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No. 03-1610
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In The
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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SIMON PROPERTY GROUP, INC., and
SIMON PROPERTY ACQUISITIONS, INC.,
Plaintiffs-Appellees,
x.
XXXXXXX CENTERS, INC., A. XXXXXX XXXXXXX,
XXXXXX X. XXXXXXX, XXXX X. XXXXX, XXXXXX X. XXXXXXX,
XXXXX XXXXXXXX, JR., XXXXXXX X. XXXXXXX, XXXXX X. XXXXXXXXX,
XXXXXX X. XXXXXX, and S. XXXXXX XXXXXXX,
Defendants-Appellants.
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Appeal from the United States District Court
Eastern District of Michigan, Southern Division
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BRIEF OF AMICUS CURIAE STATE OF MICHIGAN
IN SUPPORT OF APPELLANTS
AND IN SUPPORT OF REVERSAL
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Xxxxxxx X. Xxx
Attorney General
Xxxxxx X. Xxxxx
Solicitor General
Co-Counsel
Xxxx X. Xxxxx
Assistant Attorney General
Consumer Protection Division
X.X. Xxx 00000, Xxxxxxx, XX 00000
517/335-0855
Dated: August 4, 2003
TABLE OF CONTENTS
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Page
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Table of Authorities ..........................................................i
Statement Of Amicus Curiae ....................................................1
Argument ......................................................................2
I. The Formation Of A Group Is Not A Control Share Acquisition
Under The Michigan Act.........................................................3
II. The Michigan Act Is Constitutional Without A "Deemed" Acquisition
Provision......................................................................8
Conclusion and Relief Sought .................................................11
Certificate Of Service .......................................................12
i
TABLE OF AUTHORITIES
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Page
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Cases
XXXXXX ACQUISITION CORP. v. UNIVERSAL FOODS CORP., 877 F.2d 496, 503
(7th Cir. 1989)..............................................................8
CTS CORP. v. DYNAMICS CORP. OF AMERICA, 481 U.S. 69 (1987) .................8, 9
IN RE CERTIFIED QUESTION FROM THE UNITED STATES COURT OF APPEALS FOR
THE SIXTH CIRCUIT; XXXXXXX XXXXX SPECIAL PROJECTS PROCUREMENT, MARKETING
AND CONSULTING CORPORATION V. CONTINENTAL BIOMASS INDUSTRIES, INC., 468
Mich. 109; 659 N.W.2d 597 (2003).............................................4
Statutes
Mich. Comp. Laws ss. ss.450.1790(2) ...........................................7
Mich. Comp. Laws ss. ss.450.1790-.1799......................................1, 2
Mich. Comp. Laws ss.450.1790(2), .1791(1)......................................2
Mich. Comp. Laws ss.450.1791(1) ...............................................3
Official Comments to Ind. Code ss.23-1-42-1 (West 1989)........................6
Rules
Federal Rules of Appellate Procedure 29(a) ....................................1
Federal Rules of Appellate Procedure 29(e) ....................................1
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STATEMENT OF AMICUS CURIAE
--------------------------
This amicus curiae brief is respectfully submitted on behalf of the State
of Michigan by the Attorney General of the State of Michigan.(1) The State of
Michigan has an interest in this action because it involves the interpretation
of a Michigan statute, not an Indiana statute, and the arguments of the Attorney
General of the State of Indiana are wrong as a matter of law. The outcome of
this appeal will significantly impact the rights of shareholders of publicly
traded Michigan corporations.
Rule 29(a) of the Federal Rules of Appellate Procedure grants the State of
Michigan the right to file an amicus curiae brief without the consent of the
parties or leave of the Court. The State of Michigan has sought leave, under
Federal Rules of Appellate Procedure Rule 29(e), to file this brief later than
the time specified in Rule 29(e) to respond to the issues recently raised by the
Indiana Attorney General (in its brief filed on July 28, 2003) concerning the
statutory interpretation of the Michigan Control Share Acquisitions Act, Mich.
Comp. Laws ss.ss.450.1790-.1799 ("MCSAA" or "Michigan Act").
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(1) The Michigan Attorney General files this amicus brief solely to express
Michigan's opinion on the legal questions implicated in interpreting the MCSAA.
The Attorney General expresses no view on the fact determinations rendered by
the District Court.
1
ARGUMENT
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The Michigan Control Share Acquisitions Act, Mich. Comp. Laws
xx.xx. 450.1790-.1799, is clear and unambiguous. It regulates the voting rights
of persons who acquire "control shares" in a "control share acquisition." SEE
ID. ss. 450.1790(2), .1791(1). The Michigan Act makes no distinction between
acquisitions made by a single person or by two or more persons acting as a
group.
The Indiana Attorney General argues that, in instances where a "control
share acquisition" as defined under Michigan's statute has not occurred, such an
acquisition can nonetheless be inferred by borrowing from "deemed acquisition"
language set forth in SEC Rule 13d-5. But there is no language in the Michigan
Act to suggest that it silently incorporates a "deemed acquisition" provision
from the Federal securities reporting laws, or that the Michigan Act was
intended to strip existing shareholders of the right to vote their
previously-owned shares when they collectively voice their position on a
corporate matter, such as a proposed takeover. The Michigan Act only applies to
shares over which an acquiring person has acquired the ACTUAL power in fact to
direct the vote. Accordingly, there is no justifiable basis for the INDIANA
Attorney General's argument that the MICHIGAN Act should be read to silently
incorporate a "deemed" acquisition provision from federal securities
regulations.
2
I. THE FORMATION OF A GROUP IS NOT A CONTROL SHARE ACQUISITION UNDER THE
MICHIGAN ACT
The definition of a "control share acquisition" under the MCSAA is an
"acquisition, directly or indirectly, by any person of ownership of, or the
power to direct the exercise of voting power with respect to, issued and
outstanding control shares." Mich. Comp. Laws ss.450.1791(1). The Michigan Act
by its terms applies only to an "acquisition" of either: 1) shares; or 2) the
power to direct the voting of shares. Quite obviously, for there to be an
"acquisition," something must be acquired. Where two shareholders merely "align"
or "unite" in a "group," neither shareholder has "acquired" voting power over
the other's shares. Each shareholder is still free to vote however he or she
chooses. And the mere fact that the aligned shareholders have elected to express
their collective views, either for or against a proposed tender offer (although
it may be a reportable event for Xxxxxxxx Act purposes), does not mean that they
have triggered the "acquisition" language set forth in Section 791(1) of the
MCSAA.
The Indiana Attorney General argues that the Michigan Act should be read to
incorporate a "deemed acquisition" concept from federal disclosure law because
of an Official Comment to the Indiana Act. This argument should be rejected for
several reasons.
First, the Indiana Attorney General's argument ignores basic Michigan
principles of strict statutory construction. In a certified question directed by
this
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Court to the Michigan Supreme Court, the latter Court recently set forth the
standards for statutory construction that govern interpretation of Michigan
statutes:
A fundamental principle of statutory construction is that `a
clear and unambiguous statute leaves no room for judicial
construction or interpretation.' The statutory language must be
read and understood in its grammatical context, unless it is
clear that something different was intended. When a legislature
has unambiguously conveyed its intent in a statute, the statute
speaks for itself and there is no need for judicial construction;
the proper role of a court is simply to apply the terms of the
statute to the circumstances in a particular case.
IN RE CERTIFIED QUESTION FROM THE UNITED STATES COURT OF APPEALS FOR THE SIXTH
CIRCUIT; XXXXXXX XXXXX SPECIAL PROJECTS PROCUREMENT, MARKETING AND CONSULTING
CORPORATION v. CONTINENTAL BIOMASS INDUSTRIES, INC., 468 Mich. 109, 113; 000
X.X.0x 000, 000 (2003)(citations omitted). What the Indiana Attorney General
wants this Court to do is rewrite the Michigan Act to delete the requirement
that there be an ACTUAL acquisition of shares or voting power and to allow the
court to "deem" the occurrence of an acquisition that never happened. But
Appellees' "deemed acquisition" language expressly stated in SEC Rule 13d-5 is
not in the Michigan Act, and there is no judicial license to import it. Such an
importation of additional substantive language would alter the definition of
"acquisition" in the MCSAA and violate the Michigan strict statutory
construction principle that the statute should "speak for itself."
Secondly, Michigan's reading of the word
"acquisition" is buttressed by the further provision in the Michigan Act, which
is absent from the Indiana statute,
4
clarifying that a transfer of voting power "without consideration" is excluded
from the definition of a control share acquisition. The Act, therefore, could
not be more clear that the transfer of voting power must be contractually
enforceable in order to be an "acquisition," and that the mere formation of a
"group" of shareholders in a nonbinding alignment does not rise to the level of
a "control share acquisition" as defined in the Michigan statute.
The Michigan Legislature wisely chose to establish a bright line test for
determining whether the Michigan Act has been triggered. There must be either an
acquisition of shares or an acquisition of voting power. Otherwise, the Michigan
Act would become a trap for the unwary, and the voting rights of the
shareholders in Michigan corporations would be left to the uncertainties of a
case-by-case judicial determination of whether shareholders were deemed to have
acquired control shares by virtue of their having "acted together" or exercised
their First Amendment rights to collectively express a view in favor of, or in
opposition to, a proposed tender offer.
Thirdly, although the Michigan Attorney General generally extends deference
to the Indiana Attorney General in questions of interpreting Indiana law, the
Michigan Attorney General would respectfully submit that, even under Indiana
law, Indiana's argument is a "stretch." The Indiana Comments, upon which the
5
Indiana Attorney General relies, say nothing about a "deemed" acquisition. Quite
simply, the Official Comments to the Indiana act state that
[T]he acquisition of control shares may be "directly or
indirectly, alone or as part of a group" - meaning that the legal
form of the acquisition, whether the acquisition is made by one
person or by two or more persons acting cooperatively or in
concert, will not affect application of the Chapter. This is
similar to the "group" - approach adopted by the Securities and
Exchange Commission under the Securities Exchange Act of 1934.
See Reg. 13d-5, 17 C.R.R. [sic] ss. 240.13d-5.
Official Comments to Ind. Code ss.23-1-42-1 (West 1989) (on file in Appellants'
Addendum at A-13). Nothing in the final sentence of this comment says anything
about a "deemed" acquisition in the Indiana act; nor does it make a comparison
of a "deemed" acquisition provision in the Indiana act to a "deemed" acquisition
provision in the federal regulation. It is one thing to compare the use of the
term "group" under the Indiana act and in the federal regulation and note a
similarity in the factors to consider when determining whether or not
shareholders are acting as a group when one of them makes an acquisition. It is
something else to suggest that this final sentence substantively alters the
definition of "acquisition" under either Indiana or Michigan law to include a
"deemed" acquisition provision expressly stated in the Federal regulation.
Surely, if either the Michigan or Indiana Legislature had intended to
incorporate into their statute the "deemed" acquisition
6
provision expressly stated in the federal regulation, they could have done
so(2). This is especially true if, as the Indiana Attorney General now suggests,
this was the mechanism that the Indiana Legislature set up to establish the
"neutrality" and constitutionality of their statute.
Finally, this Court should also reject the "deemed acquisition" argument
because it would undermine shareholder democracy in publicly held Michigan
corporations. Shareholders would be prevented from aligning to replace
management, call a special meeting, propose new directors, or oppose a coercive
or inadequate tender offer. Shareholders also would be discouraged from
communicating with one another for fear that they would be accused of having
formed an alignment or group at the pain of losing the right to vote their
stock.
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(2) The Indiana Attorney General argues that the failure to read a "deemed"
acquisition provision into the Michigan Act would "eviscerate" the law. (Indiana
Amicus Brief at p. 10.) By way of example, the Indiana Attorney General suggests
that such a provision is necessary because, otherwise, "a determined bidder,
management team or family [would be enabled] simply to acquire and hold just
below the thresholds and then at the last instant join together to oppose or
favor an acquisition of a company, as the case may be, depriving shareholders of
the democracy that the Statutes are designed to provide." (ID.) To the extent
that the Indiana Attorney General complains of shareholders joining together to
support or oppose a proposed corporate action, this is not something to be
shunned. It is a classic example of the EXERCISE OF their democratic rights. To
the extent that the Indiana Attorney General complains of a "determined bidder"
or group of bidders making a series of actual acquisitions as part of a plan or
scheme to take over a company, those acquisitions should be a "control share
acquisition" under the express terms of the Michigan Act. Mich. Comp. Laws
ss.ss.450.1790(2), 450.1791(1).
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This Court should not accept the District Court's judicial revision of the Act,
which would lead to these harmful consequences.
II. THE MICHIGAN ACT IS CONSTITUTIONAL WITHOUT A "DEEMED" ACQUISITION
PROVISION
The Indiana Attorney General also argues that the failure to incorporate,
SUB SILENTIO, a deemed acquisition provision would create a risk that the
MICHIGAN Act would be rendered unconstitutional under the Supreme Court's
analysis of the Indiana control share acquisitions act in CTS CORP. V. DYNAMICS
CORP. OF AMERICA, 481 U.S. 69 (1987). Essentially, the Indiana Attorney General
argues that a finding of "neutrality" between management and hostile tender
offerors was essential to the CTS Court's holding that the Indiana law did not
violate the Constitution of the United States, and that a failure to read a
"deemed" acquisition rule into the Michigan Act would destroy its
constitutionality. This argument is both incorrect and illogical.(3)
The CTS Court made no mention whatsoever of a "deemed" acquisition
provision in upholding the Indiana statute, and there is nothing in the CTS
Court's
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(3) Even if this Court were to find that Michigan's control share statute was
not "neutral" in its application towards different groups of investors, that
finding alone may not justify a ruling that the statute is unconstitutional. "To
say that Congress wanted to be neutral between bidder and target - a conclusion
reached in many of the Court's opinions - is not to say that it also forbade the
states to favor one of those sides." XXXXXX ACQUISITION CORP. V. UNIVERSAL FOODS
CORP., 877 F.2d 496, 503 (7th Cir. 1989)(citations omitted).
8
opinion that suggests that it relied on the incorporation of a "deemed"
acquisition provision to justify sustaining the Indiana law. In fact, while the
Indiana Attorney General relies heavily on a fleeting reference to SEC Rule
13d-5 in the Official Comments to the Indiana Act to support his opinion that
the Indiana law incorporated Appellees' "deemed acquisition" rule, these
comments (which themselves make no reference to any notion of "deemed"
acquisition) were not even published in draft form until December 10, 1987,
eight months AFTER the CTS opinion was issued. Thus, there is simply no basis to
suggest that the Supreme Court's decision to uphold the Indiana statute was in
any way based on an unstated "deemed" acquisition provision in that law.
Moreover, the Indiana Attorney General has it exactly backwards when it
argues that it is necessary to impute a "deemed acquisition" provision into the
Michigan Act to preserve the "neutrality" of the Michigan Act. Michigan's
statute applies evenhandedly to "groups" of shareholders who support, as well as
those that oppose, tender offers. If, on the other hand, a "deemed" acquisition
provision were read into the Michigan Act, it would substantially tip the
balance in favor of tender offerors in those corporations where some or all of
the directors are themselves substantial shareholders because they will lose the
right to vote their shares if, as directors, they collectively oppose the tender
offer. Thus, under the Indiana Attorney General's proffered interpretation, a
corporation cannot engage in
9
self defense against a would-be acquirer without converting all objecting
directors into a single shareholder group. Such an interpretation would have the
devastating consequence of promoting hostile and unfriendly takeovers of
corporations and would render these corporations powerless to defend themselves.
This certainly is not the law passed by the Michigan Legislature, nor should it
be so rewritten by the Court.
10
CONCLUSION AND RELIEF SOUGHT
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The Indiana Attorney General's opinion about the MICHIGAN Control Share
Acquisitions Act is entitled to no weight and should be disregarded entirely.
By its terms, the Michigan Control Share Acquisitions Act is triggered only
when an acquiring person ACQUIRES either 1) shares; or 2) the actual power in
fact to direct the voting of another's shares. There was no justifiable basis
under the rules of statutory construction for the district court to have written
into the Act a "deemed" acquisition provision, and the lower court's opinion
must be reversed.
Respectfully submitted,
Xxxxxxx X. Xxx
Attorney General
Xxxxxx X. Xxxxx
Solicitor General
Co-Counsel of Record
Xxxx X. Xxxxx
Assistant Attorney General
Consumer Protection Division
X.X. Xxx 00000, Xxxxxxx, XX 00000
517/335-0855
Dated: August 4, 2003
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CERTIFICATE OF SERVICE
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I hereby certify that, on August 4, 2003, I served one copy of the Motion
of Amicus Curiae State of Michigan for Leave to File Late Its Brief in Support
of Appellants and in Support of Reversal and Brief of Amicus Curiae State of
Michigan in Support of Appellants and in Support of Reversal on Xxxx X. xxx
Xxxx, lead counsel for Plaintiffs-Appellees, and on Xxxxxx Aviv, lead counsel
for Defendants-Appellants, by first-class mail addressed as follows:
Xxxx X. xxx Xxxx, Esq.
Miller, Canfield, Xxxxxxx & Xxxxx, X.X.X.
Xxxxx 0000
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Xxxxxx Aviv, Esq.
Xxxx Xxxxxx & Xxxxxx, P.C.
Suite 100
00000 Xxxxxxxx Xxxxxx
X.X. Xxx 000
Xxxxxxxxxx Xxxxx, Xxxxxxxx 00000-0000
----------------------------------------
Xxxxx X. Xxxxxxxxx
Legal Secretary
Michigan Department of Attorney General
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