Insider trading case is reinstated

An insider trading case dismissed two years ago in favor of Orange County businessman J. Thomas Talbot, a former director of Fidelity National Financial Inc., was reinstated Monday by a federal appeals court.

The Securities and Exchange Commission can seek to hold Talbot liable for trading on inside information when he purchased shares of LendingTree Inc. in 2003 before the Internet consumer loan service was acquired by USA Interactive Inc., the U.S. 9th Circuit Court of Appeals ruled.

LendingTree was 10% owned by Fidelity National, based in Jacksonville, Fla. Talbot learned of the transaction at a board meeting, according to the ruling.

The appellate panel in San Francisco said Talbot had a duty to keep the information about the acquisition confidential. A lower court had thrown out the case, saying Talbot could be liable for misappropriating inside information only if he owed confidentiality to LendingTree, the original source of the information.

“Talbot, as a member of Fidelity’s board, owed a duty arising from a relationship of trust and confidence to Fidelity, the source of the information on which he traded,” the appeals court said.

When USA Interactive, now known as IAC/InterActiveCorp, announced the acquisition on May 5, 2003, LendingTree’s shares rose 41%, and Talbot sold the stock for a $67,881 profit, according to the ruling.

Talbot resigned from the board of Fidelity National, the nation’s second-largest title insurer, in September 2003 and was sued by the SEC in 2004 in Los Angeles. The 9th Circuit sent the case back to federal court to decide whether the information that Talbot traded on was material to investors’ trading decisions.