Breswick & Co. v. United States

pat- protected system which was However, 171,441. there ent No. D— tags printed proof were that the dispenser within the manufactured Kentucky. The District Western juris- therefore, Court, not have would upon plaintiff, impose fine diction to notwithstanding of the Court the belief fully plain- evidence establishes that the Pentlarge guilt v. of the offense. tiff’s Kriby, D.C., 501; Hotchkiss v. 19 P. D.C., Co., Cupples Wooden-Ware Samuel 1018. F. Conclusion the conclusion is therefore complaint plaintiff’s should

Court that judgment im-

be dismissed and that a posing on the a fine defendant $500 imposed, Stry-Lenkoff Company one- plain- payable half of which remaining

tiff Morris and the Cornick payable States one-half United plaintiff and that Morris Cornick pay should the costs this action

that the defendants’ counterclaim should

be dismissed. judgment A effect will be upon notice

sented the defendant days

plaintiff, within ten from the date this memorandum. Randolph Phillips, & CO.

BRESWICK as common stockholders Plaintiffs, Corporation, America, The Inter STATES of

UNITED Commission, Alleghany Commerce state Corporation, The New York Central Joseph Gruss, Company and S. Railroad Cohen, Blatt, Albert B. Ar Charles H. Delaire, thur A. Winner and Alvin J. doing copartnership business under style the firm name and of Grass Co. Mehlman, A. and Samuel Defendants. District

United States Court D. New York. S.

July

Injunction Stayed Part, 75 S.Ct. 912. Brussel, injunction against York Rosston, for an & New Hort enforce- Co., City, plaintiff approv- Breswick ment of two orders the I.C.C. George Eugene King, Brussel, Jr., proposed exchange G. City, Alleghany. New York stock of counsel. Randolph City, pro Phillips, York matter New is an now before this court interlocutory injunc- se. for an vacating said Alle- orders that Stanley Atty. Gen., Barnes, N. Asst. ghany be considered as a carrier en- Atty., Lumbard, J. Edward United States joining the enforcement of the orders two Parker, City, York James

New Albert dealing preferred with the stock. Gen., Atty. Durkin, Spe. to H. Assts. for defendant United States. September 17, 1954, Alleghany, On Acting Howell, The New York Samuel R. Coun- Central Gen. Railroad Com- sel, pany Counsel, Pou, and Leo H. Associate Gen. two subsidiaries of the New Central, C., Washington, York D. for defendant Inter- Louisville & Jeffersonville Bridge Cleveland, & state Commission. Co. Commerce Railroad and The Cincinnati, Chicago and Louis Rail- St. Case, City, White & New York Wheeler way Big Company, Four”, known as “the C., Wheeler, Washington, for D. de- application pur- filed with an the I.C.C. Alleghany Corp., Edward K. fendant 5(2) suant section of the Interstate Wheeler, Washington, C.,D. Hart- David Act, 5(2). Commerce 49 U.S.C. On its § field, Jr., City, York Robert New G. face, principal object applica- of the Seaks, Knoxville, Tenn., O. Mil- Andrew approval merger to obtain for a ler, Oyster Bay, Y., Moskin, N. Morton Bridge Company Big of the into the Estate, Y.,N. of Jamaica counsel. Four. of substantial effect McLean, City, Harold H. New York granting application, however, of the Wheeler, Washington, C., K. D. Edward been, would have as claimed Alle- New for defendant The York Central ghany, Alleghany, pursuant to constitute R. R. Co. provisions 5(3), section a non- Proskauer, Rose, Mendelsohn, Goetz & subject carrier “considered as a carrier” City, York New for defendants Gruss & above-designated provisions to the Co., Levin, City, Harold H. New York purpose Interstate Commerce Act for the counsel. securities, of the issuance of etc. It is Mehlman, City, Samuel A. New York agreed that, except on all hands for the pro se. Alleghany of such effect an carrier”, should be “considered as a HINCKS, Judge, Circuit Before and subject company would be an investment WALSH, Judges. DIMOCK District provisions of the to the Investment Com- Act, pany seq., 15 U.S.C. 80a-l for et Judge. DIMOCK, District purposes securities, of the issuance of brought originally This action according Thus, Alleghany’s etc. requiring the Interstate theory, granting Commission set aside two Commerce constitutes a determination that Alle- they the extent orders to ghany issuing subject securities Alleghany granted application of supervision of the I.C.C. rather Corporation to be “considered as car- Exchange Securities and Commission. of sections rier” importance The immediate of this is in (10) inclusive and sections with the connection issuance of a new 20a(2) (11) inclusive the Interstate preferred pursuant class to a Act, 20(1)-(10) 49 U.S.C. §§ Commerce exchange voluntary offer authorized inclusive, 20a(2)-(ll) inclusive. Alleghany directors, public made on complaint By supplemental stipu- February 2, approved by scope of the action has in the orders under since lation I.C.C. review but not prayer by as to so include S.E.C. extended been amounting 2,400 ap- Alleghany been shares sales filed with'the plication new class stock. issue the leave to February preferred stock on proceed- Since the institution Railroad, through ing, I.C.C., New York Central On March merger ap- Alleghany 4, approved two holders its Division plication and, Co., copart- May stock, 24, 1955; the I.C.C. Gruss & nership, Mehlman, through Commission, and Samuel A. affirmed the whole .granted ap- been approval. de- leave to intervene two orders These being

proval fendants. reviewed are the ones now included were this court and which theory Alleghany’s indicated, As above original complaint. effect Since as a result of the determination usually re- was the same merger application, ob- singular. ferred to herein tained deemed the status of a non-carrier coming days purpose to be a May carrier for the after two On supervision approving under of the I.C.C. the full order of Commission relating ap- merger, matters curities, to of se- the issuance 4 of I.C.C. Division distinguished preferred status proved from the of the the issuance coming company under an investment stock. supervision of the for such S.E.C. complaint 6, 1955, this June On matters. and, filed on June action was statutory provisions involved are seeking this made following: against enforce- preliminary a Act, 5, 49 Interstate Commerce assuming orders. of the ment 5. U.S.C. § preferred order was stock Attack on the prior postponed of the full to the action “(2) Unifications, mergers, and theory review on the Commission acquisitions control. premature. would be lawful, with the approval and authorization of the “(a) It shall be 22, 1955, entire Commis- June On preferred order of affirmed stock sion Commission, provided in subdivi- preferred two stock These Division (b)— sion being reviewed are now also orders this court “(i) for or carriers to two more by sup- they were but added merge properties consolidate or jurisdic- plemental complaint. Like any thereof, franchises, part or or usually assuming orders corporation for the owner- into one singular. to in referred management, operation ship, sepa- properties theretofore in Alleghany, 23, 1955, imme- On June any carrier, ownership; or learning rate diately upon Commis- of the full jointly, or two or more carriers to approving finally the issu- sion’s order lease, oper- began purchase, or stock, contract to ance of any part properties, there- or pursuant ate new stock distribution carrier, another; any of, or for or exchange That distribution offer. jointly, restraining to ac- or more carriers temporary two quire by a halted through of another control not before court but order issued otherwise; ownership or its stock proposed had issue of the half more person is not a which carrier or for a exchanged. of that The effect been temporary acquire of two or more restraining control has been through ownership of their carriers new shares of prevent the transfer otherwise; person or consequently or stock to halt preferred stock not a carrier and which has which is trading New York on the Stock therein or more carriers to of one control Exchange. before advised areWe acquire control another carrier actually stopped, had trading there ^37 (cid:127) “which, change- carrier’s the. does or not. ownership through- its., ' * existing or future status”. , otherwise; *. f n .Here the Alleghany, absent status “(3) carrier Non-carrier .deemed 5(2)- an order under sections acquiring control. (3),.that as a .5 it should be considered Und person “Whenever subject carrier Interstate Com- by. authorized, an order a carrier Act, merce was that of an investment (2),'to ac- paragraph entered under company subject .ány ór of two quire óf carrier orders, Investment Act. carriers,' person there- such or more sought changed to'be reviewed its “exist- provided shall, after to the .extent quoted status”. future Hence order, in such the Commission principle does not of the Shannahan-Case a carrier considered as' prevent their review. following provisions as such of the Justice Rochester applicable involved Frankfurter carrier case, quoting Justice Bran- acquisition besides of control: Sec- such déis, 304(a) (1) (10), stated for himself fol- the rule tions lows, page 132, title, (which (2), at 59 S.Ct. at 307 U.S. 320 and 913 of this page 758, complainant accounts, reports, and so “Where seeks relate to authority carriers), forth, terms and sections Commission’s under the title, 20a(2) (11), of a of this statute and the Commission’s action and 314 * * legal (which consequences of securities followed relate to issues . liability assumptions of car- or where the denies Commission’s order including exemption riers), in case the an from the each the terms of stat- ' ' * * * penalties applicable ute courts’ in the case the road to the jurisdiction provisions.” violations of. such seems to be clear.” threshold make two granted At the defendants Here the I.C.C. ex an. objections: first, jurisdiction emption that the terms of Invest the the assuming Company act, by order is not reviewable and ment Act. That section second, reviewable, 3(c) (9), if it is 80a-3(c) (9), even 15 U.S.C. ex standing plaintiff cepts has no to review it. company” from the “investment class, “[a]ny company subject regula Reviewability of the Orders. tion under the Interstate Commerce Act”. States, Shannahan v. United 303 U.S. Section of the Interstate Comhierce 1039, 596, 732, 58 82 L.Ed. is said S.Ct. Act, under Which the I.C.C. acted in mak against authority reviewability to be the ing here, provides the order that the assuming jurisdiction order. The shall, provided non-carrier “to the extent determination held to be unreview- .there order”, the' in Commission such be finding able was a the carrier con- subject considered as a carrier cerned was not an interurban railroad provisions enumerated of the Interstate subject pro- and was therefore to certain By making Alleghany Commerce' Act. dispute visions as labor mediation. Act, to the Interstate Commerce exempted the I.C.C. it from the Invest Supreme Court in Rochester Tel. Company thereby brought ment Áct and S., Corp. 125, 754, U. 307 U.S. 59 S.Ct. the order within the test for review- to.disagree 1147, seemed 83 L.Ed. ability laid down in the Rochester case. decision on Shannahan facts but Frankfurter, page Justice U.S. at There is no room here for idea explained might generated page 757, 131, 59 S.Ct. at the Shanna-. principle by quoting attempt the statement of han case that to review assuming jurisdiction in Brandeis United Justice States v. Los orders Co., Angeles 310, 299, L. R. 273 U.S. & S. mature. The has been exer-. 413, 651, adoption 71 L.Ed. approv- 47 S.Ct. the effect cised of the order ’ ing preferred can be no review of an there the issue of the stock. against ap- managing the order Defendants those com- intimate panies proving persons other the issue of interests permissive only is therefore and that investors. citing in Miller unreviewable a statement complaint charges in sub- here States, D.C.S.D.N.Y., F. v. United Young stance that one Robert R. and one 95, approving that an order of the I.C.C. Kirby Allan P. are control of Alle- direct does not issuance securities ghany conducting and have Alle- been only puts the carrier issuance but ghany’s primarily affairs in the interest position where, is- if the securities are group themselves and of in- a small they If sued valid.1 this state- secondarily siders and in the interest lay rule ment were intended to down a charg- the other stockholders. It further permissive orders of the I.C.C. es that the orders reviewed, has been not be the law since under review was instance of made at the contrary. York In New settled to the Young Kirby purpose States, Corp. Central Securities v. United escaping provisions Investment D.C.S.D.N.Y., 122, affirmed 287 F.2d Company Act. 138, 45, L.Ed. stock- U.S. 53 S.Ct. holder allowed to review an order allege The stockholders here authorized, did the I.C.C. but that, by obtaining ruling an erroneous direct, corporation. Ac- action I.C.C., persons from the in control of Chicago Case, 264 cord: Junction U.S. corporation escap have succeeded 258, 263, 68 L.Ed. 667. S.Ct. ing passed an act express purpose protecting Standing stock Plaintiffs’ to Review persons holders from in control. Since “Irreparable Orders and corporation, by help hypothesis, Damage”. less, plaintiffs say have stand Aug. 22, Act, The Investment prevent thwarting to sue to 1-53, I, 54 Stat. c. Title §§ Congress. the declared will We begins 80a-52, 80a-l 15 U.S.C. tit. §§ stockholder, convinced that a who seeks findings legislative a declaration with Congress provided that which has 1(b) policy. of Section declares right, for him as matter of need not show “adversely af- is investors” “interest of money damage to entitle him to sue. * * * com- investment when fected enough It is if he shows * * that no one else * operated panies [or] are corpora will act on his behalf. Here the * * * managed of interest tion, by which is controlled those he is advisors, directors, officers, investment attacking sought and which has rul persons depositors, affiliated or other ing objects, help to which he will not him. dec- with a ends That section thereof”. perhaps While it would be too much to purposes policy of “that the laration expect engage juris of the in * * S.E.C. * miti- subchapter are to this fight great dictional with another admin feasible, to elimi- gate and, far as is so body standing, istrative of coordinate in this enumerated conditions nate par hard fact is that it has limited its adversely na- affect section ticipation request to a to the I.C.C. to of and the interest public interest tional part of surrender as a investors.” grace. matter of Moreover no such remedy provided by In purposes of the via the S.E.C. of the One protect Groesbeck, See Goldstein v. thus to statute. 2 Act is vestment 422, Cir., companies 154 142 F.2d A.L.R. 1285. investment in investors question 20a but whether at tíon noted I.O.C., any other, under section or whether the sec case was in issue approval its conclusion regulating securities had stand Al tion question leghany complied is to be deemed a carrier Here under with. been merely compliance section 5. see one of with is not

139 right plenary seek is the of a stockholder A action the stockholders right against Alleghany corporation. enjoin the issuance the orders while standing stock were accorded Stockholders and effect force the I.C.C. stand in full Urgent Act to sue under Deficiencies quite properly de- with the would met to review sec- action of the I.C.C. under collaterally attack- fense were in York Central Securities New body’s determina- an administrative Corp. 122, States, 54 F.2d United 3 present proceeding, where tion.2 The supra. plaintiff In that case held directly attacked the I.C.C.’s orders are corpora- of two of a kinds: stock lessee party may in be heard where as a corporations. tion and stock of lessor behalf, play to affords fair both pay- plan acquisition involved sides. corporation lessee ment rent corporations lessor stockholders un question that of Where held in lieu dividends. The court regulatory usurpation lawful corpora- that, as stockholder of a lessee distinguished from the reasonableness tion, standing plaintiff had because agency regulatory an action “plaintiff any in- cannot sustained jurisdiction, has a stockholder conceded standing jury respect other than indi- or to attack an administrative rectly through corporation.” the lessee management corporate der which minority 54 F.2d 125. “As a stockhold- though acquiesced he cannot has even corporations, however, er of lessor its al- than a derivative show an interest other leged injury merely is not derivative corporation. See behalf one on through ownership stock, but is Valley Author Ashwander v. Tennessee independent injury itself mem- aas 288, 466, ity, 80 L.Ed. 56 297 U.S. S.Ct. leasing ber of a class created to stock 688. There relief was accorded agreements between lessors lessee.” duty against [which holders a “breach 54 F.2d 126. yielding, appro without consists] governmental In priate resistance, States, de Schwabacher v. United 182, 334 1305, U.S. 68 warrant of law S.Ct. which are without L.Ed. mands permitted re stockholders were in violation of to review .constitutional strictions”, page the I.C.C.’s treatment of at their class of U.S. merger plan page stock in a the stock at even when under section S.Ct. right of”, “in sued U.S. holders (2). page page at S.Ct. at principle expressed by Bran corporation. deis, J., Pittsburgh Ry. & W. Co. Va. 479, S., 487, 378, applied Yet, narrower v. U. 281 U.S. if we the 50 even S.Ct. standing applied 381, 980, where 74 to sue L.Ed. where he “Final as to said test challenges ly, the the reasonable- claim that the a order threatens stockholder regulation Wheeling’s stability, rather than the financial the I.C.C.’s ness of all, regulate plain- consequently appellant’s jurisdiction to at financial inter apart minority stockholder, from est as a interest have sufficient suf tiffs is not give standing corporation legal ficient to jury necessary them show a threat in the the they bring here what claim is a Indeed entitle it sue. right a protection suit to set stockholders aside the order. This finan regardless management against cial interest the does not differ from that of every protection Wheeling wel- the in of that investor effect securities they corporation. from an That which investor’s interest in busi- fare of the position proceeding in take in did fact be attacked a 2. before a successfully preliminary three-judge opposing enjoin in court its enforce- in Briggs, collaterally junction Co. v. ment and in Breswick & not in a stockhold- F.Supp. D.C.S.D.N.X., against 130 there derivative ers’ action the direc- determination, Alleghany. argued the if I.C.C. tors by plaintiffs, could to attack privileges corpo- preferences the the of his or lawsuit ness transaction outstanding'securities”. holders of their ration.” 80a-l(b) (3), 15 U.S.C. § plaintiffs the complaint is that manage- cases unlawfully In none of the cited counsel the extended I.C.C. argument support plaintiffs adjust relations the power ment’s standing plaintiffs Except for security have no did the holders. with other question as such a direct interest in the allegedly I.C.C. unlawful act the Pittsburgh plain- privileges the suitors here. In & W. preferences Ry. S., 479, Va. 50 S. protected Co. v. U. U.S. been would have tiffs minority 378, plaintiff against supra, Company the Ct. Act Investment sought stockholder to attack an manipulation in control of the of those permitting rail corporation.3 the abandonment of a Sprunt & road station. In Alexander precisely The situation is the same States, 249, Son v. United 281 U.S. York Central Securities that case, the New 315, S.Ct. 74 L.Ed. 832 and Edward above, the stock- abstracted where S., Hines Yellow Pine Trustees v. U. standing upheld. su- holder’s ing 143, 72, 216, 44 S.Ct. 68 L.Ed. U.S. plaintiffs complaining be- stockholder was shippers complained were who but be- cause it was to receive rentals rates, not attacked as unreasona corporation cause the was not to receive ble, competitive positions. worsened their wrong suf- them. That stockholder Merchant Truckmen’s United Bureau v. stock- fered common with all other States, D.C.S.D.N.Y., F.Supp. yet in- holders jury held that court plaintiff was a similar case where the * * *, merely was “not derivative qualification did not even have the be * * * independent.” but F.2d ing shipper. League In Moffat Tunnel nothing 126. In a literal sense could S., v. U. 289 U.S. 53 S.Ct. more derivative than the loss that Supreme 77 L.Ed. Court char per- stockholder suffered when the I.C.C. plaintiff’s acterized the “no interest as corporation mitted to renounce more than a sentiment”. In Miller v. right but, effect, to rent action States, 95, supra, United 277 F. deprived of the I.C.C. the stockholders plaintiff alleged that he was stock right independent of an to dividends properties holder in a railroad whose property corpora- earned process were in foreclosure. He here, tion. So whole standing said to be without to review an corporation which the made I.C.C. has approving order of the I.C.C. issuance subject to the Interstate Act Commerce corporation securities of a new Company'Act instead of the Investment properties of the old. but the of the action of effect plaintiffs It is said that do show deprive is to in- stockholders of an necessary .“legal injury” which is right dependent not to have their status give standing. believe We changed except permitted by they legal injury show when terms the Investment Act. demonstrate because of an errone- ruling identify by Any would ous the I.C.C. as to their that sta- construction they subject tus, possible injury plaintiffs to of these and the the interests they nugatory corporation would be render the from otherwise would protected. Company order under Act an accom- The review has Investment management exempted purpose the re- plishment of its declared the Company when strictions of the Investment condition that exists the eliminate protect companies” Act. “fail to “investment respect States, Miller v. the See N.Y., United D.C.S.D. control 3. The I.C.C. 95, supra. merely protect 277 F. Of. Investment of securities issuance Company 1-23, over-issue, against Act 15 U.S.C. §§ the bal- 80a-l §§ to hold management investor. to 23. between ance enjoined preferred is- Company was stock is be Act Investment The many in hands sued and cases reach the protection investors. adopted for the purchasers an un- investor bona fide so that Congress that an declared has scrambling, in determina- company have the event of a shall investment in an approval protec- unlaw- tion that the I.C.C. ful, was and the protection of act impossibility. practical tell would be a no answer It is of the S.E.C. find in they may Plaintiffs would then themselves better plaintiffs come out that position of common stockholders Commerce Interstate the liberal under possibility faced with the of dilution Investment under the strict than Act by their interest conversion of this new man- The law forbids Act. yet preferred stock and remediless that agement investor to spite illegality adjudged of the of the hazard. preferred stock. There no doubt can be gainsaid that it cannot be Of course injunction preliminary that without over plaintiffs demonstrate that cannot the new stock will be issued they years would fare better begun already since distribution had operate Alleghany had stockholders if by temporary when halted restrain- Company Act Investment under this case. Commerce rather than Interstate immaterial, Act. That is however. The Claim that Be Must Se- New York stockholder Central Irrespective Considered a Carrier case, 122, supra, was curities permitted 54 F.2d of the Under Order Review. many points other raise point Defendants make further point than its that rental was inade- plaintiffs were not harmed quate. determination of the I.C.C. Al- because plaintiff, en rule leghany already being had the status of injunction, must show an himself to title “considered as a carrier”. bearing damage on irreparable has no That claim based the fact right action. plaintiffs’ to maintain 5, 1945, an order June dated they cannot All that it means is Finance Docket No. injunction ade an an if have have given Chesapeake that status. have, remedy quate lav/.4 If at Ry. Purchase, O. Co. 261 I.C.C. 239. right pro think, this to invoke the as we proceeding in a That order made be- Company Act Investment tection gun September 2, 1944, the C. & O. juris against assumption of an unlawful 5(2) act, under section of the ac- I.C.C., they ade diction quisition Norfolk Terminal and quate remedy at law to vindicate Transportation Company. Septem- On right. 5, Alleghany supplemental ap- ber filed a right preliminary Plaintiffs’ to a in- plication, joining applica- the C. & O.’s junction is a different matter. “seeking approval tion and and authori- injunc support preliminary To zation under act through injunction plaintiff by it, 0., tion in proper- an suit the the C. & of the Company”, must show not other rem ties of the Terminal edy injunction approval in a final would be asked leghany’s Al- continuance of adequate relationship is but also with the carriers waiting by it, directly indirectly, sued after time involved in controlled including 0., inadequate protection. for trial would the C. & the Nickel Plate Here, proposed Marquette. unless the Pere issuance and the III, 487; Injunctions, Chap. 484, College Music, 4. Kerr on 3rd Ed. A. etc., Columbia 1, p. 14; Tunberg, 19, Charles Wilson & Son v. v. 64 C. Wash. 116 P. Harrisburg, 787; 280, 282; 207, 218, Seigni Me. A. Miles Laboratories v. Shiebeck, ous, 412, D.C.E.D.S.C., F.Supp. v. 24 A.2d Smith 180 Md. 795; Hodge Giese, N.J.Eq. 342, 1945, Alleghany’s relinquishment making instant of of June In the order among others, find- Nickel made, the by control Plate, plaintiffs the C. & andO. the I.C.C. “acquisition Alle- here were entitled ing, p. Congress through special control, protection ghany which Corporation of described, provided of has invest- for stockholders in ownership of stock as above companies Plate, Ohio, Pere ment which do control Chesapeake not Nickel Although apply railroads. and af- failure for Marquette subsidiaries and their might estop scope Alle- vacation of filiates, order is a transaction within ghany, it from the 5(2) Com- could not shield it the Interstate of section ” * * * binding upon and provided S.E.C. it would be not merce Act persons such third of Al- other- stockholders that “unless and until the order leghany. Alleghany, except Al- As all said wise ordered this Commission accepted which had leghany Corporation it the 1945 order as shall considered be read, provision regulation by its for as a carrier I.C.C. after (10), inclusive, 20(1) factual basis I.C.C. and Sec- Section jurisdiction ceased, empty (11) 20a(2) inclusive, fiat. In- was terstate Commerce Act”. 5, 1945, if Even order of June January Alleghany terminated, were ject 19, 1954, effective until di- ob- On proceedings it below to sub- the C. & O. vested itself stock stitute control Plate the New York Central had theretofore held. The Nickel for control of the Pere C. & O. and Nickel stock had been earlier sold and merged as a Marquette Up- Plate basis declaration of status the C. & O. suggestion to be “considered as a Plain- on the of those I.C. carrier”. facts the tiffs requested Alleghany were entitled to be heard on Alle- C. cause to show ghany’s qualification why order of June status the new basis. Carriers Finance Docket not inter- No. should changeable at will. be vacated applied aside set insofar as Alleghany provided to and Alleghany’s Failure to Find that Control should be “considered as a carrier”. Al- of the New York Central is “Con- leghany responded ready that it would be sistent with the Public Interest.” proper accept at a time to an order ter- question presented fundamental A minating its control of the C. & O. and empowered I.C.C. whether the requested regarding that action sta- section to direct proceedings tus be withheld until the re- should be “considered as a carrier” even sulting in the order below could be- Alleghany pe- be though Alleghany, applying for con- gun. allowed carrier, did sideration as a seek au- sixty days riod of purpose for that thority acquire control of a carrier. proceedings under review were be- gun expiration. before To us it seems that the I.C.C. power. such had no be noted that proceedings In the under review the 5(2) empowers section the I.C.C. to au alleged had thorize transactions of two classes: “recently” relinquished control of the First, involving transactions carriers By & O. review, C. the orders under and, second, alone where transactions portions the effective of the order of persons which are not carriers are in 5, 1945, June expressly were terminated volved relations with carriers. “[A] and declared to be of no further force person may which is not a carrier” or effect. acquire “to authorized control of two or might through ownership Whatever been the more carriers of 5, 1945, person of June or otherwise” and “a terms upon Alleghany not have conferred could is not carrier which has control qualifications “considered a car of one more carriers” be author possess. acquire which it did not “to rier” From the ized another [car- ownership Transp., through or Al- its stock Trail M.C.C. 469. Fe tier] though these cases show need for I. otherwise”. un- authorization consolidation C.C. 5(3), find we to section we come person When support 5(2), der section do not not a carrier” which is “a that may present contention such consolida- only a carrier” “considered as already acquired tion between subsidi- by an under order is authorized it when paragraph control”, “acquisition aries constitutes any acquire (2) control of “to parent previ- or that a non-carrier more, carriers”. or of two or carrier ously subject 5(3) to section becomes assuming jurisdiction subject to that section such a consoli- Alleghany to case did not authorize this acquire Chesapeake Railway dation. In & Ohio two carrier or of control of Company-Purchase, supra, Alleghany, it did was more carriers. What parent, subject non-carrier was held merger permit a carriers which two 5(3) upon section but already by parent controlled a car- were intra-system basis of the consolidation in rier, Central, which said the New York is that case. It was the basis of Alle- non-carrier, Alle- be controlled to ghany. ghany’s application ap- for retroactive certainly fall The case does not proval acquisition of its of control over language within the in the the statute Chesapeake Ohio, & the Nickel ordinary acceptance of words. Marquette. Plate and the Pere Neither Control, does Warrior & Nav. Gulf Co. The effect of the Commission’s supra, holding. constitute such a There holding position is that whenever a com the Commission asserted that the ac- position pany deems quisition of direct control of a bring subsidi- it desirable to itself within the ary place through of indirect control class “considered as a carrier” it needs subsidiary subjected another join ap the non- with its subsidiaries in parent regulation carrier approval under plying sec- to the I.C.C. for of some 5(3). tion concluded, It parent however, that, merger transaction such as the rail because the bridge primarily was not company road into one of the sub transportation business, sidiary it would not companies. railroad Such regulation. seek to Thus, exercise such transaction, as, indeed, the transaction the assertion in here, that case was significance but completely a dic- without put tum never to the test of far as execution. question so concerns the whether top the issuance of securities cor By another construction of the poration subject to the of statute, think, also erroneous we the I. prayer the I.C.C. or the S.E.C. has created a situation C.C. where a non- approval merger of if treated as may, approval without carrier of the I. meaningless were an effective in but acquire system control of C.C. a railroad propitiate cantation to a medicine man. then, if and when it suits non- Alleghany and the Commission con- refuge carrier’s convenience to seek interpreta- I.C.C., administrative approval tend ask its of an intra (cid:127) intra-system merger merger system such an sub- and, result, as a obtain a parent jects the non-carrier I.C.C. declaration under section that the 5(3). regulation pursuant to section non-carrier must thenceforth be consid They rely Chesapeake Railway Ohio security as a carrier ered Company-Purchase, 261 I.C.C. su- issuance of the Interstate Nicholas, Fayette pra; & Greenbrier R. Commerce Act. This second construc 546; Lease, 261 I.C.C. and Warrior Co. tion adopted we think erroneous is the one Control, Nav. opinion Co. & Gulf in of the full Com cases in turn refer two These others: mission where it said “As Central, at Parcel United Service of Portland —Pur- acquisition time of [Alleghany’s] Wiese, recognized single M.C.C. and Atchi- as a chase— estab Ry. son, system, T. & S. F. Co.—Control—Santa lished we conclude scope importance, of not within the fundamental nationwide transaction very section constituted the heart of the con- the above-stated approval structive, progressive program and that our for which of the act Congress Commission, necessary.” looked to the was not something rather than un- to be avoided ap 5(2) I.C.C. Under Section pressure important der less acquisition of proval required for the though perhaps tasks. more immediate says carriers. The statute two or more Further, contrary which to the views “systems”, yet “carriers”, I.C.C. guided apparently Commission, Con- previ of a held that control has here ously gress quiet did not seek to con- hide or system may be obtained affiliated troversy. protection It felt that the corporation its without a non-carrier public lay public exposure, as approval. similar circumstances Under expertness well as the of the Commis- applications for entertained I.C.C. 5(2) (b), sion. In section it forth set approval acquisition carrier of a the mandate that interested holding company in Weinstein-Control parties be heard but authoriza- also the Montgomery, Capital Transit Co. and public hearing require- and the Line Air ancl Seaboard 56 M.C.C. Ry. governors ment of notice of af- Receivership, We I.C.C. Co. fected states for both consolidation acquires non-carrier where a believe that acquisition of control. corporation parent of a control of the escape Here the Commission would system acquires it railroad any responsibility acquisition as to the consequently of the subsidiaries by Alleghany of the Central and focus require or more carriers” so as to “two public merger only upon attention approval. men The Commission and Jeffersonville po Louisville authority support of its tions no Bridge Big Company & Railroad into the express distaste does its sition but it Four, trying regu- keep all the while would which it for the controversies into latory control of and thus complied projected literal if it with a be reading clude consideration of the matter of the statute. believe We ' the S.E.C. The conse- undesirable position constitutes unsound and that it quences of the Commission’s Congress mis- double power re a surrender of interpretation of section 5 thus become garded important public inter pointed. Alleghany’s all the more ac- conjured est. The attendant difficulties respect tions with to the New York Cen- up by greatly ex Commission tral and the use of its funds in con- aggerated. Without undue trouble nection were transactions of distinguish a nature usual should be able to Congress regarded particular proxy acquisition contest expressed concern. Its concern was holdings by single person corpora the Investment Act which im- tion of such a block of stock it has posed management restrictions control from taken the other stockhold companies Alleghany, pro- similar to ers. regulation companies vided for of these purposes Consideration by the S.E.C. Its concern was man- also emphasizes as- statute the destructive which, ifested section 5 before the ad- put

pect of the construction forward S.E.C., attempted vent to enable Congress con- the Commission. companies the I.C.C. to reach Al- such as problems: with three the consoli- cerned leghany. Here, the I.C.C.’s action de- economically of carriers into dation regulation. plans feats both systems na- in accordance with sound transportation plan de- The S.E.C. had own commenced tional I.C.C.; looking proceeding possible veloped the affiliation to a reasser- through parents; common and tion of its over carriers regulatory company. suspend- control of non-carrier investment as an presented questions proceeding parents. Each ed this avoid conflict with plea participate, Alleghany its submitted to it main that did I.C.C. recog- I.C.C., discretion, in its its that it did ask for a determination of ju- regardless that, of its claim to control of New York a condi- nize Central as Alleghany carrier, a a over tion to a declaration of status risdiction its company primarily an investment non-carrier “considered carrier” it was as a company, transportation than a and that the did The rather I.C.C. so declare. accordingly plea sub- I.C.C. and that ject mere fact that based its 5(3). regulation under section for consideration request a it to “as a carrier” on merger approval in other the I.C.C. had done This is what of rath- request approval cases. See & Nav. Co. er than on a ac- Warrior Gulf of supra. Control, quisition I.C.C. The of I.C.C. control of the York New ap- application consequence denied the of the S.E.C. Central of no a where ground finding parently upon that it had of control of the New Cen- York comply it, saying granting power be- “We tral was with essential to the its Congress plea. ei- lieve that unless amends involved ther both statutes We do not think that was the I.C.C. herein, desires the results S.E.C. jurisdiction proceeding without power our un- to achieve are not within approve acquisition. below to In- Act.” der the Interstate Commerce deed, Alleghany if was correct in con- conclusion is without foundation. Such a acquired tention that it had control supra; Weinstein-Control, 56 M.C.C. fight proxy New York Central in a 254; Ry. Co., Arkansas & L. M. 282 I.C.C. ceding meeting May the stockholders’ Co.-Control, M. Columbia Investment 26, 1954, I.C.C. consideration 375; C.C. Warrior & Nav. Gulf Co. Con- question long overdue. Under our trol, supra; I.C.C. Cambria interpretation of the statute I.C.C. Cuya- Control, 360; I. R. Co. 275 I.C.C. finding could not have made a of control hoga Valley Ry. Control, Co. 252 I.C.C. approving control, yet without it failed Saginaw 683; Dock & Term. Co. Con- prerequisite finding to make the Application, tract Carrier public was “consistent with the necessary up- pass It is not now for us to required by (b) interest” subdivision question on the of whether I.C.C.’s 5(2). go section The case must back comply peti- failure to S.E.C.’s question for consideration of that Al- if tion is reviewable as an discre- abuse of leghany persists in its claim that it has tion. acquired control of New York Central and in its desire for a declaration acquisi- Our conclusion where no right to be “considered as a carrier”. involved, tion of a carrier is the I.C.C. jurisdiction 5(2) has no Adequacy Finding under sections of of Control. provide non-carrier a ignore Even if we were to the absence subject shall “be considered as a carrier” finding consistency pub- of a with the security-issuance provisions to the interest, adequate lic the I.C.C. made no Interstate Commerce Act mean does not finding of control in the as- proceeding dis- below must be suming order. Alleghany sought finding missed. a findings in the determination un- it controlled New York Central. very der review on this theory on that that it considered itself oblique. necessary party application un- contained in the deter- interpretation der its Mar- U. S. v. mination Division Four are fol- Co., Transport shall 322 U.S. 64 S.Ct. lows : Regardless 899, 88 L.Ed. 1110. merger capital whether the involv- “The stock of Central is Big Bridge Company widely public, and the held con- but presented reposes Four could have been without trol of its in Alle- functions Alleghany’s participation, ghany re- the facts and its officers as a result of Allegha- preceding proxy stock- realities of the situation. ny contest meeting May 26, at suc- and its interests have allied holders’ electing by Alle- sufficient mem- chosen ceeded which the nominees ghany permit them to as Central’s bers the board to were elected organize officers. has and elect own of directors. board 600,- Clearly in in office of such half interest the tenure an undivided permitted with this action directors as 000 shares of Central depends voting rights 600,000 upon shares their conformance to the agreements, joint the views who and of the stockholders under venture opinion 15,500 addition, shares. elected them. In our in owns Alleghany Alleghany rep- power reposing voting rights thus The percent total constitutes control of Central.” almost 10 resent stock outstand- of Central shares The full said: Commission also ing. the board The chairman of (Sheet 11). Alleghany, “ holds who directors of * * * findings We affirm the Central, position ben- the same eficially of Division 4 that these transactions 100,200 shares owns and the continued Central control president Al- stock. The latter's scope Alleghany within Central, leghany a director 5(2) act, of section ed, amend- 300,100 beneficially shares owns that terms and conditions are vice-presi- stock. A latter's just and reasonable and that Alleghany a similar holds dent of transactions continued control 3). (Sheet position with Central. public will be consistent with the in- recognize present that “We terest. system has of the Central control appears foregoing “As from the regular Alleghany by passed cor- discussion, Alleghany at the time it though porate procedures our even filed its was in fact premises approval has not in the person not a carrier which con- * * * sought. im- been system, trolled an established thing Alleghany portant does is that seeking which was authorization largest railroad of our control one systems 5(2) under section for modified con- regulation thereof and the system trol of one of subsidi- respon- public our interest is * * * opinion aries. our * * * 16). sibility. (Sheet properly applied that division 4 think reasons stated we “For the quoted of the act. We continuing warranted in ruling.” that we are Alleghany affirm that present status. Ac- in its It will be observed -will, pursuant cordingly, to sec- we unquali above that Division 4 made an subject Alleghany 5(3), to the recognized fied statement (10), provisions of section passed control leghany. the Central had Al to stand, 20a(2) inclusive, and section That conclusion can inclusive, (11), of the Interstate however, only sup if ultimate facts to In the event that Act. Commerce port expressly it are found in any warrant circumstances future of the Commission. State of Florida change find- modification of this States, 194, 215, United 282 U.S. 51 S. ing, to enter retain we 291; City Ct. 75 L.Ed. of Yonkers necessary pro- deem order we States, 685, 692, v. United 320 U.S. 17). (Sheet public interest.” tect 327, 88 L.Ed. 400. S.Ct. To serve that opinion in its full Commission purpose we have the statement of Divi 9). (Sheet said: sion 4 that control functions Alleghany “reposes Central “The contention and its proxy individual direc- officers a result of a contest does ignores preceding meeting a stockholders’ board on Central’s tors May 26, 1954, forced, nominees therefore, at which the We are con- by Alleghany findings chosen were elected clusion that the do no more is, say else, Alleghany, Central’s There board directors.” with someone however, nothing support They state- controls New York Central. do actually say else, ment the nominees were even whether the someone by Alleghany alone, satisfy chosen doubt and some has control. Does that cast ceding the fact that statute ? reposes statement is that control There is internal evidence “in That and its officers”. the statute itself that non-carrier statement in state- turn is much like the meaning have control within the of that ment of full sub- Commission to the term as used in the statute must be stantial “and effect that sole control. Section enumerates allied York Cen- interests” control New cases, said, as we kinds: of two tral. dealing one class with carriers alone findings To return Division to the of dealing persons and the other class with 4, its Alle- order discloses the fact that who are carriers but in control holdings ghany’s beneficial of Cen- the of or one first more carriers. In the tral in- stock are less combined than the cases, class of in the statute enumerates Young, holdings Kirby, dividual of may stances where two or more carriers group. Richardson and the Murchison carrier, be in control of but another Judge proceeding In a Walsh before when the statute comes deal the involving approval of for of case a non-carrier in of car control preferred stock, riers, only issuance new it enumerates instances Briggs, F.Supp. person Breswick & Co. v. where “a which is not a carrier” 953, supra, opinion, acquires Thus, filed an dated statute, he control. April 6, he Alle- terms, attempt in which noted that makes no to cover ghany’s voting power was increased the case where a carrier or carriers is agreement gave joint jointly by venture controlled non-carriers. 300,000 power, at that time to vote say group This is not to that where a of Murchison called shares stock. He nominally control of a carrier to the details attention fact subjected group member of the agreement joint as to ter- this minability venture obligation to the of section 5. The su- ap- did and other matters pervisory jurisdiction such com- over pear opinion of Division 4. from the binations will turn on facts of the spite In of the fact that consideration case, but those facts must least be at applications now for the orders explicit findings made in the subsequent under review was undertaken finding purpose Commission. The of a filing to the with the Commission explain action, is to the basis of not to sup- Judge opinion, no evidence Walsh’s mask it. plementing in the evidence outlined that, We thus conclude if the 4 in on the by of Division this case opinions Commission’s contain a conclu Al- of control the Central sion that is in control of New leghany introduced. was Central, opinions York those lack suf position taken findings support ficient that conclu throughout Alleghany was has been that sion. employed by instrument an but The Failure to Grant Plaintiffs a Young-Kirby-Murchison group in the Hearing. York New Central and was 5(2) (b) provides no sense control. It is to be ob- Section in such findings Di- proceeding served neither as assum- ing proceedings below, nor the I.C.C. meet vision this issue the Commission squarely. opportunity afford “shall reasonable Adjudications parties Plain- be heard”. “§ interested U. applications for repeated tiffs made every adjudication re- “In case jurisdiction as- leave in the to be heard quired by be determined statute to suming after proceedings. It was opportunity the record after * Judge involv- opinion in the case Walsh’s agency hearing, *. —* stock, Breswick Co. “(b) Procedure supra, Briggs, F.Supp. was agency inter- “The shall afford all ap- plaintiffs’ filed with the I.C.C. plication parties (1) opportunity ested granted, for intervention of, the submission and consideration very granted only then it facts, arguments, settle- offers of merger, fore- approved order which adjustment ment, proposals Alle- closed the and constituted issue time, pro- nature where ghany person a car- “considered as per- ceeding, public and the interest appeared in the order rier”. All mit, (2) that the extent May 24, 1955 of the full Commission. parties are unable so to determine consistently Division 4 had theretofore any controversy by hearing, consent, plaintiffs. denied intervention and decision notice and in con- per- The action the Commission formity with and 1007 sections 1006 mitting of “as date” intervention title.” complete- 24, May 1955 order pro- 7(c), 1006(c) Section U.S.C. 5 § ly insufficient, except perhaps to vides: strengthen standing plaintiffs’ one en- as right “Every party shall have titled to review the order. ' present or his case defense application papers Plaintiffs' on this documentary evidence, to oral or bearing allegations on are full of fact evidence, and to submit rebuttal should question of control conduct such cross-examination and Commission have been before the required a for full true no ref- made to which the Commission disclosure of the facts.” erence in its orders. passage Ad- Even before the plaintiffs were “interested If necessity Procedure Act ministrative parties” be heard and thus entitled to granting hearing par- a interested statute, doubt can be no under there ties seems been before I.C.C. to have pre opportunity to loss Ry. settled. See U. v. Abilene & So. S. setting requires the sent their evidence Co., 274, 565, 44 L.Ed. 265 U.S. S.Ct. Admin The determination. aside of the Chicago 1016; Case, 264 U.S. Junction Act, 2(b), 5 section Procedure istrative supra; 258, 317, Interstate S.Ct. “party” 1001(b), as fol defines U.S.C. § Comm. v. Louisville & Nash- Commerce lows: Co., 185, 88, ville R. R. 227 U.S. 33 S.Ct. “ any ‘Party’ person or 57 L.Ed. 431. includes par- agency admitted as named or urge opposition Defendants to this seeking ty, properly and entitled or granting that the matter a hear- par- right admitted to be as of placed in the dis- has been absolute agency proceeding”. any ty, in 5(2) (b) cretion of the I.C.C. section says: where it plaintiffs were recalled It will be ju- shall in the “If the Commission consider finally permitted to intervene necessary assuming proceeding. in order to Un- determine risdiction findings specified Act be- Procedure whether Administrative der the may properly thing permission made, low it shall no such is there public permission heard set said hear- to be without intervene ing; public hearing be, and a Administrative shall present evidence. 5(b), all Act, held in cases 5 U.S.C. where carriers section Procedure railroad are involved unless the follows: reads as 1004(b), pub- Com- defendants Interstate Commerce determines Commission Alleghany Corporation from mission and enforcing necessary hearing is lic taking pursuant or action public interest.” (a) made the I.C.C. orders language in ad- above-quoted is The May 24, 1955, 2, Fin- March immediately aft- and follows dition 18656, 14629 and insofar ance Dockets mandatory shall “and direction er the they Alleghany Cor- as poration determine that opportunity inter- afford reasonable control of The New York is in thus parties heard”. to be ested Railroad, de- and insofar as Central hearing public referred clear that Alleghany Corporation termine merely something quite different from shall a carrier be considered as parties. hearing the interested (10) section Above Effect of the Views 20a(2) (11) in- inclusive section Expressed. Act, Interstate clusive Commerce language slightly paraphrase (b.) To order of the made Mayo Lake Supreme May 26, 1955, Court Fin- and June Highlands Canning Co., U.S. authorizing land issuance ance Docket three- 84 L.Ed. 60 S.Ct. convertible stock. 6% up judge restraining against admonished temporary courts ex- preliminary applications change Alleghany Corporation’s to them on injunctions, 6% question them before Stock for Convertible Preferred its Cum- showing seri raises made 5y2% is whether ulative Preferred Stock Series enforce questions and discloses that A, 23, 1955, ous issued herein June pending of, complained the act hereby pending judg- ment of continued final irreparable hearing, final would inflict ment. plaintiffs. damage on the on order Settle notice. Su the We cannot believe that Walsh, such preme Judge, concurring. intends that in a case Court District only questions of presents which as this argued fully law that have been HINCKS, Judge, dissenting. Circuit limit parties we should the briefed immediately We have before us degree of their to the our consideration plaintiffs’ application the prelim- for a that, more conviction seriousness. Our inary injunction (1) to vacate the orders being serious, they an must of the in Finance Docket Nos. plaintiffs factor a in favor of swered 14692 and 18656 in so far as it was injunction that an in our determination ordered therein “that unless and until If, however, a conclusion issue. should Commission, otherwise ordered requir questions are serious is that the Alleghany Corporation said shall be con- ed, in our conclusion included it is subject sidered as a carrier provi- to the in of the must be answered favor 20(1) sions of (10), inclusive, Section plaintiffs. 20a(2) (11), Section inclusive, of damage said as to the we have What the Act, Interstate Commerce as amend- supports which threatens finding hereby ed, 49 20(1-10), U.S.C.A. 20a(2-ll), §§ en- made that unless the same extent that these complained isof of the orders forcement applicable are to the New York Central hearing plaintiffs pending enjoined final Railroad and its carrier subsid- damage. irreparable suffer affiliates”; iaries and (2) restrain- say full authorized to for ing We the enforcement of the orders of said prepared all in it is to do court that Commission in Finance Docket No. 18866 disposition expedite power a final May 26, (by Division 4 of the cause. Commission) and of June (by restraining, Commission). injunction will issue The An orders in said cause, approved judgment No. final in this pending substance and a sub- should be deemed also to be final Cor- of an offer

terms poration 5%%, whereby mission on merits. holders may, at their A, preferred stock comparative- plaintiffs, Series hold who a exchange for stock option, ly common small amount of of convertible in a new issue contend, alia, 6% orders stock1 that the inter stock. brought ferred Commission, in so far power case, provides 2284(3) in are void under review this 28 U.S.C.A. § restraining jurisdiction appli- on temporary lack of grant “a damage” applicable irreparable law cable facts and under the prevent finding, (particularly on specific based Alle- U.S.C.A. a “shall contain *** by ghany person which could law- identified was not a evidence irrepa- specified fully thereto, a “be considered as carrier reference regulation order is damage Com- if the to” under the Interstate will result rable challenged supplied.) In granted.” (Emphasis thus merce Act. status depending upon question plain un- context, implication one a mixed Certainly so, Urgent anAct order of fact and of law. it is Deficiencies der the injunction disputed, must com- and I think not that the Com- preliminary also jurisdiction requirement. be mission had at least to make ply If there with this Alleghany’s validity im- determination of that status doubt as to the finding exist, by Mayo and, on carrier plication rest status set at it is Canning Co., Highlands thus to exercise ing. Thus, result- Lakeland 84 L.Ed. 774. situation is one 60 S.Ct. U.S. challenged here, which, orders are on which the void was a case That most, appli- At void- their face. orders are three-judge before it court had injunction. find- The able error connection with the preliminary for a cation jurisdic- granting complex essential but Supreme held Court depended fact. on “whether tional questions” showing serious made raised purposes For now enforce- “and disclosed that of law following us, assump I before make the hearing, Act, pending final ment of (1) plaintiffs’ tions : plaint that when com damages upon irreparable inflict would hearing merits, comes on the present purposes complainants.” For the this court will set aside the under orders showing us before that the questions assume 1 will finding in for error the review Alle in of law and this serious raises ghany’s carrier status and will remand dissenting only opinion the will discuss the the case to I.C.C. for further con showing for its disclosure the made sideration; (2) eventually that a valid irreparable requirement of companion by will order be entered that Commission damage. by the and also S.E.C. to the effect that subject Alleghany is not application at a the was submitted Inter The duly noticed, Act hearing, state Commerce excepted and hence held on June is not. by Company the Investment of fact which includes Act. on a record 1955 only 80a-3(c) (9), 15 the of U.S.C.A. as admitted in facts were such companies support in investment in and those which pleadings affidavits are- and Act; having (3) testimony and oral been that these opposition, no standing plaintiffs bring have stipulation no this. was There offered. 2 so, my view, application Even in for action. made on the lack of submission the my computed plain me difficult for holding to reconcile the brothers’ 1. An intervenor has only point Pittsburgh comprising this on interest tiffs’ .002% Ry. States, outstanding Va.W. Co. v. United 281 U. common stock. 479, 487, S. S.Ct. L.Ed. 980. standing predicat- plaintiffs’ nothing to sue is I If Eor find that Act protec- upon suggests intended, threatened loss of the it or ef ed is by Company fective, peculiar protection the Investment afforded to com seq., Act, plaintiffs 80a-l is Nor et it mon stockholders. have U.S.C.A. damage showing irreparable possibility sufficient present too remote for rele- are not entitled vance presently unless under the facts sought. liminary injunction before us and under the of the Company reasonably Investment Act It is only plain- The facts which the certain that disap- the issue would be appear rely preliminary tiffs proved by result, S.E.C. For this injunction are as follows. plaintiffs in all argument, their oral and proposes immediately complete in their voluminous briefs cite neither distribution of an issue of convertible 6% chapter nothing nor verse. I find preferred hold- stock distribution to %, Investment Act which outstanding A, would ers an Series 5% preclude approval preferred issue exchange, stock in lat- at the aught S.E.C. appears For option, even if ters’ Series A stock held injunction granted eventually and by them. The distribution of the new proposed stock issue is submitted stock, immediately upon entry S.E.C., tribunal after full exer- approving issue, par- order investigative cise of its regulative tially accomplished before halted powers may approve the issue. If this temporary stay (which court prove shall result, be the plain- end pending decision was continued force gained tiffs will such satisfac- us) now before they may tion as take from the fact shortly completed (in will be so far action which dislike has the outstanding sanction preferred holders of of two tribunals Depriva- instead of one. exchange) stock elect to make the unless tion of such emotional satisfaction injunction sought granted. is no In irreparable damage more submitted, the “senti- record as I find no other facts mental” loss which was held to pertinent be insuffi- irreparable to the issue of dam- cient basis for an age. by way Moffat All else is assertion League Tunnel States, v. United argument impact plain- on the as to the U.S. 53 S.Ct. 77 L.Ed 1069. stockholders, rights, as common tiffs’ if the a distribution of the new stock connection, In this I do not overlook completed approval, before distribution is conclusory assertion in complaint, disapproval, or S.E.C. wholly unsupported by proof, that officers plaintiffs’ irreparable assertion of gain, directly stand to or damage, whatever, if of substance indirectly, proposed from the issue of validity depends on the of their con- preferred possibility gain stock. The tention that the terms of the issue are necessarily has connotations sinister. necessarily probably such that approved by large issue has been disapproved when, if S.E.C. majorities both of the by hypothesis, it shall be submitted to Presumably and the common stock. all That S.E.C. under S.E.C. the Invest- approve expected gain. who voted to might Company approve ment Act objective by achievement of that others is, possibility. I concede a issue import damage But the does not plaintiffs,. to the they common that os stockholders shown seem to me to be an interest which “does protection peculiar need of under every not differ from that of investor” in Act not available to all classes that Alleghany of securities. In New York Cen- security Corp. holders under that tral States, Securities v. United D. Pittsburgh plaintiffs C., Act. The were held 54 F.2d U.S. 53 S.Ct. standing plaintiff’s to he without because their standing 77 L.Ed. n “financial interest does not right differ from protec- not based on a claim of to every Company. investor” in the Company that tion under the Investment Act. ^Reorganization so that Even if it were interest of cases and cases under 49 protection plaintiffs to involving these under involuntary U.S.C.A. 20b § Company rights Act security is as efficacious Investment modification of holders to sue as a standing purposes pertinent standing are not to the of these n “financial interest,” plaintiffs. nevertheless it would aught appears Thus, point. that to meant however, If, assertion come within does not even this case by violative suggests directors conduct insinuate policy Com- of the Investment declaration fiduciary responsibility, it my pany are assum- by brothers Act which may litigation motivated this that indirectly by management to enforce. to embarrass a decision fomenting S.E.C., by investigations nothing aside, find in that But that I by objective in- is S.E.C. its true that gives in investment Act which investors for a

vestigations ammunition obtain to right policies. companies a to enforce its op- Certainly loss stockholders suit. Act, 80a- 42 of the 15 U.S.C.A. Section not the give to malice portunity vent to 41(a), specifies Commission that “The damage. And irreparable equivalent of any permit person it file with a shall to plaintiffs are equally clear it seems writing” as to the statement merely be- not entitled investigations possible but. matter of supplement they would like to cause it in its discre- leaves to the Commission discovery Rules provisions Federal of the it, investigations as tion to “make such investiga- by S.E.C. Procedure of Civil necessary whether deems to determine of such frustration The mere tions. any person has violated or is about to “irreparable dam- hope itself not of any provisions” of violate the Act. And may connection, noted age.” it this In given 80a-41(e) S.E.C. is Section No. Docket report Finance actions, bring power “in its discretion” to fully that it was showed the I.C.C. enjoin violations in a district court. interests directors' apprised light carefully In the of these limited Alleghany. wholly I it think inadmissible poli- interpret according any point declared the Act as My brothers private party, Company Act to whether an investor or cy Investment of the * * * potential right investor, to eliminate to enforce the “mitigate adversely policy affect of the Act as he conceives to be. which conditions” * * * court, do I think that in the Nor investors” interest “the organ- Urgent jurisdiction companies are exercise of under the investment “when * * * Act, managed has carte Deficiencies blanche ized, operated [or] officers, conception directors, policy enforce interest (cid:127)x- * Company They even Act. I to hold Investment conclude seem */> plaintiffs showing to these most these any harm that at derive absent assumption flowing benefit an incidental under Invest- plaintiffs Act; depriva- absent ment jurisdic- benefit, plain- assumption tion of such a showing pecuniary more has no measurable in action tiffs concede result S.E.C. damage.” interest, value, “irreparable advantageous to their protection which the beneficent entitled Further, my brothers seem to feel provides Company Act Investment are entitled in- skulduggery improvidence or against the sought junction because without it the possi- management. The own accomplished proposed and, issue will be protection, deprivation of bility of matter, practical as a at least the imme- enough proof feel, is my seem brothers controversy cause of will diate become injunction. the warrant to more without right moot. Granted that as that in their agree. postulated result, true I is the to submit that the I cannot Allegha- allege faulty. that thereon conclusion based extraordinary is complaint been, prima- remedy conducted and drastic of in- ny’s affairs junction product in control. is not the of those of a slot ma- rily interest the in any disgruntled only plaintiffs’ into which the chine stock- we have this for But a whatever has holder can insert nickel. It does no evidence assertion: bare allega- every right support merely in case as of issue to to offered been ever finding quo pending preserve the on status make final de- My brothers tion.

153 may n termination most that the inferred its I think it be Nor is merits. of the obtained hopes terms cannot be support or mal favorable merely to function . liquidation dead- meet a fixed forced to only discretion at the It issues ice liquidation, irrepa what- showing line and that such a aon chancellor likely terms, interfere with to injury ever the must be injury. And rable policies). I find further investment vague of a remote a statement than more Alleghany necessary, if it will contingently be potential harm. This parity repre- policy of recognized although, maintain its principle was — outstanding preferred setting sentation between sure, quite in a different be —in stock on its Jersey Sargent, stock and the common issues 269 New v. State Directors, pay 289; it either to Board of 122, 328, L.Ed. S.Ct. 70 46 U.S. large arrearages full of dividends California, of Arizona v. State of State preferred 1154; A shares Series 423, 522, L.Ed. 51 S.Ct. 283 U.S. accept offer which stock declined to v. of Massachusetts Commonwealth exchange issue, there- for the new 597, Melon, 262 48 S.Ct. 6% U.S. right by stripping that small block 1078; Nashville, L. & St. C. L.Ed. directors, to elect or redeem that two Ry. Wallace, 249, 53 S.Ct. Co. U.S. block of stock. Notice to redeem much con L.Ed. by I am not so given long stock an in- cannot be as pro possibility cerned junction precludes the distribution long-range may posed stock issue 400,000 preferred still shares the new disadvantageous future turn out to be awaiting exchange, and then under even all that is to the common stock. After redemption can charter essentially judg question of a business accomplished quarter- be ly on a stated primarily management ment which in date. If course dividend this minority the normal course stockholders injunction, cluded an to maintain its management accept. must Here has representation Alleghany policy of class made its decision and decision has arrearages required pay will be off large majority of been affirmed stock, in dividends on block this voting approved —a stocks and burdensome, course tax-wise, far which is more eventually sure, Alleghany may To be be the stockholders involved found Company Act, to the Investment classify redemption which would may, with a result capital transaction. advantageous not, more common stockholders. The loss Further, I find from the affidavit contingent advantage remote Blatt, 100,000 at least intervenor not, think, classify irrepa law does I the new were shares of damage. rable a “when basis traded on issued” between Consequently, here, in the situation I May June first hardship am more concerned with the commencing market and over the counter injunction impose that the on others. 8, 1955 on the New York Stock on June Alleghany’s From the affidavit of secre- trading Exchange; pro- and that therein tary-treasurer opposition received in in a substantial volume on ceeded injunction sought, I find that 24 when on June further actual basis trading seriously effect of the will be Exchange New on the York Stock obtaining (a) to embarrass stay suspended order because aggre- the renewal of various loans bank fairly From this it is inferable herein. gating $8,200,000 which trading will mature on in the stock will not be re- (b) September Exchange stay or about 1955 and if on the Stock sumed negotiations refunding injunc- ripens preliminary these loans into required on a more further inference is favorable basis. As a result it tion. The during may necessary pendency injunc- pay off of an become to the that liquidate marketability purpose and loans for that to tion the new stock portfolio. issued, consequently (In part connection, of its its this which report “marketable se» substantially impaired for 1954 showed value, will be market an indicated acceptability curities on hand with will be as collateral its $67,944,633. quotation He did not largely destroyed. inferable It is further liqui- explain precludes can be injunction how these securities stock- that an which deposited or interference A dated without loss their Series holders who receiving exchange policies two a deadline the investment before from impact intensify And to the confusion and months distant. as new stock will negotia- stay Alleghany’s hardship of an on them caused loans, says during penden- rights, he tions to refund its bank order. Their nothing. injunc- impact cy injunction, an As to of an to a return of the Alleghany’s obligation deposited composition re- tion on the stock and the to legal complicated ques- Board he turn it seems to think that there is involve may protracted require limit to the to can tions which well extent which this court litigation Board, saying; Alleghany’s officiate resolution. as Equity “it is obvious that this Court of against findings These I have tested power has full to deal with situation Phillips, affidavits Mr. one and to holders of the indicate that all throughout, appeared has who Stock, Series A and Preferred the 6% pro that he main affidavit shows se. His together, two should be entitled elect experience field in the man of is indeed a this, directors.” assumes more As he prior No- time finance: knowledge powers of a chancellor Assist- 1941 he was “Executive vember I, least, possess. at Alleghany’s ant” the Chairman July injunc- I “In injurious He states that Board. of an effect As to the Alle- Financial stockholders, became Consultant Mr. Phil- tion on Series A ghany Corporation I and the C. & O. lips says only at least some expert consulted was the first be early deposited Febru- stock as Young Alleghany Corporation Mr. thereby voluntarily ary 10, con- for control in connection with the contest should “frozen” until sented that Alleghany- of New York Central exchange closing offer. date of the Young-Kirby I nominees. Thereafter possibility that He does exclude the strategy was a member of the board that might normally ex- stockholders such successfully developed and executed the deposit pected to withhold until the clos- campaign.” subsequent proxy But not- deposit date was near at hand and withstanding background, this neither on then reliance the terms the ex- reply affidavit nor his main affidavit his change whereby they offer would receive distinguished facts —as does he show on marketable stock a fixed date self-serving conclusions —which from argues near future. He that because for findings my as above stated. controvert period accepting a limited stockholders damage Alleghany which As voluntarily assented to a freeze until a injunction, from an he bases result would date, fixed it must follow that will alleged vaguely on his his conclusion injured by involuntary an not be freeze Alleghany’s knowledge affairs as continued into the indefinite future while directly assert But he does insider. litigation way weary winds subsequent July an insider status through the courts and the two Commis- “general professes to have also 1953. He argument specious: I sions. think the banking knowledge I.C.C., S.E.C., and relying anguish without on cries of he offers practice.” this basis On from frozen stockholders which were ex- very only prop- proof assertion of the his informally hearing pressed at the on this prove, for him to which it was osition findings my injury application, difficulty I think viz.; no substantial “there is clearly to them as above stated are re- face renewal loan, Sept. 15, quired $8,200,000 as the due sensible inferences Alleghany’s says proved annual facts. 1955.” He n Alleghany right permanent hardship and basis of which the to a proved if, injunction perhaps irrele- Even must be determined. stockholders trial, think, plaintiffs made after the court feels constrained if, I vant damage. showing irreparable to annul for the orders under review er- at all of proceedings ror in If, however, appraisal record before the Com- jurisdic- possible find- mission or in the support Commission’s for a affords some findings, may damage them, the tional I think it de- nevertheless of such Alleghany injunction and cide impact that on the record as then made for on irreparable damage plain- which lack factor is a solid intervenors weight injunction given appropriate in the tiffs no re- should issue to should completing discretion. strain formulation of our from disposition stock distribution. Such a permissible Lastly, on the I think it proceed would leave at free to application preliminary of a submission confidence, advised, its own risk in if so irreparable raises issue appeal that on would orders annulled setting damage, proceed, least in the at Surely preliminary be reinstated. case, un- of this to a determination sought now should not be freely derlying concede that merits. I granted merely presently because it is validity impact or- for its on thought stage that at a later this court my exegesis of under review the ders will annul the under review. orders showing that the brothers demonstrates enough satisfy re- the first made is My conclusion is based not at all early quotation quirement in an Alleghany’s open offer made court at Mayo opin- page opinion from the in this hearing post principal in a bond viz., ques- ion, of “serious the existence exceeding many sum times the value exegesis, even of law. But their tions” plaintiffs’ indemnify stock to them sound, goes demon- no further than to if resulting loss from the accom- plaintiffs have solid strate plishment proposed stock distribu- attacking underlying ju- ground plaintiffs’ tion. Nor am I affected does not reach the issue risdiction: indifference to that offer. Since we are damage. irreparable Before it can be application not now concerned with an decree, in a final the defendants reflected supersedeas bond, I view the offer as right intervenors are entitled as irrelevant. on the merits. At the trial a trial damage stay irreparable I would terminate the will be in claim of forth- deny provoke expected a with issue us, liminary injunction. not now before of fact record

Case Details

Case Name: Breswick & Co. v. United States

Court Name: District Court, S.D. New York

Date Published: Jul 21, 1955

Citation: 134 F. Supp. 132

Court Abbreviation: S.D.N.Y.