*1 SE еt CORPORATION al. CHENERY EXCHANGE COMMIS CURITIES AND GAS (FEDERAL WATER AND SION Intervenor). CORPORATION,
No. Appeals Court of States
District of Columbia. Eel).
Argued 10, 1942. April 27, 1942.
Decided *2 mately dollars, consequence four million which, Delaware, of under the laws of payment of dividends on of Class stock prohibited. was Utility Operators Com pany (hereinafter Utility) called was a company holding owning all the outstand ing shares of Federal’s Class common B 6,500 stock arid pre some shares of its ferred stock. Water and Cor Federal Gas Gordon, poration’s Messrs. whom Spencer unimportant, with Mr. assets were and Du- its entire outstanding Parker William William Merrick and stock was owned C., by November, 1937, D. Sheldon, Washington, Fed of Bose all Federal. registered Commission, Fon- eral brief, Mr. petitioners. with and were on the C., day pur on Washington, application D. same filed an Bradley, of taine C. al- suant to Utility of petitioners. the Public appearance so entered an Holding Company Act of for a volun Kripke, whom with Messrs. Mr. Homer tary reorganization accomplished, Counsel, Chris- Lane, General Chester T. pursuant law, through the Delaware an Coun- topher Assistant General Lesser, Special Jenks, M. caрi amendment reducing to its charter its Counsel, sel, Lawrence S. tal stated ratable reduction of the Washington, all of Jones, and Frederick N. values of its several issues. The stock brief, C., the Securi- of D. were on all capital was to eliminate deficit its Commission, Exchange for re- ties and and thus to payment enable it to resume' of spondent. preferred dividends on its stocks. Jr., Hughes, E. Charles Messrs. formally Commission never acted on Hubbard, City, York both of New Allen S. application, nor three other more court, oh by special filed leave plans proposed less similar during a]brief the fol Gas Cor- ; Federal Water and behalf of because, lowing years, opinion three poration, Intervenor. capital was Federal’s so reduced leave no equity as to for the GRONER, Justice, and Before Chief B which, proposed under the Class VINSON,' Associate MILLER Jus- plans, was large voting to continue with tices. : power. thought This the Commission was inequitably 11(b) (2) unde.r Sec.tion GRONER, C. J. (cid:127) Act.2 reyiew order petition to This is a Supreme In January, Court of Exchangе the Securities Delaware Federal Havender v. Utility Holding the Public decided issued under Corporation, A.2d the effect order Company 1935.1 The was Act of to declare that under Dela- was application filed made on an preferred stock, ware law together approval March thereon, might dividends arrears be con- plan merger among Federal of a Water through into merg- verted new securities Utility Operators Corporation, Service advantage Taking opportunity er. of this Company, Federal Water Gas Cor structure, its rearrangement capital for a poration. Water Service Cqrpora Federal Federal filed with the Federal) called is a (hereinafter tion Dela March, 1940, application and declara- new and at the time of corporation, filing ware plan setting reorganization tion forth a application was the owner securities involving merger of Utility and Fed- water, electric, gas, subsidiary into eral Water and Gas Federal. The question, the time in prоperties. At Fed two former filed declarations accordance $5,222,000 outstanding per eral had 5% merger. proposed with the due four cent Debentures series Gold 160,000 pre approximately During November, shares of filed, stocks, plan little half a more than mil the first June, ferred when stock) A and a shares of Class like some four months after new lion submitted, petitioners, stock. Federal’s who of Class B balance are officers and amount capital Federal, Chenery, deficit' of approxi sheet showed a directors a cor- adjust seq. fairly its 1 Tit. 15 U.S.C.A. 79a et structure so to dis- securities, provides voting The Section the Com tribute the may require company mission to re- them, though honestly purchased even full made and after poration some owned 12,000 price of a total issue disclosure fair and at a at a approximately shares sale, “public inter- 160,000 shares of Fed- was detrimental approximately *3 report purchases points est”. out the The Commission’s preferred stock. All of eral’s plan proposed that under shares currently reported the Commis- the these were participate parity the would on a with other required 17 of Act.3 by sion as stock, preferred shares of the and this plan, Commission merger the which cir- thought ought Commission not in the conditions, con- ultimately approved on cumstances to be allowed. The Commis- B templated Class stock the elimination of that, admittedly direc- sion said while the preferred stocks the conversion company’s did the tors not hold title to common stock stock into new and Class A stock, duty owed in nevertheless a value, par effect of which a new the with dealings great shareholders as capital materially the was to reduce of “that of a trustee who holds title to a res which we corporation. The condition for, his On the benefit of beneficiaries”. shares of just that no have referred was theory, that, since a “trus- it concluded be new common stock should issued purchaser prop- may of tee” become exchange preferred for shares of trust, erty may neither he holds three-year period, purchased 1937- corporation, the officers or directors of a any of by officer or director the cor- conditions, any pur- under or circumstances ; purchased so poration but that shares pending chase shares of stock corpora- new should be surrendered to the proceedings. purchasers payment (peti- tion to the us, then, question brings This to the per price and four tioners) the cost purchases whether these which is purchase. cent interest from date of stock, narrated, in the circumstances imposed this condition The Commission public interest or were “detrimental to the opinion it was of officers because the interest investors” within Section occupied, during and directors of Federal Act.4 proceedings pendency whole before fiduciary Preliminary relation to the to the discussion shareholders, corporation question, helpful briefly may to its relate stock, result of which the the conditions under whiсh the stock was Every person acquired 79q.] (a) faith in [§ “Sec. connection previously regis contracted, who is an officer director of a debt shall inure or holding company holding tered file with be recoverable com- shall pany subsidiary company respect or such form as the Commis prescribe security profit (1) of the realized, sion shall at time of of which such was registration holding company, any irrespective of such or intention on days part person or within ten after such becomes such officer director in en- tering director, an officer or into transaction statement of such hold the security purchased registered holding repurchase securities such com or pany any security subsidiary company or sold thereof of more ” than, directly is, indirectly, six of which or months. he owner, Utility Holding (2) days Company beneficial Public within ten close of 1935: after of each calendar month thereafter, any change Except (a) if there has been “Sec. 6. [79f.’J accordance ownership during month, in such such with a declaration effective under section ownership [79g] a statement of such as of the and with the order under such permitting such close of changes calendar month and of the section be- such declaration to ownership effective, in such that have it shall oc be unlaw'ful for come during any registered holding company curred such calendar month. sub- or sidiary “(b) preventing company thereof, Por use of the any instrumentality unfair use of mails or or information means by any commerce, otherwise, been obtained officer or di- of interstate or di- such relationship rectly indirectly any (1) rector reason of or his to issue or sell registered company security holding any company; (2) such or or to ex- subsidiary any company profit any thereof, privilege right ercise or to alter the by any preferences, voting priorities, power, realized or such officer director any purchase any rights sale, sale reg- of the holders of an out- any security purchase, standing security compаny. of such of such holding company any subsidiary istered company any period [79g.] (a) registered holding thereof within A less “Sec. months, security company subsidiary company than six unless such thereof pro- plan they purchased stockholders first from whom purchased. When staff question.” contrary, shares in Commission’s On the posed, members of the Commission, very properly, voting admits that objected retention stock, complained sub- the common transactions of were con- Class B Federal Utility belonged “any purpose” summated stantially without ulterior all of which equally profit in turn was and Operators Company, which without intention to personally directors of “in the consummation of the controlled officers suspense plan pro- opposition through having held in traded while the Federal. This proposed have, ceedings pending”. years the were We there- for two and a half fore, amend- suggested agreed, subsequently case in the facts are and various *4 posi- petitioners admitted, the Commission’s faith of ments. Notice of the tion in this by public squarely assump- made both the decision regard was based on the Federal, and it is purchase tion that the the Commission and of securities of a by- corporation by understood agreed known and its officers or directors for Realizing account, that their own pending or investors. -action on stockholders an persisted application approval this stand merger, the of a if the officers and Commission employees of Federal who public “detrimental interest” to the as that phrase class of stock would (6) invested in this used in 7(d) had find Section the a stake or either It without Act. is true that the in its themselves Commission they helped company had influence in the brief refers also to the standard “fair and employed, by they were equitable” applicable 11(e) create and which Chenery, under Section Federal, suggested Act; president to of the but if there is a substantial money many they use what of them that meaning distinction in or between “detrimental, stock; buy preferred spare phrase to cоuld the to the he would follow the same stating that interest of investors or consumers” and the purchases over phrase, equitable per- course. This resulted in not “fair and years half three plan”, of two and a to a on the sons affected we —which part various officersand directors think is not the fact is that the —the corporation. average purchase of the present case were con- proceedings directors, of each of the officers and under ducted 7 of the Act and the Chenery and one Vandenberg other expressly decision rendered under that Chenery, for Section, was around shares.' the though says the Commission family corporation controlled account aof the same conclusion would be whether the 8,000 by him, purchased approximately is considered under the stand- application 2,700 shares, of which a lot shares may ards of or of 11. And to this be add- purchase exchange not a but an ed, finding that there is no that the acts prior $100,000 of Federal’s deben- petitiоners in this case are unfair or in- bonds, gold and as to which ture the persons equitable “to the affected” party the transaction testified that contrary. plan, but preferred he to have the bonds to the stock Obviously, therefore, the answer to our today very delighted “and am much I we question light must be found of the director, remaining made the trade”. The Vandenberg, prescribes, statute standards the as like or merg- who at the time of the interpreted have been similar “standards” gather er—we from the record—had ceased .explained view, the courts. or to be an officer and director of the cor- brought to conclude that if we are there poration, purchased open market regulation the time no of the was at Com- 1,700 approximately shares. mission, statute, provision of the argument equity prohibit- The Commission’sbrief and common in no rule law explicitly declare purchase
this court
that the conclu-
of stock
an officer
ing the
corporation
“predicated
during
pen-
sion
outlaw this stock is not
of a
director
any
petitioners
proceedings
dency
we are
finding
defrauded or
of the
concerned
that
with;
superadded
failed make the fullest disclosure to
and if there is
to this
security
file a declaration with
sale of a
the Commis-
issue or
become ef-
sion, regarding any of the acts enumerat-
unless
Commission finds that
fective
(a)
ed in subsection
[79f
of section 6
of this
chapter].
“(6)
and conditions
the terms
of the is-
security
or sale of the
are detrimental
sue
“(d)
requirements
If the
interest
the interest of
subsections
(c)
satisfied,
(g)
investors or consumers.”
permit
regarding
shall
a declaration
the'
equal
faith,
subject,
honesty, good
nor has
Commission ever
showing of
before
sellers,
sought
of all
present
like
knowledge
part
on the
of the
to enforce an order
any re-
having
stronger proof
in
one. No
and circumstances
of this can be
facts
transaction,
all
stanced than
lation
Commis
log-
concedes,
March, 1941, report,
seem
it would
sion’s
where
ically
of the Com-
right
purchasers
the action
first
time thе
follow
was an
applying the
did
questioned
mission in
rule
stock was
words:
these
assumption
erroneous
“We
de-
that a formula
be
believe
should
brings
legislative field. This
vasion
participation of
vised which will limit the
us, then,
there
whether
to consider
preferred
purchased by
stock
man-
statute,
law
regulation,
of common
or rule
agement to an amount
into ac-
which takes
present
proscribes the
purchase prices
plus
count
paid,
accumu-
transactions.
respec-
lated
dividends since
dates
purchases.
attempt
tive
We do not now
proposi
disputing the
There is no
be,
indicate what that
since
formula
laws of Delaware
tion that under the
complicated by
the matter is
fact
corpora
shares
stock
apportionment
among
sev-
prop
legal
entirely
director
tion
preferred
eral series of
is to
based
stocks
*5
Lofland,
299, 114
er.
v.
Del.Ch.
Cahall
12
upon
respective
their
dividend rates and
224; Dupont
Dupont, Cir.,
F.
256
3
A.
v.
dividend accumulations rather
129,
denied,
642,
250 U.S.
39 S.Ct.
certiorari
liquidation
their
will be
values.
staff
Our
492,
This
rule in
gH Commission; (2) only to cor- the but part upon success of the mitted the at least in plan provi- finally the last as amended was officer. poration he was an of which elimination of the Class sion made the authority assumption is con- That this stock; (3) B Class B controlled this stock intent, think Congressional we trary to the voting power corporation; (4) the assumption shown, such and that have we petitioners’ interest it also constituted main by Congress is clear contemplated never enterprise and were domi- Fletcher, to which report of Senator nant stockholders because control of their says: referred, he where we have it; petitioners question now (5) do not he course, must defined limits well “Of power to find that of the Commission authority of such which indicated within reрresented no real B Class authority may be exercised.” administrative been and that it would have unfair and limits, and pointed out these We inequitable it stockholders if would re- the Commission to hold with now eliminated; (6) not whatever had 'been say that transaction quire us to may have been the motive or the reason lawful, to recognizes general law delaying long for so the elimination of the has own Congress for reasons its stock, no through Class B it was miscon- conditions, detrimental to attached upon part duct or nonfeasance notwithstanding breach welfare, public Commission; gave petition- to (7) the law opinion, In our is shown. conditions present- the initiative in preparing ers congres- of Section the enactment ing acceptable plan; to the Commission an phrase “detrimental to sional (8) gave petitioners privilege it to proscribe an to never intended terest” was carrying plan ap- of not out the even after circumstances. under these made investment proval. not opinion, exprеssing we this In question presented our decision The Commission’s view saying that is whether the had that, end. As a desirable directed to impose, approval as a condition of probity experience opinions men of presented, finally a limitation But, if widely. will differ judgment petitioners profit may extent attained, objective is to be the Commission’s purchase, intervening from the during the only and cons pros after the it should four-year period, of other stock of the carefully weighed their rela- have been corporation. provides specif statute dangers and the tion, respectively, ically “Any permitting that: order a dec benefits, controlled should 'be and the scales laration to become effective contain Congress the Commission. terms conditions as Commis short, hold is all we compliance necessary sion to assure finds is one for the question policy vital Con- specified sect with conditions gress for the Commission. Until and not supplied] ion.”1 The Commission [Italics it change Congress acts to the standard impose necessary protested found expressly up set action compliance in order condition to secure expand enlarge the follow italicized expansion en- terms, and make such ing “ specification broad the statute: apply largement years to transactions three permit a the Commission shall old, think, great deference we regarding to become effective declaration less than neither more nor right privilege of a to alter exercise retrospective legislation. priorities, preferences, voting power, or *9 is, The order of the Commission there- rights the holders of outstand fore, and the cause remanded security reversed ing unless the finds Commission privilege the Commission for action accordance right that such exercise inequitable opinion. result in an unfair or with this will dis voting power among tribution of holders and Remanded. Reversed of the securities of the declarant or is MILLER, (dissenting). Associate public otherwise detrimental interest Justice or the interest investors or consumers."2 delay approval by The Commission supplied] [Italics explained adequately petitioners’ following (1) considerations: Dur- I no reason for questioning see the Com four-year intervening ing finding limiting four mission’s or for the broad plans language majority times amended —were sub- statute —fourteen 817, 79g(f). 2 816, 79g(e). 1 49 Stat. 15 U.S.C.A. 49 Stat. 15 § § U.S.C.A. 312 and, petition vested statute 'before the opinion proposes to do. The enactment Act, It Federal the Sher Commission. Trade Commission large discretion 1-7, man (15 the exercise Anti-Trust Act standing that U.S.C.A. long is a rule of note) upon disturbed 15 had laid its com should not he inhibition such discretion monopolize inter binations to restrain has been abused.3 except it where sev state commerce which had con Supreme admonished us courts has Court competi judicial strued to function include restraints that the occasions eral exhausted,4 one, and that tion in interstate commerce. It would quickly a limited draftsmanship the have been feat of lightly interfere with difficult courts should operation duties restricted the perfоrmance of administrative Congress has created Trade methods Commission those agencies which competition in commissions of purpose.5 interstate commerce Courts which are at in the ad law or coordinate role forbidden common play a , likely grow justice.6 into violations ministration of if the Sherman had been the petitioners conduct of Whether * ** purpose legislation. As proscribed present case would proposed by Inter the Senate Committee on law any. rule of common permitted by state and as introduced Commerce adop prior to court equity, declared Senate, ultimately bill became created, implemented tion of the acts which Federal Trade Commission Act declared empowered is of competition’ ‘unfair to be But it unlawful. entirely may be significance. small While meaning the com because the defi law for proper to to the common look req given mon law words was had those so statute nition the context when too deemеd narrow that broader improper to do so when uires,7 it is phrase more flexible ‘unfair methods of departs the com deliberately statute competition’ Congress, was substituted. or when its mon law definition8 defining powers of the to a com by adherence would be defeated which, adopted phrase advisedly thus closely example law A related mon rule.9 said, pre Court has does not ‘admit in the Federal Trade is found Stone, appli seq. 41 et the meaning cise definition but 15 U.S.C.A. Act. Justice Supreme in Federal cation which be arrived at what speaking Court must Keppel gradual v. R. F. & Court elsewhere called “the
Trade.
per
Inc.,10
process
Bro.,
strikingly
judicial
exclu
inclusion and
used
’ ”
far-reaching
“The common sion.”
The broad and
present case:
tinent to the
de-
com
standard of
which is
definition of unfair
interest
law afforded a
146,
3
134,
437,
v.
309
60
84
Commerce Commission
U.S.
Interstate
S.Ct.
452, 470,
R.,
L.Ed. 656.
R.
215 U.S.
Illinois Central
7
280;
Apex Hosiery
Leader,
155,
Alabama
L.Ed.
See
Co.
80 S.Ct.
469, 494-498,
982,
Power Commis
U.S.
Federal
S.Ct.
84 L.
Power Co. v.
—
—,
1044;
App.D.C.
1311,
sion,
Ed.
128 A.L.R.
128 F.2d
United
Ass’n.,
States v. American
Medical
Corp.
States,
Tel.
Rochester
App.D.C.
16,
707,
12,
703,
110 F.2d
cer
140,
189,
125,
754,
S.Ct.
U.S.
deniеd,
644,
tiorari
310 U.S.
60 S.Ct.
Mississippi Valley Barge
1147;
L.Ed.
1096,
1411;
84 L.Ed.
United States v.
States,
292 U.S.
Line
v. United
Co.
Cardish, D.C.E.D.Wis.,
642;
640,
143 F.
692,
282, 286,
54 S.Ct.
78 L.Ed.
States,
Cir.,
Oliver v. United
230 F.
1260;
Commis
Communications
Federal
971, 973,
denied,
certiorari
241 U.S.
Broadcasting Co., 309
v. Pottsville
sion
36 S.Ct.
313 has been used instances to reference has been which present dared interpret made, obliged stat- courts legislation Congress in earlier in Supreme such utory revisions of common law interpreted the liberally been achieve, to defeat statutory purpose. manner as to rather than accomplish the Court ;14 Trans-' regardless extent example purposes of the found their A portation interpreted in 1920,11as they depart from seem to Act of Lowden,12 v. cases as United States moorings.15 such An ex- old common law v. Commerce and Intеrstate applicable and the of law present amination Executives Ass’n.13 Railway Labor case, Reports,16 in the Committee therefore, of Con- in the reveals that it was intention present In excusable 148, dow nomic form, former. persons in securities 3]: A memorandum mission, clauses interpretation ed States v. the intent of discussed the statute Elec. Co. v. Securities mittee for official Bunte U.S.C.A. ton R. R. and nature of the Inc., 608, Sess. sis the courts is March “ strue S.Ct. 16 Sen.Rep. Pennsylvania Indemnity *® * 11 41 Stat. 15 [13] 12 See 1(18); Aldridge, Congress should be which a appraisal corporation’s Philadelphia, 308 U.S. S.Ct. L.R.A.1915C, ‘standard’ or “The dressing’ 248, (1934) also, words derive Brothers, function, was introduced 2, investing public. S.Ct. or sections presents S.Ct. have extended their A.L.R. 914. Many Id. at methods 1942. Cir., the construction of decision U.S. 84 record Federal Trade Commission v. 5(2). laid, 1-21. See relatively far 477, American easily 717, 225, Congress. L.Ed. 208. 725, No. Tucker, first were alternatives analyzing page App.D.C. prepared by Inc., statutes, See beyond any annual 582, 85 L.Ed. Baltimore too, § compiled by specific legislation.” 231, 39, being F.2d were 86 so as to time stated. vitality 402(18), purposes observed, 481, unique problem 542, also, instances of L.Ed. affirmed, upon & L.Ed. general small number of 232, Trucking Ass’ns, 378 decided exposed * * * 1345: employed great report in favor of the ‘understandable’ 73d particularly Exchange § the function of evidence App.D.C. Pacific Gas & 407(5) give It 238, & 49 U.S.C.A. —, 607; meaning Eire useful as whole every Cong., operations where preparing detriment acts.” Washing corporate 117 F.2d 220 U.S. necessity “In the effect methods Empha 240, to con decided [p. (6), to in- either April Corp. Unit ‘win Com- com 881: 123, eco aim 11] in [p. 49 2d 60 prudent to tbe ing panies ment. There inside information ity ments of ing public securities which are flate realizes stockholders of sons intrusted with tho poses ities quately security cally section it stantial control over ing tions of report change months, poration est, unlawful for of 1934 ceal sale security the fiduciary duty. beneficial tage.” (1934) officer (1935) Sen.Rep. Sen.Rep. purposes necessary any make corporate an issued them issuer and securities, which accords with public against carry corporations deficits.” related assets, should be 68: “The Securities corporation. capital to the Commission exchange 59: in a class of Security occurs in his supervised by he holding sale and investment within a aims for ‘sales of their directors, properties reorganizations the issuer from owner is rendered unlawful shall not have foisted should bear a little or no voice in No. No. “The issuance of new secur- profits system, and, such geographically legislation; obscure corporate bound to affairs or vested with sub- speculating against 1455, equity companies corporations Every person issues or who is a profits. to which corporations securities of the from underlying companies. end officers, more an uninformed invest- tbe of such 74th liabilities, 73d corporations company, ownership account to insiders security registered tbe box.’ should be limited their own advan- the event the ultimate predatory opera- than above and each secur- the interests Cong., proper Cong., of less It is also made in administration commission Exchange whenever security and economi- properties purchase sense by prevent- pyramiding director or who is rearrange- to sell the an all, its exist- and con- principal short 1st Sess. 2d manage- stock of the cor- relation By that he percent owe a to use secure to the inter- must Sess. com- pur- ade- per- any so *11 314 gress changes in sweeping open to work thereto- such an should be undertaking corporate governing possibility fore rules existing to influences from the arising management, financing reorganiza- personal profit through of changes far-reaching subject plan; tion.17 Those are as of securities conse implications profit, quently, their the abandonment that in the as should assumption pur plan, through of of consummation of the common law rule of rule, fiduciary obliga re- chases risk and the fellow-servant made while such com- tions continue. in this sense that such sulted from enactment workmen’s It is pensation Pepper American legisla- cases as accident industrial Litton,19 tion.18 Here, purpose Mutual Life Insurance there, was to United Co. City people aggressions against little Avon Woods v. National Park,20 applicable group. Consequently, we Bank Trust become dominant & Co.21 analogies present for to other branches case. For same reason drawn between should look of the the' analogy relationships legal may properly in which the be law prohibit approximate present case nearly
more
those which Con- the
and those
member,
se
gress
dealing,
henceforth in
a
'by
intended should exist
committee
he
management,
company
and reor-
is at
administration
curities of the
ganization
public utility holding com-
is even more
tempting
It
to reorganize.22
panies.
situation,
that
important
present
in the
supervisory power
me,
analogy, it seems to
is
The obvious
recognized, in
should be
order
relationship
between the
which exists
achieved, be
bemay
of the statute
And,
beneficiary.
my.
his
trustee and
opinion,
cause,
is
bankruрtcy
case there
while
contention is
the Commission’s
court,
before the estate
opportunity
meaning
correct,
within
every
finally
detail
closed
to examine
to formulate and
who undertake
that those
administration,
present
case
readjust-
plan
of
the Commission cannot
approval of a
for the
secure
supervise the con
thereby as-
rights
stockholders’
ment of
sume
require that
plan
even
stock- summation of the
or
obligations to the
fiduciary
duty,
ap
Its
proposes to it be
rights
whose
holders
consummated.23
preventive
disapproving,
proving
conduct
affect,
judgment
their
Except
controlling
holding-company
dominant
stockholder
securities.
of
necessary
group
discretionary power
com-
of stockholders.
Southern Pacific
492,
refunding issues,
Bogert,
483,
Co. v.
U.S.
39 S.
case
250
mission
par
pow-
533, 537,
63
Their
limited
Ct.
1099.
L.Ed.
new securities
appropriate
powers
stock,
ers are
in trust.
Jackson v.
See
common
value
bonds,
e.,
Ludeling,
616, 624, 22
21
voting rights,
i.
Wall.
L.Ed.
and to first-lien
physi-
normally
having
492.
fidu-
either
While
first
lien
bonds
ciary obligation
directly by
upon first-
is enforceable
the issuer or
cal assets
corporation,
through
operating
mortgage
stockhold-
bonds
subsidiaries.
action,
every phase
is, in the
almost
er’s derivative
event
as in
In this
bankruptcy
problem
corporation,
holding-company
en-
ultimate
forceable
the trustee.
For that
and investors
stand-
of consumers
terests
fiduciary
system
obligation
designed
ard of
In a
burdened with
identical.
protection
community
holding
overcapitalized
the entire
debt-ridden
corporation
operating
companies,
interests
the consumers
—creditors
topheavy
support
well as stockholders.”
subsidiaries have
paying
high
138,
157,
rates
structure
20 311U.S.
61 S.Ct.
85 L.Ed.
poor
inadequately
enduring
91,
service
315
words,
impose
iban corrective.
In other
law would
such
rather
an intolerable bur-
judicial
upon
function of deci- den
to
the conventional
Commission as make
performance
may,
impossible.26
in a case such
of its
sion after the event
duties
important
present,
the least
become
Petitioners
majority
contend and the
agency. Such
function
an administrative
C'f
opinion holds that the Commission’s action
ahead;
required to look
agencies,are
deed, they
present
attempt
case is an
to ex
duty
charged
periment in
preempted by
a field
Congress
prophecy.24
it is
For this reason
sufficient
enactment of
Section 17 of
Act.
determination
conditions under
for the
I
nothing in
suggests
find
Section which
17
enjoy
legis-
permission
given
is
to
a
Congressional
pow
intent to limit the broad
future,
ex-
that the
privilege in
lative
er conferred upon the Commission in Sec
agency
applying
a
pert administrative
If it
been
tion
the intention of Con
had
standard,
find
con-
public
shall
such
interest
gress that the .Commission should
no
reasonably necessary
achieve
to
ditions
power,
upon proposals
more
in acting
public interest
purpose to
involved,
impose,
as the one here
than to
argue
contrary is no
To
future.
approval,
spec
conditions of
limitations
argue that
trus-
convincing than
more
17,
it
ified
would have been
trust
situation25
tee
conventional
speak
easy for
it
in those terms.27
dealings
profit
should be allowed
speak;
it did
But
not so
and there
it can be shown
res unless
trust
which, directly
in Section 17
been overreach-
case
there has
in each
that
by implication,
pow
defines
limits
part.
purpose of
ing upon
his
impose
er
the Commission to
“such terms
anticipate
pre-
is,
law
each
* *
*
finds
and conditions as
necess
[it]
overreaching,
than to discover
rather
vent
ary”28 to
exercise of the
insure
it
oc-
overreaching
has
punish
after
.privilege, granted
Congress,
file
interpretation of
Any
curred.
exercising
simplification
an influence
selfish interest
mation of a
request
only
faithful
holding companies
which can interfere with the
at the
duty
owing
discharge
11(e),
in a
company.
822,
15 U.
49
Stat.
fiduciary capacity.”
79k(e).
held that
It has been
S.O.A. §
458,
Salmon,
464,
registration
Meinhard v.
249 N.Y.
application
be with-
545, 546,
any
N.E.
1:
“A
164
62 A.D.R.
it becomes ef-
at
time before
drawn
something
prejudice
fective,
trustee is
stricter
held to
than
the absence
place.
morals
the
honesty
of the market
Not
Jones v. Se-
to investors.
punctilio
alone,
Exchange
but
of an
298 U.
&
curities
sensitive,
1015,
654,
honor
the most
then
1, 18-25,
D.Ed.
S.Ct.
80
S.
56
Cardozo,
standard of
behavior. As to
there
dis-
and Brandéis
Stone
Justices
developed
senting.
has
tradition that
unbend-
ing
Uncompromising
States,
24
and inveterate.
62
Trade
Board
v.
—
rigidity,has
372,
been the
866,
attitude
courts
L.Ed.
decided
86
S.Ct.
equity
petitioned
January
judgment
when
5,
to undermine
in a
1942: “And
loyalty by
ultimately,
rule of
implies,
undivided
the ‘dis-
situation
like this
integrating
particular
excep-
erosion’
prophecy
on the facts
rec
based
* * * Only
tions.
thus has the level
illumined
the seasoned wisdom
ord as
kept,
body.
expert
perspectivе,
for fiduciaries been
conduct
at a
higher
level
trodden
had
several choices be
consciously
upon
inevitably
crowd.
It will not
be lowered
rested
it—but all
tri
fore
any
judgment of this court.”
Pacific Gas &
al and error.” See
Elec.
gee
26
Exchange
United States
Trenton
v.
Pot
v. Securities
Commis
Co.
392, 397,
April
378,
398,
teries
sion, Cir.,
47
F.2d
9
127
decided
377,
700,
;
S.Ct.
50 A.L.R.
Bethlehem
Girod,
Steel Co. v. National Labor
4 How.
Michoud v.
App.D.C.
Board,
Relations
L.Ed.
better
1076: “Is
that the
641, 647;
prohibited,
F.2d
Alabama Power
Co.
the evil shall be
cause
—
App.D.C
Federal Power
than that courts
be relied
shall
,
apply
remedy
particular