CTS Corp. v. Dynamics Corp. of America
481 U.S. 69 (1987)

  • Indiana passed the Indiana Control Share Acquisitions Law (ICSA) in order to stop hostile takeovers of Indiana corporations.
    • This law had provisions that went over and above those in Federal law (the Williams Act).
  • Dynamics was involved in a hostile takeover of CTS. They sued to enjoin enforcement of the ICSA, claiming it was preempted by the Williams Act, and that it violated the Commerce Clause.
  • The Appellate Court found the ICSA to be unconstitutional. CTS appealed.
    • The Appellate Court found that the ICSA would discourage corporations from making hostile takeovers of Indiana companies, and that would improperly impact interstate commerce.
  • The US Supreme Court reversed.
    • The US Supreme Court noted that the Dormant Commerce Clause merely says that States can’t discriminate against interstate commerce by treating in State and out of State people (or corporations) differently.
    • The Court found that the ICSA does not differentiate between in state and out of state corporations and so it is not a violation of the Dormant Commerce Clause.
      • Dynamics argued that most hostile takeovers will be originated by corporations outside of Indiana, so that would impact them more than Indiana corporations. However the Court didn’t find that argument persuasive.
    • The Court recognized that the ICSA might result in fewer people making bids to take over Indiana corporations. However, the Court noted that corporations are a creation of State law, and that the ICSA didn’t stop anyone from making a takeover bid, it just provided regulatory procedures designed for the better protection of the corporation’s shareholders. Therefore it isn’t a violation of the Commerce Clause.