The Supreme Court yesterday reinstated on technical grounds an Idaho state law that placed stiffer regulations on corporate takeovers than that provided by federal securities laws.
However, the court sidestepped the constitutional issue of whether a state has the power to block a corporate takeover involving interstate commerce that is otherwise approved by the federal government.
in a 6-3 decision, the Supreme Court overturned a ruling by the Fifth U.S. Circuit Court of Appeals which held that Idaho lacked the power to block a business tender offer made by Great Western United Corp. to acquire 2 million shares of the Sunshine Mining and Metal Co. of Idaho.
The tender offer was made in March 1977 by Great Western, which has headquarters in Dallas, to acquire the shares of Sunshine common stock at a net price of $15.75 per share.
The Idaho finance director, Tom D. McEldowney, ruled that under the Idaho takeover law he could block the acquisition unless Great Western complied with various Idaho securities regulations.
A federal district court ruled against him and the decision was upheld by the appeals court on grounds that federal law pre-empted the state's authority.
In yesterday's ruling, the Supreme Court said that Great Western did not have any right to challenge the Idaho law before a federal judge in Texas.
Justice John Paul Stevens, in the majority opinion, said, "The claim involved has only one obvious locus - the district of Idaho."
The practical effect of the ruling gives Idaho officials the power to once again challenge Great Western's takeover and seek to force the conglomerate to divest itself of its stock in Sunshine Mining.
Great Western, which is controlled by Nelson Bunker Hunt and his brother William Herbert Hunt, owns a 28 percent interest in the Idaho company.
As to the larger constitutional issue, the decision leaves the question unresolved. The Supreme Court at a future date could consider the validity of state takeover laws in a case in which the jurisdiction is not disputed, such as was the case today.
In all, 36 states have laws regulating corporate takeovers.
In a dissenting opinion, Justice Byron White said the Great Western case was properly handled by the federal court in Texas. He said state officials do not have power to regulate corporations "in a manner inconsistent" with federal law.
White was joined by Justices William J. Brennan Jr. and Thurgood Marshall.