472 U.S. 1
On December 21, 1982, Burlington Northern, Inc., made a hostile tender offer for El Paso Gas Co.1 Through a wholly owned subsidiary, Burlington proposed to purchase 25.1 million El Paso shares at $24 per share.2 Burlington reserved the right to terminate the offer if any of several specified events occurred.3 El Paso management initially opposed the takeover, but its shareholders responded favorably, fully subscribing the offer by the December 30, 1982, deadline.4
Burlington did not accept those tendered shares; instead, after negotiations with El Paso management, Burlington announced on January 10, 1983, the terms of a new and friendly takeover agreement.5 Pursuant to the new agreement, Burlington undertook to rescind the December tender offer, purchase 4,166,667 shares from El Paso at $24 per share, substitute a new tender offer for only 21 million shares at $24 per share, provide procedural protections against a squeeze-out merger of the remaining El Paso shareholders, and recognize golden parachute contracts between El Paso and four of its senior officers.6 By February 8, more than 40 million shares were tendered in response to Burlington’s January offer, and the takeover was completed.7
The rescission of the first tender offer caused a diminished payment to those shareholders who had tendered during the first offer.8 The January offer was greatly oversubscribed and consequently those shareholders who retendered were subject to substantial proration.9 Petitioner Barbara Schreiber filed suit on behalf of herself and similarly situated shareholders, alleging that Burlington, El Paso, and members of El Paso’s board of directors violated § 14(e)’s prohibition of fraudulent, deceptive, or manipulative acts or practices in connection with any tender offer.10
She claimed that Burlington’s withdrawal of the December tender offer coupled with the substitution of the January tender offer was a manipulative distortion of the market for El Paso stock.11 Schreiber also alleged that Burlington violated § 14(e) by failing in the January offer to disclose the golden parachutes offered to four of El Paso’s managers.12 The District Court dismissed the suit for failure to state a claim.13 The Court of Appeals for the Third Circuit affirmed.14
The Supreme Court granted certiorari to resolve a conflict in the Circuits over whether misrepresentation or nondisclosure is a necessary element of a violation of § 14(e) of the Securities Exchange Act of 1934.15
Whether misrepresentation or nondisclosure is a necessary element of a violation of § 14(e) of the Securities Exchange Act of 1934?16
Yes. Petitioner's reading of the term “manipulative” conflicts with the normal meaning of the term.20 The meaning the Court has given the term “manipulative” is consistent with the use of the term at common law and with its traditional dictionary definition.21 Our conclusion that “manipulative” acts under § 14(e) require misrepresentation or nondisclosure is buttressed by the purpose and legislative history of the provision.22
Congress’ consistent emphasis on disclosure persuades us that it intended takeover contests to be addressed to shareholders.23
The term “manipulative” as used in § 14(e) requires misrepresentation or nondisclosure. The judgment of the Court of Appeals is affirmed.24