Opinion ID: 2280267
Heading Depth: 1
Heading Rank: 2

Heading: Preemption Under the Supremacy Clause

Text: Article VI of the Federal Constitution provides in part as follows: This Constitution, and the laws of the United States which shall be made in pursuance thereof . . . shall be the supreme law of the land; and the judges in every state shall be bound thereby, anything in the Constitution or laws of any state to the contrary notwithstanding. [3] Our first inquiry is whether Congress has prohibited State regulation of the field in question either by explicit statement in the federal statute or by implication in its structure and purpose. See City of Burbank v. Lockheed Air Terminal, 411 U.S. 624, 633 (1973). There is no express language of preemption in the applicable provisions of the Securities Exchange Act of 1934 (SEA). See 15 U.S.C. §§ 78m(d)-(e), n(d)-(f) (hereinafter the Williams Act). Nor is the statutory scheme so pervasive that an implicit congressional intent to preempt parallel State legislation may fairly be inferred. See Pennsylvania v. Nelson, 350 U.S. 497, 504 (1956). On the contrary, section 28(b) of SEA (15 U.S.C. § 78bb(a)) provides that [n]othing in this chapter shall affect the jurisdiction of the securities commission (or any agency or officer performing like functions) of any State over any security or any person insofar as it does not conflict with the provisions of this chapter or the rules and regulations thereunder. This section was plainly intended to protect, rather than to limit, state authority. Leroy v. Great Western United Corp., 443 U.S. 173, 182 (1979). Historically, state regulation has played a coordinate role in the securities field. See Merrill Lynch, Pierce, Fenner & Smith v. Ware, 414 U.S. 117, 137 (1973). [4] Even though there may be no congressional enactments that explicitly or implicitly exclude all State legislation in the same field, federal statutes nevertheless override any state laws with which they conflict. Appeal of New England Power Co., 120 N.H. 866, 871, 424 A.2d 807, 811 (1980). The test is whether the state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress. Florida Avocado Growers v. Paul, 373 U.S. 132, 141 (1963) (quoting Hines v. Davidowitz, 312 U.S. 52, 67 (1941)). This determination requires us to consider the relationship between state and federal laws as they are interpreted and applied, not merely as they are written. Jones v. Rath Packing Co., 430 U.S. 519, 526 (1977). The Williams Act was designed to close the gap in the disclosure requirements of the federal securities laws by bringing cash tender offers, which previously had been virtually unregulated, within the ambit of those laws. Mite Corp. v. Dixon, 633 F.2d 486, 492 (7th Cir. 1980). The dominant theme of that act is the protection of investors who are confronted with a tender offer. Piper v. Chris-Craft Industries, 430 U.S. 1, 35 (1977). This is accomplished by requiring the disclosure of pertinent information to the stockholders when a person seeks to obtain control of a corporation. The principal disclosure provisions of the Williams Act are sections 13(d) (15 U.S.C. § 78m(d)) and 14(d) (15 U.S.C. § 78n(d)). Section 13(d) requires that a purchaser of any equity security registered pursuant to the SEA file a Schedule 13D with the Securities and Exchange Commission (SEC) within ten days after its ownership exceeds five percent of the outstanding shares of the security. Section 14(d) is designed to insure informed shareholder decisionmaking in the face of a tender offer by requiring that a tender offeror file a Schedule 14D-1 with the SEC and furnish to the target's shareholders all material information which it contains. Mite Corp. v. Dixon, 633 F.2d at 492-93. (Emphasis added.) [5] The first alleged conflict is between 15 U.S.C. § 78n(d)(1) and RSA 421-A:3 (Supp. 1979). The State statute provides that [n]o offeror shall make a takeover bid unless at least 20 days prior thereto he files with the commissioner and the target company a registration statement containing the information required by RSA 421-A:4 [Supp. 1979] and publicly discloses the material terms of the offer. The federal statute, on the other hand, requires disclosure of the information specified in 15 U.S.C. § 78m(d) at the time a tender offer is made. The commissioner properly answered this contention in his opinion: The simple answer to Offeror's argument is that they are not conducting a tender offer and are under no . . . obligations [under 15 U.S.C. § 78n(d)(1)]. Thus as to their immediate conduct, no conflicting obligations are imposed by state and federal law. Indeed the absence of a conflict is evident from the fact that Offerors have made no filing under Rule 14d-2(b) [17 C.F.R. 240 14d-2(b)]. I need not consider in this case the argument that a conflict would be presented were Offerors proceeding via a tender offer. See Esmark, Inc. v. Strode, No. 80-CA-1210-MR, slip op. at 5 (Ky. April 3, 1981). The term tender offer has been defined as follows: A tender offer has been conventionally understood to be a publicly made invitation addressed to all shareholders of a corporation to tender their shares for sale at a specified price. Cash or other securities may be offered to the shareholders as consideration; in either case, the consideration specified usually represents a premium over the current market price of the securities sought. This opportunity to tender shares at a premium remains open for only a limited period of time, often about two weeks. Matter of City Investing Co., 411 N.E.2d 420, 427 (Ind. App. 1980) (quoting Note, The Developing Meaning of Tender Offer Under the Securities Exchange Act of 1934, 86 HARV. L. REV. 1250, 1251-52 (1973)). Based on this definition, we agree with the commissioner that there is no tender offer involved in this case. [6] The commissioner also properly ruled that there is no genuine conflict between the requirements of RSA 421-A:3 (Supp. 1979) and 15 U.S.C. § 78m(d)(1) (Supp. 1980), which requires a public disclosure to be made ten days after the stock is acquired. The plaintiffs did not prove that it is physically impossible to meet both requirements. Furthermore, the defendants claim that the plaintiffs have conceded that they are technically able to comply with both requirements. There is no preemption merely because the State and Federal Acts contain different provisions. See Florida Avocado Growers v. Paul, 373 U.S. at 142-43. [7] We also sustain the commissioner's ruling that RSA 421-A:7 (Supp. 1979) does not conflict with stock exchange rules governing the type of open market transactions with which we are dealing in this case. RSA 421-A:7 (Supp. 1979) is entitled Tender and Withdrawal of Shares. It deals with proration of shares which have been tendered or deposited pursuant to a takeover offer. It also deals with the withdrawal of those shares, and its best price regulation requires that if there has been an increase in the price offered for shares before the expiration of the tender date, all the shareholders must receive the increased consideration. RSA 421-A:2 VI (Supp. 1979) defines a takeover bid broadly enough to include all methods of acquisition, ranging from so-called open market transactions to formal tender offers addressed to shareholders. It is evident by its provisions, however, that section 7 of our act was not intended to apply to a takeover bid by open market transactions as is the case in this appeal. The legislative history of the Williams Act shows that it too was passed with full awareness of the difference between tender offers and other forms of large scale stock accumulations. Brascan Ltd. v. Edper Equities Ltd., 477 F. Supp. 773, 790 (S.D.N.Y. 1979). [8, 9] We have considered the history of the Securities Exchange Act of 1934 and especially section 28(a), 15 U.S.C. § 78bb(a), which explicitly recognizes the role of the states in regulating securities transactions. We also note that the Williams Act has never expressly indicated an intent to preempt the securities field. The evidence of alleged conflicts between the provisions of the Williams Act and our Security Takeover Disclosure Act has failed to show an actual and significant frustration of federal purposes. Kargman v. Sullivan, 552 F.2d 2, 13 (1st Cir. 1977); see Goldstein v. California, 412 U.S. 546, 553 (1973). Our act became effective March 25, 1977. It has not yet undergone significant shaping at the hands of the commissioner, to whom its administration has been delegated by the legislature. Nor is its language so unambiguous and inflexible as to leave no leeway for interpretation by the commissioner. His administrative interpretation is therefore entitled to deference. N.H. Dept. of Rev. Administration v. Public Emp. Lab. Rel. Bd., 117 N.H. 976, 977-78, 380 A.2d 1085, 1086 (1977). The United States Supreme Court will generally sanction State regulation that supplements federal efforts so long as compliance with the State law is not likely to significantly impede the purposes of the federal law. L. TRIBE, AMERICAN CONSTITUTIONAL LAW § 6-24 at 379 (1978). An examination of the provisions of our Security Takeover Disclosure Act reveals that, like the Williams Act, it is concerned with the protection of shareholders. The plaintiffs have failed to show that our act would produce in this case a direct and serious conflict with the clearly delineated federal purposes. We therefore hold that the commissioner properly ruled that our act is not preempted by the Williams Act.