## Facts

- Illinois enacted the Business Take-Over Act regulating certain tender offers for “target companies,” including firms where Illinois residents owned 10% of the relevant securities or where specified Illinois contacts were met.
- The Act required advance notice to the Illinois Secretary of State and the target company 20 days before an offer became effective, during which the offeror could not communicate with shareholders.
- The Act required registration of takeover offers and permitted the Secretary to call a hearing to evaluate fairness and deny registration if the offer was found “inequitable” or otherwise noncompliant.
- MITE Corp. (a Delaware corporation with its principal office in Connecticut) initiated a tender offer for Chicago Rivet & Machine Co., filed the federal disclosures required by the Williams Act with the SEC, and did not comply with the Illinois Act.
- MITE sought declaratory and injunctive relief in federal court, asserting the Illinois Act was invalid under federal law and the Commerce Clause.
- The district court preliminarily and then permanently enjoined enforcement of the Illinois Act against MITE and declared the Act unconstitutional; the court of appeals affirmed.
- After judgment, the tender offer was withdrawn and not renewed, but Illinois officials indicated an intent to enforce the Act based on MITE’s prior conduct, creating potential civil and criminal exposure if the injunction were reversed.

## Issues

1. Whether the dispute remained justiciable or became moot after the tender offer was withdrawn and not renewed.
2. Whether the Illinois Business Take-Over Act was preempted by the federal Williams Act.
3. Whether the Illinois Act violated the Dormant Commerce Clause by burdening interstate commerce and regulating transactions beyond Illinois’s legitimate authority.

## Decision

- The Supreme Court held the case was not moot because reversal would expose MITE to potential civil and criminal liability under the Illinois Act.
- The Court affirmed the injunction and declaratory judgment invalidating the Illinois Act.
- The Court concluded the Illinois Act violated the Dormant Commerce Clause because its burdens on interstate commerce were excessive relative to the local interests asserted.
- No single preemption rationale commanded a majority; the judgment rested on the Commerce Clause ground.

## Legal Principles

- A case is not moot where a credible threat of enforcement and resulting legal liability remains if the challenged judgment is reversed.
- Under the Dormant Commerce Clause, a state law is invalid when it imposes burdens on interstate commerce that are excessive in relation to the state’s legitimate local interests.
- A state may not project regulatory power beyond its borders by conditioning whether a transaction with substantial out-of-state participants may proceed based on limited in-state contacts.
- A tender offer and resulting stock transfers are market transactions and do not, by themselves, constitute regulation of a corporation’s internal affairs sufficient to justify broad state takeover controls.

## Conclusion

The Supreme Court invalidated Illinois’s takeover statute because it allowed Illinois to impede tender offers affecting dispersed, multistate shareholders and imposed approval and delay mechanisms with substantial extraterritorial effects, creating burdens on interstate commerce that outweighed Illinois’s asserted shareholder-protection interests.


Edgar v. MITE Corp., 457 U.S. 624 (1982)