UNITED STATES of America, Plaintiff-Appellant,
v.
NEW YORK, NEW HAVEN AND HARTFORD RAILROAD COMPANY, Tri-Continental Financial Corporation, A. C. Allyn and Company, Incorporated, American Transportation Enterprises, Inc., Equitable Securities Corporation, Carl M. Loeb, Rhoades & Co., The Robinson-Humphrey Company, Inc., and John W. Clarke & Co., Defendants-Appellees.
Helene GLENMORE et al., Plaintiffs-Appellants,
v.
John I. AHERN et al., Defendants-Appellees.
No. 109.
Docket 25793.
Docket 25879.
United States Court of Appeals Second Circuit.
Argued October 6, 1959.
Application for Hearing In Banc Denied March 23, 1960.
Decided November 2, 1959.
Rehearing Denied December 2, 1959.
On Suggestion of Lack of Appellate Jurisdiction, January 29, 1960.
January 29, 1960.
COPYRIGHT MATERIAL OMITTED George Cochran Doub, Asst. Atty. Gen., and Morton Hollander, Peter H. Schiff, Attys., Department of Justice, Washington, D. C. (S. Hazard Gillespie, Jr., U. S. Atty. New York City, Peter H. Schiff, Robert W. Ginnane, and Harvard R. Osmond, Washington, D. C., on the brief), for plaintiff-appellant in Docket 25793.
Mathias F. Correa, New York City (James A. Fowler, Jr., J. Bernard Quigley, H. Richard Schumacher and Cahill, Gordon, Reindel & Ohl, New York City on the brief), for defendants-appellees Tri-Continental Financial Corporation et al in Docket 25793, and for defendant-appellee Tri-Continental Financial Corporation in Docket 25879.
Julius Levy, New York City (Irving Bizar and Pomerantz Levy & Haudek, New York City, on the brief), for plaintiffs-stockholders in Glenmore et al. v. Ahern et al., as amicus curiae in Docket 25793 and for plaintiffs-appellants in Docket 25879.
William T. Griffin, New York City, submitted a brief for defendant-appellee, New York, New Haven & Hartford R. Co.
Before LUMBARD, WATERMAN and FRIENDLY, Circuit Judges.
Opinion of November 2, 1959, on the merits in Docket 25793.
FRIENDLY, Circuit Judges.
The question here is whether a railroad subject to § 20a of the Interstate Commerce Act, 49 U.S.C.A. § 20a, can lawfully provide by agreement for significant changes in the rights and privileges of holders of 27% of its preferred stock without having obtained authorization from the Interstate Commerce Commission under § 20a(2).1 We hold it cannot.
The question arises as follows: In August and October, 1955, the New York, New Haven & Hartford Railroad Company sustained extensive hurricane and flood damage. In an effort to raise funds required for repairs the New Haven management sought a $10,000,000 bank loan, which was to be guaranteed by the United States pursuant to § 302 of the Defense Production Act of 1950, 64 Stat. 798, 801, as amended, 50 U.S.C.A.Appendix, § 2092. The New Haven's charter required that such a loan be approved by the affirmative vote of two-thirds of the shares of its preferred stock considered as one class and of a majority of all the preferred and common shares considered as another. The management gave notice of a special meeting of the New Haven's stockholders to vote such approval.
After the notice was mailed, Amoskeag Company and the Dumaine family, owning 76,570 of the 491,540 shares of preferred, asked that the stockholders' approval be conditioned upon a proviso that the New Haven should not declare or pay any dividend on its common stock so long as the proposed loan remained unpaid. The New Haven's management then abandoned the proposed special meeting. It did this on the basis of a professed belief that Amoskeag, the Dumaine family, and other holders of preferred who normally voted with them could block the needed two-thirds vote of the preferred if the proviso were not included and that the needed majority vote of the preferred and common considered as one class could not be attained if it were.
The New Haven management thereupon entered into negotiations with a banking group to have the latter acquire the preferred shares owned by Amoskeag, the Dumaine family and others allied with them. These negotiations led to an agreement, dated November 10, 1955, between the New Haven and Union Securities Corporation on behalf of the banking group. The agreement provided that the banking group would purchase from specified sellers not less than 120,000 nor more than 140,000 shares of New Haven preferred stock at a price ultimately fixed at $60 per share. The New Haven agreed that it would declare a $5 dividend for 1955 on the preferred not later than April 1, 1956, and that the purchasers should have the right to sell, or, in the language of the market, to "put" to the New Haven on and after November 18, 1957, and prior to December 18, 1957, all of the preferred stock purchased by them, less any stock sold in accordance with the agreement, at a price $10 above the purchase price. During the same period the New Haven could "call" on the purchasers to sell the stock to the New Haven at the same price. The "put" to the New Haven was buttressed by a provision that if "for any reason such right should not, in the opinion of counsel for the Purchasers, be immediately enforceable in accordance with its terms, or if, for any reason, the New Haven shall fail to purchase the Preferred Stock," the purchasers might sell the stock and hold the New Haven liable for the difference between the agreed repurchase price and what was realized. The purchasers also agreed that prior to November 18, 1957, they would not sell any of the preferred stock without the approval of the New Haven, and that if they sold any of it at such prices that the net proceeds exceeded the amount payable by the New Haven under its "call," they would pay such excess to the New Haven.
The agreement was consummated on November 18, 1955. The seven members of the banking group purchased 131,385 shares of the New Haven's preferred stock at $60 per share. They received "stock certificates registered in the names of the several purchasers" bearing specified certificate numbers. And the New Haven delivered to Union Securities on behalf of the group an instrument granting the "put" relating to these specific shares required by the November 10 agreement and providing that all other provisions of that agreement should continue in full force and effect.
The New Haven then gave another notice of a special meeting of stockholders to vote on the proposed $10,000,000 loan. The proxy statement disclosed the facts summarized above. The necessary stockholder approval was given, and the loan was made with authorization of the Interstate Commerce Commission.
By the spring of 1956 it had become apparent that the New Haven required additional funds to repair the flood damage. As a condition to securing an additional loan the New Haven was required to and did obtain a modification of the agreement with the banking group. This modification included a waiver of the New Haven's obligation to pay a $5 dividend on its preferred stock for 1955; a two-year postponement of the period of the put;2 a change so that both the put and the call should apply to all or any part of the total amount of stock held by the group; an acceleration of one year in the period for the call; and a provision that if the put or call should be exercised after repayment of the proposed loan and prior to payment of the $5 dividend for 1955, the put or call price should be $75 rather than $70 per share.
The New Haven did not seek authorization of the Interstate Commerce Commission to enter into these agreements. However, on November 29, 1955, the New Haven's Vice President-Treasurer, its Vice President-Law, and another attorney conferred with the chairman of the Interstate Commerce Commission's Finance Division and the Director of the Commission's Bureau of Finance with respect to the proposed $10,000,000 loan. The agreements between the New Haven and the banking group were disclosed to the Commission officials and copies were given them. The Vice President-Law informed them that the New Haven did not intend to apply for Commission approval of the agreements under § 20a because he did not think it was required, that for this reason he was not filing the contracts officially, but that the New Haven desired the Commission to know about the transaction.
On March 13, 1956, the Commission issued a press release announcing that it would "institute an inquiry concerning agreements entered into recently by the New York, New Haven & Hartford Railroad Company whereby it undertook to repurchase certain of its outstanding securities, and concerning the accounting practices of that carrier to determine whether there has been any violation of the Commission's regulations or of the statutes administered by it, or any practices indulged in which are contrary to the best interests of the carrier or of the public." The record is not very informative as to the course of this "inquiry." Apparently no docket number was assigned, no hearings were held, no briefs filed or arguments made, and the inquiry was concluded without order of any sort. Our best information regarding it comes from the Commission's report in New York, New Haven & Hartford R. R. Loan Guarantee,
On November 17, 1958, the United States, suing on behalf of the Interstate Commerce Commission pursuant to 49 U.S.C.A. § 12(1), brought this action in the Southern District of New York. It sought a declaratory judgment that the agreement between the New Haven and the banking group with respect to the preferred stock was unlawful and void, since authorization by the Commission under § 20a(2) of the Interstate Commerce Act was required and had not been obtained, and a decree enjoining the defendants from carrying it out. The New Haven did not defend, and our references to "defendants" or "appellees" will relate to the banking group.
The defendants moved to dismiss the complaint under F.R. 12(b) or in the alternative to enter judgment on the pleadings under F.R. 12(c) of the Federal Rules of Civil Procedure, 28 U.S.C.A. The government countered with motions for a preliminary injunction and for summary judgment, these being supported by certificates and statements from the Secretary of the Commission. The New Haven submitted affidavits setting forth the November 29, 1955, conference with the Commission officials and annexing the report of the Commission cited above in the margin (Footnote 3). Considering the defendants' motions as for summary judgment, the Court (McGohey, J.), in a brief opinion, granted the motions of defendants and denied those of the government. Later the Court entered the judgment embodying this action and dismissing the complaint from which this appeal is taken. While the problem is difficult and the case one of first impression, we have concluded that the District Court was in error and that the government is entitled to the relief sought.
On brief the government based its case in part on a claim that the agreement between the New Haven and the banking group constituted an "evidence of * * * indebtedness." The government did not press this contention in argument. We think it was wise in not doing so. For "indebtedness is merely the state of being in debt" and debt "means a sum of money due by certain and express agreement [citations] and does not include liabilities which are contingent in that it is uncertain as to whether anything will ever be demandable under the contract." Sharpe v. First National Bank, 1936,
In order to prevail, therefore, the government must show that the transaction here under attack came within the provision of § 20a(2) requiring Commission approval "for any carrier to issue any share of capital stock."
The New Haven did not here "issue" additional preferred stock in the sense in which "issue" is used in corporation law. The preferred stock was issued in 1947, pursuant to authorization granted by the Commission,
Indeed, appellees do not seriously question that if the same rights conferred upon them by the various agreements had been conferred upon all the preferred stockholders as a result of amendment of the New Haven's charter, authorization by the Commission under § 20a would have been required.7 In our view, however, the applicability of § 20a(2) to a substantial change in the rights and obligations of a carrier and its stockholders does not depend on the particular method employed to effect the change. If the New Haven had invited preferred stockholders to accept new terms and to evidence their assent by depositing their stock with an agent designated by the New Haven for that purpose, this would have required Commission approval, even though the New Haven's charter was not altered and non-assenters were not affected. Indeed, that was precisely the case before this Court in Associated Gas. We see no reason for a different result because here the New Haven, dealing with only a few stockholders who owned large blocks of preferred, was able to change the terms of that stock by simpler means.
Appellees place much reliance on claim that what we have before us is a mere "executory agreement." We find no magic in the word "executory." Most preferred stock provisions, with respect to dividends, sinking funds, voting rights and the like, are to be performed in the future. Whatever the words, the facts are that if the agreements here are valid, the New Haven has become obligated in respect of appellees' shares for a sum nearly as great as the $10,000,000 flood loan which triggered this transaction, and appellees' shares are worth $75 whereas the current market value of shares not having the benefit of the agreements is around $12. Clearly appellees' shares have been changed under the highly practical tests of the marketplace. We think it would indeed be "to place form above substance and to defeat the statutory purpose" if, in the absence of other considerations that ought to lead us to that end, we were to say that an agreement having so great an economic effect did not modify the stock held by appellees. Concededly, the present case is a close one. But, in the absence of administrative construction supporting appellees' contentions, we prefer a construction of § 20a of the Interstate Commerce Act that gives effect to its remedial purposes to give "the commission control over stock and bond issues" in order to avoid for the future abuses in the issuance of securities whereby "railroad properties have been bankrupted or saddled with almost overwhelming burdens of indebtedness, which have not increased the amount or value of property devoted to the public service, have not improved the service rendered, and have on the whole had the effect of increasing the charges for service,"8 rather than an interpretation, no more reasonable, that would frustrate them. For we must read statutes "not as theorems of Euclid but with some imagination of the purposes which lie behind them." Lehigh Valley Coal Co. v. Yensavage, 2 Cir., 1914,
We turn therefore to appellees' contentions that there is an established administrative construction in their favor:
(1) Appellees argue that the Commission's administrative construction of "issue" to include amendments has related only to amendments evidenced by physical stamping of the securities as distinguished from modifications evidenced only by agreement. But the government has cited a number of cases to the contrary,9 and we think the Commission has properly regarded the question as being whether rather than how the terms of the securities were changed. The report in Fonda, Johnstown & Gloversville R.R. Bonds,
(2) Appellees place heavy reliance on Commission decisions holding § 20a inapplicable to various types of agreements imposing financial obligations on carriers. Among these are decisions holding the section inapplicable to contracts which evidenced indebtedness but did not take the form of bonds or notes, e. g., equipment purchase contracts, Louisiana Ry. & N. Co.,
(3) Appellees claim that in its annual reports to the Congress the Commission has conceded that § 20a(2) did not cover agreements such as those here before us and has recommended that its jurisdiction be expanded to include them, and that Congress has not seen fit to respond.
In fact, two different recommendations by the Commission are involved. On the view that we take of the case, neither is relevant.
The first recommendation appears in the Annual Reports for 1937, 1938, 1943, and 1944, 51 I.C.C. Ann.Rep. 105 (1937); 52 I.C.C. Ann.Rep. 121 (1938); 57 I.C.C. Ann.Rep. 132-33 (1943); 58 I.C.C. Ann. Rep. 105 (1944). This stemmed from the Commission's investigation of the bankruptcy of the very carrier here before us, New York, N. H. & H. R.R.,
The second recommendation, found in the Annual Reports from 1952 through 1955, 66 I.C.C. Ann.Rep. 147 (1952), 67 I.C.C. Ann.Rep. 147 (1953), 68 I.C.C. Ann.Rep. 128 (1954), 69 I.C.C. Ann.Rep. 124 (1955), was that Congress reverse the result reached by the Commission in Lehigh Valley R.R. Conditional Sale Contract, supra, that "evidence of * * * indebtedness" did not include indebtedness under a conditional sale not evidenced by a bond or note, and include in § 20a(2) "any contract for the purchase or lease of equipment not to be fully performed within 1 year from the date of the contract." This is irrelevant for reasons developed above.
(4) Appellees' final and, we think, most serious contention on administrative construction relates to the Commission's conduct in this very case. They assert that the Commission's three years of inaction after full disclosure of the agreements in November 1955, save only for the institution in March 1956 of the inquiry that was closed late that year, brings the case within United States v. Chicago, North Shore & Milwaukee R.R., 1933,
In North Shore, the United States, at the request of the Commission, sought to enjoin the carrier from issuing securities without Commission authorization. The North Shore answered that it was an "interurban electric railway which is not operated as a part of a general steam railroad system of transportation" and thereby exempted from § 20a(1). The record showed that from the enactment of § 20a in 1920 the Commission had never previously challenged the North Shore's claim to the exemption; that during that period the North Shore had issued $61,662,600 of securities without Commission authorization; that the annual reports filed by the North Shore with the Commission had fully disclosed the character of its operations and the issuance of these securities, and had stated that the latter were issued with the authority of the regulating commissions of Wisconsin and Illinois; that in one instance the North Shore had failed to include this statement and on inquiry from the Commission had supplied it; and that the Director of the Commission's Bureau of Finance had formally advised the North Shore that it came within the narrower exemption for interurban electric railways in the then § 15a of the Interstate Commerce Act. The Court's opinion recites also that, in a series of Annual Reports to Congress, for 1921, 1923, 1924 and 1925, the Commission had called attention to its lack of jurisdiction under § 20a over the securities of independent interurban electric railways which, like the North Shore, were "engaged in the general transportation of freight in interstate commerce in addition to the transportation of passengers," some of which "correspond substantially to steam roads in all important particulars except that of motive power," although § 15a included "such interurban electric lines as are engaged in the general transportation of freight" even though independent, and had asked that § 20a be amended; that in its 1928 report the Commission made a specific proposal for narrowing the § 20a exemption; and that Congress had consistently refused to act. Moreover, the North Shore did not stand alone. The Commission had equally failed to challenge the exemption of other independent interurban electric railways whose operations were generally similar to the North Shore, and in one instance had formally disclaimed jurisdiction over such a line under the identical language of § 1(22), Proposed Acquisitions by Cincinnati, Hamilton & Dayton Ry. Co.,
Here we have no such adequate evidence. We have only an isolated transaction, an inconclusive discussion, an abortive inquiry, and then two years of silence. It is possible, of course, that silence here meant assent — by someone; but we cannot find a sufficiently clear basis for inferring from what the Commission did and did not do an administrative construction that was never expressed. If 60 years of Commission failure to consider maintenance-of-way vehicles to be within the Safety Appliance Act, 45 U.S.C.A. § 1 et seq., was not sufficient evidence for the Supreme Court to infer an administrative determination, Baltimore & Ohio R. Co. v. Jackson, 1957,
Appellees were not obliged to rely on so infirm a foundation. They could have required the New Haven to apply under § 20a for approval of the agreement while at the same time moving to dismiss the application for want of jurisdiction, see Lehigh Valley R.R. Conditional Sale Contract, supra, and Davidson Transfer and Storage Company, supra, or they could themselves have sought a declaratory order under § 5(d) of the Administrative Procedure Act, 5 U.S.C.A. § 1004(d). No serious delay need have resulted; for the Commission normally acts on finance applications with relative promptness.
We have dealt with appellees' contention as to the Commission's action and inaction in terms of administrative construction rather than of estoppel, since that is the basis on which appellees have argued. In any event the applicability of the doctrine of estoppel to regulatory agencies is, to say the least, doubtful. See SEC v. Morgan Lewis & Bockius, 3 Cir., 1953,
Appellees appear at times to suggest that although no single one of the four contentions as to administrative construction which we have just reviewed may be conclusive, the combination is. However, we have found that appellees' first contention is not made out and that the second and third deal with matters which are irrelevant to the only government contention that we sustain. Consequently we are left only with the fourth. This we deem insufficient, for the reasons set forth above.
Appellees assert that in no previous case has the Commission or a court applied Section 20a to a transaction such as that here before us. The government does not dispute this but answers there are also none where the Commission or a court has refused to do so. Under these circumstances the mere fact of novelty does not show where the path of correct decision lies. The problem of interpreting statutes is inevitably one of applying old terms to new situations. Our task is to determine whether, if Congress had envisioned this case, it would have wished to require Commission authorization before a railroad undertook new obligations to stockholders such as those which the New Haven has assumed, and, if so, whether the words that it used were sufficient to express that desire and thereby give fair warning to those who read them. We entertain no doubt in giving an affirmative answer to the former question; and we think that, once "issue" was broadened by nearly four decades of unquestioned administrative construction to include "alter" or "amend," the same answer must be given to the latter. For we must construe § 20a, as the Supreme Court has construed the Securities Act, in the light of "* * * the doctrine that courts will construe the details of an act in conformity with its dominating general purpose, will read text in the light of context and will interpret the text so far as the meaning of words fairly permits so as to carry out in particular cases the generally expressed legislative policy." SEC v. C. M. Joiner Leasing Corp., 1943,
The District Court ought therefore have granted the government's motion for summary judgment and denied the motions of the banking group, and it should now do so. In order to protect the rights of appellees in the event that rehearing or certiorari should be sought and granted and our judgment reversed, the injunction should contain an exception permitting any or all members of the group, if so advised, to give notice of the exercise of their put during the period between November 18 and December 18, 1959. In view of the short time remaining before November 18, 1959, when the put becomes exercisable, the mandate shall issue on November 10, 1959, unless, if the banking group desires to apply for rehearing, the banking group and the New Haven stipulate that no action under the agreements other than the giving of notice will be taken pending further order of this Court.
Judgment reversed.
Notes:
Notes
This section, so far as material, provides:
"It shall be unlawful for any carrier to issue any share of capital stock or any bond or other evidence of interest in or indebtedness of the carrier (hereinafter in this section collectively termed `securities') or to assume any obligation or liability as lessor, lessee, guarantor, indorser, surety, or otherwise, in respect of the securities of any other person, natural or artificial, even though permitted by the authority creating the carrier corporation, unless and until, and then only to the extent that, upon application by the carrier, and after investigation by the commission of the purposes and uses of the proposed issue and the proceeds thereof, or of the proposed assumption of obligation or liability in respect of the securities of any other person, natural or artificial, the commission by order authorizes such issue or assumption."
The additional loan, initially $4,500,000, was evidenced by short-term notes maturing August 25, 1956. Later the loan was increased to $6,000,000, and made subject to Section 302 of the Defense Production Act of 1950, supra. Both the $6,000,000 loan and the $10,000,000 loan required principal payments of $500,000 each on December 30, 1957 and 1958. A two-year postponement of the "put" thus meant that $2,000,000 of the loans would become repayable before the "put" of the preferred stock could be made
During the pendency of the inquiry, the Commission issued its report in New York, New Haven & Hartford Securities, Finance Docket No. 19416, Aug. 6, 1956, approving issuance of a substituted note for the $10,000,000 borrowed in 1955 and an additional note of $6,000,000 representing the additional loan discussed above. This report stated that procurement of the additional loan was a condition precedent to the extension by the New Haven "for 2 years of its contingent commitment to purchase certain shares of its preferred stock * * *"
Bonds of Erie R.R.,
Notes of Trans Mississippi Terminal R.R.,
Increase in Dividend Rate on Preferred Stock by Virginian Ry.,
This is a sufficient answer to the argument, which, indeed, has not been vigorously advanced, that because of the clause in § 20(a) (2) forbidding a carrier "to assume any obligation or liability * * in respect of the securities of any other person" without Commission approval, the statute cannot be read to forbid a carrier to assume additional obligations with respect to its own. For if "issue" includes amendment, as the settled administrative construction has been, there is no need for further prohibition on a carrier's assuming obligations with respect to its own stock, bonds or notes
H.R.Rep. 456, 66th Cong. 1st Sess., at 21; testimony of Commissioner Clark, Hearings on Extension of Tenure of Government Control of Railroads, Senate Committee on Interstate Commerce, 65th Cong. 3d Sess., Vol. I, pp. 235-36
Bonds of Erie R.R., supra; Notes of Union Terminal Co., supra; Notes of Western Maryland Ry.,
Piedmont & Northern Ry. v. I. C. C., 1932,
On Petition for a Rehearing in Docket 25793 Dec. 2, 1959.
PER CURIAM.
The arguments, advanced in appellees' petition for rehearing, that the obligations undertaken by the New Haven ran to them as bankers rather than as stockholders and that we failed to give due effect to Lehigh Valley RR., Conditional Sale Contract, 233 ICC 359 (1939), raise no questions not fully considered when the case was first before us. However, appellees make two contentions as to which a further word may be warranted.
The first is that assuming that we were right, which appellees, of course, deny, in reversing the grant of appellees' motion to dismiss the complaint or for judgment on the pleadings, we were nevertheless wrong in also holding that the government's motion for summary judgment should be granted. The contention is that appellees are entitled to develop the facts as to the action or inaction by the Commission with respect to the agreement here in question and "as to the economic effect of the transaction in suit at the time it was entered into." However relevant evidence on this latter point may have been before the Commission if permission under 20 (a) had there been sought, it is clearly irrelevant here before us now. And as to both points appellees' proposal comes too late.
The government moved for summary judgment on January 7, 1959. Its motion and appellees' motion for judgment to dismiss or for judgment on the pleadings were argued together before Judge McGohey on February 17. The only additional facts that anyone sought to bring to the attention of the District Court were a "certificate and statement" of the Secretary of the Interstate Commerce Commission dealing with the Commission's inquiry and stating that "A diligent search of the records of the Commission fails to reveal any Commission action, formal or informal, approving the Agreements, or any of them," affidavits of the New Haven's Vice President-Law and his associate as to the November 29, 1955 conference, and the Commission's report of August 6, 1956 referred to in footnote 3 of our opinion. If appellees believed there was any triable issue of fact, that was the time for them to say so. It is no excuse to say, as they now do, that the facts were in the exclusive possession of the government; for Fed.R.Civ.Proc. 56(f), 28 U.S.C.A., gave any needed remedy. No suggestion as to the existence of any triable issue of fact was made, and the District Judge stated in his opinion, D.C.,
"All parties agree and I independently find that no genuine issue as to any material fact is raised on any of the motions." No contrary contention was made to us in the briefs or at the argument of the appeal. The proposal for a trial comes too late on petition for rehearing after judgment on appeal, even if we were to assume in appellees' favor that their exploration could develop facts having legal significance — an assumption which we deem highly dubious.
Appellees' second complaint is that our directions to the District Court as to the form of judgment are unclear and erroneous. Their expressed fear that our direction to grant the government's motion for summary judgment might lead the District Court to grant the government's prayer that the agreement be declared invalid as "an unlawful issuance of evidence of indebtedness," which we specifically rejected, is captious. We are confident that, in this and other respects, the District Court requires no further direction from us to carry out its normal obligation to frame an order not inconsistent with our opinion. In particular appellees raise the question whether we intended the District Court to annul the provision of paragraph 6(d), quoted in our opinion, that if the right of appellees to put the stock to the New Haven should not in the opinion of their counsel be immediately enforceable, or if for any reason the New Haven should fail to purchase the stock, appellees might sell the stock and hold the New Haven liable for the difference between the agreed repurchase price and what was realized. We answer in the affirmative. Any other answer would permit the purposes of Section 20(a) to be frustrated.
The petition for rehearing is denied.
Opinion of Jan. 29, 1960, in Dockets 25793 and 25879
FRIENDLY, Circuit Judge.
This opinion deals primarily with questions of jurisdiction and procedure in Docket No. 25793, to which we shall refer as the government's suit, and in Docket No. 25879, to which we shall refer as the stockholders' suit. The substantive question in both suits is whether transactions between the New Haven and certain bankers, to whom we shall refer as "the banking group" or as "appellees," constituted an issuance of securities by the New Haven requiring approval by the Interstate Commerce Commission under § 20a(2) of the Interstate Commerce Act, 49 U.S.C. § 20a.
On November 2, 1959, we rendered our opinion in the government's suit, holding that the transactions did constitute such an issuance of securities and reversing the judgment of the District Court which had granted the banking group's and denied the government's motions for summary judgment. On December 2, 1959 we denied, in a short opinion, the banking group's petition for rehearing.
On December 17, 1959, counsel for the banking group suggested to us that the government's appeal had been improperly taken to this Court since, as they believed, § 2 of the Expediting Act of 1903, 32 Stat. 823, 49 U.S.C. § 45, required that the appeal from the order of the District Court be taken directly to the Supreme Court. We immediately requested the parties to the government's suit and the stockholders' suit to file briefs on the problems thus raised as to the government's suit and also on certain questions as to the appeal in the stockholders' suit, and instructed the Clerk to defer issuance of the mandate in the former.
Our earlier opinion sets forth the facts and the proceedings in the government's suit. The stockholders' suit was brought in the District Court for the Southern District in 1957 against the New Haven, its then directors, some former directors, Tri-Continental Financial Corporation (a member of the banking group), and others. The complaint was in multiple counts and concerned many transactions. The sixth count set forth the same contracts between the New Haven and the banking group alleged in the government's suit and claimed, as does the government, that the transactions were void for lack of approval by the Interstate Commerce Commission under § 20a(2). The prayer for relief asked among other things that the defendants be enjoined temporarily and permanently from performing the contracts. On February 17, 1959, in the same opinion in which he decided the motions in the government's suit, the District Judge denied a motion for summary judgment by the plaintiffs to grant, and granted a similar motion of Tri-Continental to dismiss, the sixth count of the complaint in the stockholders' suit. On the same day, acting sua sponte, the District Judge made a "Memorandum and Order" in the stockholders' suit.
I. The Government's Suit
The government contends its appeal was properly taken to this Court. It says we must look to the Expediting Act as this appears in the Statutes at Large, rather than the version in 49 U.S.C. §§ 44 and 45; that, when we do this, we find that, so far as regards the Interstate Commerce Act, the Expediting Act is limited to suits by the United States to restrain violations of the Interstate Commerce Act as originally enacted in 1887 together with such amendments thereof as had "a like purpose"; and that the amendment to the Interstate Commerce Act, made by § 20a, added by Transportation Act, 1920, ch. 91, § 439, 41 Stat. 494, vesting the Interstate Commerce Commission with jurisdiction over the issuance of railroad securities, was not of "like purpose" with the 1887 Act which was concerned with unreasonable rates, discriminatory practices, and unreasonable preferences. The government argues also that the Expediting Act did not embrace every action brought by the United States to enforce the legislation specified therein but only a "suit in equity"; that the substitution of the words "in every civil action" for "in every suit in equity" in § 2 by the Act of June 25, 1948, ch. 646, § 17, 62 Stat. 989, should not be construed as altering this; that the government's action here was not a suit in equity but an action for a declaratory judgment; and that if the prayer for an injunction in the government's complaint were to be an obstacle to our jurisdiction, the government should now be allowed to abandon this. It says that even if we should disagree with both these contentions, we are not compelled to set our judgment aside and ought not do so. Finally, the government urges that if none of these contentions should prevail and we should vacate our judgment of reversal, we should also vacate the judgment of the District Court so that the District Judge may enter a fresh judgment from which the government may take an appeal directly to the Supreme Court.
As might be expected, appellees deny that the appeal was properly taken here and contend that we have no alternative to vacating our judgment for lack of jurisdiction. They insist also that if we do this, we lack power to vacate the judgment of the District Court; that this must stand, since the time for taking an appeal to the Supreme Court has long since expired; and that it would operate as res judicata in the stockholders' suit.
(1) One of the few points not disputed is that the construction of § 2 of the Expediting Act must be determined on the text in the Statutes at Large rather than in the Code. Stephan v. United States, 1943,
In none of the several amendments to the Expediting Act, the last as recent as 1948,2 did Congress broaden the reference to the Act of 1887 so as to refer to that Act as amended.3 Therefore, argues the government, when a suit brought by the United States relates to any provision added to the Interstate Commerce Act of 1887, the suit is within the Expediting Act if, but only if, the added provision was of "like purpose," and regulation of the issuance of railway securities is not of "like purpose" with the Interstate Commerce Act and the Sherman Act as these stood in 1903.
It has been stated that "the general rule unquestionably is that, when a statute refers to and adopts an existing law, its purport is confined to the law as it then exists, and does not embrace or include any subsequent modification of it." Postal Telegraph Cable Co. v. Southern Railway Co., C.C.W.D.N.C.1898,
When we turn from these general considerations to the specifics concerning application of the Expediting Act to the Interstate Commerce Act, perplexities abound. The first consideration in point of time favors appellees. In 1903, the Interstate Commerce Act of 1887 had itself been thrice amended, by the Act of March 2, 1889, ch. 382, 25 Stat. 855, the Act of February 10, 1891, ch. 128, 26 Stat. 743, and the Act of February 8, 1895, ch. 61, 28 Stat. 643; it is difficult to believe that Congress' failure to insert the words "as amended" in the Expediting Act manifested an intention that, in each case brought by the United States to enforce one of the sections of the 1887 Act thus amended, the Court would have to determine whether or not the amendment was of "like purpose" with the original Act. We come then to history that weighs for the government. Eight days after approval of the Expediting Act, the Elkins Act of February 19, 1903, ch. 708, 32 Stat. 847, 49 U.S.C. §§ 41-43, was approved. It included, in § 3, a specific provision making the Expediting Act applicable to suits brought for its enforcement. That fact alone is inconclusive, for the Elkins Act was not an amendment of the Interstate Commerce Act and, though it would seem rather clearly to have been of "like purpose," Congress might have wished to place the question beyond all doubt. However, § 1 of the Elkins Act contains the phrase "under the provisions of the Act to regulate commerce or Acts amendatory thereto," thereby demonstrating that this method of cross-reference was well-known to Congress at the time when and in the context with which we are here concerned.
The government could find further support in another statute of the same month. The Act of February 25, 1903, ch. 755, 32 Stat. 903, contains an appropriation "for the enforcement of the provisions of the Act entitled `An Act to Regulate Commerce', approved February fourth, eighteen hundred and eighty-seven, and all Acts amendatory thereof or supplemental thereto, and of the Act entitled `An Act to protect trade and commerce against unlawful restraints and monopolies,' approved July second, eighteen hundred and ninety, and all Acts amendatory thereof or supplemental thereto." Since the Sherman Act had not then been amended, the reference to "Acts amendatory thereof" must be to future amendments; the same words with respect to the Act of 1887 must have the same meaning; and the contrast with the Expediting Act, approved only three weeks before, is striking. Nor can this contrast be dismissed on the ground that the Act of February 25, 1903 was an appropriations act where the precise text may not have been thoroughly considered. For the very section here discussed also contained the provision granting immunity from prosecution for any matter concerning which a person might testify or produce evidence "in any proceeding, suit, or prosecution under said Acts."
Still more support to the government's contention is furnished by § 5 of the Hepburn Act of 1906, ch. 3591, 34 Stat. 584, 592. This made the Expediting Act applicable to any suit to enjoin any order or requirement of the Commission and also "to any proceeding in equity to enforce any order or requirement of the Commission, or any of the provisions of the Act to regulate commerce approved February fourth, eighteen hundred and eighty-seven, and all Acts amendatory thereof or supplemental thereto." The Act of June 18, 1910, ch. 309, 36 Stat. 539, 554, creating the Commerce Court, removed the quoted clause, and, when the Urgent Deficiencies Act of 1913, ch. 32, 38 Stat. 208, 219, abolished the Commerce Court and provided that suits to enjoin orders of the Commission should be heard by three-judge courts, the Hepburn expansion of the scope of the Expediting Act was not restored. Nevertheless the Hepburn history gives added significance to the failure of Congress, when amending the Interstate Commerce Act by Transportation Act, 1920, ch. 91, 41 Stat. 456, 474, to expand the Expediting Act to include suits in equity to enforce acts amendatory to the Interstate Commerce Act.
The government may draw further support from certain anomalies that seem to result from construing the Expediting Act to apply to all the provisions added by the Transportation Act. We shall mention one. Section 1(20) added to the Interstate Commerce Act in 1920 provides that railroad construction, operation or abandonment contrary to the provisions of that paragraph or of paragraphs (18) or (19) of § 1 "may be enjoined by any court of competent jurisdiction at the suit of the United States, the Commission, any commission or regulating body of the state or states affected, or any party in interest. * *" If the Expediting Act applies to any suit by the government to enjoin violation of the Interstate Commerce Act as amended, there is a direct appeal to the Supreme Court if such a suit is brought by the United States, though appeal is to the Court of Appeals if the suit is brought by the Commission, as it was in Piedmont & Northern Ry. v. Interstate Commerce Commission, 1932,
When we move beyond 1920, we find considerations favoring appellees. In United States v. Chicago, North Shore & Milwaukee R. Co., 1933,
With the language inconclusive and the history thus Janus-faced, we resort to considerations of practicality. The basic purpose of § 2 of the Expediting Act was "* * * to ensure expeditious disposition of suits in equity brought by the United States" and to eliminate the opportunities for delay which were then inherent in appeals to the Supreme Court by way of the Circuit Court of Appeals, United States v. California Cooperative Canneries, 1929,
(2) The government next says that even though this be so, the Expediting Act would not have applied here prior to its 1948 amendment since the government's action was not a "suit in equity" but an action for a declaratory judgment, which has been said to be neither an action at law nor a suit in equity but sui generis, see, e. g., United States Fidelity & Guaranty Co. v. Koch, 3 Cir., 1939,
However, it does not follow that no effect whatever should be given to the amendment. Although an action by the government for a declaratory judgment that a transaction violates the Interstate Commerce Act might not have been a "suit in equity," we think that such an action, especially when addressed to a transaction still executory, is sufficiently akin to such a suit to come within § 2 of the Expediting Act as amended by the Act of 1948; and we leave to others the problem whether such an action would be within § 1 or 47 U.S. C. § 401(d). This conclusion follows a fortiori where, as here, the complaint included a prayer for an injunction. The distinction between such a complaint and the type of complaint exemplified by Northern Pacific Ry. v. United States, 1958,
We hold therefore that although both the government's arguments for the propriety of having taken its appeal to this Court rather than to the Supreme Court are substantial, we would not have decided the appeal if our appellate jurisdiction had been questioned before we rendered our judgment.
(3) Appellees say this ends the matter, since the question of appellate jurisdiction may be raised at any time. In support of this, they cite cases that have permitted the question to be raised on petition for rehearing. Black & Yates v. Mahogany Association, 3 Cir., 1941,
If we had decided in favor of appealability on a motion to dismiss and had rendered judgment on the merits, although our judgment would have been subject to review and possible reversal on a timely application to the Supreme Court, we doubt that it would have been open to collateral attack or that we would have been compelled to reopen it after the time for applying for rehearing had expired. Here, although appellate jurisdiction was not argued, the question was necessarily before us and, as recently said by Judge Pope in Yanow v. Weyerhaeuser Steamship Company, 9 Cir., 1959,
In a long line of decisions going back as far as Gully v. Interstate Natural Gas Co., 1934,
II. The Stockholders' Suit
We pass now to the appealability of the judgment dismissing the sixth count of the complaint in the stockholders' suit. As to this, of course, § 2 of the Expediting Act has no application, since that Act is limited to suits by the United States. The questions are whether the judgment is appealable under 28 U.S.C. § 1291 as a final judgment by virtue of the certification under Fed. R.Civ.Proc. 54(b), or under 28 U.S.C. § 1292(a) (1) as an interlocutory order refusing an injunction. The judgment plainly was not final even as to the transactions here challenged, since other theories of liability remained. Schwartz v. Eaton, 2 Cir., 1959,
The sixth count alleged the invalidity of the transactions here in issue for lack of Interstate Commerce Commission authorization. The prayer sought, inter alia, a judgment "enjoining temporarily and permanently the performance and enforcement of said contracts by the defendants." Judge McGohey's order of February 17, 1959, denied plaintiffs' motion for summary judgment on the sixth count and granted Tri-Continental's motion to dismiss that count,
Appellees argue that the judgment was not appealable as an interlocutory order refusing an injunction under § 1292(a) (1) because, even as to the transactions here challenged, other grounds for the grant of an injunction remained undetermined. Decisions of this Court point against this. In Raylite Electric Corporation v. Noma Electric Corporation, 2 Cir., 1948,
Our decisions in Studer v. Moore, 2 Cir., 1946,
We are fully aware that "Finality as a condition of review is an historic characteristic of federal appellate procedure," Cobbledick v. United States, 1940,
That appeal presents the identical issue involved in the government's suit. The two cases were heard together in the District Court. In the appeal in the government's suit we permitted the stockholders to submit an amicus brief and appellees to answer this in a reply brief. Here, as in Trans World Airlines, Inc. v. Civil Aeronautics Board, 2 Cir., 1950,
We therefore direct:
I. In the government's suit:
(1) That our judgment dated November 2, 1959 be vacated;
(2) That the judgment of the District Court dated July 10, 1959 be vacated for the sole purpose of enabling the District Judge to enter a fresh judgment from which the United States may, if so advised, take a direct appeal to the Supreme Court under 49 U.S.C. § 45;
(3) That no costs be allowed on the appeal; and
(4) That the mandate issue five days after the filing of this opinion.
II. In the stockholders' suit:
(1) That the motion to dismiss the appeal be denied;
(2) That the judgment dimissing the sixth count of the complaint in the stockholders' suit be reversed, with costs, and that an injunction, containing the exception stated in our opinion of November 2, 1959, p. 34 [
(3) That issuance of the mandate be stayed for 30 days pending the filing of a petition for certiorari and, if such a petition be filed within said period, until final determination thereon, such stay to be conditioned upon the filing within 10 days of a stipulation by Tri-Continental and the New Haven as set forth in said opinion, p. 34 [
It is so ordered.
Notes:
"Chap. 544. — An Act To expedite the hearing and determination of suits in equity pending or hereafter brought under the Act of July second, eighteen hundred and ninety, entitled `An Act to protect trade and commerce against unlawful restraints and monopolies,' `An Act to regulate commerce,' approved February fourth, eighteen hundred and eighty-seven, or any other Acts having a like purpose that may be hereafter enacted
"Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That in any suit in equity pending or hereafter brought in any circuit court of the United States under the Act entitled `An Act to protect trade and commerce against unlawful restraints and monopolies,' approved July second, eighteen hundred and ninety, `An Act to regulate commerce,' approved February fourth, eighteen hundred and eighty-seven, or any other Acts having a like purpose that hereafter may be enacted, wherein the United States is complainant, the Attorney-General may file with the clerk of such court a certificate that, in his opinion, the case is of general public importance, a copy of which shall be immediately furnished by such clerk to each of the circuit judges of the circuit in which the case is pending. Thereupon such case shall be given precedence over others and in every way expedited, and be assigned for hearing at the earliest practicable day, before not less than three of the circuit judges of said circuit, if there be three or more; and if there be not more than two circuit judges, then before them and such district judge as they may select. In the event the judges sitting in such case shall be divided in opinion, the case shall be certified to the Supreme Court for review in like manner as if taken there by appeal as hereinafter provided.
"Sec. 2. That in every suit in equity pending or hereafter brought in any circuit court of the United States under any of said Acts, wherein the United States is complainant, including cases submitted but not yet decided, an appeal from the final decree of the circuit court will lie only to the Supreme Court and must be taken within sixty days from the entry thereof: Provided, That in any case where an appeal may have been taken from the final decree of a circuit court to the Circuit court of appeals before this Act takes effect, the case shall proceed to a final decree therein, and an appeal may be taken from such decree to the Supreme Court in the manner now provided by law."
Approved, February 11, 1903.
Section 17 of the Act of June 25, 1948, ch. 646, 62 Stat. 989, amended Section 2 to read as follows:
"Sec 2. In every civil action brought in any district court of the United States under any of said Acts, wherein the United States is complainant, an appeal from the final judgment of the district court will lie only to the Supreme Court."
These include the Act of February 19, 1903, 32 Stat. 847; the Act of June 25, 1910, ch. 428, 36 Stat. 854; the Act of June 19, 1934, ch. 652, § 401(d), 48 Stat. 1092; the Act of April 6, 1942, ch. 210, 56 Stat. 198-199; the Act of June 9, 1944, ch. 239, 58 Stat. 272; and the Act of June 25, 1948, ch. 646, 62 Stat. 989
As shown below, the Hepburn Act of June 29, 1906, 34 Stat. 592, had the effect of broadening the scope of the Expediting Act, for a brief period, to include Acts amending the Act of 1887
Mr. Justice Reed cites the North Shore case as one authority on jurisdiction in Union Pacific R. Co. v. United States, 1941,
WATERMAN, Circuit Judge (concurring in part and dissenting in part).
I concur with my brother panel members in the dismissal of No. 25793, the government suit, for lack of appellate jurisdiction and I concur in vacating the district court's judgment. I also concur with them in holding that the judgment order of Judge McGohey below in No. 25879, the stockholders' derivative action, was not a final judgment order, and therefore not appealable as such. I disagree with them, however, insofar as they hold that the order below dismissing the Sixth Count in No. 25879 is appealable under 28 U.S.C. § 1292(a) (1) as an interlocutory order refusing an injunction; but I wish it to be clear, nevertheless, that if I believed the issue were properly before us for determination I would agree with them and join with them in their disposition of the case.
The stockholders' complaint contains various allegations of wrongdoing, i. e., contains multiple claims against various defendants. Not all the counts are joined in by the same plaintiffs or seek relief from the same defendants. In Counts 5, 6 and 7, however, there is complete identity of plaintiffs and defendants. The prayers for relief in the complaint include prayers for enjoining both temporarily1 and permanently the performance and enforcement of certain contracts of the New Haven, one of which is the contract involved in No. 25793, the government action. Counts 5, 6 and 7 allege that this contract is a nullity and seek to enjoin its performance. No other contract is involved in these counts. The government action alleged this contract to be null and void because the New Haven had not obtained prior approval to enter into it from the Interstate Commerce Commission. Count 6 of the stockholders' suit alleges that the contract is void for the same reason.
The government suit in its entirety having come before the trial judge for disposition, Count 6 of the stockholders' suit was simultaneously disposed of also. No disposition was made of any of the other allegations in the stockholders' suit, not even of Counts 5 and 7, despite the fact that these Counts related to the same contract attacked in Count 6, involved the identical parties plaintiff and identical parties defendant; and prayed for identical relief. Count 5 seeks to nullify the contract and enjoin its performance on the ground that its making was, and its performance would be, violative of Section 17(a) of the Investment Company Act of 1940, 15 U.S.C.A. § 80a 17(a). Count 7 seeks nullification and an injunction on the ground that the contract was made in violation of the charter provisions of the New Haven. Though I believe it well within his discretion for the trial judge to combine his consideration of the legal theory of recovery contained in Count 6 of the stockholders' suit with his adjudication of the validity of that theory in the Government's suit, I am of the opinion that the legal theories advanced by the stockholders in support of Counts 5 and 7 must also be resolved below before the question of whether this injunction was properly refused can become appealable.
It is my thought that we should not entertain an appeal under 1292(a) (1) until all the legal theories advanced to support or deny injunctive relief in connection with one claim of breach, or one claim of wrong, have been considered and adjudicated upon below. Otherwise we lay ourselves open to interlocutory appeals, piecemeal, first to review with respect to a single claim one theory of recovery or defense, and then another, and then yet another, so long as prayers for injunctions are contained in the pleadings and the pleadings are ruled upon below at separate times. This would result in poor judicial administration, would be contrary to the long-standing practice and policy of the federal courts, and could not have been contemplated as within the purview of 1292(a) (1). For instance, here, because petitioners set forth three separate and distinct legal theories to support the issuance of an injunction to prevent performance of a contract we could be faced with three separate appeals from the grant or denial of that prayer; yet the single claim before the court is whether, as a matter of law, that contract is a nullity.
Although the majority reverses the action of the court below with respect to the one count, the sixth, and orders that a permanent injunction issue, we are unanimous in holding that the order below with reference to this one count (which order is interpreted by the majority as an order refusing an injunction) was not a final order so as to be appealable as such. We state the order was not final and was not appealable because all theories of defendants' liability were not disposed of below by the ruling.
The majority, however, grants prayers of final relief as a matter of law, though we all say we are not reversing a final order below denying relief. This final relief is granted by the taking of appellate jurisdiction over an order that we are unanimous in denominating an interlocutory, non-final order, and even though the court below did not adjudicate upon all theories of defendants' liability.
It is claimed that we may properly do this, despite the clear inconsistency of doing so, not only by literally interpreting the statute, 1292(a) (1), but also on the authority of our decisions in three cases cited in the majority opinion. I only point out that in the instant case we have at least three theories of liability with reference to one contract and that contract is one of several contracts attacked in the suit, whereas a reading of the three cases relied upon will demonstrate that the portions of those cases permitted to be appealed dealt with quite different and broader problems of liability. In Telechron, which the majority particularly relies upon, the counts involved application of federal law on the one hand and state law on the other. The case of Schwartz v. Eaton, which the majority seeks to distinguish as not applicable here, was a case like this one, brought by stockholders, and a close reading of the opinion in that case appears to me to lend substantial support to the position I take.
By taking jurisdiction of this appeal under 28 U.S.C. § 1292(a) (1) the majority creates opportunities for harassment and delay in suits such as this. Cf. Baltimore Contractors v. Bodinger,
I would grant the motion to dismiss the stockholders' appeal.
Notes:
The question of whether a "temporary" injunction should issue was not before Judge McGohey at the time of the ruling sought to be appealed from. The stockholder plaintiffs moved for partial summary judgment on their sixth count, and if they had prevailed would have been entitled to a permanent injunction preventing performance of this one of the several contracts they were attacking. A cross-motion for summary judgment to dismiss the sixth count was filed by one of the 25 defendants. The cross-motion was granted as to that defendant. The stockholders' motion was denied. In this wise the sixth count was dismissed, and my colleagues hold this dismissal to be the refusal of an injunction. It does not appear how many of the defendants had been served at this time, but at least nine of the twenty-five were
On Application for Hearing in banc in Glenmore et al. v. Ahern et al., Docket 25879.
Before LUMBARD, Chief Judge, and CLARK, WATERMAN, MOORE, and FRIENDLY, Circuit Judges.
Application denied.
CLARK, Circuit Judge (dissenting).
In this case a panel majority has held, against strong dissent by Judge WATERMAN, that a trial judge's rejection of one theory of liability, leaving others pending, is the denial of an injunction sufficient to support an appeal and reversal for issuance of the injunction. Glenmore v. Ahern, 2 Cir.,
Naturally I am sorry that I could not express these convictions before or at least with the filing of the decision, as would have been possible had our custom of intramural warnings of the approach of overruling opinions been observed here. As it was, I acted at the earliest possible moment. My dissent appears to have had one unique consequence in that it has induced a counterdissent to it wherein my authority to take these steps seems to be questioned. I do no see how this can be pressed, since the statute authorizing in banc procedure, 28 U.S.C. § 46(c), contains no such restriction and the leading case, Western Pac. R. Corp. v. Western Pac. R. Co.,
The decision was rendered in a stockholders' derivative action, which challenged as invalid without I. C. C. approval transactions between the New Haven Railroad and certain bankers to raise money on loan through the means of somewhat involved transfers of a large block of preferred stock. The district court had held the transactions valid, but in the companion appeal of United States v. New York, New Haven & Hartford R. Co. my brothers first ruled — at the behest of the United States on behalf of the Interstate Commerce Commission — that they were invalid. 2 Cir.,
Under the settled federal rule that "claim" refers to the operative facts giving rise to an enforceable right, and not to legal theories, Original Ballet Russe v. Ballet Theatre, 2 Cir.,
The basis for the holding here according some more definitive character to the judge's present action is based upon the first opinion in Federal Glass Co. v. Loshin, 2 Cir.,
Actually, however, there have been more lately a whole series of cases in this court, not noticed in the original majority opinion, which rather completely establish that the merely interlocutory rulings of an equity judge advancing the case on his calendar may not properly be considered either the grant or denial of an injunction. Thus see Greenstein v. National Skirt & Sportswear Ass'n, 2 Cir.,
Additionally a further substantial line of recent cases are definitely at variance with this result; they are cases where we have dismissed appeals for lack of final judgment which should have been held appealable as rulings on injunctions, had my brothers' present views been then accepted. They include Goldlawr, Inc. v. Heiman, 2 Cir.,
The leading case is probably Judge Hastie's notable and often-cited decision in Morgenstern Chemical Co. v. Schering Corp., 3 Cir.,
The decisions indicate that nowhere else in the country is the issue of piecemeal appeals in such acute condition as here. Presumably it is due somewhat to the permeation of local practice, for New York is notorious for interlocutory appeals — a fact which is said to lead lawyers to choose the federal courts where available. Harper & Atwood, Civil Practice in the Federal Courts (Practising Law Institute, July 1956 Ed.) 1, 2. What we are doing is to invite a plethora of such appeals. Every motion day has numerous ones involving such questions as denials of leave to amend pleadings or refusals to quash service;8 while most of these are quite properly (if somewhat inconsistently) denied, yet the burden remains. And more than occasionally an utterly inconsistent decision appears.9 No wonder counsel are confused. Judge WATERMAN's unanswered dissent in this case states the correct course, and it is my earnest hope that it may be followed hereafter.
Of course assumption of nonexistent jurisdiction perhaps often does not do much harm except to add substantially to the burdens of an overburdened appellate court and to invite other such appeals. Thus attempted affirmance may perhaps amount to hardly more than an interim accolade to the trial judge. But often it may raise much more serious questions. Here it would seem we have such a case. For the court has assumed to issue a rather far-reaching injunction affecting substantial financial interests in a case where it lacks jurisdiction. It seems to me that the injunction must be held invalid; hence its potentialities of damage are extensive. A rehearing in banc would have afforded opportunity to settle some of these issues now left blind.
I am authorized to state that Judge WATERMAN concurs in this opinion.
Notes:
Now undesirable (as the event here again tends to show), but not actually forbidden. See Clark, Code Pleading 459-461, 462-464 (2d Ed. 1947); F.R.Civ.P. 10 (b); Gins v. Mauser Plumbing Supply Co., 2 Cir.,
Of the ten counts left standing, numbers 5 and 7 are particularly interesting, since they are so precisely similar to 6, except that 5 relies on the Investment Companies Act, and 7 on the railroad charter, to show invalidity of the questioned transactions
It is necessary to stress the judge's undoubted power to make a definitive ruling when he so chooses because question is suggested as to whether he must state all the grounds for decision or can raise doubts of irreparable damage and so on. Of course he is not so hampered and the issue is or should not be on rationale, but as to what, if anything, he has decided. Once his intent is clear, then it is a question of applying the normal principles of law to his action. Naturally the issue here is not the sole one possible; thus there may be a serious question whether a trial judge has granted merely a temporary restraining order which is not appealable or a temporary injunction which is. See, e. g., Connell v. Dulien Steel Products, Inc., 5 Cir.,
Also cited is Telechron, Inc. v. Parissi, 2 Cir.,
I doubt if Raylite Elec. Corp. v. Noma Elec. Corp., 2 Cir.,
This seems generally true of the law review comments on the case. 4 Buffalo L. Rev. 355; 68 Harv.L.Rev. 1278; 39 Minn. L.Rev. 921; 103 U. of Pa.L.Rev. 816; 7 Stanford L.Rev. 549
Possibly it has support in a single case, International Forwarding Co. v. Brewer, 5 Cir.,
Thus three of such abortive appeals were dismissed at the last motion session in which I participated, together with my brothers MOORE and FRIENDLY
An example in Goldlawr, Inc. v. Heiman, supra, 2 Cir.,
FRIENDLY, Circuit Judge.
To Chief Judge LUMBARD and me, the four opinions already written would have seemed sufficient, even for the tangled problems in this and its companion case, United States v. New York. New Haven & Hartford R. Co., November 2, 1959: December 2, 1959; majority and concurring-dissenting opinions January 29, 1960. This is particularly true since the cases are now before the Supreme Court, which can review both the many substantive and procedural questions on which this Court was unanimous and the single procedural question, the appealability under § 1292(a)(1) of the refusal of the injunction in the New Haven stockholders' suit, as to which Judge WATERMAN dissented. Now we have a fifth opinion, on that point. We feel obliged to note that the course which has brought this to us would mean that any active judge may publish a dissent from any decision, although he did not participate in it and the Court has declined to review it en banc thereafter, a practice which seems to us of dubious policy especially since, if the issue is of real importance, further opportunities for expression will assuredly occur.1 We would not have responded but for the assertions, unwarranted as we think, that our opinion left Judge WATERMAN's dissent unanswered and that we overlooked a series of cases in this Court which apparently are claimed to have overruled sub silentio, or at least to have undermined, the authority on which we relied.
The issue is the interpretation of the word "refusing" in 28 U.S.C. § 1292(a) (1) which, so far as here material, gives the courts of appeals jurisdiction over appeals from "Interlocutory orders of the district courts * * * refusing * * * injunctions."
The first problem to arise in this regard was whether denial of a motion by a plaintiff for summary judgment in a suit for an injunction on the ground that there was a triable issue of fact was an order "refusing" an injunction. In Raylite Electric Corp. v. Noma Electric Corp., 2 Cir., 1948,
Moreover, as pointed out in our opinion, the issue here was not that on which this Court and the Third Circuit have disagreed but one where we deem the case for appealability to be stronger. Is a district judge's dismissal of a count of a complaint for an injunction resting on a claim of violation of a Federal statute separate from any other claim to be denied recognition as a "refusal" of an injunction because some day the same or another judge might or might not grant an injunction on another count raising wholly distinct legal questions? To us a negative answer seems obvious; we think this would have been clear to everyone if the stockholders' suit had been all that stood between the New Haven and the $10,000,000 expenditure sought to be prevented and plaintiffs had pressed the allegation of Interstate Commerce Act violation as the only one sufficiently strong to afford a prospect of temporary relief. Indeed, we gather our brother CLARK would agree that an order denying such a temporary injunction would have been appealable under § 1292(a)(1). But, as pointed out by Judge Frank in Federal Glass Co. v. Loshin,
It is not surprising, therefore, that the differences of opinion in this Circuit as to appealability of the denial of summary judgment in an action for an injunction had not previously spilled over to the problem here presented. In Telechron, Inc. v. Parissi, 2 Cir., 1952,
Neither the persuasiveness nor the authority of the decisions in Loshin and Telechron is in any way challenged by the four cases which are cited as establishing that merely interlocutory rulings of an equity judge advancing a case on his calendar may not properly be considered as either the grant or the denial of an injunction. We are in full accord with this proposition, but its very statement suffices to show how far it and the cases relied on are from the issue here. Three elements are required for appealability under § 1292(a)(1) as here applied: (1) The order must be "interlocutory"; (2) it must "refuse"; and (3) what is refused must be an "injunction." Our question, like Raylite, Loshin and Telechron, related to the second element; the cases cited concerned the third. Armstrong-Norwalk Rubber Corp. v. Local Union No. 283, 2 Cir., 1959,
We do not assert our reading of § 1292(a)(1) is the only possible one. However, we think this comports best not only with the language of the statute, but also with its reason and its history. Orders refusing injunctions are important orders — important not only to the litigants but often, as here, to the public. The need for prompt review arises from the very nature of an injunction, a remedy whose grant or refusal may result in an injury beyond possibility of repair. Congress recognized this when it subjected to review not only interlocutory orders "granting" or "refusing" injunctions but orders "continuing" or "modifying" them. To say that nothing was determined by Judge McGohey's order denying the stockholder's claim of Interstate Commerce Act violation seems to us legal theorizing unrelated to the facts. To be sure, the District Judge might have required the stockholders to present all their counts relating to the challenged transaction at one time but, for entirely sufficient reasons, he did not do so. We assure our brother CLARK that, having long practiced in New York, we have no desire to see 28 U.S.C. § 1292 modified, either by legislation or by interpretation, to parallel the provisions as to appeal from non-final orders contained in § 609 of the New York Civil Practice Act — or to come near that. But § 1292 is as much a part of the Judicial Code as § 1291; the provision, now in § 1292 (a)(1), with which we are here concerned, was enacted in 1895, 28 Stat. 666, because the implications of "the lack of all review over the action of a single judge in denying interlocutory injunctions" "had not been adequately considered" in the Evarts Act of 1891, 26 Stat. 826, Frankfurter and Landis, The Business of the Supreme Court, 108-09; after limiting the section to the grant or continuing of an injunction in 1900, 31 Stat. 660, Congress restored its former breadth in § 129 of the Judicial Code of 1911, 36 Stat. 1134; and the need for still further expansion of appeals from interlocutory orders was demonstrated by the enactment of § 1292(b) in 1958, 72 Stat. 1770. It is not for us to put personal predilections on appealability above the Congressional will.8
Chief Judge LUMBARD joins in this opinion. Judge MOORE, not having participated in the decision, deems it inappropriate that he comment as to the merits; however, he joins us in considering that an en banc should not have been granted here and also in regretting inauguration of a practice of writing opinions with respect to an en banc vote.
Notes:
Despite our brother CLARK'S expressed belief "that in a proper case a panel of this court may frankly state its disagreement with a decision of another panel and refuse to be bound thereby," Dunbar v. Henry DuBois' Sons Co., Inc., 2 Cir.,
Although the vote against the en banc renders the point moot, we do entertain serious doubts whether, in the absence of any court rule or practice, an en banc may be ordered at the request of a judge not participating in the decision, made after judgment was rendered (although unavoidably so), when no request for this has been made by a party. We do not read the remark in Western Pacific R. Case, 1953,
Of the judges in this Circuit who had considered the problem, four, Judges Learned Hand, Swan, Chase and Frank, had held that an order denying a motion for summary judgment by a plaintiff in an action for an injunction was appealable under § 1292(a) (1); two, Judges Clark and Medina, thought it was not
Its following, at least in the Federal courts, is nothing like so great as the long list of citations would indicate. In Division 689 v. Capital Transit Co., 1955,
Neither Chief Judge LUMBARD nor I recall a single appeal of this sort at the present Term
We would suppose also that denial of a temporary injunction for want of sufficient showing of irreparable injury would be appealable, even if the judge gave plaintiff leave to renew on a more adequate showing, although it could be argued there at least as forcefully as here that the judge had not yet "refused" an injunction
A footnote (at page 759) cites "* * * Raylite Electric Corp. v. Noma Electric Corp., 2 Cir.,
Judge CLARK also cites the cases, fully considered in our original opinion at page 546, where the Court has dismissed appeals that were argued to be properly before it as from final judgments under 28 U.S.C. § 1291 and no contention was made with respect to appealability under 28 U.S.C. § 1292(a) (1). Apart from other factors distinguishing most of these cases, it has been clear since Chief Justice Marshall's statement in United States v. More, 1805,
We see no occasion to discuss our brother CLARK'S observations in footnote 9 with respect to the unanimous action taken on January 18, 1960, in Goldlawr v. Heiman, 2 Cir.,