## Facts

- Polaroid Corporation was the target of a contested takeover attempt by entities and individuals associated with Roy and Patricia Disney (acting through a tender-offer vehicle).
- Polaroid had established an Employee Stock Ownership Plan (ESOP) and issued millions of shares of Polaroid common stock to the plan.
- The bidder commenced a tender offer for Polaroid common stock but excluded the ESOP shares, citing a contemporaneous challenge to the ESOP’s validity in separate litigation.
- Polaroid sued and sought a preliminary injunction to halt the tender offer on two federal securities theories.
- First, Polaroid alleged the ESOP exclusion violated the SEC’s “All Holders Rule,” 17 C.F.R. § 240.14d-10(a), which generally requires a tender offer to be open to all holders of the class.
- Second, Polaroid alleged the bidder made materially false or misleading statements about whether the offer’s financing complied with Federal Reserve Board margin regulations limiting certain debt financing in takeover structures involving shell entities.
- The district court denied preliminary injunctive relief, rejecting injunction based on the All Holders Rule theory and declining relief on the § 14(e) misrepresentation claim.
- Polaroid appealed.

## Issues

1. Whether a target corporation has standing to seek injunctive relief for an alleged violation of the SEC’s All Holders Rule, 17 C.F.R. § 240.14d-10(a).
2. Whether the bidder’s alleged misstatements about margin-regulation compliance stated a viable § 14(e) claim and, if so, whether Polaroid satisfied the requirements for a preliminary injunction.

## Decision

- The Third Circuit held Polaroid lacked standing to assert an All Holders Rule claim and affirmed denial of injunctive relief on that basis.
- The Third Circuit held Polaroid demonstrated a reasonable probability of success on its § 14(e) misrepresentation claim.
- The court found Polaroid’s shareholders would suffer irreparable harm absent relief because the tender decision would be made under allegedly misleading disclosures.
- The court reversed the denial of a preliminary injunction on the § 14(e) claim and remanded for further proceedings.

## Legal Principles

- Standing under the Williams Act tender-offer rules is generally oriented toward protecting security holders; a target corporation is not necessarily within the class entitled to sue for discriminatory tender-offer treatment under Rule 14d-10(a).
- Section 14(e), 15 U.S.C. § 78n(e), functions as an antifraud provision in the tender-offer context, prohibiting material misstatements or omissions made in connection with a tender offer.
- Statements about the legality and financial structure of a tender offer, including compliance with margin regulations governing financing, can be material to shareholders and actionable under § 14(e) if false or misleading.
- Preliminary injunctive relief in a tender offer may be warranted where the plaintiff shows a reasonable probability of success on a § 14(e) claim and that shareholders face irreparable harm from proceeding under materially misleading disclosures.

## Conclusion

The Third Circuit limited target-corporation standing to enforce the All Holders Rule but required injunctive relief where the target showed likely success on a § 14(e) claim that tender-offer disclosures materially misrepresented compliance with margin regulations, creating irreparable harm to shareholders’ informed choice.


Polaroid Corp. v. Disney, 862 F.2d 987 (3d Cir. 1988)