## Facts

- Tyson Foods, Inc., an out-of-state poultry producer, sought to acquire WLR Foods, Inc., a Virginia-incorporated poultry company.
- After WLR’s board rejected Tyson’s initial overture and indicated WLR was not for sale, Tyson made a hostile tender offer to WLR shareholders for $30 per share.
- WLR’s board adopted defensive measures, including governance changes and a shareholder rights plan, and relied on multiple Virginia antitakeover statutes.
- The Virginia Control Share Acquisitions Act limited voting rights for certain acquired shares unless restored by a vote of disinterested shareholders.
- Tyson asserted that WLR’s defenses and the Virginia statutory scheme impaired Tyson’s ability to obtain voting power and made the tender offer impracticable; Tyson withdrew the offer.
- WLR sued for declaratory relief supporting its defenses and the relevant Virginia statutes; Tyson counterclaimed and sought a preliminary injunction, alleging federal preemption and Commerce Clause violations.
- The district court denied the preliminary injunction, upheld the challenged statutes, and limited Tyson’s discovery into substantive legal and financial advice provided to WLR’s board.

## Issues

1. Whether the challenged Virginia antitakeover statutes were preempted by the Williams Act’s federal regulation of tender offers.
2. Whether the statutes violated the Commerce Clause by discriminating against or unduly burdening interstate commerce.
3. Whether limiting discovery into the substance of professional advice to WLR’s board was an abuse of discretion under the Virginia Business Judgment Statute.

## Decision

- The Fourth Circuit affirmed the district court.
- The court held the Virginia antitakeover statutes were not preempted by the Williams Act because they did not conflict with federal disclosure and shareholder-protection objectives.
- The court held the statutes did not violate the Commerce Clause because they were not discriminatory and any burdens on interstate commerce were incidental and justified by Virginia’s interest in regulating its domestic corporations’ internal affairs.
- The court held the district court did not abuse its discretion in limiting discovery into substantive advice to the board where Tyson had sufficient access to information bearing on directors’ good faith and decision-making process.

## Legal Principles

- The Williams Act generally does not preempt state corporate laws that regulate the governance consequences of acquisitions, so long as they do not prohibit tender offers or obstruct federally required disclosure to shareholders.
- State antitakeover statutes that apply evenhandedly to in-state and out-of-state bidders and govern corporations chartered by the state ordinarily survive Commerce Clause review when any interstate burdens are incidental and outweighed by the state’s legitimate interest in corporate internal affairs.
- Under Virginia’s business judgment framework, judicial review centers on directors’ good faith, reasonable belief in the corporation’s best interests, and appropriate care; discovery may focus on the information and process directors used without requiring broad disclosure of the substantive content of professional advice.

## Conclusion

The Fourth Circuit sustained Virginia’s use of antitakeover statutes and related board defenses against federal preemption and Commerce Clause challenges, and it approved trial-court discretion to limit discovery to matters relevant to directors’ good faith and process under business judgment review.


WLR Foods, Inc. v. Tyson Foods, Inc., 65 F.3d 1172 (4th Cir. 1995)