481 U. S. 69
April 21, 1987
Indiana passed a law that changed the default stock selling and shareholder voting rights rules governing corporations. The law was intended to stop hostile takeovers of Indiana corporations. When this law prevented Dynamics from acquiring a large portion of CTS, Dynamics challenged the law, claiming it was preempted by the federal Williams Act, and that it violated the dormant commerce clause by excessively limiting the rights of interstate stock owners and purchasers.
The Court ruled 6-3, with Powell writing, that the Indiana law could stand. There was no obvious basis on which the Williams Act preempted the Indiana law. In response to the objection that the Williams Act was frustrated by the tougher restrictions Indiana placed on offerors, Powell stated that the basic purposes of the two laws were still one and the same – protecting shareholders against coercive offers. Moving on to the dormant commerce clause challenge, Powell pointed out that states generally do retain the right to set default rules for corporations, and that the Indiana law made no explicit distinctions based on the home state of offerors. He also rejected some more novel commerce clause arguments that the effect of the law would be to discourage out-of-state offers, and offers more generally, continuing to cite a state’s well-established right to regulate its own corporations
Scalia concurred in judgment. He had joined the opening section of Powell’s commerce clause discussion, but did not join the parts discussing the more novel theories. He felt that a commerce clause violation should never be found on the basis of balancing purposes and predicted effects. Scalia also thought that the Williams Act utterly disclaimed any intent to preempt laws which did not directly conflict with it. White dissented. The Indiana law frustrated the rights of certain shareholders to sell their stock, and that, he contended, was emphatically contrary to the purpose of the Williams Act. In another section joined by Blackmun and Stevens, he argued that the law’s intent was so protectionist, and its effects on out-of-state traders so severe, that a dormant commerce clause violation ought to be found.
The Court made the right call. The arguments of the dissenters are an interesting illustration of the degradation of the Court’s commerce clause jurisprudence. Rather than limiting federal power, by the 1980s the commerce clause appears to have ironically become primarily a limitation on state power.