Schreiber v. Burlington N., Inc.

United States Court of Appeals for the Third Circuit · 1984 · Corporations

731 F.2d 163 (1984)

Updated August 22, 2026

CorporationsSecurities regulationTender offersWilliams ActSection 14(e)§ 14(e)tender offermanipulation

Facts

Burlington made a hostile tender offer in December 1982 for 25.1 million El Paso shares at $24 per share, and El Paso shareholders fully subscribed by the deadline. Burlington did not accept those shares and later negotiated a friendly agreement with El Paso under which it rescinded the December offer, made a new January offer for only 21 million shares at the same price, and recognized golden parachute contracts for four El Paso officers. The January offer was oversubscribed, so shareholders who had tendered in December and re-tendered in January were subject to substantial proration. Schreiber alleged that rescinding the December offer was manipulative under § 14(e) and that Burlington failed to disclose in the January offer the golden parachutes and that those arrangements helped secure management approval.

Issue

Does § 14(e) of the Williams Act reach the rescission of a tender offer as a manipulative act when the rescission was fully disclosed but allegedly distorted the market? Also, can a shareholder state a § 14(e) claim based on nondisclosure in a later tender offer when that nondisclosure did not cause the shareholder's loss?

Rule

Under § 14(e), deception is an essential element of a manipulative act; manipulation must involve some form of misrepresentation, such as omission or misstatement of material facts. In addition, a § 14(e) deception claim fails absent a causal link between the alleged misrepresentation or nondisclosure and the plaintiff's injury.

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Lakeview Minerals, a Wyoming corporation, launched a public tender offer in Denver for shares of Prairie Grid Co. After shareholders tendered heavily, Lakeview openly announced that it was withdrawing the offer and replacing it with a negotiated merger on different terms. Several shareholders sued in federal court under § 14(e), alleging the withdrawal distorted the market and cost them the chance to sell on the original terms.

What is the strongest argument that the shareholders failed to state a § 14(e) manipulation claim?

Explanation. The majority treated § 14(e) principally as a disclosure statute and held that manipulation requires deception, meaning some omission or misstatement of material facts. A fully disclosed withdrawal may be harmful or unfair, but without deception it is not manipulative under § 14(e).