Newspaper article THE JOURNAL RECORD

Lawsuit Wanting Disclosure, Conservation Acts Repealed

Newspaper article THE JOURNAL RECORD

Lawsuit Wanting Disclosure, Conservation Acts Repealed

Article excerpt

A lawsuit which seeks to have the Oklahoma Takeover Disclosure Act of 1985 and the Oklahoma Energy Resources Conservation A ct declared unconstitutional was filed Monday in U.S. District Court in Oklahoma City by Burlington Northern Inc. of Seattle and M-R Holdings Inc., a wholly-owned subsidiary of Burlington Northern.

Named as defendants in the suit were Southland Royalty Co. of Fort Worth; C. Raymond Patton, administrator of the Oklahoma Department of Securities; the Oklahoma Corporation Commission and OklahomaAttorney General Mike Turpen.

The suit was filed because Burlington is in the process of instituting a takeover of Southland. Either of the acts could be used by Southland or the other defendants to thwart the takeover.

Burlington plans to offer $17 per share for the stock of Southland. It filed the suit because while neither act may be "applicable to the tender offer. . .Burlington believes that, as has often occurred in situations where the target company's management opposes a tender offer, the defendants may seek to enforce the Takeover Act and the Resources Act, thereby obstructing the offer. . ."

Although the defendants may attempt to obstruct the tender offer, Burlington said, the U.S. Supreme Court and other courts have held that state takeover statutes that "purport to regulate interstate transactions violate the commerce clause and the supremacy clause of the U.S. Constitution."

Burlington cited several cases, including Mesa Petroleum v. Cities Service Co., Occidental Petroleum Corp v. Cities Service Co. and Mesa Partners II v. Unocal Corp., in which the courts had held the acts to be unconstitutional, usually on the grounds that it interfered with interstate commerce.

"Although the Takeover Act was only recently enacted," Burlington said in the suit, "it is functionally identical to its own statutory predecessors and to the other state takeover statutes which have been struck down by the courts.

"It is obvious that the Oklahoma Energy Resources Conservation Act, while operating under the guise of a natural resource statute, is simply another attempt to achieve the same constitutionally impermissable obstruction of an interstate tender offer since it was enjoined shortly after it was enacted in the Northern District Court of Oklahoma," the suit stated. …

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