In the
United States Court of Appeals
For the Seventh Circuit

No. 01-2293

Alliant Energy Corporation and Wisconsin Power
and Light Company,

Plaintiffs-Appellants,

v.
Ave M. Bie, Joseph P. Mettner, and John H.
Farrow, in their official capacities as
Commissioners of the Wisconsin Public
Service Commission,

Defendants-Appellees.

Appeal from the United States District Court
for the Western District of Wisconsin.
No. 00-C-611-S--John C. Shabaz, Judge.

Argued November 13, 2001--Decided January 17, 2002



  Before Harlington Wood, Jr., Easterbrook,
and Kanne, Circuit Judges.

  Easterbrook, Circuit Judge. Wisconsin
regulates the corporate structure of
firms that provide utility service in
that state. Some of these regulations,
according to our plaintiffs (an electric
utility and its parent),
unconstitutionally discriminate against
interstate commerce and deprive them of
the laws’ equal protection. Compare Edgar
v. MITE Corp., 457 U.S. 624, 643-46
(1982), with Amanda Acquisition Corp. v.
Universal Foods Corp., 877 F.2d 496 (7th
Cir. 1989). Plaintiffs, who have sued
under 42 U.S.C. sec.1983, want an
injunction blocking these statutes’
enforcement. But the district court did
not adjudicate the plaintiffs’
contentions. Instead it dismissed the
complaint for lack of standing, ruling
that the complaint did not spell out in
enough factual detail the proposed
actions that state law would block. We
hold, to the contrary, that the complaint
satisfies Fed. R. Civ. P. 8. Perhaps the
plaintiffs will be unable to prove their
allegations of injury, but they are
entitled to try.

  Wisconsin Power & Light Co. (wpl) is the
utility, and Alliant Energy the parent
holding company. One of the laws in
question requires Alliant (and any other
corporation owning as little as 5% of a
Wisconsin utility such as wpl, or of a
holding company such as Alliant) to be
incorporated in Wisconsin. Wis. Stat.
sec.196.795(1)(h)1, (5)(l). The utility
itself must be incorporated in Wisconsin.
Wis. Stat. sec.196.53. A third law
prevents any holding company in Alliant’s
position from selling as little as 10% of
its stock to a single person without
prior administrative approval, Wis. Stat.
sec.196.795(3). A fourth blocks any
utility holding company from investing
more than 25% of its assets outside the
utility sector. Wis. Stat.
sec.196.795(6m)(b). There are more, but
because standing to sue is the only open
question we need not mention them. The
first amended complaint asserted in
general terms that these statutes injure
Alliant and wpl by preventing them from
reincorporating outside Wisconsin,
selling blocs of stock to non-Wisconsin
firms in order to raise capital at lower
rates, and diversifying their business
outside the utility sector by more than
the 25% cap. The district court deemed
this inadequate because it did not allege
that Alliant and wpl have firm commitments
to do any of these forbidden things and
did not spell out exactly what harm they
suffer from not being able to do them.
Plaintiffs then sought to file a second
amended complaint, accompanied by
affidavits of both managers and
economists, stating expressly (for
example) that Alliant would incorporate
outside Wisconsin, if doing so were
prudent after the district judge’s
ruling, would sell more than 10% of its
stock to raise investment capital, and
would make higher profits if it could
engage in these and other transactions
forbidden by the challenged laws.
Thedistrict judge refused to allow this
amendment, ruling that it would be
pointless because it would not solve the
problem. Neither the second amended
complaint nor any affidavit identifies a
buyer (and price) for the stock that
Alliant would like to sell, identifies a
partner committed to a merger, or makes
an unqualified commitment to
reincorporate in a particular state
outside Wisconsin. Injury thus is
conjectural, the judge wrote.
  Reading plaintiffs’ papers leaves us,
like the district judge, wondering
whether there is a concrete dispute. It
would be easy enough for Alliant to say
something like: "As soon as the law
allows, we will reincorporate in
Delaware." And if Alliant fears that this
is imprudent (because Delaware might
change its laws while this case is
pending), Alliant could say something
like: "The Board of Directors has passed
a resolution committing this firm to
reincorporate in Delaware, provided that
the shareholders approve and provided
further that provision X of Delaware law
has not changed in the interim." From the
nature of this suit, in which plaintiffs
protest the unusually stringent anti-
takeover rules of Wisconsin law (even the
anti-minority-bloc rules), the
reservation about Delaware law might read
something like "provided further that
Delaware law still freely allows sales of
minority blocs and the purchase of shares
by third parties." But Alliant has not
said anything of the sort. The amended
complaint and accompanying affidavits
just say "we want to reincorporate,"
without identifying the proposed state of
reincorporation, the reason why that
state’s law is preferable to Wisconsin’s,
or any contingencies that would affect
the choice. The maddening vagueness of
the complaint, and the fact Alliant and
wpl haven’t committed themselves to do
anything, implies that maybe the state
laws aren’t really blocking them from do
ing what they would prefer to do.

  Both in their brief and at oral argument
plaintiffs insisted that this standoffish
position is compelled by the directors’
fiduciary duties. It would be imprudent,
counsel insist, for the directors to make
commitments when the litigation might
linger on the docket and business or
legal circumstances change. "The business
judgment rule," plaintiffs’ brief says,
prevents the directors from making firm
plans. This confuses a defense to
liability with a rule of conduct. The
business judgment rule is a defense; if
directors act loyally and carefully, they
are not liable even if the transaction
goes awry. See, e.g., E. Norman Veasey,
Seeking a Safe Harbor from Judicial
Scrutiny of Directors’ Business
Decisions, 37 Bus. Law. 1247 (1982). The
rule of conduct is that directors must
try to maximize investors’ expected
returns. If doing this requires the
directors and managers to make long-term
commitments, then they are required to do
so. Firms cannot operate only in the
short term. wpl knows this. It may take 20
years to design, get approval for, and
build a new power plant. During that time
the price of fuel, the demand for power,
and the environmental regulations that
affect the plant’s operation may change,
for the better or the worse. What seemed
profitable at the outset may turn out to
be a losing venture. Yet directors who
refuse to make long-term plans, because
they fear loss, are doing the investors a
disservice. Investors can cope with
project-specific and firm-specific risk
easily by holding a portfolio of stocks;
some investments will be winners, some
losers. Directors who refuse to make
long-term commitments because they dread
loss end up ensuring loss. So if
directors believe that being rid of
Wisconsin’s laws would improve Alliant’s
or wpl’s profitability, and if because of
standing rules the only way to get an
adjudication and a crack at liberation
from the laws is to make a long-term
commitment, then the directors are not
just allowed by corporate law to make
that pledge but also required to do so if
they believe that step a paying venture
on balance. The plaintiffs’ excuses for
filing mealy-mouthed documents just do
not wash.

  All of this assumes, however, that the
district judge was right in thinking that
it is legally essential that such
commitments be part of the complaint. It
is not. A complaint need only state the
nature of the claim; details can wait for
later stages, such as an evidentiary
hearing under Fed. R. Civ. P. 12(b)(1) or
summary judgment under Rule 56.
"Complaints need not be elaborate, and in
this respect injury (and thus standing)
is no different from any other matter
that may be alleged generally. See Lujan
v. Defenders of Wildlife, 504 U.S. 555,
561 (1992)." South Austin Coalition
Community Council v. SBC Communications
Inc., No. 00-3864 (7th Cir. Dec. 19,
2001), slip op. 3; see also Alliance for
Clean Coal v. Miller, 44 F.3d 591 (7th
Cir. 1995). The Supreme Court elaborated
in Lujan:

The party invoking federal
jurisdiction bears the burden of
establishing these elements. See
FW/PBS, Inc. v. Dallas, 493 U.S.
215, 231 (1990); Warth, supra, at
508. Since they are not mere
pleading requirements but rather an
indispensable part of the
plaintiff’s case, each element must
be supported in the same way as any
other matter on which the plaintiff
bears the burden of proof, i.e.,
with the manner and degree of
evidence required at the successive
stages of the litigation. See Lujan
v. National Wildlife Federation, 497
U.S. 871, 883-889 (1990); Gladstone,
Realtors v. Village of Bellwood, 441
U.S. 91, 114-115, and n. 31 (1979);
Simon, supra, at 45, n. 25; Warth,
supra, at 527, and n. 6 (Brennan,
J., dissenting). At the pleading
stage, general factual allegations
of injury resulting from the
defendant’s conduct may suffice, for
on a motion to dismiss we "presum[e]
that general allegations embrace
those specific facts that are
necessary to support the claim."
National Wildlife Federation, supra,
at 889. In response to a summary
judgment motion, however, the
plaintiff can no longer rest on such
"mere allegations," but must "set
forth" by affidavit or other
evidence "specific facts," Fed. Rule
Civ. Proc. 56(e), which for purposes
of the summary judgment motion will
be taken to be true. And at the
final stage, those facts (if
controverted) must be "supported
adequately by the evidence adduced
at trial." Gladstone, supra, at 115,
n. 31.

504 U.S. at 561. "[G]eneral factual
allegations", which suffice at the
pleading stage, are exactly what Alliant
provided. It plans to reincorporate
outside Wisconsin, wants to sell more
stock to investors not incorporated in
Wisconsin, and so on. Details--
reincorporate where? when? sell to whom?-
-can come later. The extra detail
provided with the proposed second amended
complaint and affidavits does not plead
the case out of court. These documents do
not show that the case is doomed. They
just leave things open; too open, the
district judge thought, but supplying
details is not the function of a
complaint. It is easy to imagine facts
consistent with this complaint and
affidavits that will show plaintiffs’
standing, and no more is required. See,
e.g., Hishon v. King & Spalding, 467 U.S.
69, 73 (1984); Conley v. Gibson, 355 U.S.
41, 45-46 (1957); Walker v. National
Recovery, Inc., 200 F.3d 500 (7th Cir.
1999); Bennett v. Schmidt, 153 F.3d 516
(7th Cir. 1998).

  Moreover, because investors’ loss is
derivative from corporate loss, the fact
that investors (and potential buyers or
merger partners) have not sued is not
fatal. The market price of stock reflects
anticipated corporate profits (plus
liquidation value). Plaintiffs say that
their costs of raising capital will fall
if they can avoid the challenged state
statutes. Higher costs of capital injure
the firm, making Alliant and wpl the right
plaintiffs. See Frank v. Hadesman &
Frank, Inc., 83 F.3d 158, 160 (7th Cir.
1996); Kagan v. Edison Brothers Stores,
Inc., 907 F.2d 690 (7th Cir. 1990);
Bagdon v. Bridgestone/Firestone, Inc.,
916 F.2d 379 (7th Cir. 1990); Twoy v.
First National Bank of Chicago, 758 F.2d
1185, 1194 (7th Cir. 1985); Johnson v.
Ingersoll, 63 F.2d 86 (7th Cir. 1933).
(We have not overlooked the possibility
that Wisconsin uses an abnormal
distinction between direct and derivative
standing in corporate transactions, so
that events raising corporations’ costs
of capital would produce claims owned by
the investors, but the parties have not
cited any statute or case to that effect,
and none has turned up in our search.)
Alliant and wpl will need to prove their
contention that these statutes raise the
costs of hiring capital; otherwise the
laws cannot hamper interstate commerce.
In this respect standing merges into the
merits. But, as we have said, at this
stage allegations are enough. Skepticism
about a plaintiff’s ability to prove its
claims is not a reason to dismiss a
pleading, however. It is at most a reason
to hold a hearing and require the
plaintiff to pony up the proof.

  Some of the proof should be easy to come
by--if the plaintiffs are serious about
having business plans with which these
statutes interfere. The board need only
make the sort of commitment we have
described. Proof that the rule requiring
regulatory approval to sell a 10% bloc,
or forbidding diversification, hampers
plans (or raises the cost of capital, if
it does) may be harder to come by.
Potential investors may be unwilling to
identify themselves; sometimes the value
of a business transaction is enhanced by
confidentiality while negotiations
proceed, lest a premature announcement
give valuable information to one’s
rivals. See Flamm v. Eberstadt, 814 F.2d
1169 (7th Cir. 1987); Alan Schwartz, The
Fairness of Tender Offer Prices in
Utilitarian Theory, 17 J. Legal Studies
165 (1988). But the difficulty of
identifying particular transactions is
not fatal, as we held in Alliance for
Clean Coal, 44 F.3d at 594-95. A statute
that deprives a firm of an opportunity to
compete for business gives standing to
sue, without need for proof that the firm
would have won the competition or made a
profit in the process. See Northeastern
Florida Contractors v. Jacksonville, 508
U.S. 656 (1993); Adarand Constructors,
Inc. v. Pena, 515 U.S. 200, 210-12
(1995). The 10% and 25% limits interfere
with the competition for capital. An
economist would say that they deprive the
firm of an option value--that is, of the
power to sell a 10% bloc (or diversify,
with or without a merger) in the event
that step should prove to be profitable.
The principle is the same as the loss-of-
a-chance approach to measuring damages in
tort law. See Doll v. Brown, 75 F.3d 1200
(7th Cir. 1996).

  Suppose that there is only a 10% chance
that the firm would be able to attract an
investor willing to buy a 10% bloc of
stock in the next year at a price that is
attractive to the firm, but that if such
a buyer can be found the firm will save
$1 million compared with the outlay in
hiring the same capital from banks. Then
the loss from not having the option to
make the placement is $100,000, and this
loss affords standing. When financial
markets are volatile, the option to make
a placement is worth even more. This is
one of the principal conclusions of the
Black-Scholes option pricing theorem,
which today lies at the core of many
financial markets, such as those in puts,
calls, and other forms of options. See
generally Hans R. Stoll & Robert E.
Whaley, Futures and Options (1993); Frank
J. Fabozzi & Franco Modigliani, Capital
Markets: Institutions and Instruments
(1992); Myron S. Scholes, Global
Financial Markets, Derivative Securities,
and Systemic Risks, 12 J. Risk &
Uncertainty 271 (1996); Roberta Romano, A
Thumbnail Sketch of Derivative Securities
and Their Regulation, 55 Md. L. Rev. 1
(1996). A call--that is, a right to buy
stock in the future at a price fixed
today--will sell for a positive price
even if it is out of the money (for
example, a right to buy IBM stock for
$100 per share during the next 90 days
may sell for $5 today, even if IBM is
trading at $90). The more volatile the
market, the more likely the stock is to
rise above the option’s strike price and
thus produce a profit. So too with
options such as a right to sell 10% of
one’s stock. This has a positive value
even if no one wants to buy today. A firm
with the ability to sell such blocs in
the future, when conditions change, is
worth more in the market today than a
firm hamstrung by laws cutting off its
opportunities. This difference in value
supplies standing.

  As we have said, plaintiffs may fail in
their proof; if, for example, Wisconsin
has a system of rate regulation so
airtight that any savings in the capital
markets are passed through to consumers
in lower rates, then plaintiffs would not
suffer injury even in this option-value
sense. But passing-on is a defense, not
something the complaint must negate, and
is so hard to prove that elsewhere in the
law it is disregarded, even for regulated
utilities. Kansas v. Utilicorp United
Inc., 497 U.S. 199 (1990). At all events,
these and other complexities must await
further development in the district
court.

Reversed and Remanded
