EDGAR v. MITE CORPORATION

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Case Basics
Docket No. 
80-1188
Appellee 
Mite Corporation
Appellant 
Edgar
Advocates
(Argued the cause for the State of New York as amicus curiae urging reversal)
(Argued the cause for the Securities and Exchange Commission as amicus curiae urging affirmance)
(Argued the cause for the appellees)
(Argued the cause for the appellant)
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Facts of the Case 

The MITE Corp, 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. 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 target company, but not the offeror, is free to disseminate information about the offer to the target company's shareholders. In addition, the Secretary of State could call a hearing, and the offer could not proceed until the hearing was completed. Finally, the Secretary of State could deny registration of a takeover offer he or she found inequitable. MITE Corp. sought and won a declaratory judgment holding that the Illinois Act was pre-empted by the Williams Act, 15 U.S.C. Sections 78m(d)-(e) and 78n(d)-(f), and that it violated the Commerce Clause.

Question 

Is the Illinois Business Take-Over Act unconstitutional under the Supremacy and Commerce Clauses of the U.S. Constitution?

Conclusion 
Decision: 6 votes for Mite Corporation, 3 vote(s) against
Legal provision: Article 1, Section 8, Paragraph 3: Interstate Commerce Clause

Yes, with regard to the Commerce Clause. The Illinois Act imposes burdens on interstate commerce that are excessive in light of the local interests the Act purports to further. Among the ways a corporation can be covered by the Act is if 10% of the class of equity securities subject to the offer is owned by shareholders located in Illinois. Thus Illinois would have the power to determine whether a tender offer may proceed even if made for a corporation incorporated and having a principal place of business outside of Illinois, with up to 90% of the shareholders residing outside of Illinois. Illinois's asserted interest in protecting resident security holders is insufficient to outweigh the burdens Illinois would impose on interstate commerce. In addition, Illinois's asserted interest in regulating the internal affairs of a corporation incorporated under its laws not only fails to justify the Act's coverage of foreign corporations, but transfers of stock to a third party do not implicate the internal affairs of a corporation.

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EDGAR v. MITE CORPORATION. The Oyez Project at IIT Chicago-Kent College of Law. 12 December 2014. <http://www.oyez.org/cases/1980-1989/1981/1981_80_1188>.
EDGAR v. MITE CORPORATION, The Oyez Project at IIT Chicago-Kent College of Law, http://www.oyez.org/cases/1980-1989/1981/1981_80_1188 (last visited December 12, 2014).
"EDGAR v. MITE CORPORATION," The Oyez Project at IIT Chicago-Kent College of Law, accessed December 12, 2014, http://www.oyez.org/cases/1980-1989/1981/1981_80_1188.