RESPONDENT: Burlington Northern, Inc.
LOCATION: United States Courthouse
DOCKET NO.: 83-2129
DECIDED BY: Burger Court (1981-1986)
LOWER COURT: United States Court of Appeals for the Third Circuit
CITATION: 472 US 1 (1985)
ARGUED: Jan 09, 1985
DECIDED: Jun 04, 1985
Irving Bizar - on behalf of the petitioner
Marc P. Cherno - on behalf of the respondent
Facts of the case
Media for Schreiber v. Burlington Northern, Inc.
Audio Transcription for Oral Argument - January 09, 1985 in Schreiber v. Burlington Northern, Inc.
Warren E. Burger:
Mr. Bizar, I think you may proceed whenever you're ready.
Mr. Chief Justice, and may it please the Court; the issue in this case is whether the statutory language enacted by the Congress for section 14(e) in the Williams Act is to be given a different construction in the plain meaning of the words used.
14(e)... and I shall paraphrase that briefly for Your Honor... provides three parts.
The first part prohibits misrepresentations or omissions to state facts.
The second part, preceded by the disjunctive "or", prohibits the making of any fraudulent, deceptive or manipulative acts or practices in connection with a tender offer.
And the third part directs the Securities and Exchange Commission to promulgate regulations to prevent fraudulent, deceptive or manipulative acts or practices.
The courts below held, although the Third Circuit criticized this finding and my brothers argue here, that misrepresentation is required for any violation of section 14(e), and they found none below.
The facts upon which this case arises are relatively simple.
They're based upon a complaint, and a complaint which was subject to a 12(b)(6) motion, on which no evidence was considered, and, as Your Honors know, a 12(b)(6) motion assumes the truth of the complaint.
And those facts are, briefly, these: Burlington Northern, after acquiring a block of El Paso stock, made a tender offer for 51 percent of the El Paso stock outstanding, or approximately 25-odd million shares, at $24 a share.
They did this on December 20, 1982.
December 30, 1982, they have received the 51 percent they had tendered for.
El Paso management, anxious to defeat this tender offer, first issued some preferred stock.
Burlington Northern attacked that issuance in the Delaware Chancery Court, and was on the very eve of receiving a victory in that court, the Chancellor having announced that that issue would be held illegal and was calling the parties in to consider what further remedies were to be considered.
I might add that the tender offer which had originally been promulgated by Burlington Northern had a number of outs.
The complaint alleges that those outs were inapplicable.
Thereafter, on... faced with defeat, the El Paso management met with Burlington Northern and arranged a new deal.
The new deal called for cancellation of the old offer, notwithstanding the fact that the old offer had been fully subscribed for, and provided for, instead, the following.
El Paso would sell 4.1 million shares to Burlington Northern for the same $24 per share, so that Burlington Northern would in effect not be damaged by having cancelled its winning control of El Paso, and would give to Burlington Northern an option to acquire another 4.9 million shares at the same price.
Burlington Northern would ratify various golden parachute contracts which had been entered into for the El Paso management and insiders and then Burlington Northern would then immediately tender for 21 million shares, in which all of the shareholders of El Paso would now be free to tender, including the insiders.
Simply arithmetic would indicate that having taken advantage of the first deal and having that destroyed, any 30 million shares in an effort to offset the Burlington Northern position.
Needless to say, the second offer was over-subscribed and this suit follows.
Now, we submit to Your Honors that what occurred here plainly violated section 14(e), and we ask Your Honors to follow the reasoning of the Mobil case in the Sixth Circuit rather than the cases in the Second, Third and Fourth Circuits, which hold that misrepresentation is a necessary element in--
Byron R. White:
Are those the only Circuits?
--We think those are the only Circuits.
There are a number of District Court cases throughout the country seemingly following the same rationale.
Byron R. White:
As the Third Circuit?
As the Third Circuit and the Second Circuit.
Byron R. White:
So the Sixth Circuit is the only... the Sixth Circuit is the only one supporting your position?