CTS CORPORATION V. DYNAMICS CORPORATION OF AMERICA
481 U.S. 69 (1987)
NATURE OF THE CASE: An appeal from declaratory judgment and injunctive relief concerning a violation of Commerce Clause. CTS Corp (D) appealed an affirmance of a judgment for Dynamics (P).
FACTS: Indiana adopted the Control Share Acquisitions Chapter (Act). On August 1, 1987, the Act applied to any corporation incorporated in Indiana, unless the corporation amends its articles of incorporation or bylaws to opt out. Before that date, any Indiana corporation can opt into the Act by resolution of its board of directors. The Act applies only to 'issuing public corporations.' The term 'corporation' includes only businesses incorporated in Indiana. The Act addresses the acquisition of 'control shares' in an issuing public corporation. It involves acquisitions of shares when a company maintains 100 shareholders, the company resides in Indiana (physical, principal office or majority assets), the other 10 percent of shareholders live in Indiana, and 10 percent of all shares are owned by Indiana residents or 10,000 shareholders are resident in Indiana. The law seems to allow non-controlling shareholders to determine who will acquire voting control shareholder status. The law prohibits delay by enabling rejection of tender offers (initial offers). Dynamics (P) owned 9.6% of the common stock of D, an Indiana corporation. Six days after the Act went into effect, D announced a tender offer for another million shares in D. P would have owned 27.5% of D. P also filed suit alleging that D had violated the federal securities laws in a number of respects. Two weeks later, the board of directors of D elected to be governed by the provisions of the Act. P moved for leave to amend, alleging that the Act is preempted by the Williams Act, and that the Act violates the Commerce Clause. P sought a temporary restraining order, a preliminary injunction, and declaratory relief against The court agreed with P that the Act violates the Commerce Clause. Its substantial interference with interstate commerce outweighs the articulated local benefits so as to create an impermissible indirect burden on interstate commerce. D appealed. The Court of Appeals affirmed the judgment of the District Court. The Act is calculated to impede transactions between residents of other states. For the sake of trivial or even negative benefits to its residents, Indiana is depriving nonresidents of the valued opportunity to accept tender offers from other nonresidents. The court determined that the internal affairs doctrine did not apply because the effect on the interstate market in securities and corporate control is direct, intended, and substantial. The Supreme Court granted certiorari.
ISSUE:
RULE OF LAW:
HOLDING AND
DECISION:
LEGAL ANALYSIS:
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