BNS, Inc. v. Koppers Co.

In the wake of the United States Supreme Court’s 1982 ruling in Edgar v. MITE Corp. that a state’s anti-takeover statute violated the Commerce Clause of the United States Constitution, many states restructured their anti-takeover statutes to avoid a similar fate under the preemption doctrine and the Supremacy Clause. Section 203 of the Delaware General Corporation Law prohibited various hostile takeovers and business combinations between a 15 percent stockholder (called an “interested stockholder”) and the company for a period of three years after that 15 percent ownership threshold was met, unless (among other exceptions) (1) the transaction was authorized by the company’s board of directors before the interested stockholder met the threshold; (2) the interested stockholder owned 85 percent or more after the transaction; or (3) after the interested stockholder met the threshold, the transaction was approved by the company’s board and 66 2/3 percent of the shares not owned by the interested stockholder. BNS, Inc. (plaintiff) claimed that § 203 violated the Williams Act and the United States Constitution’s Commerce Clause. A statute does not violate the Commerce Clause if its effects are nondiscriminatory, it provides consistency in its regulation, and it promotes both shareholder protection and acceptable corporate relationships. Delaware argued that § 203 did not intrude upon the tender-offer process. Delaware further argued that the Williams Act and § 203 could be complied with simultaneously and that, thus, § 203 should not be preempted. BNS sought a preliminary injunction based on the alleged unconstitutionality of § 203.