687 F.2d 1122 (8th Cir. 1982), 81-2044, National City Lines, Inc. v. LLC Corp.
|Docket Nº:||81-2044, 81-2074, 81-2193, 81-2356 and 82-1212.|
|Citation:||687 F.2d 1122|
|Party Name:||Blue Sky , NATIONAL CITY LINES, INC., Appellee, v. LLC CORPORATION, Joseph Schoeberl, Commissioner of the Securities Division of the State of Missouri, and Donald Ainsworth, Director of the Division of Insurance of the State of Missouri, Appellants.|
|Case Date:||August 17, 1982|
|Court:||United States Courts of Appeals, Court of Appeals for the Eighth Circuit|
Submitted Nov. 11, 1981.
Kaye, Scholer, Fierman, Hays & Handler, New York City, for amici curiae AGO Holding N. V. and AGO International B. V.
John Ashcroft, Atty. Gen., B. J. Jones, Asst. Atty. Gen., Jefferson City, Mo., for appellants Ainsworth and Schoeberl.
Husch, Eppenberger, Donohue, Elson & Cornfeld, St. Louis, Mo., Bartlett, Venters & Pletz, P. C., Jefferson City, Mo., for appellants.
Jeffrey S. Davidson, Nancy E. Hollingsworth, Kirkland & Ellis, Washington, D. C., Kenneth R. Heineman, Walter O. Theiss, Coburn, Croft & Putzell, St. Louis, Mo., for appellee National City Lines, Inc.
Before HENLEY, [*] McMILLIAN and ARNOLD, Circuit Judges.
McMILLIAN, Circuit Judge.
LLC Corporation (LLC) 1 and the State of Missouri appeal from two preliminary injunctions entered in the District Court for the Western District of Missouri 2 enjoining them from enforcing specific provisions of the Missouri Takeover Bid Disclosure Act (Takeover Act), Mo.Rev.Stat. § 409.500 et seq., and the Missouri Insurance Holding Companies Act (Insurance Act), Mo.Rev.Stat. § 382.010 et seq., against National City Lines, Inc. (National) in hotly contested tender offer and proxy solicitation battles. The district court found that the challenged provisions, as applied to National, were unconstitutional under the Supremacy,
Commerce and Full Faith and Credit Clauses of the United States Constitution.
For reversal appellants argue that the district court erred in finding that (1) the challenged provisions of the state acts conflict with and are preempted by the Securities Exchange Act of 1934, 15 U.S.C. § 78c et seq. (1976), as amended by the Williams Act; (2) the same provisions violate the Commerce Clause; and (3) the McCarran-Ferguson Act, 15 U.S.C. § 1012, did not preclude federal preemption of the Insurance Act. 3 Appellants also raise the issue of federal court deference to state proceedings under the Pullman and Younger abstention doctrines and the Anti-Injunction Act, 28 U.S.C. § 2283. We conclude that we are not precluded by these abstention doctrines from granting relief. We affirm the district court's judgment on the basis that the challenged provisions of the Takeover Act are invalid under the Supremacy and Commerce Clauses and that the Insurance Act is inapplicable on its face to National's tender offer and proxy solicitation. Therefore, we do not reach National's constitutional challenges to the Insurance Act.
A. Tender Offer
The facts, though lengthy, are not in dispute. National is a Delaware corporation engaged in the businesses of trucking, truck terminal leasing, and energy and real estate developments. LLC is a Delaware corporation with subsidiaries engaged in the businesses of convenience food, credit insurance and finance. 4 One of its subsidiaries, Personal Life Insurance Company (Personal), is organized and operated under the insurance laws of Missouri. 5
On September 8, 1981, National announced its intention to make a cash tender offer for any or all shares of LLC common stock. On that same day, National filed a complaint in federal district court seeking to invalidate and enjoin enforcement of several provisions of the Missouri Takeover Act on the basis that they violated the Supremacy and Commerce Clauses of the Constitution.
A hearing was held on September 9, 1981, before Judge Elmo B. Hunter. Judge Hunter indicated his intention to transfer the case to Judge Scott O. Wright and deferred issuing a temporary restraining order after securing the parties' commitment to maintain the status quo. The hearing before Judge Wright was set for September 11, 1981.
On September 10, 1981, the General Counsel of Missouri's Division of Insurance advised National that he believed the Insurance Act was applicable to the tender offer because LLC held securities of Personal, a domestic insurer.
On September 11, 1981, Personal filed a complaint in state court based on the Insurance Act. Judge Byron Kinder issued an ex parte temporary restraining order forbidding National from completing its tender offer until it complied with the Insurance Act. A hearing on a preliminary injunction was set for September 24, 1981.
Also on September 11, 1981, National filed an amended complaint in federal district court seeking to invalidate and enjoin enforcement of specific provisions of the Insurance Act for the same reasons it alleged in its challenge to the Takeover Act. The district court entered a temporary restraining order (TRO) declaring the Takeover and Insurance Acts unconstitutional as applied to National's tender offer and temporarily restraining LLC, the state's securities director and insurance commissioner from enforcing either Act against National.
A hearing on the preliminary injunction was set for September 29, 1981.
On September 14, 1981, National commenced its tender offer by filing a Schedule 14D-1 with the Securities and Exchange Commission (SEC) pursuant to § 14(d)(1) of the Williams Act and Regulation 14D promulgated thereunder. The offer was scheduled to expire on October 9, 1981.
On September 28, 1981, the state court granted LLC's motion for a preliminary injunction and enjoined National from purchasing tendered shares until it complied with the Insurance Act. The court limited its order by inserting, "except to the extent that such relief is precluded by a then presently outstanding order of either the United States District Court ..., the Eighth Circuit or the United States Supreme Court." Personal Life Insurance Co. v. National City Lines, Inc., No. CV181-734CC (Mo.Cir.Ct. Sept. 28, 1981), slip op. at 5. The court also expressly abstained from considering National's constitutional challenges to the Act. Id.
On September 30, 1981, the district court granted National's motion for a preliminary injunction declaring that the challenged provisions of the state acts conflicted with and were preempted by the Williams Act. The court, however, stayed National's right to commence purchasing tendered shares until midnight October 6, 1981. National City Lines, Inc. v. LLC Corp., 524 F.Supp. 906 (W.D.Mo.1981).
On October 9, 1981, this court denied LLC's request for a continuance of the district court's stay pending appeal, thereby permitting National to purchase tendered shares. However, we enjoined National's voting of those shares pending appeal. We also enjoined LLC from disposing of any corporate assets other than in the ordinary course of business pending appeal. National City Lines, Inc. v. LLC Corp., No. 81-2044 (8th Cir. Oct. 9, 1981).
National subsequently extended its tender offer until October 23, 1981, at which time it announced that the offer had not been successful. The record does not indicate whether National intends to make another tender offer for LLC's shares. Nevertheless, National faces both criminal and civil liability under state laws for making its September 14, 1981, offer without first complying with the Takeover Act, Mo.Rev.Stat. §§ 409.540, 409.545, and the Insurance Act, Mo.Rev.Stat. §§ 382.270, 382.290. Therefore, the issues relating to National's tender offer are not moot.
B. Proxy Solicitation
The progression of litigation surrounding National's proxy solicitation is analogous to that of its tender offer. On September 11, 1981, National announced its intention to consider soliciting proxies to vote at LLC's annual meeting which was scheduled to be held on November 17, 1981. The purpose of the meeting was to elect eight directors. On October 27, 1981, 6 National filed preliminary copies of its proxy solicitation materials with the SEC. The following day it filed a Schedule 14B with the SEC and the New York Stock Exchange. Pursuant to the applicable SEC rules, National could distribute its proxy materials ten days after the preliminary filing, SEC Rule 14a-6(c), 17 C.F.R. § 240.14a-6(a), and could commence soliciting proxies five days after filing its Schedule 14B, SEC Rule 14a-11(c)(1), 17 C.F.R. § 240.14a-11(c)(1).
On October 30, 1981, LLC, through its subsidiary Personal, obtained a TRO in state court restraining National's distribution and solicitation of proxy materials until it complied with the Insurance Act. The order was limited, however, by the proviso that the TRO applied "unless pre-empted by federal order or decree." Personal Life Insurance Co. v. National City Lines, Inc., No. CV181-890CC (Mo.Cir.Ct. Oct. 30, 1981), slip op. at 1.
On November 2, 1981, National amended its complaint in federal district court alleging that the federal proxy rules preempted the Insurance Act. The following day the district court issued a preliminary injunction declaring specific provisions of the Insurance Act unconstitutional as applied to
National's proxy solicitation and enjoining enforcement of the Act against National's proxy solicitation. National City Lines, Inc. v. LLC Corp., No. 81-4183-CV-C-W (W.D.Mo. Nov. 3, 1981). National distributed its proxy solicitation materials to LLC shareholders on November 9, 1981.
On November 5, 1981, this court denied LLC's motion for stay of the second preliminary injunction, thereby permitting National's proxy solicitation to go forward. However, we enjoined National's use of those proxies pending appeal. National City Lines, Inc. v. LLC Corp., No. 81-2193 (8th Cir. Nov. 5, 1981).
A. Pullman Abstention
Appellants argue that the district court should have abstained from deciding National's motions...
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