within its authority over local corporate matters.
Amanda Acquisition Corporation v. Universal Foods Corporation, 877 F.2d 496 (7th Cir. 1989), lends further weight to this conclusion. In that case, the Seventh Circuit confronted a Wisconsin law preventing mergers from taking place within three years of acquisition unless the Wisconsin target's board of directors approves. The District Court in Amanda considered the law so severe that it "'effectively eliminates hostile leveraged buyouts.'" Amanda, 877 F.2d at 499. The Circuit Court expressed its dissatisfaction as well, remarking that "[if] our views of the wisdom of state law mattered, Wisconsin's takeover statute would not survive." Ibid, at 500.
Nevertheless, the court upheld the law for the same reasons advanced by the Supreme Court in CTS. Like the statute there, and the Illinois Act here, Wisconsin's law neither discriminated against interstate commerce nor raised the specter of inconsistent regulations. Furthermore, the Seventh Circuit considered and rejected a third theory of Commerce Clause violation in Amanda, which Hoylake has pressed upon this court. The theory, as the court described it, is the "broader, all-weather, be-reasonable vision of the Constitution." Ibid, at 505.
Originating with the Supreme Court's decision in Pike v. Bruce Church, Inc., 397 U.S. 137, 25 L. Ed. 2d 174, 90 S. Ct. 844 (1970), this approach requires the court to balance the local interests served by a statute against the burden it imposes on interstate commerce. The Amanda court, noting the absence of any such inquiry in CTS, questioned its validity and rejected its applicability. See Amanda, 877 F.2d at 505. "At all events," the court concluded, " CTS did not even cite [ Pike ] when dealing with a statute that regulated only the affairs of a firm incorporated in the state." Ibid. When a statute of this nature is at issue -- as it is with the Illinois Act -- "states may regulate corporate transactions as they choose without having to demonstrate under an unfocused balancing test that the benefits are 'enough' to justify the consequences." Ibid, at 507.
Finally, Hoylake cites Healy v. Beer Institute, Inc., 491 U.S. 324, 105 L. Ed. 2d 275, 109 S. Ct. 2491, for the proposition that the Commerce Clause precludes application of a state law to commerce occurring wholly outside the state's borders. This court agrees with the District judge in Kansas that Hoylake's proposed tender offer presents a very different scenario. As that court recognized, "to say Kansas has no real interest in the transaction or that Kansas is reaching beyond its territorial power would be to ignore the obvious interest Kansas has in one of its insurance companies." Hoylake Investments Limited v. Fletcher Bell, supra, n. 4. The same is clearly true for Illinois.
With or without the protection of the McCarran-Ferguson Act, the Illinois Insurance Holding Company Systems Act does not violate the Commerce Clause of the United States Constitution.
2. The Due Process Clause
Hoylake contends that the Illinois Act violates the Due Process Clause of the Constitution. This argument ignores the Supreme Court's admonition that insurance regulations do not violate due process "'merely because the affected business transactions are carried on outside the state.'" Travelers Health Association v. Virginia, 339 U.S. 643, 650, 94 L. Ed. 1154, 70 S. Ct. 927 (1950) (quoting Hoopeston Canning Co. v. Cullen, 318 U.S. 313, 320-21, 87 L. Ed. 777, 63 S. Ct. 602 (1943)).
To satisfy due process, a state must have sufficient contacts creating an interest in the transaction such that application of the state law is neither arbitrary nor fundamentally unfair. Allstate Insurance Company v. Hague, 449 U.S. 302, 312-313, 66 L. Ed. 2d 521, 101 S. Ct. 633 (1980). As already noted, Illinois has a substantial interest in protecting Illinois policyholders from inefficient or unscrupulous management of domestic insurance companies. The Illinois Act embodies this interest. It does not violate the Due Process Clause.
3. Encroachment on Foreign Affairs
Finally, Hoylake argues that Illinois unconstitutionally encroaches on the Federal Government's province over foreign affairs. This claim is without merit. Unlike the Oregon law in Zschernig v. Miller, 389 U.S. 429, 19 L. Ed. 2d 683, 88 S. Ct. 664 (1967), upon which Hoylake relies, the Illinois Act does not "involve the . . . courts in an evaluation, either expressed or implied, of the administration of foreign law, the credibility of foreign diplomatic statements, and the policies of foreign governments." Zschernig, 389 U.S. at 442 (Stewart, concurring). Illinois has made no attempt to interfere with foreign relations, nor does the Act have such an effect.
Because the Illinois Act violates neither the Commerce Clause, nor the Due Process Clause, nor the Foreign Affairs Clauses of the Constitution, the court finds that Hoylake has failed to show a likelihood of success on the merits.
Balance of hardships
In the Seventh Circuit, motions for preliminary injunction are evaluated "in accordance with a 'sliding scale' approach: the more the balance of irrevocable harms inclines in the plaintiff's favor, the smaller the likelihood of prevailing on the merits he need show in order to get the injunction." Kowalski v. Chicago Tribune Co., 854 F.2d 168, 170 (7th Cir. 1988). Theoretically, Hoylake might still be entitled to injunctive relief if it would suffer far greater damage without an injunction than would the Director if enjoined.
Hoylake cannot make such a showing. While it may be true that "time is of the essence" in tender offers, as Hoylake asserts, that fact alone does not amount to irreparable injury. No longer constrained by London's City Code to complete its offer unconditionally by late October, the company faces only the customary market pressures. This court will not grant the "extraordinary" remedy of injunctive relief under these circumstances. See Wright & Miller, Federal Rules of Civil Procedure, ch. 9, § 2948 (1973).
Moreover, the interests of the Director and the policyholders he represents must be weighed in the balance.
As the District Court for the District of Kansas observed,
The policyholders of Farmers Insurance, Inc. and the state . . . would be greatly harmed if the Insurance Commissioner were enjoined from conducting his investigation as required by the . . . Act. The policyholders would lack assurance that the ultimate holder of the insurance company will be capable of covering claims or that the company will be in financially stable hands.
Hoylake Investments Limited v. Fletcher Bell, supra, p. 581.
Plaintiff Hoylake Investments Limited has not satisfied the requirements for obtaining injunctive relief. The plaintiff's motion for preliminary injunction in connection with its tender offer for the shares of B.A.T. Industries p.l.c. is therefore DENIED.
MOTION TO DISMISS
Defendant Director of Insurance has filed a motion to dismiss Hoylake's action, based on three abstention doctrines: Younger, Burford, and Pullman. The latter two bear little relevance to the present dispute. A court should abstain under Burford when it confronts complex issues normally decided by specialized state agencies ( Burford v. Sun Oil Company, 319 U.S. 315, 87 L. Ed. 1424, 63 S. Ct. 1098 (1943)); the only issue presented by Hoylake is whether the Illinois Act violates the United States Constitution. This is a matter squarely within the expertise of federal courts. Pullman abstention, "a great time waster . . . is justified only when there are large benefits, as when a statute or ordinance can be saved by a narrowing construction." Lynk v. LaPorte Superior Court No. 2, 789 F.2d 554, 568 (7th Cir. 1986). Hoylake challenges the Act itself, not any particular interpretation. Pullman abstention would yield no benefits.
The case for Younger abstention, on grounds of equity and comity, is stronger; nonetheless, there are countervailing considerations that militate against abstaining. Foremost among them is the delay occasioned by referring the case to Illinois' administrative and judicial processes. According to Hoylake, the delay brought about by enforcement of the Illinois Act has already injured the company, and will do so irreparably unless the Director is enjoined. Although the court thinks less of this argument than does Hoylake (see above), Hoylake is entitled to have all facts construed in its favor on defendant's motion to dismiss.
From Hoylake's perspective, then, this case comes to the court as an emergency situation. Under such circumstances, a court need not abstain from exercising jurisdiction. See, e.g., Pike v. Bruce Church, supra, 397 U.S. at 140, n. 3; Anderson v. Babb, 632 F.2d 300, 306, n. 3 (4th Cir. 1980). With abstention remaining "the exception, not the rule," and the federal courts' obligation "to adjudicate claims within their jurisdiction . . . virtually unflagging," this court will not abdicate its responsibility to hear Hoylake's claims. New Orleans Public Service, Inc. v. Council of the City of New Orleans, 491 U.S. 350, 109 S. Ct. 2506, 105 L. Ed. 2d 298 (1989). Defendant's motion to dismiss is accordingly DENIED.
Dated: October 4, 1989