Document: 472 U.S. 1 105 S.Ct. 2458 86 L.Ed.2d Barbara R. SCHREIBER, Petitionerv.BURLINGTON NORTHERN, INC., et al. No. 83-2129. Argued Jan. 9, 1985. Decided June 4, Syllabus In December 1982, respondent Burlington Northern, Inc., made a hostile tender offer for El Paso Gas Co. to which majority of Paso's shareholders ultimately subscribed. did not accept the tendered shares, and instead, in January 1983, after negotiations with Paso, announced new friendly takeover agreement. Pursuant this agreement, undertook rescind substitute offer. The was soon oversubscribed. rescission first caused diminished payment those who had during offer, because retendered were subject substantial proration. Petitioner filed suit Federal District Court on behalf herself similarly situated shareholders, alleging that Burlington, members board directors violated § 14(e) Securities Exchange Act 1934, prohibits "fraudulent, deceptive, or manipulative acts practices . connection any offer." She claimed Burlington's withdrawal coupled substitution "manipulative" distortion market stock. dismissed failure state claim, holding alleged manipulation involve misrepresentation, so violate 14(e). Appeals affirmed. Held: 1. "Manipulative" under require misrepresentation nondisclosure. To read term include that, although fully disclosed, "artificially" affect price target's stock, conflicts normal meaning as connoting conduct designed deceive defraud investors by controlling artificially affecting securities. Pp. 5-8. 2. This interpretation used is supported provision's purpose legislative history. Williams Act, added ensure public are confronted will be required respond without adequate information. Nowhere history there suggestion serves other than disclosure, should an invitation courts oversee substantive fairness offers; quality matter marketplace. 8-12. 3. Applying above case, respondents' actions manipulative. 12-13. 731 F.2d 163 (CA3 1984), Irving Bizar, New York City, petitioner. Marc P. Cherno, respondents. Chief Justice BURGER delivered opinion Court. We granted certiorari resolve conflict Circuits over whether nondisclosure necessary element violation 15 U.S.C. 78n(e). 2 * On 21, Through wholly owned subsidiary, proposed purchase 25.1 million shares at $24 per share. reserved right terminate if several specified events occurred. management initially opposed takeover, but its responded favorably, subscribing 30, deadline. 3 shares; management, 10, terms undertook, inter alia, (1) (2) 4,166,667 from share, (3) only 21 (4) provide procedural protections against squeeze-out merger1 remaining (5) recognize "golden parachute"2 contracts between four senior officers. By February 8, more 40 response completed. 4 greatly oversubscribed consequently Schreiber 14(e)'s prohibition also failing failed disclose parachutes" offered managers. claims deceptive act forbidden 5 claim. 568 F.Supp. 197 (Del.1983). reasoned relied fact cases involving violations 10(b) 78j(b)), has section. F.Supp., 202. 6 Third Circuit (1984). held "§ intended create federal cause action all harms suffered proffering offers." Id., 165. "enacted principally disclosure statute, insure fully-informed could intelligently decide how 165-166. It concluded "arguable breach contract" petitioner "manipulative act" 7 conflict,3 469 815, 81, 83 29 affirm. II A. 8 asked case interpret 82 Stat. 457, amended, starting point language statute. Section provides: 9 "It shall unlawful person make untrue statement material omit order statements made, light circumstances they misleading, engage fraudulent, practices, request tenders, solicitation security holders opposition favor such request, invitation. Commission shall, purposes subsection, rules regulations define, prescribe means reasonably prevent, manipulative." 10 relies construction phrase, practices." reads phrase practices" which, Petitioner's belief directed broader providing full true information investors. 11 reading term. have context Act: 12 "Use word 'manipulative' especially significant. virtually art when securities markets. connotes intentional willful securities." Ernst & v. Hochfelder, 425 185, 199, 96 1375, 1384, 47 668 (1976) (emphasis added). 13 Other interpreting reflect use general comprising range misleading practices: 14 "The refers generally wash sales, matched orders, rigged prices, mislead activity. 10(b)'s deemed SEC 'manipulative'—in technical sense activity investors—is consistent fundamental 1934 ' "to philosophy caveat emptor. ." Indeed, usually essential success scheme. No doubt Congress meant prohibit ingenious devices might manipulate prices. But we do think it would chosen 'term art' bring within scope instances corporate mismanagement this, essence complaint treated unfairly fiduciary." Santa Fe Industries, Inc. Green, 430 462, 476-477, 97 1292, 1302-1303, 51 480 (1977). given common law,4 traditional dictionary definition.5 16 argues, however, takes different 10(b). disjunctive "or" implies need fraudulent deceptive" well, interpreted misrepresentation.6 Moreover, " 'familiar principle statutory words grouped list related meaning.' Industry Assn. Board Governors, FRS, 468 207, 218, 104 3003, 3010, 158 All three species misconduct, i.e., manipulative," listed failures disclose. provides emphasis guidance must determine types reached statute; does suggest deviation section's facial primary concern congressional core Act. B 17 Our conclusion buttressed provision. originally part 457. cash their stock information." Rondeau Mosinee Paper Corp., 422 49, 58, 95 2069, 2075, 45 (1975).7 18 clear primarily implement Senator Williams, bill's Senate sponsor, stated debate: 19 "Today, shareholder deciding reject possesses limited what he does, knowledge enable him rationally best course action. precisely dilemma our laws prevent." 113 Cong.Rec. 24664 (1967). 20 expressed intent preserve neutral setting contenders present arguments.8 sponsor went say: "We taken extreme care avoid tipping scales either making bids. S. 510 solely fair benefit bill same time offeror equal opportunity case." Ibid. 22 objective, §§ 13(d), 13(e), 14(d), 14(e), 14(f) Some relate disclosure; add specific registration provisions. Others—§§ 13(e) 14(d)—require certain possess additional take advantage disclosed information.9 23 adds "broad antifraud prohibition," Piper Chris-Craft 1, 24, 926, 940, 124 (1977), modeled provisions Rule 10b-5, CFR 240.10b-5 (1984).10 supplements precise found elsewhere while requiring explicitly addressed 24 While specifically concerning sparse, House Reports discuss role Describing regulating "fraudulent transactions," stating thrust section: 25 "This provision affirm persons engaged opposing offers otherwise seeking influence decision outcome obligation whom deal." H.R.Rep. 1711, 90th Cong., 2d Sess., (1968), U.S.Code Cong. Admin.News 1968, pp. 2811, 2821 added); S.Rep. 550, 1st (1967) 26 slightest disclosure,11 27 adopt urged unwarranted odds it. Inviting judges own constitutes "unfair" "artificial" inject uncertainty into process. An piece information—whether court deem one side "manipulative"—would available until closed. directly contradict desire give 28 Congress' persuades us contests shareholders. pursuit goal, Congress, mechanism created sweeping requirements narrow safeguards. placed choice fairness. even less likely implementing intention express through single middle devoted disclosure. C hold requires "conduct U.S., S.Ct., 1384. Without nondisclosure, been violated. 30 definition respondents amended fails allege cancellation accompanied deception. correctly found: "All defendants conceivably affected done openly." 203. 31 alleges entered undisclosed agreements second substance allegations return benefits, managers agreed support both noted petitioner's seeks redress injuries Since occurred reference offer—when already sustained—these bear no possible causal relationship injuries. dealt III judgment 32 Affirmed. 33 POWELL took case. 34 O'CONNOR consideration A "squeeze-out" merger occurs Corporation A, holds interest B, uses control merge itself subsidiary. minority are, effect, forced sell protection provided agreement approval non-Burlington before proceed. eventually purchased $12 one-quarter share preferred parties dispute paid tendering her officers parachute" "extended employment benefits event over, them millions dollars extra compensation." corporation top guarantee continued employment, lump sum, change ownership. As described Schedule 14D-9 12, "employment agreements" two period five years, years. Deferred Compensation Plan participant retired instance Company his duties director, officer employee curtailed respect." Sixth always Mobil Corp. Marathon Oil Co., 669 366 (1981), cert. denied, 455 982, 102 1490, 71 691 (1982). Second Eighth applied analysis apply today. Feldbaum Avon Products, 741 234 (CA8 1984); Buffalo Forge Ogden 717 757 (CA2), 464 1018, 78 724 (1983); Data Probe Acquisition Datatab, 722 (CA2 1983), 465 1052, 1326, 79 See L. Loss, Regulation 984-989 (3d ed. 1983). For example, seminal English Scott Brown, Doering, McNab [1892] Q.B. (C.A.), broke ground recognizing occur dissemination false statements, nonetheless presence Lord Lopes "I can see distinction rumours fictitious acts." 730. United States 85 (SDNY 1933) ("[E]ven speculator entitled speculative thereof misrepresented act"). Webster's International Dictionary 1376 (1971) (Manipulation "management unfair, scheming, underhanded methods"). (1977); 43, 950, 1383, (1976). thorough discussion supra, 24-37, 940-947. process developed suggests calculated reliance rather court-imposed principles "fairness" "artificiality," method regulation. progressed hearings, Houses became concerned repurchases distort control. problem imposes corporations purchasing grants broad regulatory power regulate repurchases. stopped short, imposing forbidding trade maintaining price. scheme set forth unnecessary endowed significance. 13(d) acquiring threshold percentage company's file reports disclosing purchaser's background identity, source funds purchase, extent holdings target company. 78m(d). restrictions issuers. 78m(e). 14(d) 78n(d)(1). These allowing withdraw times bidding process, 78n(d)(5), proration purchases number exceeds sought, 78n(d)(6), whose purchased, 78n(d)(7). result person, indirectly, "(b) employ, sale registered national exchange registered, device contrivance contravention may appropriate investors." 78j(b). 10b-5 instrumentality interstate commerce, mails facility exchange, "(a) employ device, scheme, artifice defraud, "(c) act, practice business operates operate fraud deceit upon security." Because textual similarities, often assumed 10b-5. See, e.g., Panter Marshall Field 646 271, 283 (CA7), denied 454 1092, 658, 70 631 (1981). "manipulative," most significant changes addition "fraudulent," "acts" "devices." Neither bears obvious way "manipulative." Similar terminology 15(c) 78o(c), 17(a) 1933, 77q(a), 206 Investment Advisers 1940, 80b-6. 1970, sentence, argues pointless only. disagree. adding 1970 amendment, simply defining guarding amendment gives latitude nondeceptive activities "reasonably designed" preventing acts, suggesting itself.

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