Leroy v. Great Western United Corporation

PETITIONER: Leroy
RESPONDENT: Great Western United Corporation
LOCATION: Collision between Mr. Montrym’s car and motorcycle

DOCKET NO.: 78-759
DECIDED BY: Burger Court (1975-1981)
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: 443 US 173 (1979)
ARGUED: Apr 17, 1979
DECIDED: Jun 26, 1979

ADVOCATES:
Amy Juviler - for the State of New York, as amicus curiae
Frank H. Easterbrook - for the Securities and Exchange Commission, as amicus curiae
Ivan Irwin, Jr. - for appellee
Peter E. Heiser, Jr. - for appellants
Washington D. C. - for the Securities and Exchange Commission, as amicus curiae

Facts of the case

Question

Media for Leroy v. Great Western United Corporation

Audio Transcription for Oral Argument - April 17, 1979 in Leroy v. Great Western United Corporation

Warren E. Burger:

We'll hear arguments next in Leroy against Great Western United Corporation.

Before you proceed counsel, I want to inform the counsel in United States against Batchelder, the Solicitor General's office and Mr. Bellows that we will not reach your case this afternoon and you may be excused if you -- at any time you wish.

Peter E. Heiser, Jr.:

Mr. Chief Justice --

Warren E. Burger:

Mr. Heiser.

Peter E. Heiser, Jr.:

-- and may it please the Court.

The Idaho official appellants in this case believe that the jurisdiction and venue issues that are brought here before the Court are the most important jurisdiction and venue issues relating to federal court jurisdiction over state officials since the decision in 1908 in ex parte Young.

And that the issues on the merits of this case are very demanding, very interesting in the interrelationship of federal securities laws and state securities laws in a system of cooperative federalism.

This case involves in attempt by the appellee, Great Western United Corporation, a New York Stock Exchange traded, Delaware Corporation with corporate offices in Colorado, executive offices in Texas and which does business throughout the United States to effect a cash partial tender offer for up to two million shares of the outstanding common stock of the Sunshine Mining Company.

A New York Stock Exchange traded, Washington State Corporation with its principle asset, a silver mine located in the State of Idaho, its corporate offices in the State of Idaho, its executive offices in New York and other substantial assets in the states of Maryland and New York.

Though in this case, the proposed tender offer was initiated by Great Western United Corporation in Dallas, Texas.

The tender offer was announced and disseminated through a New York investment banking firm and the shares were to be tendered to a Chicago, Illinois bank.

As far as timing is concerned, on Monday, March 21, 1977, Great Western United Corporation simultaneously filed a Scheduled 14D statement with the Securities Exchange Commission as required by the William Act amendment to the 1934 Securities Exchange Act, which relates to cash tender offers for corporate control.

It voluntarily appeared in the State of Idaho to file a registration statement under the Idaho Corporate Takeover Law which is the subject of the constitutional challenge herein.

And it inquired of the States of Maryland and New York as to whether those states would exercise jurisdiction under their respective state takeover laws.

Four days later, that Friday, the Deputy Administrator of Securities of the State of Idaho responded to Great Western United requesting additional information under the Idaho filing and contemporaneously, appellant McEldowney, the Director of the Idaho Department of Finance, submitted an executive order -- administrative order delaying the effective date of the tender offer.

No other official from any state, including the appellant Kidwell who has been replaced in office by appellant Leroy, took any action or threatened any action.

They were merely officials who were charged under their respective state laws with administering those respective state securities laws.

Nor did Great Western United ever attempt to negotiate or respond in part to the request of Idaho for additional information, despite the fact that one of those requests was merely that the eight missing pages from the Xerox copy of the 14D Statement which had been filed with the SCC, be submitted.

Instead, Great Western United sole response to the request for additional information that was received by them on a Friday was that next Monday morning at 9 o'clock in the morning, to appear in Federal District Court in the Northern District of Texas, Dallas division, seeking an ex parte temporary restraining order in a lawsuit which challenged the constitutionality of the state takeover laws of Idaho, Maryland and New York and asserted that personal jurisdiction and venue were proper over the state officials challenged under the ex parte Young Stripping Doctrine in the Northern District of Texas, rather than in their home states.

William H. Rehnquist:

Was the sole basis of this claim of fact that the federal law preempted the Idaho law?

Peter E. Heiser, Jr.:

No, Mr. Justice Rehnquist, the basis for the constitutional challenge was preemption on the one hand, and on the other hand that the Idaho law and the Maryland and New York law is unduly burdened interstate commerce, and were therefore forbidden on that ground as well.

William H. Rehnquist:

I suppose the mere existence of an Idaho statute which might ultimately be determined to preempt -- to be preempted by a federal statute wouldn't mean that the state official charged with administering would be “violating” the federal statute within Section 27?

Peter E. Heiser, Jr.:

Mr. Justice Rehnquist that is exactly our contention.

We have a situation here where the officials involved were themselves regulators of securities transactions and are being sought to be held under the jurisdiction and venue portion of the Securities Exchange Act of 1934 to be subject to suit under that as though they had participated in fraudulent activities, or had in fact violated some direct command of that Securities Exchange Act.

Byron R. White:

That's one -- on what basis for jurisdiction?

Peter E. Heiser, Jr.:

That is the federal securities law basis for jurisdiction.

That is correct Mr. Justice White.

The other basis for jurisdiction was the Texas long-arm statute and under the Texas long-arm statute, it was alleged that the Idaho and other officials were actually doing business in Texas, and doing business is a jurisdictional prerequisite in that statute.

It has a two-step analysis that must be reached.

The statute defines two categories of doing business.