Amanda Acquisition Corporation, Plaintiff-Appellant/cross-Appellee v. Universal Foods Corporation, Defendants-Appellees/cross-Appellants

States have enacted three generations of takeover statutes in the last 20 years. Illinois enacted a first-generation statute, which forbade acquisitions of any firm with substantial assets in Illinois unless a public official approved. We concluded that such a statute injures investors, is preempted by the Williams Act, and is unconstitutional under the dormant Commerce Clause. MITE Corp. v. Dixon, 633 F.2d 486 (7th Cir.1980). The Supreme Court affirmed the judgment under the Commerce Clause, Edgar v. MITE Corp., 457 U.S. 624, 643-46, 102 S.Ct. 2629, 2641-43, 73 L.Ed.2d 269 (1982). Three Justices also agreed with our view of the Williams Act, id. at 634-40, 102 S.Ct. at 2636-39 (White, J., joined by Burger, C.J. & Blackmun, J.), while two disagreed, id. at 646-47, 102 S.Ct. at 2642-43 (Powell, J.), and 655, 102 S.Ct. at 2647 (Stevens, J.), and four did not address the subject.

Indiana enacted a second-generation statute, applicable only to firms incorporated there and eliminating governmental veto power. Indiana’s law provides that the acquiring firm’s shares lose their voting power unless the target’s directors approve the acquisition or the shareholders not affiliated with either bidder or management authorize restoration of votes. We concluded that this statute, too, is inimical to investors’ interests, preempted by the Williams Act, and unconstitutional under the Commerce Clause. Dynamics Corp. of America v. CTS Corp., 794 F.2d 250 (7th Cir.1986). This time the Supreme Court did not agree. It thought the Indiana statute consistent with both Williams Act and Commerce Clause. CTS Corp. v. Dynamics Corp. of America, 481 U.S. 69, 107 S.Ct. 1637, 95 L.Ed.2d 67 (1987). Adopting Justice White’s view of preemption for the sake of argument, id. at 81, 107 S.Ct. at 1645, the Court found no inconsistency between state and federal law because Indiana allowed the bidder to acquire the shares without hindrance. Such a law makes the shares less attractive, but it does not regulate the process of bidding. As for the Commerce Clause, the Court took Indiana’s law to be regulation of internal corporate affairs, potentially beneficial because it would allow investors to avoid the “coercion” of two-tier bids and other tactics. 481 U.S. at 83, 91-93, 107 S.Ct. at 1646, 1650-51. Justices White, Black-mun, and Stevens disagreed with the analysis under the Commerce Clause, id. at 99-101, 107 S.Ct. at 1655-56; only Justice White disagreed with the conclusion about preemption, id. at 97-99, 107 S.Ct. at 1653-55.

Wisconsin has a third-generation takeover statute. Enacted after CTS, it postpones the kinds of transactions that often follow tender offers (and often are the reason for making the offers in the first place). Unless the target’s board agrees to *498 the transaction in advance, the bidder must wait three years after buying the shares to merge with the target or acquire more than 5% of its assets. We must decide whether this is consistent with the Williams Act and Commerce Clause.

I

Amanda Acquisition Corporation is a shell with a single purpose: to acquire Universal Foods Corporation, a diversified firm incorporated in Wisconsin and traded on the New York Stock Exchange. Universal is covered by Wisconsin’s anti-takeover law. Amanda is a subsidiary of High Voltage Engineering Corp., a small electronics firm in Massachusetts. Most of High Voltage’s equity capital comes from Berisford Capital PLC, a British venture capital firm, and Hyde Park Partners L.P., a partnership affiliated with the principals of Beris-ford. Chase Manhattan Bank has promised to lend Amanda 50% of the cost of the acquisition, secured by the stock of Universal.

In mid-November 1988 Universal’s stock was trading for about $25 per share. On December 1 Amanda commenced a tender offer at $30.50, to be effective if at least 75% of the stock should be tendered. 1 This all-cash, all-shares offer has been increased by stages to $38.00. 2 Amanda’s financing is contingent on a prompt merger with Universal if the offer succeeds, so the offer is conditional on a judicial declaration that the law is invalid. (It is also conditional on Universal’s redemption of poison pill stock. For reasons that we discuss below, it is unnecessary to discuss the subject in detail.)

No firm incorporated in Wisconsin and having its headquarters, substantial operations, or 10% of its shares or shareholders there may “engage in a business combination with an interested stockholder ... for 3 years after the interested stockholder's stock acquisition date unless the board of directors of the [Wisconsin] corporation has approved, before the interested stockholder’s stock acquisition date, that business combination or the purchase of stock”, Wis. Stat. § 180.726(2). An “interested stockholder” is one owning 10% of the voting stock, directly or through associates (anyone acting in concert with it), § 180.726(1)(j). A “business combination” is a merger with the bidder or any of its affiliates, sale of more than 5% of the assets to bidder or affiliate, liquidation of the target, or a transaction by which the target guarantees the bidder’s or affiliates debts or passes tax benefits to the bidder or affiliate, § 180.726(1)(e). The law, in other words, provides for almost hermetic separation of bidder and target for three years after the bidder obtains 10% of the stock — unless the target’s board consented before then. No matter how popular the offer, the ban applies: obtaining 85% (even 100%) of the stock held by non-management shareholders won’t allow the bidder to engage in a business combination, as it would under Delaware law. See BNS, Inc. v. Koppers Co., 683 F.Supp. 458 (D.Del.1988); RP Acquisition Corp. v. Staley Continental, Inc., 686 F.Supp. 476 (D.Del.1988); City Capital Associates L.P. v. Interco, Inc., 696 F.Supp. 1551 (D.Del.), affirmed, 860 F.2d 60 (3d Cir.1988). Wisconsin firms cannot opt out of the law, as may corporations subject to almost all other state takeover statutes. In Wisconsin it is management’s approval in advance, or wait three years. Even when the time is up, the bidder needs the approval of a majority of the remaining investors, without any provision disqualifying shares still held by the managers who resisted the transaction, *499 § 180.726(3)(b). 3 The district court found that this statute “effectively eliminates hostile leveraged buyouts”. As a practical matter, Wisconsin prohibits any offer contingent on a merger between bidder and target, a condition attached to about 90% of contemporary tender offers.

Amanda filed this suit seeking a declaration that this law is preempted by the Williams Act and inconsistent with the Commerce Clause. It added a pendent claim that the directors’ refusal to redeem the poison-pill rights violates their fiduciary duties to Universal’s shareholders. The district court declined to issue a preliminary injunction. 708 F.Supp. 984 (E.D. Wis.1989). It concluded that the statute is constitutional and not preempted, and that under Wisconsin law (which the court believed would follow Delaware’s) directors are entitled to prevent investors from accepting tender offers of which the directors do not approve. 4 Amanda prevailed on one issue, however: the court held that Universal does not have a private right of action to enforce the margin regulations issued by the Federal Reserve Board, and it therefore declined to consider Universal’s argument that Amanda had arranged to borrow more than 50% of the cost of its bid.

As a practical matter, the decision denying preliminary relief ends the case. The parties treat their appeals as if taken from the conclusive denial of relief; so shall we. The financial stakes on both sides cancel out, and the question becomes who is right on the merits. CTS, 794 F.2d at 252; see also FTC v. Elders Grain, Inc., 868 F.2d 901, 903-05 (7th Cir.1989). The parties ask us to decide whether Universal has a private right of action to enforce the margin rules, whether Universal’s directors violated their fiduciary duties under Delaware law (or Wisconsin law if it differs) in refusing to redeem the poison pill rights, and whether § 180.726 is consistent with the Constitution and federal law.

II

Courts try to avoid constitutional adjudication. There is no escape for us today, however. Even if we were to conclude that Universal has a private right of action and that its board acted within its rights in refusing to redeem the poison pill, we would have to reach the constitutional question. Amanda is entitled to attack each hurdle in its path. Although the poison pill might be an insuperable obstacle if the statute were held invalid, Amanda may gain from having one fewer stumbling block, which gives it standing to protest the statute independently of the pill. See Larson v. Valente, 456 U.S. 228, 238-43, 102 S.Ct. 1673, 1680-82, 72 L.Ed.2d 33 (1982); Tyson Foods, Inc. v. McReynolds, 865 F.2d 99, 101 (6th Cir.1989). The reverse is not true, however. At oral argument counsel for Amanda said that if the statute is within Wisconsin’s powers, then its offer is doomed. So starting with the *500 statute holds out the prospect of avoiding some issues, while starting with private rights of action or directors’ duties would not enable us to avoid the constitutional question. If we conclude that § 180.726 is within Wisconsin’s power, the offer is defunct, and it would be unnecessary to decide whether targets have a private right of action to enforce the margin rules or whether Universal’s directors had to redeem the poison pill. We begin, therefore, by considering whether Wis.Stat. § 180.726 conflicts with the Williams Act or the Commerce Clause.

A

If our views of the wisdom of state law mattered, Wisconsin’s takeover statute would not survive. Like our colleagues who decided MITE and CTS, we believe that antitakeover legislation injures shareholders. 5 MITE, 633 F.2d at 496-98 and 457 U.S. at 643-44, 102 S.Ct. at 2641-42; CTS, 794 F.2d at 253-55. Managers frequently realize gains for investors via voluntary combinations (mergers). If gains are to be had, but managers balk, tender offers are investors’ way to go over managers’ heads. If managers are not maximizing the firm’s value — perhaps because they have missed the possibility of a synergistic combination, perhaps because they are clinging to divisions that could be better run in other hands, perhaps because they are just not the best persons for the job — a bidder that believes it can realize more of the firm’s value will make investors a higher offer. Investors tender; the bidder gets control and changes things. Michael Bradley, Anand Desai & E. Han Kim, Synergistic Gains from Corporate Acquisitions and Their Division Between the Stockholders of Target and Acquiring Firms, 21 J.Fin.Econ. 3 (1988). The prospect of monitoring by would-be bidders, and an occasional bid at a premium, induces managers to run corporations more efficiently and replaces them if they will not.

Premium bids reflect the benefits for investors. The price of a firm’s stock represents investors’ consensus estimate of the value of the shares under current and anticipated conditions. Stock is worth the present value of anticipated future returns —dividends and other distributions. Tender offers succeed when bidders offer more. Only when the bid exceeds the value of the stock (however investors compute value) will it succeed. A statute that precludes investors from receiving or accepting a premium offer makes them worse off. It makes the economy worse off too, because the higher bid reflects the better use to which the bidder can put the target’s assets. (If the bidder can’t improve the use of the assets, it injures itself by paying a premium.)

Universal, making an argument common among supporters of anti-takeover laws, contends that its investors do not appreciate the worth of its business plans, that its stock is trading for too little, and that if investors tender reflexively they injure themselves. If only they would wait, Universal submits, they would do better under current management. A variant of the argument has it that although smart investors know that the stock is underpriced, many investors are passive and will tender; even the smart investors then must tender *501 to avoid doing worse on the “back end” of the deal. State laws giving management the power to block an offer enable the managers to protect the investors from themselves.

Both versions of this price-is-wrong argument imply: (a) that the stock of firms defeating offers later appreciates in price, topping the bid, thus revealing the wisdom of waiting till the market wises up; and (b) that investors in firms for which no offer is outstanding gain when they adopt devices so that managers may fend off unwanted offers (or states adopt laws with the same consequence). Efforts to verify these implications have failed. The best available data show that if a firm fends off a bid, its profits decline, and its stock price (adjusted for inflation and market-wide changes) never tops the initial bid, even if it is later acquired by another firm. Gregg A. Jarrell, James A. Brickley & Jeffrey M. Netter, The Market for Corporate Control: The Empirical Evidence Since 1980, 2 J.Econ. Perspectives 49, 55 (1988) (collecting studies); John Pound, The Information Effects of Takeover Bids and Resistance, 22 J.Fin.Econ. 207 (1988). Stock of firms adopting poison pills falls in price, as does the stock of firms that adopt most kinds of anti-takeover amendments to their articles of incorporation. Jarrell, Brickley & Netter, 2 J.Econ. Perspectives at 58-65 (collecting studies); Michael C. Jensen, Takeovers: Their Causes and Consequences, 2 J.Econ. Perspectives 21, 25-28, 41-45 (1988); Michael Ryngaert, The Effect of Poison Pill Securities on Shareholder Wealth, 20 J.Fin.Econ. 377 (1988); cf. John Pound, The Effects of Antitakeover Amendments on Takeover Activity: Some Direct Evidence, 30 J.L. & Econ. 353 (1987). Studies of laws similar to Wisconsin’s produce the same conclusion: share prices of firms incorporated in the state drop when the legislation is enacted. Jonathan M. Karpoff & Paul H. Malatesta, The Wealth Effects of Second Generation State Takeover Legislation, University of Washington Graduate School of Business Working Paper (Dec. 22, 1988).

Although a takeover-proof firm leaves investors at the mercy of incumbent managers (who may be mistaken about the wisdom of their business plan even when they act in the best of faith), a takeover-resistant firm may be able to assist its investors. An auction may run up the price, and delay may be essential to an auction. Auctions transfer money from bidders to targets, and diversified investors would not gain from them (their left pocket loses what the right pocket gains); diversified investors would lose from auctions if the lower returns to bidders discourage future bids. But from targets’ perspectives, once a bid is on the table an auction may be the best strategy. The full effects of auctions are hard to unravel, sparking scholarly debate. 6 Devices giving managers some ability to orchestrate investors’ responses, in order to avoid panic tenders in response to front-end-loaded offers, also could be beneficial, as the Supreme Court emphasized in CTS, 481 U.S. at 92-93, 107 S.Ct. at 1651-52. (“Could be” is an important qualifier; even from a perspective limited to targets’ shareholders given a bid on the table, it is important to know whether managers use this power to augment bids or to stifle them, and whether courts can tell the two apart.)

State anti-takeover laws do not serve these ends well, however. Investors who prefer to give managers the discretion to orchestrate responses to bids may do so through "fair-price” clauses in the articles of incorporation and other consensual devices. Other firms may choose different *502 strategies. A law such as Wisconsin’s does not add options to firms that would like to give more discretion to their managers; instead it destroys the possibility of divergent choices. Wisconsin’s law applies even when the investors prefer to leave their managers under the gun, to allow the market full sway. Karpoff and Malatesta found that state anti-takeover laws have little or no effect on the price of shares if the firm already has poison pills (or related devices) in place, but strongly negative effects on price when firms have no such contractual devices. To put this differently, state laws have bite only when investors, given the choice, would deny managers the power to interfere with tender offers (maybe already have denied managers that power). See also Roberta Romano, The Political Economy of Takeover Statutes, 73 Va.L.Rev. 111, 128-31 (1987).

B

Skepticism about the wisdom of a state’s law does not lead to the conclusion that the law is beyond the state’s power, however. We have not been elected custodians of investors’ wealth. States need not treat investors’ welfare as their summum bo-num. Perhaps they choose to protect managers’ welfare instead, or believe that the current economic literature reaches an incorrect conclusion and that despite appearances takeovers injure investors in the long run. Unless a federal statute or the Constitution bars the way, Wisconsin’s choice must be respected.

Amanda relies on the Williams Act of 1968, incorporated into §§ 13(d), (e) and 14(d)-(f) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78m(d), (e), 78n(d)-(f). The Williams Act regulates the conduct of tender offers. Amanda believes that Congress created an entitlement for investors to receive the benefit of tender offers, and that because Wisconsin’s law makes tender offers unattractive to many potential bidders, it is preempted. See MITE, 633 F.2d at 490-99, and Justice White’s views, 457 U.S. at 630-40, 102 S.Ct. at 2634-40.

Preemption has not won easy acceptance among the Justices for several reasons. First there is § 28(a) of the '34 Act, 15 U.S.C. § 78bb(a), which provides that “[njothing in this chapter shall affect the jurisdiction of the securities commission ... of any State over any security or any person insofar as it does not conflict with the provisions of this chapter or the rules and regulations thereunder.” Although some of the SEC’s regulations (particularly the one defining the commencement of an offer) conflict with some state takeover laws, the SEC has not drafted regulations concerning mergers with controlling shareholders, and the Act itself does not address the subject. States have used the leeway afforded by § 28(a) to carry out “merit regulation” of securities — “blue sky” laws that allow securities commissioners to forbid sales altogether, in contrast with the federal regimen emphasizing disclosure. So § 28(a) allows states to stop some transactions federal law would permit, in pursuit of an approach at odds with a system emphasizing disclosure and investors’ choice. Then there is the traditional reluctance of federal courts to infer preemption of “state law in areas traditionally regulated by the States”, California v. ARC America Corp., — U.S. -, 109 S.Ct. 1661, 1665, 104 L.Ed.2d 86 (1989); see also, e.g., Hillsborough County v. Automated Medical Laboratories, Inc., 471 U.S. 707, 716, 105 S.Ct. 2371, 2376, 85 L.Ed.2d 714 (1985); Air Line Pilots Ass’n v. UAL Corp., 874 F.2d 439, 447-48 (7th Cir.1989). States have regulated corporate affairs, including mergers and sales of assets, since before the beginning of the nation.

Because Justice White’s views of the Williams Act did not garner the support of a majority of the Court in MITE, we reexamined that subject in CTS and observed that the best argument for preemption is the Williams Act’s “neutrality” between bidder and management, a balance designed to leave investors free to choose. This is not a confident jumping-off point, though: “Of course it is a big leap from saying that the Williams Act does not itself exhibit much hostility to tender offers to saying that it implicitly forbids states to adopt more hostile regulations, but this *503 leap was taken by the Supreme Court plurality and us in MITE and by every court to consider the question since_ [Whatever doubts of the Williams’ Act preemptive intent we might entertain as an original matter are stifled by the weight of precedent.” 794 F.2d at 262. The rough treatment our views received from the Court— only Justice White supported the holding on preemption — lifts the “weight of precedent”.

There is a big difference between what Congress enacts and what it supposes will ensue. Expectations about the consequences of a law are not themselves law. To say that Congress wanted to be neutral between bidder and target — a conclusion reached in many of the Court’s opinions, e.g., Piper v. Chris-Craft Industries, Inc., 430 U.S. 1, 97 S.Ct. 926, 51 L.Ed.2d 124 (1977)-is not to say that it also forbade the states to favor one of these sides. Every law has a stopping point, likely one selected because of a belief that it would be unwise (for now, maybe forever) to do more. Rodriguez v. United States, 480 U.S. 522, 525-26, 107 S.Ct. 1391, 1393-94, 94 L.Ed.2d 533 (1987); Covalt v. Carey Canada Inc., 860 F.2d 1434, 1439 (7th Cir.1988). Nothing in the Williams Act says that the federal compromise among bidders, targets’ managers, and investors is the only permissible one. See Daniel R. Fischel, From MITE to CTS: State Anti-Takeover Statutes, the Williams Act, the Commerce Clause, and Insider Trading, 1987 Sup.Ct.Rev. 47, 71-74. Like the majority of the Court in CTS, however, we stop short of the precipice. 481 U.S. at 78-87, 107 S.Ct. at 1643-49.

The Williams Act regulates the process of tender offers: timing, disclosure, pro-ration if tenders exceed what the bidder is willing to buy, best-price rules. It slows things down, allowing investors to evaluate the offer and management’s response. Best-price, proration, and short-tender rules ensure that investors who decide at the end of the offer get the same treatment as those who decide immediately, reducing pressure to leap before looking. 7 After complying with the disclosure and delay requirements, the bidder is free to take the shares. MITE held invalid a state law that increased the delay and, by authorizing a regulator to nix the offer, created a distinct possibility that the bidder would be unable to buy the stock (and the holders to sell it) despite compliance with federal law. Illinois tried to regulate the process of tender offers, contradicting in some respects the federal rules. Indiana, by contrast, allowed the tender offer to take its course as the Williams Act specified but “sterilized” the acquired shares until the remaining investors restored their voting rights. Congress said nothing about the voting power of shares acquired in tender offers. Indiana’s law reduced the benefits the bidder anticipated from the acquisition but left the process alone. So the Court, although accepting Justice White’s views for the purpose of argument, held that Indiana’s rules do not conflict with the federal norms.

CTS observed that laws affecting the voting power of acquired shares do not differ in principle from many other rules governing the internal affairs of corporations. Laws requiring staggered or classified boards of directors delay the transfer of control to the bidder; laws requiring supermajority vote for a merger may make a transaction less attractive or impossible. 481 U.S. at 85-86, 107 S.Ct. at 1647-48. Yet these are not preempted by the Williams Act, any more than state laws concerning the effect of investors’ votes are preempted by the portions of the Exchange Act, 15 U.S.C. § 78n(a)-(c), regulating the process of soliciting proxies. Federal securities laws frequently regulate process while state corporate law regulates substance. Federal proxy rules demand that firms disclose many things, in order to promote informed voting. Yet states may permit or compel a supermajority rule (even a unanimity rule) rendering it all but *504 impossible for a particular side to prevail in the voting. See Robert Charles Clark, Corporate Law § 9.1.3 (1986). Are the state laws therefore preempted? How about state laws that allow many firms to organize without traded shares? Universities, hospitals, and other charities have self-perpetuating boards and cannot be acquired by tender offer. Insurance companies may be organized as mutuals, without traded shares; retailers often organize as co-operatives, without traded stock; some decently large companies (large enough to be “reporting companies” under the ’34 Act) issue stock subject to buy-sell agreements under which the investors cannot sell to strangers without offering stock to the firm at a formula price; Ford Motor Co. issued non-voting stock to outside investors while reserving voting stock for the family, thus preventing outsiders from gaining control (dual-class stock is becoming more common); firms issue and state law enforces poison pills. All of these devices make tender offers unattractive (even impossible) and greatly diminish the power of proxy fights, success in which often depends on buying votes by acquiring the equity to which the vote is attached. See Douglas H. Blair, Devra L. Golbe & James M. Gerard, Unbundling the Voting Rights and Profit Claims of Common Shares, 97 J.Pol.Econ. 420 (1989). None of these devices could be thought preempted by the Williams Act or the proxy rules. If they are not preempted, neither is Wis.Stat. § 180.726.

Any bidder complying with federal law is free to acquire shares of Wisconsin firms on schedule. Delay in completing a second-stage merger may make the target less attractive, and thus depress the price offered or even lead to an absence of bids; it does not, however, alter any of the procedures governed by federal regulation. Indeed Wisconsin’s law does not depend in any way on how the acquiring firm came by its stock: open-market purchases, private acquisitions of blocs, and acquisitions via tender offers are treated identically. Wisconsin’s law is no different in effect from one saying that for the three years after a person acquires 10% of a firm’s stock, a unanimous vote is required to merge. Corporate law once had a generally-applicable unanimity rule in major transactions, 8 a rule discarded because giving every investor the power to block every reorganization stopped many desirable changes. (Many investors could use their “hold-up” power to try to engross a larger portion of the gains, creating a complex bargaining problem that often could not be solved.) Wisconsin’s more restrained version of unanimity also may block beneficial transactions, but not by tinkering with any of the procedures established in federal law.

Only if the Williams Act gives investors a right to be the beneficiary of offers could Wisconsin’s law run afoul of the federal rule. No such entitlement can be mined out of the Williams Act, however. Schreiber v. Burlington Northern, Inc., 472 U.S. 1, 105 S.Ct. 2458, 86 L.Ed.2d 1 (1985), holds that the cancellation of a pending offer because of machinations between bidder and target does not deprive investors of their due under the Williams Act. The Court treated § 14(e) as a disclosure law, so that investors could make informed decisions; it follows that events leading bidders to cease their quest do not conflict with the Williams Act any more than a state law leading a firm not to issue new securities could conflict with the Securities Act of 1933. See also Panter v. Marshall Field & Co., 646 F.2d 271, 283-85 (7th Cir.1981); Lewis v. McGraw, 619 F.2d 192 (2d Cir.1980), both holding that the evaporation of an opportunity to tender one’s shares when a defensive tactic leads the bidder to withdraw the invitation does not violate the Williams Act. Investors have no right to receive tender offers. More to the point — since Amanda sues as bidder rather than as investor seeking to sell — the Williams Act does not create a right to *505 profit from the business of making tender offers. It is not attractive to put bids on the table for Wisconsin corporations, but because Wisconsin leaves the process alone once a bidder appears, its law may co-exist with the Williams Act.

C

The Commerce Clause, Art. I, § 8 cl. 3 of the Constitution, grants Congress the power “[t]o regulate Commerce ... among the several States”. For many decades the Court took this to be what it says: a grant to Congress with no implications for the states’ authority to act when Congress is silent. See David P. Currie, The Constitution in the Supreme Court: The First Hundred Years 171-83, 222-36 (1985) (discussing cases); Martin H. Redish & Shane V. Nugent, The Dormant Commerce Clause and the Constitutional Balance of Federalism, 1987 Duke L.J. 569. Limitations came from provisions, such as the Contract Clause, Art. I, § 10, cl. 1 (“No State shall ... pass any ... Law impairing the Obligation of Contracts”), expressly denying the states certain powers. The Contract Clause has been held to curtail states’ authority over corporations, see Trustees of Dartmouth College v. Woodward, 17 U.S. (4 Wheat.) 518, 4 L.Ed. 629 (1819), and it may have something to say about states' ability to limit the transferability of shares after they have been issued. See Henry N. Butler & Larry E. Ribstein, State Anti-Takeover Statutes and the Contract Clause, 57 U.Cin.L.Rev. 611 (1988). Broad dicta in Cooley v. Board of Wardens, 53 U.S. (12 How.) 299, 13 L.Ed. 996 (1852), eventually led to holdings denying states the power to regulate interstate commerce directly or discriminatorily, or to take steps that had unjustified consequences in other states. Meanwhile the Court began to treat the Contract Clause as if it said that "No State shall pass any unwise Law impairing the Obligation of Contracts”, so that divergent clauses have become homogenized. Chicago Board of Realtors, Inc. v. Chicago, 819 F.2d 732, 742-45 (7th Cir.1987).

When state law discriminates against interstate commerce expressly — for example, when Wisconsin closes its border to butter from Minnesota — the negative Commerce Clause steps in. The law before us is not of this type: it is neutral between inter-state and intra-state commerce. Amanda therefore presses on us the broader, all-weather, be-reasonable vision of the Constitution. Wisconsin has passed a law that unreasonably injures investors, most of whom live outside of Wisconsin, and therefore it has to be unconstitutional, as Amanda sees things. Although Pike v. Bruce Church, Inc., 397 U.S. 137, 90 S.Ct. 844, 25 L.Ed.2d 174 (1970), sometimes is understood to authorize such general-purpose balancing, a closer examination of the cases may support the conclusion that the Court has looked for discrimination rather than for baleful effects. See Donald H. Regan, The Supreme Court and State Protectionism: Making Sense of the Dormant Commerce Clause, 84 Mich.L.Rev. 1091 (1986); Julian N. Eule, Laying the Dormant Commerce Clause to Rest, 91 Yale L.J. 425 (1982). At all events, although MITE employed the balancing process described in Pike to deal with a statute that regulated all firms having “contacts” with the state, CTS did not even cite that case when dealing with a statute regulating only the affairs of a firm incorporated in the state, and Justice Scalia’s concurring opinion questioned its application. 481 U.S. at 95-96, 107 S.Ct. at 1652-53. The Court took a decidedly confined view of the judicial role: “We are not inclined ‘to second-guess the empirical judgments of lawmakers concerning the utility of legislation,’ Kassel v. Consolidated Freightways Corp., 450 U.S. [662] at 679 [101 S.Ct. 1309, 1320, 67 L.Ed.2d 580 (1981) ] (Brennan, J., concurring in judgment).” 481 U.S. at 92, 107 S.Ct. at 1651. Although the scholars whose writings we cited in Part II.A conclude that laws such as Wisconsin’s injure investors, Wisconsin is entitled to give a different answer to this empirical question —or to decide that investors’ interests should be sacrificed to protect managers’ interests or promote the stability of corporate arrangements.

*506 Illinois’s law, held invalid in