ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY - NEWARK, D.C. Civil No. 84-0411
BEFORE: GIBBONS and HIGGINBOTHAM, Circuit Judges, and NEWCOMER, District Judge*fn*
New Jersey Resources Corporation (Resources) appeals of right pursuant to 28 U.S.C. § 1292(a)91)(1982) and by permission pursuant to 28 U.S.C. § 1292(b)(1982) from a summary judgment declaring N.J. Stat. Ann. § 48:2-51.1, 1984 N.J. Sess. Law. Serv. ch. 2 (West), unconstitutional, vacating the election of Resources' Board of Directors held on February 2, 1984, and directing that a new election shall be held. The appeals have been consolidated. The order appealed from was entered in a suit by N.U.I. Corporation (NUI) against Irwin I. Kimmelman, Attorney General of New Jersey, and against Resources.*fn1 The dispute that inspired the NUI complaint is a proxy contest in which NUI failed to oust Resources' Board of Directors and replace it with NUI candidates. We hold that the court erred in vacating the election held on February 2, 1984 and in unnecessarily deciding the issue as to whether N.J. Stat. Ann. § 48:2-51.1 was unconstitutional, and we reverse.*fn2
Resources and NUI, both incorporated in New Jersey, are investor-owned public utility holding companies, exempt from the public Utility Holding Company Act of 1935, 15 U.S.C. § 79 et seq. (1982), because their activities are essentially intrastate. The stock of both is traded on the New York Stock Exchange, and both have shareholders residing in various states and countries. Resources has a principal subsidiary, New Jersey Natural Gas Company, and NUI has a principal subsidiary, Elizabethtown Natural Gas Company, each of which engages in the distribution of natural gas to residential, commercial and industrial customers in separate franchise areas in New Jersey. New Jersey Natural Gas Company and Elizabethtown Gas Company are public utilities, as defined in N.J. Stat Ann. § 48:2-13,*fn3 and thus are subject to the regulatory jurisdiction of the New Jersey Board of Public Utilities (the Board).*fn4
In November, 1983 NUI made two merger proposals to the management and directors of Resources. Because NUI owned less than five percent of Resources' outstanding shares, those proposals did not fall under the coverage of the Williams Act. See 15 U.S.C. § 78n(d)(1)(1982). Both proposals were rejected by Resources' management and directors. Thereupon, on December 1, 1983, NUI announced its intention to wage a proxy contest for the stated purpose of electing to Resources Board of Directors a majority slate of seven directors who would support the merger.
The annual meeting of Resources' shareholders, scheduled for January 6, 1984, was rescheduled for February 2, 1984. Between December 1, 1983 and February 2, 1984, NUI and Resources waged an intense proxy context. NUI's proxy solicitation materials claimed that the merger would benefit Resources shareholders and would result in higher dividences. Resources countered that it was a stronger company than NUI, that Resources had always paid better dividends than NUI, and that the merger would impede Resources' future access to supplies of natural gas. NUI's solicitation materials also contained information about the merger terms it intended to offer to Resources' shareholders. Resources countered that NUI had not yet made an offer to purchase Resources' shares, and in fact was prohibited by New Jersey law from making such an offer until the Board of Public Utilities approved the merger.*fn5 Resources also called attention to the need for approval of the merger by the Department of justice and the Federal Trade commission before nay offer was made to shareholders.
In addition to its own campaign resisting NUI's proxy solicitation, Resources petitioned the Board of Public Utilities on December 7, 1983 for an order halting NUI's proxy solicitation, and for other relief. On January 17, 1984 the Board held a hearing on the petition, and on January 31, 1984, it issued an order. By then Resources had withdrawn its request for an order halting NUI's proxy solicitation, and the Board did not pass on it. The Board's order did, however, assert jurisdiction to approve or disapprove the merger, and outlined twelve public interest factors which it would consider. The Board directed that, pending review of any merger proposal, the current senior management of New Jersey Natural Gas must be retained and permitted to manage and operate that utility. It also enjoined Resources' Board of Directors from seeking or obtaining ratification by Resources' shareholders of any merger proposal before the Board of Public utilities evaluated and reached a determination on the planned merger. Thus, the effect of the Board's order was to permit proxy solicitation to go forward, but to prevent any other steps toward consumation of a merger until after Board approval.
While Resources' petition was under consideration by the Board of Public utilities, the proxy contest for control of Resources' Board of Directors received the attention of the New Jersey Legislature. Early in January 1984, the Assembly considered Bill A-826, which would supplement Title 48 of the New Jersey Revised Statutes by broadening the authority of the Board of Public Utilities. Resources' management lobbied for its passage, and on January 30, 1984 it was passed by both houses of the legislature. The legislation was signed into law by the Governor on Tuesday, January 312, 1984: the same date on which the Board of Public Utilities entered the order referred to in the proceeding paragraph. The new legislation provides in relevant part:
No person shall acquire or seek to acquire control of a public utility directly or indirectly through the medium of an affiliated or parent corporation or organization, or through the purchase of shares, the election of a board of directors, the acquisition of proxies to vote for the election of directors, or through any other manner, without requesting and receiving the written approval of the Board of Public Utilities. Any agreement reached, or any other action taken, in violation of this act shall be void. In considering a request for approval of an acquisition of control, the board shall evaluate the impact of the acquisition on competition, on the rates of ratepayers affected by the acquisition of control, on the employees of the affected public utility or utilities, and on the provision of safe and adequate utility service at just and reasonable rates. The board shall accompany its decision on a request for approval of an acquisition of control with a written report detailing the basis for its decision, including findings of fact and conclusions of law.
N.J. Stat. Ann. § 48:2-51.1. The Resources annual meeting was scheduled for Thursday, February 2, 1984; no effort to enforce the new legislation with respect to NUI's proxy solicitation was made by Resources, ...