Edgar v. Mite Corp., 457 U.S. 624 (1982)

Edgar v. MITE Corp.,

No. 80-1188

Argued November 30, 1981
Decided June 23, 1982
457 U.S. 624

APPEAL FROM THE UNITED STATES COURT OF APPEALS FOR

THE SEVENTH CIRCUIT

Syllabus

The Illinois Business Take-Over Act requires a tender offeror to notify the Secretary of State and the target company of its intent to make a tender offer and the terms of the offer 20 days before the offer becomes effective. During that time, the offeror may not communicate its offer to the shareholders, but the target company is free to disseminate information to its shareholders concerning the impending offer. The Act also requires any takeover offer to be registered with the Secretary of State. A target company is defined as a corporation of which Illinois shareholders own 10% of the class of securities subject to the takeover offer or for which any two of the following conditions are met: the corporation has its principal office in Illinois, is organized under Illinois laws, or has at least 10% of its stated capital and paid-in surplus represented within the State. An offer becomes registered 20 days after a registration statement is filed with the Secretary of State unless he calls a hearing to adjudicate the fairness of the offer. Appellee MITE Corp., a corporation organized under Delaware laws with its principal office in Connecticut, initiated a tender offer for all outstanding shares of Chicago Rivet & Machine Co., an Illinois corporation, by filing with the Securities and Exchange Commission the schedule required by the Williams Act. MITE, however, did not comply with the Illinois Act, and brought an action in Federal District Court seeking a declaratory judgment that the Illinois Act was preempted by the Williams Act and violated the Commerce Clause, and also seeking injunctive relief. The District Court issued a preliminary injunction prohibiting enforcement of the Illinois Act against MITE’s tender offer. MITE then published its offer. Subsequently, the District Court issued the requested declaratory judgment and a permanent injunction. Shortly thereafter, MITE and Chicago Rivet entered into an agreement whereby both MITE’s tender offer and an offer made by Chicago Rivet before the District Court entered its judgment were withdrawn and MITE was given a specified time to make another offer. Ultimately, MITE decided not to make another offer. The Court of Appeals affirmed the District Court.

Held: The judgment is affirmed.

633 F.2d 486, affirmed.

JUSTICE WHITE delivered the opinion of the Court with respect to Parts I, II, and V-B, concluding that:

1. The case is not moot. Because the Secretary of State has indicated his intention to enforce the Illinois Act against MITE, a reversal of the District Court’s judgment would expose MITE to civil and criminal liability for making an offer in violation of the Act. P. 630.

2. The Illinois Act is unconstitutional under the Commerce Clause, because it imposes burdens on interstate commerce that are excessive in light of the local interests the Act purports to further. Pike v. Bruce Church, Inc., 397 U.S. 137. Illinois’ asserted interests in protecting resident security holders and regulating the internal affairs of companies incorporated under Illinois law are insufficient to outweigh such burdens. Pp. 643-646.

WHITE, J., delivered an opinion, joined in its entirety by BURGER, C.J., Parts I, II, and V-B of which are the opinion of the Court. BLACKMUN, J., joined Parts I, II, III, and IV. POWELL, J., joined Parts I and V-B. STEVENS and O’CONNOR, JJ., joined Parts I, II, and V. POWELL, J., filed an opinion concurring in part, post, p. 646. STEVENS, J., filed an opinion concurring in part and concurring in the judgment, post, p. 647. O’CONNOR, J., filed an opinion concurring in part, post, p. 65. MARSHALL, J., filed a dissenting opinion, in which BRENNAN, J., joined, post, p. 655. REHNQUIST, J., filed a dissenting opinion, post, p. 664.