Opposition Brief — Amanda Acquisition Corp. v. Universal Foods Corp.

. Supreme Court, u.d. —

5\ FILED

(3% ‘Sep 26 1989

No. 89-372 JOSERH F. SPANIOL, JR.

CLERK

IN THE

SUPREME COURT OF THE UNITED STATES

October Term, 1989

AMANDA ACQUISITION CORPORATION,

Petitioner,

VS.

UNIVERSAL FOODS CORPORATION, ALAN R.

ANDERSON, MICHAEL E. BATTEN, DR. OLAN D.

FORKER, DR. CAROL I. WASLIEN GHAZAII, LEON T.

KENDALL, PAUL L. KOHNSTAMM, CHARLES S.

McNEER, ORVILLE R. MERTZ, JOHN L. MURRAY, DR.

BERNARD S. SCHWEIGERT, GUY A. OSBORN, GERARD ~—

E. VENEMAN, and DARRELL E. WILDE,

Respondents.

On Petition For A Writ of Certiorari To The

United States Court of Appeals For The Seventh Circuit

RESPONDENTS’ BRIEF IN OPPOSITION

*DAVID E. BECKWITH

JOHN R. DAWSON

Foley & Lardner

777 East Wisconsin Avenue

Milwaukee, Wisconsin 53202-5367

(414) 271-2400

MICHAEL W. SCHWARTZ

% PETER C. HEIN

Wachtell, Lipton, Rosen & Katz

299 Park Avenue

New York, New York 10171

(212) 371-9200

* Counsel of Record

Attorneys for Respondents

“=a

7 id

QUESTIONS PRESENTED FOR REVIEW

1. Whether petitioner has rendered this case moot by reason of

its voluntary termination of its tender offer?

2. Whether the decision of the Court of Appeals below, which

upheld the constitutionality of the Wisconsin Business Combination

Act, is consistent with this Court’s decision in CTS v. Dynamics Corp.

of America, 481 U.S. 69 (1987)?

RULE 28.1 LISTING

Respondent Universal Foods Corporation has no parent compa-

nies, no domestic subsidiaries other than wholly-owned subsidiaries

and no foreign subsidiaries whose stock is publicly traded.

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED FOR REVIEW ............. i

a ii

pps iv

ES Ne |

SE 9 l

COUNTERSTATEMENT OF THE CASE.............. 2

ES 2

I ew sce cs unseen aaces 2

ek pcs cewek cee eee e ee 4

REASONS FOR DENYING THE WRIT ............... 6

1. THE ISSUES RAISED BY THE

I 6

Il. THE DECISION OF THE COURT OF APPEALS

UPHOLDING THE WISCONSIN BCA MERELY

APPLIES THE ANALYSIS OF THIS COURT IN

CTS AND PRESENTS NO IMPORTANT

ay kee ene sees tees 8

A. The Court Of Appeals Merely Applied The Analysis

Of This Court In CTS In Concluding That The

Wisconsin BCA Is Not Preempted By The

LIE hives es Gag ea 9

B. The Court Of Appeals Merely Applied The

Analysis Of This Court in C7S In Concluding That

The Wisconsin BCA Does Not Contravene The

Ae ee ee eee 12

A 17

iV

TABLE OF AUTHORITIES

CASES: Page

BNS, Inc. v. Koppers Co.,

683 F. Supp. 458 (D. Del. 1988) ............ 10,13

CTS v. Dynamics Corporation of America,

Uy des ES oak p scx ecu csiecesves passim

California v. ARC America Corp.,

fo) eee ee Ce ee 9

City of Mesquite v. Aladdin’s Castle,

me ree eee one 8

Country Classic Dairies v. Montana Department of

Commerce Milk Control Bureau,

O67 F.28 See-Ge Coe. 1908)... . 2. 2... 15

Dynamics Corp. of America v. CTS Corp. ,

794 F.2d 250 (7th Cir. 1986)................ 11

Edgar v. MITE Corp.,

ee re .. 6,11,13,15

Exxon Corp. v. Governor of Maryland,

er RRO ae chon e ski vse caces 14,16

Healy v. Beer Institute, Inc.,

US. . 109 S. Ct. 2491 (1989) ....... 15

Hillsborough County v. Automated

Medical Laboratories, Ine.,

Co rr Y

Hyde Park Partners, L.P. v. Connolly,

Rm Pre Ee | 7,15

Kansas City, Memphis & Birmingham R.R. v. Stiles,

gS eR ee ee 14

Kassell v. Consolidated Freightways Corp.,

i EE oo ps ab Ch awacwean vac 14

Vv

CASES: Page

Louisville & Nashville R.R. v. Kentucky,

oo ee re ae ee 14

Murphy v. Hunt,

UD Soild vans Veebeeeesés 7

Northwest Central Pipeline Corp. v.

State Corporation Commission of Kansas,

sic Ee ccien EE el NOE (EDR O). 25... 15

Pike v. Bruce Church, Inc.,

ee a aig baa genie k pk enue “14

Piper v. Chris-Craft Industries, Inc.,

NS I sc rer ag FPN ok was wins ce 1

Polaroid Corp. v. Disney,

O62 F.20 Sa? Ged Civ. 1960) ............4.. 7

Powell v. McCormack, ;

pS ee err e aden 6

RP Acquisition Corp. v. Staley Continental, Inc.,

686 F. Supp. 476 (D. Del. 1988) ............ 10.13

Schreiber v. Burlington Northern, Inc.,

GORE RR eee rer eee re

Tiverton Board of License

Commissioners v. Pastore,

ee es ade cae vase nenes 6

Tyson Foods, Inc. v. McReynolds,

OES Fie Or Gere Get. FPF). iw we eee 7.13.15

United States v. Munsingwear, Inc.,

ee es cob ek ese Ks eee 8

United States Parole Commission v. Geraghty,

oo Me ee 6

Veere, Inc. v. Firestone Tire & Rubber Co..

685 F. Supp. 1027 (N.D. Ohio 1988)......... 10

vi

CASES: Page

Vernitron Corp. v. Kollmorgen Corp.,

89 Civ. 241 (JES) (S.D.N.Y. Feb. 9, 1989) ... 10,13

Weinstein v. Bradford,

3 RE peri 7

West Point-Pepperell, Inc. v. Farley, Inc.,

711 F. Supp. 1096 (N.D. Ga. 1989).......... 10,13

FEDERAL STATUTES: ;

Williams Act, 15 U.S.C. §§ 78m(d), (e), o

Oe ere 4,5,8-12

ee SR ae 7

er ere l

STATE STATUTES:

dg wai cach wkb yeu ce eebs passim

so 3

cA 3

Wis. Stat. § (80. 72601KL)i.a-d ...........6..... 3

I 3

I cca ccc we ceneeaeas 3

ec a a va wanna deunus 3

OTHER AUTHORITIES:

upromise COUT Ree 20.4 . 1. ccc l

UE EE EM ideo ts CN 6 COE dc ces l

OPINIONS BELOW

The opinion of the United States Court of Appeals for the Seventh

Circuit, reported at 877 F.2d 496, is set forth in the appendix to the

petition beginning on page A-I7. The decision and order of the dis-

trict court, reported at 709 F. Supp. 984, are set forth in the appen-

dix beginning on page A-42.

JURISDICTION

Respondents believe that the petition, filed August 28, 1989, is

untimely pursuant to Supreme Court Rule 204 and 28 U.S. § 210I(c).

The Court of Appeals rendered judgment in this matter on May 24,

1989 and mailed the judgment to the parties on that date. There was

no other mailing by the Court of Appeals under Fed. R. App. P. 36.

The judgment, which provides among other things that the judgment

of the District Court is affirmed “in accordance with the order of

this Court entered this date” (emphasis added), bears the date May

24, 1989, and no other date.' If May 24, 1989 is the operative date,

the petition, filed ninety-six days thereafter, is untimely.

'The petition is entirely misleading in this regard. The copy of the judgment

of the Court of Appeals which Amanda reprinted in its appendix is nor the formal

judgment mailed to the parties by the Court of Appeals in accordance with Fed.

R. App. P. 36. The formal judgment mailed by the Court of Appeals bears the date

May 24, 1989, and does nor contain the words **Entered on AIMS May 30 1989"

which petitioner has inserted in the form of the judgment included in its appendix.

(A-114.) Long after the Court of Appeals mailed the formal judgment, Amanda

apparently independently obtained an internal Seventh Circuit copy of the judgment

which bore a stamp off to the side of the document containing the words Amanda

now has inserted into the text of the judgment reprinted in its appendix. Respon-

dents have reprinted in their appendix to this brief the only judgment mailed to the

. parties by the Court of Appeals. (Res. App. 1).

By letter of August 30, 1989, the Clerk of the Court of Appeals

informed this Court that personnel of the Court of Appeals did not

enter a computer record of the judgment into the Court’s “appellate

information management system” until May 30, 1989. If that is the

date on which judgment was entered, the petition is timely.

Respondents also believe that the petition presents no Article III

case or controversy because the issues raised by the petition have been

rendered moot by petitioner’s voluntary abandonment of its tender —

offer. See Res. App. 2; pp. 6-8, infra.

COUNTERSTATEMENT OF THE CASE

A. Mootness

On December 2, 1988, petitioner Amanda Acquisition Corpora-

tion commenced a highly-leveraged, highly-conditional hostile tender

offer for respondent Universal Foods Corporation, a Wisconsin cor-

poration. Among a host of conditions Amanda imposed in the offer

was one requiring a final judicial declaration that the Wisconsin Bus-

iness Combination Act, Wis. Stat. § 180.726 (““Wisconsin BCA’), is

unconstitutional or a determination that the Act is otherwise inap-

plicable to Amanda's hostile offer. After a preliminary hearing, the

district court held that the Wisconsin BCA is constitutional. On May

24, 1989, the Seventh Circuit affirmed that decision.

Amanda filed its petition with this Court on August 28, 1989. Four-

teen days later, however, Amanda terminated the tender offer and aban-

doned its effort to acquire Universal. See Res. App. 2. As a

consequence of Amanda’s decision to abandon the tender offer, respon-

dents submit that this case is moot.

B. The Wisconsin BCA

The Wisconsin BCA restricts the extent to which a Wisconsin

corporation may effect certain defined “‘business combinations” with

an “interested stockholder” (one acquiring ten percent or more of

a corporation’s voting stock) after the stockholder acquires its dominant

position (without the advance approval of the board of directors). Wis.

Stat. § 180.726(2). See also Wis. Stat. §§ 180.726(1)(j),(n). The Act

is limited both in scope and duration. First, the Act limits the defini-

tion of “business combinations” to those mergers and equivalent trans-

actions which involve self-dealing between the corporation and the

dominant stockholder. See § 180.726(i)(e). Second, the restrictions

imposed by the Act also are only of a three-year duration, after which

the dominant shareholder may engage in a business combination upon

approval of the remaining shareholders or the payment of a defined

fair price. § 180.726(3). Finally, the Wisconsin legislature limited the

application of the Act to corporations chartered in Wisconsin, and,

of those, only ones which have other significant connections to the

State. § 180.726(1)(L)I.a-d.

Petitioner’s mischaracterizations of the Wisconsin BCA make it

equally important to describe what the Act does not do. First, the

Act in no way purports to regulate tender offers or tender offerors:

nothing in the Act prevents, limits, delays or otherwise regulates tender

offers — their terms, timing or disclosures — in any respect. The

Act in fact has nothing to do with when and under what circumstances

a bidder can make a tender offer to shareholders of Wisconsin cor-

porations. Second, the Act does not prevent a change of control in

a Wisconsin corporation? nor does it in any way regulate or restrict

the transfer of shares in the tender offer context. The Act likewise

does not impair a tender offeror’s voting rights; nothing in the Act

interferes with the ability of a bidder to purchase a controlling in-

terest in a Wisconsin corporation or to exercise that control. Moreover,

the Wisconsin BCA does not restrict a tender offeror’s ability to com-

municate with shareholders in a proxy contest or otherwise, or grant

advantages to target management in doing so.

?The very statistics cited by petitioner confirm this fact. Despite petitioner's

assertions throughout its petition that business combination acts “are effective in

squelching offers’ (p. 11), a closer look at the 64 hostile tender offers cited by

petitioner for shares of corporations chartered in states with such statutes reveals

that at least 43 resulted in a sale of the target. including at least 22 which resulted

in a sale of the target to the hostile bidder.

PT saat ian ieee aia

The limited restrictions of the Act do not apply to all business

combinations. Recognizing that all such transactions are not neces-

sarily detrimental to shareholders and other affected corporate con-

stituencies, the Wisconsin Legislature left it to the elected

representatives of the shareholders, the board of directors, to evalu-

ate proposed control transactions and exempt those beneficial to the

corporation and its shareholders. By withholding their approval for

particular transactions, however, the board cannot prevent a tender

offer from proceeding, delay the closing of the offer or prevent the

successful tender offeror from exercising full control (other than with

respect to defined self-dealing transactions).

C. The Decisions Below

The uncontroverted findings of the courts below confirm the limit-

ed focus of the Wisconsin BCA. The District Court specifically ob-

served that the Wisconsin Act “does not directly impede a tender offer

in any respect” nor does it “prevent a tender offer from going for-

ward.” (A-68.) See also A-69 (“[nJothing about the Act prohibits any

entity from purchasing or offering to purchase shares in Wisconsin

corporations, or from attempting thereby to gain control”). Similar-

ly, the Court recognized that “‘[t]he Act can not reasonably be said

to impair shareholder decision-making in the tender offer process.”

(A-71.) Contrary to petitioner’s assertions, the District Court also found

that the Act’s claimed deterrent effect on tender offers was “‘specula-

tive” (A-69) and “uncertain.” (A-79.) Following an exhaustive analy-

sis of the provisions and purposes of the Williams Act as explained

by this Court in CTS v. Dynamics Corp. of America, the District Court

concluded that the Wisconsin BCA’s regulation of the substantive in-

ternal affairs of Wisconsin corporations does not frustrate any pur-

pose of the Williams -Act. (A-76.) The District Court similarly

concluded that the Act’s nondiscriminatory regulation of Wisconsin

corporations only in the furtherance of legitimate state interests does

not contravene the Commerce Clause. (A-81.)

The Seventh Circuit affirmed the District Court in both respects.

The Court, in an opinion by Judge Easterbrook, initially noted its

strong disagreement with the economic principles relied upon by the

Wisconsin Legislature in enacting the Business Combination Act.

(A-23-24.) Nevertheless, the Court held that the preemption analysis

clearly defined by this Court in CTS v. Dynamics Corp. of America

compelled the conclusion that the Act does not frustrate any purpose

of the Williams Act. Like the District Court, the Seventh Circuit recog-

nized that the Wisconsin Act’s regulation of the internal affairs of state

corporations does not prevent, delay or otherwise regulate tender offers

or the tender offer process. The Court observed that the Wisconsin

BCA does not “alter any of the procedures governed by federal regu-

lation” (A-32) and that the Act leaves bidders “free to acquire shares

of Wisconsin firms on schedule.” (A-31.)

Relying on CTS, the Seventh Circuit held that nothing in the Wil-

liams Act indicates an intent to preempt such state regulation of the

internal affairs of domestic corporations. (A-29.) Indeed, the Court

found that the Wisconsin BCA is conceptually indistinguishable from

the statute this Court upheld in CTS, and from other rules, such as

cumulative voting, governing the internal affairs of corporations. (A-30,

31.) “If [such statutes] are not preempted,’ the Court observed,

“neither is Wis. Stat. § 180.726." (A-31.) Noting finally that “the Wil-

liams Act does not create a right to profit from the business of mak-

ing tender offers,’ the Seventh Circuit concluded that under CTS the

Wisconsin BCA is not preempted by the Williams Act. (A-33.)

The Court of Appeals found that CTS likewise controlled peti-

tioner’s Commerce Clause challenge to the Wisconsin BCA. In ac-

cord with CTS, the Court found that the Wisconsin BCA does not

discriminate against interstate commerce nor subject interstate activities

to a risk of inconsistent regulation. (A-34-36, 37.) In addition, the

Seventh Circuit recognized that the Wisconsin BCA does not direct-

ly regulate interstate commerce in any respect: “Buyers of stock in

Wisconsin firms may exercise full rights as investors, taking immediate

control. No interstate transaction is regulated or forbidden.” (A-35.)

These matters resolved, the Seventh Circuit concluded that this Court's

clear holding in CTS dictated a simple, straightforward result: Since

the Wisconsin BCA evenhandedly regulates only the internal affairs

of corporations created under Wisconsin law, the Act does not vio-

late the Commerce Clause, even if it may make some Wisconsin cor-

porations less attractive takeover targets. (A-40, 41.)

REASONS FOR DENYING THE WRIT

I. THE ISSUES RAISED BY THE PETITION ARE MOOT.

This case is moot. “‘[W]Jhen the issues presented are no longer

‘live’ or the parties lack a legally cognizable interest in the outcome,”

United States Parole Commission v. Geraghty, 445 U.S. 388, 396

(1980), quoting Powell v. McCormack, 395 U.S. 486, 496 (1969), there

no longer exists a case or controversy for review by this Court. Peti-

tioner commenced this litigation and ultimately sought review by this

Court in order to facilitate its tender offer for Universal. That tender

offer no longer exists; two weeks after filing its petition, Amanda

terminated its tender offer for Universal, “instructed the depositary

for its offer to return all shares tendered to [it]-and not previously

withdrawn” (Res. App. 2) and withdrew its offer to acquire Univer-

sal by merger. This case accordingly is moot because “‘no decision

. . . by this Court can now have an effect’ on petitioner's now-

abandoned transaction. Tiverton Board of License Commissioners v.

Pastore, 469 U.S. 238, 239 (1985) (per curiam).

Edgar v. MITE Corp., 457 U.S. 624 (1982), does not alter this

conclusion: Although MITE had withdrawn its offer before review

by this Court, it retained a significant interest in the controversy be-

cause it remained “expose{d] . . . to civil and criminal liability for

making the . . . offer in violation of the Illinois Act.” /d. at 630 (plural-

ity opinion). Here, petitioner faces no poteniial civil or criminal lia-

bility, nor any other ‘collateral consequences” on matters relating

to the judgment at issue.’

The mere fact that Amanda has spent money on its former offer (mgney Amanda

cannot recover regardless of any action by this Court) does not keep alive a con-

troversy that has now ended.

Similarly, the circumstances in CTS Corp. v. Dynamics Corp.

of America, 481 U.S. 69 (1987), only underscore the mootness of the

instant case. The statute at issue in CTS affected the voting rights of

the CTS stock acquired by Dynamics. The Court held that even though

the parties had settled several disputes regarding a tender offer, the

case was not moot because the judgment of this Court would still

affect the voting rights of Dynamic’s shares. 481 U.S. at 78 n. 5. The

operation of the Wisconsin BCA in no way restricts Amanda’s rights

as a shareholder (if it remains a shareholder) or otherwise has any

continuing harmful effects on Amanda.

Apparently anticipating that its offer would be withdrawn not long

after the filing of the petition and that it would face a mootness

challenge, petitioner included in its petition (pp. 10-11) a section enti-

tled “constant repetition consistently evading review.’ These argu-

ments are wholly unpersuasive. The “capable of repetition’’ exception

applies only where “*(1) the challenged action was in its duration too

short to be fully litigated prior to its cessation or expiration, and (2)

there was a reasonable expectation that the same complaining party

would be subjected to the same action again.” Weinstein v. Bradford,

423 U.S. 147, 149 (1975). This case fails both tests. First, there is no

time limitation inherent in tender offer activity which prevents full

litigation of constitutional issues during the pendency of an offer.

Tender offers frequently reach the appellate stage, as demonstrated

by this Court’s decision in CTS, this_very case (prior to petitioner's

abandonment of its offer), and numerous decisions of other courts

of appeals, including those cited in the petition. See, e.g., Polaroid

Corp. v. Disney, 862 F.2d 987 (3d Cir. 1988); Tyson Foods, Inc. v.

McReynolds, 865 F.2d 99 (6th Cir. 1989); Hyde Park Pariners, L.P.

| v. Connolly, 839 F.2d 837 (Ist Cir. 1988).

Second, Amanda can point to no “reasonable expectation” or

“demonstrated probability” that it will ever be subject to the provi-

sions of the Wisconsin BCA. See Weinstein v. Bradford, 423 U.S. 147,

149 (1975) (per curiam). A mere “theoretical possibility” that Amanda

may make a new offer or that some other controversy will develop

in the future involving the Wisconsin BCA is insufficient to revive

this case. See Murphy v. Hunt, 455 U.S. 478, 482 (1982) (per curi-

| icaiacieaaaeaiiii il

am). This case is moot. The petition should be denied, without vacat-

ing the decisions below4

II. THE DECISION OF THE COURT OF APPEALS

UPHOLDING THE WISCONSIN BCA MERELY AP-

PLIES THE ANALYSIS OF THIS COURT IN CTS AND

PRESENTS NO IMPORTANT ISSUES FOR REVIEW.

In CTS v. Dynamics Corp. of America, 481 U.S. 69 (1987), this

Court set forth clear and definitive principles to govern Supremacy

and Conimerce Clause challenges to state regulation of the internal

affairs of domestic corporations. The Seventh Circuit below concluded

that these principles clearly outlined in CTS compel the conclusion

that the Wisconsin BCA is constitutional. That decision is the first,

and to this point the only, court of appeals decision which addresses

a claim that a state business combinations act which applies only to

domestic corporations is preempted by the Williams Act or violates

the Commerce Clause. There is no conflict among the circuits on

these issues. Since the Seventh Circuit simply followed CTS, this case

raises no new, interesting or important legal issues for review by this

Court, and no sound reason to revisit issues definitively resolved only

two years ago.

‘Because this case has become moot through the petitioner's own voluntary

acts, this Court should not vacate the judgment below pursuant to the Munsingwear

mootness rule. Because **those who have been prevented from obtaining the review

to which they are entitled should not be treated as if there had been a review.”

the Munsingwear rule protects parties from the res judicata effects of judgments,

**review of which was prevented through happenstance. *’ United States v. Mun-

singwear, Inc. , 340 U.S. 36, 39-41 (1950) (emphasis added). The rationale for this

rule obviously does not apply where a party has mooted the controversy through

its own voluntary acts. Otherwise, disappointed Jitigants could have adverse judg-

ments vacated simply by announcing that they had terminated the conduct at issue

(thereby obtaining in many cases in substance what was sought from the Court in

the first instance). Cf. City of Mesquite v. Aladdin's Castle, 455 U.S. 283. 288-89

(1982). Such a result would be particularly inappropriate here, for an order vacat-

ing the lower courts’ judgments would leave Amanda (technically) free to reinsti-

tute litigation in the same courts, making arguments fully argued. fully litigated

and fully resolved in this litigation. This Court should accordingly simply deny the

petition for certiorari.

A. The Court Below Merely Applied The Analysis Of This

Court in CTS In Concluding That The Wisconsin BCA Is

Not Preempted By The Williams Act.

The Court of Appeals correctly acknowledged at the outset that

preemption analysis begins with the presumption that Congress does

not intend to preempt state action, particularly ‘‘state law in areas

traditionally regulated by the States*~-See A-28, quoting California

v. ARC America Corp., U.S. , 109 S. Ct. 1661, 1665

(1989). See also Hillsborough County v. Automated Medical Labora-

tories, Inc., 471 U.S. 707, 716 (1985). This Court in CTS made it clear

that there is perhaps no area of regulation more traditionally reserved

to state governments than the regulation of the internal affairs of domes-

tic corporations. See 481 U.S. at 89-91. The Securities Exchange Act

(which the Williams Act amended) itself sets forth an unequivocal

Congressional intent to preserve state laws which do not “conflict

with the provisions of this chapter or the rules and regulations there-

under. . 2” 15 U.S.C. § 78bb(a) (1988). See also CTS, 481 U.S. at

96 (Scalia, J., concurring) (““Unless it serves no function, [§ 28(a)]

forecloses preemption on the basis of conflicting ‘purpose’ as opposed

to conflicting ‘provision. ”’).

The Seventh Circuit recognized that the Wisconsin BCA does

not conflict with the provisions or policies of the Williams Act. The

Seventh Circuit observed, as has this Court, that “[t}he Williams Act

regulates the process of tender offers: timing, disclosure, proration

. . ., best-price rules.” (A-30) (emphasis by the Court). See also CTS,

481 U.S. at 79-80 (summarizing “the structure and purposes of the

Williams Act”); Schreiber v. Burlington Northern, Inc. , 472 U.S. 1,

8-11 (1985). The Wisconsin BCA, in contrast, regulates only the in-

ternal affairs of corporations domiciled in Wisconsin; “‘it does not

. alter any of the procedures governed by federal regulation.”

(A-32.)° Like dozens of other state statutes regulating the internal af-

fairs of domestic corporations, all the Wisconsin BCA does is define

‘Amanda also seems to suggest in the petition that the Wisconsin BCA some-

how frustrates a 60-day tender offer period set forth by the Williams Act. Petition,

26-27. To the contrary, as the Seventh Circuit recognized, **[aJny bidder comply-

ing with federal law is free to acquire shares of Wisconsin firms on schedule.”

(A-31).

10

corporate privileges after a successful tender offer.

The Seventh Circuit’s conclusion that the Williams Act does not

preempt such state regulation of internal corporate affairs follows

directly from CTS. This Court in CTS expressly refused to read the

Williams Act to preempt state laws which “may limit or delay the

free exercise of power after a successful tender offer.” 481 U.S. at

85 (emphasis added). CTS identified staggered directors’ terms (which

may delay control for up to three years in some states) and cumula-

tive voting statutes as corporate governance laws of “‘unquestioned

validity”” even though they, like the Wisconsin BCA, may delay the

exercise of complete control following a successful tender offer. /d.

Judge Easterbrook expanded on these examp!cs by identifying a num-

ber of other state statutes which would fall in that category — sta-

tutes authorizing charitable and mutual corporations, buy-sell

agreements and non-voting stock — all of which would be preempt-

ed if the Williams Act were read as suggested by the plaintiff in C7S,

and petitioner here. (A-30, 31.) Like this Court in CTS, the Seventh

Circuit recognized that there is no principled distinction between those

statutes of “‘unquestioned validity” — which “may make a transac-

tion less attractive or impossible” (A-30) — and the Wisconsin BCA’s

short-term limitation on corporate privileges which were created by

Wisconsin law in the first place.®

*While the Seventh Circuit's opinion below is the only appellate court decision

addressing the interaction of the Williams Act and a state business combination act,

the opinions of the district courts in substance are in accord. In addition to the Dis-

trict Court opinion here, the court in Vernitron Corp. v. Kollmorgen Corp. , 89 Civ.

241 (JES.), trans. at 53 (S.D.N.Y. Feb. 9, 1989), rejected a tender offeror’s sub-

stantive “‘neutrality’’ argument and concluded that New York's business combina-

tion act is fully consistent with Williams Act purposes. See also Veere, Inc. v.

Firestone Tire & Rubber Co., 685 F. Supp. 1027, 1030 (N.D. Ohio 1988) (recog-

nizing that after CTS a majority of this Court rejects the ‘‘neutrality’* interpretation

of the Williams Act). No district court has ever permanently struck down a busi-

ness combination act as frustrating any purpose of the Williams Act, although some

have applied a *‘meaningful opportunity for success’’ standard in the analysis. See,

e.g., BNS, Inc. v. Koppers Co., 683 F. Supp 458, 469 (D. Del. 1988); RP Acquisi-

tion Corp. v. Staley Continental, Inc., 686 F. Supp. 476, 482 (D. Del. 1988); West

Point-Pepperell, Inc. v. Farley, Inc., 711 F. Supp. 1096, 1102 (N.D. Ga. 1989).

While not adopting the *‘meaningful opportunity for success’’ standard, the Seventh

Circuit identified a variety of meaningful ways hostile tender offers may succeed

notwithstanding the provisions of the Wisconsin BCA. (A-39, 40.)

hl

The Court of Appeals likewise simply applied CTS in its rejec-

tion of the “neutrality” interpretation of the Williams Act. The Court

below correctly observed that, beginning with Piper v. Chris-Craft

Industries, Inc. , 430 U.S. 1 (1977), this Court has rejected the notion

that there was a Congressional purpose in the Williams Act to ensure

substantive “neutrality” between bidder and management in the tender

offer context. Any Congressional “‘policy of evenhandedness does not

go .. . to the purpose of the legislation,’ the Piper court empha-

sized; “[nJjeutrality is, rather, but one characteristic of legislation

directed toward a different purpose — the protection of investors.”

430 U.S. at 29. Cf Schreiber v. Burlington Northern, Inc. , 472 U.S.

1, 9 (1985). While three Justices of this Court suggested in Edgar

v. MITE Corp., 457 U.S. 624, 634-40 (1982), that there wa. such

a policy of “neutrality” to be found in the Williams Act, in CTS only

one Justice advanced that interpretation of the Act. 481 U.S. at 97-99

(White, J., dissenting). See also A-29 (noting this Court’s “rough treat-

ment” of the Seventh Circuit's favorable views of the “neutrality”

interpretation in CTS). CTS thus compelled the lower court’s conclu-

sion that while Congress itself may have desired to remain neutral

in regulating the procedural aspects of the tender offer process, “*{n]Joth-

ing in the Williams Act says that the federal compromise among bid-

ders, targets’ managers, and investors is the only permissible one.”

A-29, citing CTS, 481 U.S. at 78-87.’

The Seventh Circuit also correctly rejected petitioner's argument

’This Court in fact upheld in CTS a statute far more onerous in its practical

effect than the Wisconsin BCA. The Indiana Control Share Acquisition statute at

issue in CTS could in certain circumstances deprive a tender offzior of all voting

rights for shares acquired in a tender offer. Notwithstanding the lower court's con-

clusion that the Indiana statute was a ‘‘lethal dose’ to prospective offers, see Dy-

namics Corp. of America v. CTS Corp., 794 F.2d 250, 262-63 (7th Cir. i986).

this Court concluded that the Indiana statute did not frustrate any purpose of the

Williams Act. 481 U.S. at 85-87. The Wisconsin BCA in contrast does not regu-

late the acquisition of control or otherwise affect a tender offeror’s voting rights:

rather, the Act simply delays the right to exercise the corporate privilege to merge

parent and subsidiary — a privilege created by Wisconsin law in the first instance

— a result CTS makes clear is consistent with the Williams Act. See 481 U.S. at

85-86.

/ 12

that principles of “shareholder autonomy” (supposedly created by the

Williams Act) invalidate statutes like the Wisconsin BCA: “Only if

the Williams Act gives investors a right to be the beneficiary of offers

could Wisconsin’s law run afoul of the federal rule. No such entitle-

ment can be mined out of the Williams Act, however.” (A-32.) This

conclusion, the Seventh Circuit recognized, follows directly from

Schreiber v. Burlington Northern, Inc. , 472 U.S. | (1985), in which

this Court specifically held that actions by a tender offeror and target

management leading to the withdrawal of a tender offer “did not

deprive investors of their due under the Williams Act.” (A-32.)

In the end, therefore, the Seventh Circuit did no more than ap-

ply the preemption analysis developed by this Court in CTS. As was

the case with the Indiana statute in CTS, “(t]he long standing preva-

lence of state regulation in this area suggests that, if Congress had

intended to pre-empt” state regulation of the internal affairs of domestic

corporations like the Wisconsin BCA “‘it would have said so explicit-

ly.” 481 U.S. at 86. Since Congress clearly did not do so, and since

the Court of Appeals simply followed well-established precedent in

upholding the Wisconsin BCA, the petition presents no new or im- _

portant issues, and there is no reason for this Court to accept this

case for review.

B. The Court of Appeals Merely Applied The Analysis Of This

Court In CTS In Concluding That The Wisconsin BCA Does

Not Contravene The Commerce Clause.

The central element of the Commerce Clause analysis in CTS

is the principle that a state corporate law which applies only to domestic

corporations, does not discriminate against interstate commerce and

furthers legitimate state interésts does not contravene the Commerce

Clause. 481 U.S. at 87-94. The Court below, applying the uniform

approach of the lower courts since CTS, upheld the Wisconsin BCA

against petitioner’s contention that the Act unreasonably burdens in-

terstate commerce. Once again, there is no confusion in the lower

courts on this score, no conflict among the circuits and, in light of

the analysis outlined by CTS only two years ago, no important issue

in need of review by this Court.

/

13

The straightforward Commerce Clause analysis set forth in CTS

to govern the regulation of internal corporate affairs has generated

no confusion, and certainly no conflict, in the lower courts. The lower

courts have uniformly concluded that where business combinations

| acts, like the statute here, apply evenhandedly and only to domestic

: corporations, under CTS they do not run afoul of the Commerce

Clause’ In contrast, where, as in Edgar v. MITE Corp., 457 U.S.

624 (1982), a state statute purports to apply to corporations chartered

elsewhere, the lower courts have found it unconstitutional under the

Commerce Clause. See, e.g., Tyson Foods, Inc. v. McReynolds, 865

| F.2d 99, 101-02 (6th Cir. 1989) (a case incdrrectly cited by petitioner

as evidence of a supposed conflict among the lower courts).

The Seventh Circuit’s decision below (the first post-C7S appel-

late court decision in this context) falls directly in line with the anal-

ysis and holding of CTS as consistently interpreted by the lower courts.

Because the Wisconsin BCA applies evenhandedly and only to domes-

tic corporations, the Act plainly neither discriminates against inter-

state commerce nor poses a risk of subjecting tender offers to

inconsistent regulation. (A-18-26, 21.) The Seventh Circuit also cor-

rectly recognized, directly contrary to petitioner’s apparent assertion

(pp. 16-17), that the Act in no respect regulates interstate commerce.

(A-35) (“No interstate transaction is regulated or forbidden.”’). Fi-

nally, the Seventh Circuit did not disturb the District Court's uncon-

trover:ed finding that the Wisconsin BCA furthers the interests deemed

constitutionally legitimate in CTS. (A-78, 79.) This conclusion, too,

is in accord with the decisions of the lower courts addressing busi-

ness combinations acts. See BNS, Inc. v. Koppers Co. , 683 F. Supp.

at 473; RP Acquisition Corp., 686 F. Supp. at 482; West Poini-

Pepperell, 711 F. Supp. at 1107.

The Court of Appeals also observed in accord with CTS that many

*See, e.g., Vernitren Corp. v. Kollmorgen Corp., 89 Civ. 241 (JES), slip op.

at 54-56 (S.D.N.Y. Feb. 9, 1989); West Point-Pepperell, Inc. v. Farley, Inc.. 711

F. Supp 1096, 1108 (N.D. Ga. 1989); RP Acquisition Corp. v. Staley Continen-

tal,, Inc., 686 F. Supp. 476, 482 (D. Del. 1988); BNS, Inc. v. Koppers Co. , 683

F. Supp. 458, 473 (D. Del. 1988).

a il

14

unquestionably valid state statutes have similar or more substantial

effects on interstate commerce than the claimed. effect of the Wiscon-

sin BCA. (A-35.) This Court likewise found in C7S that numerous

statc laws which “prohibit[ ] certain transactions, and regulat[e] others

. . necessarily affect certain aspects of interstate commerce.” 481

U.S. at 90. CTS in fact identified mergers, one of the precise subjects

of the Wiscensin BCA, as a “typical example” of state regulations

which affect interstate commerce but do not violate the Commerce

Clause even though they may “make it more difficult for corpora-

tions to merge.” /d. The Seventh Circuit applied this example by noting

that this Court has long held that, as the merger privilege is granted

by the state, withholding the privilege altogether does not violate the

Commerce Clause. (A-35), citing, inter alia, Louisville & Nashville

R.R. v. Kentucky, 161 U.S. 677, 701-04 (1896); Kansas City, Memphis

& Birmingham R.R. v. Stiles, 242 U.S. Ill, 17 (1916).

Petitioner nonetheless now attempts to create the illusion of er-

ror and conflict by suggesting that the Seventh Circuit improperly

“rejected”’ some form of a constitutional balancing analysis. Petition,

20-22, citing Pike v. Bruce Church, inc., 397 U.S. 137 (1970). This

assertion oversimplifies and distorts the Seventh Circuit's decision:

what the Court below did was simply follow the Commerce Clause

analysis dictated by CTS. In so doing, the Seventh Circuit declined

to find that the constitutionality of the Wisconsin BCA turned bn its

view of the legislative wisdom of the Act, particularly since the Act

regulates an area traditionally reserved to the States. (A-34, 38-39.)

This approach is entirely consistent with CTS and a long line of like

precedent of this Court. See CTS, 481 U.S. at 92 (“The Constitution

does not require the States to subscribe to any particular economic”

theory. We are not inclined to ‘second-guess the empirical judgments

of lawmakers concerning the utility of legislation. **), guoting Kas-

sell v. Consolidated Freightways Corp., 450 U.S. 662, 679 (1981)

(Brennan, J., concurring). See also Exxon Corp. v. Governor of

Maryland, 437 U.S. 117, 127-29 (1978).

The precise contours of any balancing analysis required by the

Commerce Clause in the context of other state regulation in other

areas of commerce may be the subject of debate in academe. This

Court has recently made it clear that a balancing analysis may be

———

wy

15

appropriate in other contexts. See Northwest Central Pipeline Corp.

v. State Corporation Commission of Kansas, US.

109 S. Ct. 1262, 1282 (1989); Healy v. Beer Institute, Inc.,

U.S. , 109 S.Ct. 2491 (1989). CTS made equally clear, however,

the appropriate analysis for nondiscriminatory state regulation of the

internal affairs of domestic corporations, and there has since been

no confusion or conflict in the lower courts in applying that analysis.

Ultimately, the decision of the Court of Appeals upholding the

Wisconsin BCA recognizes that the fundamental assertion of the pe-

tition (that the Wisconsin BCA unreasonably burdens interstate com-

merce) is premised on a notion this Court squarely rejected in CTS.

In language that controls the outcome of this case as well, CTS made

it clear that even if a state’s exercise of its traditional authority to regu-

late the internal affairs of domestic corporations “‘limit[s] the num-

ber of successful tender offers . . . this result would not substantially

affect our Commerce Clause analysis”:

*The petitioner's claimed conflict among the circuits regarding Commerce Clause

balancing in the takeover context is illusory as well. Concededly, the Sixth Circuit

applied a balancing analysis in striking down state takeover legisiation. but the legis:

lation there; dike that in Edgar v. MITE Corp., purported to apply to corporations

chartered in other states. See Tyson Foods, Inc. v. McReynolds, 865 F.2d 99. 101-02

(6th Cir. 1989). Hvde Park Partners, L.P. v. Connolly, 839 F. 2d 837 (1st Cir.

1988), another supposed example of conflict according to the petition, in fact is

fully in accord with the Seventh Circuit's decision below. The Hyde Park court

affirmed that the deferential approach of CTS applies where. like the Wisconsin

BCA. a state statute does not directly regulate interstate commerce but merely *‘de-

fine|s] the rights that are acquired by purchasing [domestic corporations] shares."

839 F.2d at 845, citing CTS, 481 U.S. at 69. The Hyde Park court utilized a balancing

analysis in that case because, in contrast to the Wisconsin BCA, the Massachusetts

statute at issue there directly **prohibit/s]"* or **condition|s}"* the interstate sale of

the shares themselves. 839 F.2¢ at 845. Since the Seventh Circuit, consistent with

the other lower courts, directly applied the analysis defined by C7S, whether it may

be appropriate to attach the purely formal label *‘balancing”’ to the CTS opinion,

see Country Classic Dairies v. Montana Department of Commerce Milk Control

Bureau, 847 F.2d 593, 595 (9th Cir. 1988), certainly does not alone create an im-

portant issue for review in this case.

16

We reiterate that this Act does not prohibit any entity -- resi-

dent or nonresident — from offering to purchase, or from

purchasing, shares in Indiana corporations, or from attempting

thereby to gain control . . . We have rejected the “notion that

the Commerce Clause protects the particular structure or

methods of operation in a. . . market.” Exxon Corp. v. Gover-

nor of Maryland, 437 U.S., at 127.-The very commodity that

is traded in the securities market is one whose characteris-

tics are defined by state law. Similarly, the very commodity

that is traded in the “market for corporate control’” — the

corporation — is one that owes its existence and attributes

to state law. Indiana need noi define these commodities as

other States do; it need only provide that residents and non-

residents have equal access to them. This Indiana has done.

Accordingly, even if the Act should decrease the number of

successful tender offers for Indiana corporations, this would

not offend the Commerce Clause.

481 U.S. at 93-94.

The Seventh Circuit’s decision demonstrates that all of these ob-

servations apply fully to the Wisconsin BCA. This holding in C7S

thus alone confirms that the decision below upholding the Wiscon-

sin BCA in accordance with the uniform approach of the lower courts

since CTS raises no important issues for review by this Court, and

no reason to reexamine CTS only two years after it was decided.

17

CONCLUSION

For all of the foregoing reasons, respondents respectfully sub-

mit that the petition for a writ of certiorari should be denied.

Dated this 26th day of September, 1989.

Respectfully submitted,

DAVID E. BECKWITH

JOHN R. DAWSON

Foley & Lardner

777 East Wisconsin Avenue

Milwaukee, WI 53202-5367

(414) 271-2400

MICHAEL W. SCHWARTZ

PETER C. HEIN ;

Wachtell, Lipton, Rosen

& Katz

299 Park Avenue

New York, NY 10171

(212) 371-9200

Attorneys for Respondents

App. |

JUDGMENT — ORAL ARGUMENT

United States Court of Appeals

For the Seventh Circuit

Chicago, Illinois 60604

May 24, 1989

Before

Hon. William J. Bauer, Chief Judge

Hon. Frank H. Easterbrook, Circuit Judge

Hon. Hubert L. Will, Senior District Court Judge*

AMANDA ACQUISITION _ »

CORPORATION

Plaintiff-Appellant,

Cross-Appellec,

Appeals from the United

States District Court for the

Eastern District of Wisconsin

No. 89-1581 and VS. No. 88 C 1296

89-1712 Judge Joseph P. Stadtmueller

UNIVERSAL FOODS y,

CORPORATION, et al.,

Defendants-Appellees,

Cross-Appellants.

This cause was heard on the record from the United States Dis-

trict Court for the Eastern District of Wisconsin ,

Division, and was argued by counsel.

On consideration whereof. IT IS CORDERED AND ADJUDGED

by this Court that the judgment of the said District Court in this cause

appealed from be, and the same is hereby, AFFIRMED, in accor-

dance with the order of this Court entered this date. Amanda Acqui-

sition Corporation pays costs.

*Hon. Hubert L. Will, Senior District Judge for the Northern District

of Illinois, sitting by designation.

Adams & Rinehart, Inc.

708 Third Avenue

New York, New York 10017

Tel. 212-557-0100

NEWS

FOR IMMEDIATE RELEASE

Contact: Michael Gross

Thomas W. Campo

Adams & Rinehart, Inc.

(212) 557-0100

HIGH VOLTAGE ENGINEERING CORPORATION TERMI-

NATES OFFER FOR UNIVERSAL FOODS CORPORATION

BOSTON, Mass., September 11, 1989 — High Voltage En-

gineering Corporation announced today that it has terminated its $38

per share cash tender offer for Universal Foods Corporation and its

offer to the Board of Directors of Universal to acquire Universal for

$42 per share in cash in a negotiated transaction. High Voltage has

instructed the depositary for iis offer to return all shares tendered

to High Voltage and not previously withdrawn.

Clifford Press, Deputy Chairman of High Voltage, stated, **The

Board's rejection of our proposals, and its refusal even to meet with

us to discuss any questions they may have had, did not serve the in-

terests of Universal's shareholders. We have determined at this time

not to continue our tender offer and concluded that this tender offer

cannot be consummated in light of the Wisconsin anti-takeover sta-

tute. Universal's Board of Directors has made a number of promises

to its shareholders during the course of our offer, and now we and

the other shareholders will see if they can follow through on those

promises. We and the other shareholders will also look forward to

the determination by the Supreme Court of the validity of Wiscon-

sin’s anti-takeover statute.”

KK

[2205W . 3]

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