefore ‘been reluctant to
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`exceed a literal, “mechanical” application of the statutory text in determining who
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`may be subject to liability.’” Id. at 126 (quoting Gollust v. Mendell, 501 U.S. 115, 122
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`(1991)). “The strict liability remedy should be employed cautiously to avoid unfair
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`application.” Id. It is to be applied “narrowly.” Foremost-McKesson, Inc. v. Provident
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`Securities Co., 423 U.S. 232, 251 (1976).
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`
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`It would not be consistent with these principles to accept the District Court’s
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`first reason for rejecting Master Fund’s delegation of voting and investing
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`authority to RCM. Although Rule 13d-3(a) includes within the definition of a
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`beneficial owner “any person who, directly or indirectly, through any contract,
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`arrangement, understanding, relationship, or otherwise has” voting or investment
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`authority, 17 C.F.R. § 240.13d-3(a), using generalized wording such as
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`“intertwined” or “not unaffiliated”12 to bring a person within the coverage of Rule
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`12 The District Court quoted a leading treatise’s statement that includes the word “unaffiliated” in
`relation to beneficial ownership. Packer, 2019 WL 3936813, at *5. After stating that “‘an entity is the beneficial
`owner of its portfolio securities where voting and investment decisions are made by the persons who . . .
`13
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`13d-3(a) would extend the reach of section 16(b) beyond the text of both the statute
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`and the rule.
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`The District Court based its second reason for rejecting Master Fund’s
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`delegation to RCM‒an agency relationship‒on this Court’s decisions in Analytical
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`Surveys, Inc. v. Tonga Partners, L.P., 684 F.3d 46 (2d Cir. 2012), and Huppe v. WPCS
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`International, Inc., 670 F.3d 214 (2d Cir. 2012). See Packer, 2019 WL 3936813, at *3-*4.
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`In Tonga, as relevant here, this Court ruled that, under applicable Delaware law,
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`Del. Code Ann. tit. 6 § 15-301(a), a general partner (Cannell Capital), was the agent
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`of a limited partnership (Tonga), and that an individual (Cannell), who was the
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`sole managing member of the general partner, was an agent of the limited
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`partnership’s agent. As a result of these state-law-based agency relationships, both
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`the limited partnership and the limited partner’s agent were liable for a violation
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`are charged with making those decisions,’” the treatise adds, “‘The result may be different where the entity
`delegates voting and investment authority to an unaffiliated third party and does not retain the ability to
`revoke that authority within 60 days.’” Id. (quoting Peter J. Romeo & Alan L. Dye, Section 16 Treatise and
`Reporting Guide, § 2.03[5][f] at 148 (5th ed. 2020)). The use of the word “may” recognizes that the statement
`is only a possibility, and, more important, definitively states the governing rule that “an entity may not
`remain a beneficial owner of securities, however, where it delegates voting and investment authority to a
`third party and does not retain the ability to revoke that authority within 60 days.” Romeo & Dye,
`§ 2.03[5][f][i]. We note that treatise co-author Dye has signed the amicus curiae brief submitted by the
`Managed Fund Association in this appeal, which explains the word “unaffiliated” in the above-quoted
`sentence: “[T]he term ‘unaffiliated’ in this context means a distinct legal entity, as opposed to the fund’s
`general partner . . . . The Customer Fund [Master Fund] and the RIA [RCM] are ‘unaffiliated’ in the relevant
`sense, given that the two are completely distinct corporate entities whose relationship is governed by strict
`contractual terms.” Br. for Amicus Curiae at 26.
`
`
`
`14
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`of section 16(b) by the managing member of the general partner. See Tonga, 684
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`F.2d at 51-52.
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`
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`Somewhat similarly, in Huppe, on which Tonga was based, this Court ruled
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`that, under the same Delaware law, two funds (identified as PE and QP), which
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`were limited partners, were each agents of general partners (unidentified limited
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`partnerships), and that two individuals (Marxe and Greenhouse), who were
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`limited partners of those general partners, were agents of the general partners’
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`agents. As a result, the funds were liable for section 16(b) violations by the
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`individuals. 670 F.3d at 221-22.13
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`
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`In the pending case, there is no comparable state-law-based agency
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`relationship between Master Fund and RCM. They are both distinct corporations,
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`and the District Court did not rule that the corporate veil could be pierced.
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`
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`It is true that, pursuant to provisions of the IMA, Master Fund has made
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`RCM its agent for the specific purpose of exercising voting and investment
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`authority with respect to the Flowers (and any other) shares that RCM holds on
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`Master Fund’s behalf. That is the essence of a customer/investment advisor
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`13 As we stated in Rubenstein v. International Value Advisers, LLC, 959 F.3d 541 (2d Cir. 2020), Huppe
`held only that an “insider principal cannot shed its insider status by transferring trading authority to a non-
`insider agent.” Id. at 550.
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`
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`15
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`relationship. But making an investment advisor a customer’s agent for the
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`specified purpose of carrying out the advisor’s traditional functions for a customer
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`does not make the advisor an agent for all purposes. Neither Tonga nor Huppe, nor
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`anything in SEC statutes, rules, or guidance, supports such a result.
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`
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`The District Court’s third reason for rejecting delegation was the Court’s
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`view that Martin had the power to amend the IMA. Such power, if it existed,
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`would allow him to eliminate the sixty-one days’ notice requirement in the
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`termination provision, thereby ending the delegation within sixty days of
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`acquiring shares and triggering application of Rule 3d-3(a) and section 16(b) to
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`short-swing profits. The District Court based its view of Martin’s authority to
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`amend the IMA on the fact that he had signed it on behalf of all four parties to the
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`agreement. See Packer, 2019 WL 3936813, at *4 n.5, *5.
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`
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`We do not doubt that Martin had authority to sign the IMA on behalf of all
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`four parties to it. Martin was the controlling person of RCM. He signed on behalf
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`of Master Fund pursuant to a resolution adopted by the three directors of Master
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`Fund explicitly authorizing any one director to sign the IMA for that corporation.
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`He signed on behalf of Offshore pursuant to a similar resolution adopted by
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`16
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`Offshore’s board. He signed on behalf of QP as the controlling person of RCM,
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`which was QP’s general partner.
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`
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`Authority for an individual to sign a document on behalf of an entity,
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`however, does not necessarily carry with it authority to commit those entities to
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`making changes in, or terminating, that document. We can accept that Martin
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`could commit RCM to amend the IMA because he was in control of RCM. Whether
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`he could similarly commit Master Fund and the feeder funds is not clear at this
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`point. With respect to these three entities, the District Court stated, “Notably
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`absent from the termination provision of the agreement is a requirement that
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`termination requires
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`‘unanimous consent’ of Master Fund’s directors or
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`shareholders, which is an express requisite for termination of the other entities to
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`the agreement.” Packer, 2019 WL, at *4 n.5.
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`The Court’s statement is problematic. First, with respect to Master Fund, the
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`absence of a unanimous consent requirement in the IMA does not mean that
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`Master Fund’s board has authorized Martin alone to commit Master Fund to
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`termination of the agreement. In fact, Martin has averred that the board of Master
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`Fund “was empowered to act by majority vote only.”14 A-33. Second, with respect
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`14 Packer relies on resolutions adopted by the board of Master Fund that authorize any one director,
`for example, Martin, to make changes to a group of agreements that includes the IMA. Master Fund
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`to Offshore, the termination provision requires unanimous consent of its
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`shareholders, but the record to date does not indicate that such consent to
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`termination has been given. Third, with respect to QP, the termination provision
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`does not require unanimous consent of its directors or shareholders; it requires
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`unanimous consent of its partners,15 and the record to date does not indicate that
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`such consent to termination has been given.
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`Packer’s essential argument that Martin could commit Master Fund and the
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`feeder funds to termination of the IMA is that he had the power to compel all of
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`the required directors, partners, or shareholders of those entities to do his bidding.
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`He asserts, for example, that Ebanks and Kenny were not independent of Martin.
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`He points out that Ebanks acknowledged serving on the boards of about 200
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`entities, had never met Martin, participated in Master Fund’s quarterly board
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`meetings by telephone, and “provided no independent decision-making on
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`behalf of Master Fund.” Br. for Appellee at 7. Packer also cites Master Fund’s
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`Schedule 13G filings in June and July of 2014, stating that Master Fund
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`responds that this authority was limited to making changes in the proposed IMA, not the executed
`agreement. And Martin has averred that Master Fund’s board can act only by majority vote. To whatever
`extent this dispute becomes relevant, it is an issue to be resolved either on a renewed motion for summary
`judgment on an expanded record or at trial.
`15 QP, a limited partnership, has neither shareholders nor directors.
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`acknowledged that it had shared beneficial ownership of more than ten percent
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`of Flowers’ common stock with RCM and Martin.
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`The Defendants have responded by challenging the accuracy or significance
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`of Packer’s allegations. For example, Martin averred that he has “no affiliation or
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`relationship” with Ebanks or Kenny, the directors, along with Martin, of Master Fund
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`and Offshore. A-32. Martin has characterized Ebanks and Kenny as “independent
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`directors” of Master Fund and Offshore, acting as directors of these entities
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`“through” two Cayman Island directors services firms. A-32. Martin explained
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`that “[b]y ‘independent’ I mean directors who had no employment, financial, or
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`other relationship with me or RCM.” A-31. He also stated, “I have no power to
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`unilaterally make decisions on behalf of [Master Fund]. Rather, decisions must be
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`approved, at a minimum, by a majority of the board of directors.” A-33, A-737.
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`With respect to Master Fund’s 13G Schedules, the Defendants point out that they
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`disclosed the purchase and sale of the Flowers shares on those schedules, which
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`they describe as “reserved for institutional investors who have no plan or intent to
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`effect control of the issuer. See 17 C.F.R. § 240.13d-1(b).” Br. for Appellants at 5.16
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`16 Neither side’s brief discusses the significance, if any, of the fact that the 13G Schedules described
`Master Fund’s “voting power” and “dispositive power” as “shared.” A-121, A-131, A-140, A-150.
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`Packer seeks to diminish the persuasive force of some of Martin’s sworn
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`statements by calling them “self-serving,” Br. for Appellee at 9, which they surely
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`are. Evidence offered by a party to litigation is usually self-serving. That’s why
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`the party offers it. Whether it is credible and of sufficient persuasive force to
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`support a favorable finding is a matter for a fact-finder. See United States v. Scully,
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`877 F.3d 464, 475 (2d Cir. 2017 (“[The witness] is competent to testify . . .even if
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`his testimony is one-sided and self-serving.”).
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`The District Court could not, on a motion for summary judgment, determine
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`that Martin could alter the IMA on behalf of all four entities with “strokes of a
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`pen.” Packer, 2019 WL 3936813, at *4 n.5. It remains to be determined as a factual
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`matter whether, under all the relevant circumstances, Martin is in control of
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`Master Fund and the feeder funds with authority to commit these entities to
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`altering or terminating the IMA. Whether that determination can be made on a
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`renewed motion for summary judgment, after the record has been expanded, or
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`will require a trial is a matter initially for the District Court on remand.
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`For these reasons, the judgment in favor of Packer is vacated, and the case
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`is remanded for further proceedings. In view of this ruling, the cross-appeal from
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`the denial of prejudgment interest to Packer is dismissed as moot.
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