114 F. Supp. 683 | N.D.N.Y. | 1953
This application, entitled “Second Supplemental Application” is made by the Securities Exchange Commission and generally requests approval and enforcement of certain determinations by the Commission relating to fees and expenses. It is an outgrowth of lengthy proceedings before the Commission, which culminated in approval by the Commission, and approval and enforcement by this court, after appellate review, of two plans relating to the Niagara Hudson Power Corporation. Such procedure was pursuant to the provisions of Section 11(e) of the Public Utility Holding Company Act of 1935, 15 U.S.C.A. § 79k (e)-
A successful conclusion was reached, and the two plans became effective as of Janu
Substantial allowances and expenses were requested of the Commission. The aggregate allowances requested for fees totalled $54%,895.81, and for expenses $449,130.72, Niagara Mohawk Power Corporation was authorized and directed to pay fees in the amount of $428,895.51 and $443,598.59 for expenses. 'Such large sums, requested and allowed, were in proper range because of the magnitude and complexity of the proceedings, and particularly so because of the successful result effected by a blending of sustained and expert effort. The professional labourers were indeed “worthy of their hire.”
The Commission’s determinations were embodied in the usual formal and detailed memorandum opinion of the Commission dated January 14, 1953 (Release No. 11,-667), and the supplemental order of the same date based upon such opinion is essentially the one under the attack by the two objectors, the law firm of Sullivan and iWorcester and the United Corporation.
There is agreement by both objectors that the fees, expenses and reimbursements in question here are subject to the approval and control of the Commission. Sullivan and Worcester contend that the court should not accept the Commission’s determination if it is so arbitrary or unreasonable as to shock the conscience of the court, and United contends that a determination of law by the Commission is not binding on the courts. I accept such qualifications, and I believe any other court of review, and the Commission itself, would do likewise. Neither thought is antagonistic in my judgment to the paramount principle enunciated in S. E. C. v. Central-Illinois Corp., 338 U.S. 96, 126, 69 S.Ct. 1377, 1393, 93 L.Ed. 1836, that the findings of the Commission are not subject to reexamination by the court “unless they, are not supported by substantial evidence or •were not arrived at ‘in accordance with legal standards.'”’ (Italics mine.) There is recent controversy in the courts concern
However, I do agree with the position of both objectors in their review, that the support and basis for the adverse determination to them should be reasonably kept within the confines of the stated findings and conclusions of the Commission upon which it based its action. In the usual splendid manner, the findings of the Commission purport to state the essentials; the important, detailed reasons for the ultimate conclusions. They are set forth as a comprehensive basis for decision, and in my opinion they should be accepted and reviewed as such. When the broad grounds involved are intelligently and comprehensively outlined as here, the review should be confined to the adequacy of such grounds. See S. E. C. v. Chenery Corp., 332 U.S. 194, 196-197, 67 S.Ct. 1575, 91 L.Ed. 1995. Otherwise, even though a new and different basis or theory might find support in the record, a court would be groping in the dark for the object of its search, namely, the motivating reasons for the determination of the Commission. An objector would be at equal disadvantage.
I have outlined my concept as to scope and confinement of review, probably in too much detail, because of the great stress placed upon these points by the opposing attorneys. I want to make clear any error of approach to the problem here, if such •be present.
Applying these principles, it is my judgment that I cannot interfere with the determination of the Commission denying counsel fee and reimbursement of expenses to the law firm of Sullivan and Worcester. The high standing, reputation and experience of this firm is apparent from the record, and also from the vigorous and able presentation of its position upon this review. The Commission findings are short, but detailed, reasoned and clearly based upon facts within its actual observation, or that of its trained personnel.
Finally, to apply the tests asked by the attorneys themselves, there is nothing in the record apparent to me indicating an unreasonable and arbitrary attitude on the part of the Commission so as to shock the conscience of the court. The memorandum opinion of the Commission indicates a most serious effort to be fair and there obviously was no “color of the necktie” determination as to the individual applicants.
The objections of the United Corporation give me more concern. At the time the plans were filed in these proceedings, United owned 2,818,397 shares of common stock and 48,529 shares of second preferred stock. Concededly, such holdings constituted 28.-5% of the outstanding voting securities of Niagara Hudson. It also owned option warrants entitling it to purchase 140,530 shares of common stock but it did not contest before the Commission or this court the proposed cancellation of such warrants.
Although the Commission characterizes the participation of United as “of some benefit” in these proceedings, an important contribution seems present. The approval of the value of services as reasonable and the finding that the services had a direct bearing upon United’s reorganization under the Act and were beneficial to it, emphasizes to me the intrinsic worth of such efforts.
■However, the reason for denial of reimbursement is flatly stated by the Commission: “However, we think these expenses should properly be borne by United and not by its subsidiary, Niagara Hudson. Under the Act, holding companies are charged with the duty of bringing their systems into compliance with the standards of the Act, and we are of the opinion that they rather than the subsidiaries should bear the costs incurred in connection with system proceedings for effecting such compliance. Moreover, United’s own compliance with the Act was largely dependent upon compliance by its principal subsidiaries and it could not resolve its own problem unless and until the problems of the subsidiaries were resolved, thus its participation in the reorganization of Niagara Hudson had the dual aspects of furthering its own compliance as well as protecting its own investment in Niagara Hudson. * * *
“ * * * The amounts expended by United were costs of services rendered primarily for its own benefit, and in our opinion no penalty is involved in United’s paying such costs even though its services may to some extent have otherwise benefited the proceedings.” (Pages 8, 9, Niagara Hudson Power Corp. Release No. 11,667).
The serious question posed is: “Does such conclusion have the necessary rational and statutory foundation to allow it freedom from judicial disturbance?” S. and E. C. v. Chenery Corp., 332 U.S. 194, 207, 67 S.Ct. 1575, 1760, 91 L.Ed. 1995. I am unable to say it has not and therefore shall not disturb such determination.
1 cannot conclude that the Commission laid down an inflexible, unreasonable and arbitrary rule denying holding companies reimbursement for substantial contribution of effort in proceedings of this kind merely because they are holding companies as such. As I read the Commission’s decision the denial of reimbursement to United is not predicated upon its nature as a technical
In my judgment, the Commission is sufficiently within the realm of proper administrative decision. The Public Utility Holding Company Act is extremely broad in its purposes and the determination challenged here, whether or not it be considered a policy decision, does not seem to violate the legal standards of equity and fairness which ultimately must govern this situation. The placing of the expense upon the United stockholders instead of tire Niagara Hudson stockholders has rational basis, even if the conclusion be subject to disagreement. An injustice is not apparent from the record.
Previous determinations by the Commission are in line with the decision now discussed. One determination was rendered after the decision challenged here and indicates an honest belief in and reiteration of its previous position. As always, distinctions may be made in the facts but enough similarity is present to show a consistency by the Commission, and thus answer the charge that it was capricious and arbitrary in this instance.
The objections are overruled, and a supplemental order of approval and enforcement in accord with the relief prayed for in this second supplemental application may enter.
. Niagara Hudson Power Corporation Holding Company Act Releases Nos. 9270 (August 16, 1949), 9295 (August 25, 1949); In re Niagara Hudson Power Corp., D.C., 86 F.Supp. 697; S. and E. C. v. Leventritt, 2 Cir., 179 F.2d 615; Niagara Hudson Power Corp. v. Leventritt, 340 U.S. 336, 71 S.Ct. 341, 95 L. Ed. 319.
. Finn v. Childs Co., 2 Cir., 181 F.2d 431, 435.
. The United Corporation requested reargument, and the request was denied by an order of the Commission dated January 22, 1953.
. Whitman, Ranson, Coulson & Goetz, counsel $19,189.43
The First Boston Corporation financial adviser ' 25,0C)0.00
Reis & Chandler, Inc., statistical service ■ 1,750.14
Miscellaneous expenses 3,502.56
$49,442.13
. In re North American Light & Power Co., D.C., 101 F.Supp. 931, Id., D.C., 106 F.Supp. 686, affirmed, 3 Cir., 202 F.2d 638, petition for certiorari pending; S. E. C. v. Cogan, 9 Cir., 201 F.2d 78, 81; see also Electric Bond & Share Co., D.C., 80 F.Supp. 795.
. Commission memorandum opinion, page 11, Release 11,667.
“Sullivan & Worcester
This firm acted as counsel for three corporate holders of an aggregate of approximately 700,000 shares of Niagara Hudson common stock. The firm’s application recites that partners devoted 629 hours to this matter, and a fee of $22,500 plus reimbursement of expenses of $2,220.54 are requested.
Counsel attended hearings, cross-examined witnesses, filed briefs, and participated in the oral argument. On behalf of its clients, the firm supported tbe plans filed by the company, but directed its efforts primarily to showing the need for and legality under the Act of the dividend preference feature of the Dissolution Plan.
This firm did not contribute to the formulation or development of the plans nor effect or attempt to effect any modifications thereof. Its participation was at all times limited to supporting the company’s proposals and securing our approval of the plans as filed. It devoted little time to the fairness aspects of the Dissolution Plan, and its support of the dividend preference feature merely supplemented that of the company and others participating in the proceedings. The firm represented only individual holders of common stock and did not purport to represent the common stockholders as a class. After careful consideration of the record, we conclude that the firm’s application should be denied.”
. In re Mt. Forest Fur Farms, 6 Cir., 157 F.2d 640; In re Paramount Publix Corp., 2 Cir., 85 F.2d 588; Warren v. Palmer, 2 Cir., 132 F.2d 665, 669.
. Electric Power & Light Corp., Release No. 11,175 (April 1952); American Power & Light Co. Release No. 11,517; Portland Gas & Coke Co., Release No. 11,560 (October 1952); Northern States Power Co., Release No. 11,145 (April 8, 1952); Eastern Gas & Fuel Associates, Release No. 11,954 (May 1953).