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Schreiber v. Burlington Northern, Inc.

United States Supreme Court
472 U.S. 1 (1985)


Facts

Burlington Northern, Inc. (Burlington) (defendant) attempted a hostile takeover of El Paso Gas Co. (El Paso) (defendant) by a tender offer for 25.1 million shares at $24. El Paso’s management supported the offer once shareholders showed support. Burlington rescinded the offer, and then offered to buy over four million shares from El Paso and 21 million from shareholders at $24 per share. The new offer acknowledged “golden-parachute” agreements with El Paso managers. Forty million shareholders accepted, resulting in major proration of the per share price. Barbara Schreiber (plaintiff) sued Burlington, El Paso, and El Paso’s board in district court on behalf of all similarly positioned stockholders. Schreiber claimed that the defendants violated § 14(e) of the Securities and Exchange Act of 1934 (SEA) by their “manipulative” behavior surrounding the two tender offers and failure to disclose the “golden parachutes.” Schreiber’s action was dismissed for failure to state a claim, and the United States Court of Appeals for the Third Circuit upheld the dismissal. Schreiber appealed to the United States Supreme Court.

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Holding and Reasoning (Burger, C.J.)

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