## Facts

- Burlington Northern, Inc., through a subsidiary, made a hostile tender offer for El Paso Gas Co. on December 21, 1982, to buy 25.1 million shares at $24 per share, with conditions allowing termination.
- The offer was fully subscribed by the December 30, 1982 deadline, but Burlington did not accept the tendered shares.
- After negotiations with El Paso’s management, Burlington announced a new friendly transaction on January 10, 1983, including rescission of the December offer, a purchase of 4,166,667 shares from El Paso at $24, and a new tender offer for 21 million shares at $24.
- The January offer was oversubscribed (over 40 million shares tendered), resulting in proration for shareholders who tendered, including those who re-tendered after the December offer was withdrawn.
- A shareholder sued under § 14(e) alleging (1) the withdrawal/substitution of tender offers was “manipulative” because it distorted the market and disadvantaged early tenderers, and (2) the January offer materials inadequately disclosed “golden parachute” arrangements for certain El Paso executives.
- The district court dismissed for failure to state a claim, and the Third Circuit affirmed; the Supreme Court granted review to address whether § 14(e) “manipulation” requires misrepresentation or nondisclosure.

## Issues

1. Whether “manipulative” acts under Exchange Act § 14(e) include fully disclosed conduct affecting the market for a target’s stock absent any misrepresentation or nondisclosure.
2. Whether the pleaded tender-offer withdrawal/substitution and the alleged “golden parachute” disclosure deficiencies stated a claim for “fraudulent, deceptive, or manipulative acts or practices” under § 14(e).

## Decision

- The Supreme Court affirmed the judgment dismissing the complaint.
- The Court held that “manipulative” acts under § 14(e) require deception, i.e., misrepresentation or nondisclosure.
- Fully disclosed withdrawal of one tender offer and substitution of another, even if it changes market conditions or produces proration effects, is not “manipulative” within § 14(e) absent deceptive conduct.
- § 14(e) is directed to disclosure and does not authorize courts to police the substantive fairness of tender-offer tactics as such.

## Legal Principles

- In § 14(e), “manipulative” carries its established securities-law meaning: conduct designed to deceive or defraud investors by controlling or artificially affecting securities prices through deceptive means.
- A § 14(e) “manipulation” theory cannot rest solely on fully disclosed tender-offer structuring that allegedly produces an “artificial” price or allocation effect; deception is required.
- The Williams Act’s central aim is ensuring shareholders receive adequate information in responding to tender offers, not regulating the merits or fairness of offer terms.
- § 14(e) liability based on nondisclosure or misstatement depends on traditional disclosure analysis (including materiality), rather than on objections to deal structure alone.

## Conclusion

The Court limited § 14(e) “manipulation” claims to cases involving deceptive conduct and rejected using § 14(e) to challenge fully disclosed tender-offer tactics on fairness grounds.


Schreiber v. Burlington N., Inc., 472 U.S. 1 (1985)