Breswick & Co. v. Briggs

Decision Date06 April 1955
Citation130 F. Supp. 953
PartiesBRESWICK & CO. and Myron Neisloss, as stockholders of Alleghany Corporation and on behalf of themselves and all other stockholders similarly situated, Plaintiffs, v. O. Henry BRIGGS, Thomas J. Deegan, Jr., Walter W. Foskett, Henry J. Guild, Allan P. Kirby, Herman R. Neff, Andrew Van Pelt, Robert R. Young, Clint W. Murchison, Sid W. Richardson, John D. Murchison, Clint W. Murchison, Jr., Murchison Brothers and Alleghany Corporation, Defendants.
CourtU.S. District Court — Southern District of New York

Rosston, Hort & Brussel, New York City (George Brussel, Jr., Eugene G. King, Joseph B. Hyman, New York City, of counsel), for plaintiffs.

Lord, Day & Lord, New York City (Thomas F. Daly, Saul L. Sherman, New York City, of counsel), for defendant Alleghany Corp.

WALSH, District Judge.

Upon the claim that Alleghany Corporation is an investment company subject to regulation by the Securities and Exchange Commission, rather than a carrier subject to regulation by the Interstate Commerce Commission, plaintiffs, minority stockholders of Alleghany, seek to enjoin it from conducting certain proceedings before the I.C.C. and to prevent the issue and exchange of certain securities for which S.E.C. approval would be required if this claim of the plaintiffs is correct. Plaintiffs' application for a temporary injunction is denied, and they are left to the exhaustion of their administrative remedies before the I.C.C. and before the court having jurisdiction to review the determinations of that agency.

The management of Alleghany claims that that corporation controls the New York Central Railroad system and that consequently it is a carrier under the provisions of Section 5(3) of the Interstate Commerce Act, 49 U.S.C.A. § 5(3). All agree that if it is such a carrier it is exempt from regulation by the S.E.C., 15 U.S.C.A. §§ 77c, 80a-3(c) (9).

Plaintiffs claim that control of a single railroad system does not bring Alleghany within the Interstate Commerce Act; and that even if the New York Central system be considered a combination of two or more carriers (which would clearly constitute the corporation controlling it an undisputed carrier), Alleghany does not in fact control it.

The question should first be determined by the I.C.C. and the courts reviewing its proceedings. Myers v. Bethlehem Shipbuilding Corp., 1938, 303 U.S. 41, 58 S.Ct. 459, 82 L.Ed. 638; Macauley v. Waterman S.S. Corp., 1946, 327 U.S. 540, 66 S. Ct. 712, 90 L.Ed. 839. Determination of what constitutes control of a carrier has implications to both the I.C.C. and the S.E.C. broader than this individual case. It is a matter within their particular expertness and a matter in which the I.C.C. should be given an opportunity to harmonize its prior administrative decisions.

The I.C.C. has pending before it two proceedings in which the very question is presented. In one, Finance Docket 18656, its Division Four, subject to review by the full Commission, has held that Alleghany is a carrier subject to its jurisdiction rather than that of the S.E.C.1 This proceeding concerned a merger of two components of the New York Central system. Plaintiffs sought to intervene but their application was denied. The S.E.C. was permitted to intervene for the limited purpose of submitting a memorandum "suggesting" that the I.C.C., in its discretion, defer to the S.E.C. because Alleghany operated preponderantly as an investment company. The Division concluded that it could not concur in this "suggestion" because the statute did not allow it such discretion.

In the second proceeding pending before the I.C.C., Finance Docket 18866, Alleghany seeks approval of the very stock issue this court is asked to enjoin. Plaintiffs have not sought to intervene in this proceeding. Denial of intervention in Docket 18656, where plaintiffs claimed no special interest in the merits but desired only to raise the issue of jurisdiction, does not necessarily foreclose intervention where this interest is obviously substantial. The interests of minority stockholders in proceedings under § 5 and § 20a of the Interstate Commerce Act must be considered and protected by the Commission. Cleveland, C. C. & St. L. R. Co. v. Jackson, 6 Cir., 1927, 22 F.2d 509, 511; Schwabacher v. United States, 1948, 334 U.S. 182, 201, 68 S.Ct. 958, 92 L.Ed. 1305.

Finally, an adequate legal remedy is available to plaintiffs in the form of judicial review when the I.C.C. proceedings are finally terminated. When interests of minority stockholders as distinguished from those of the corporation are affected by orders of the I.C.C., those stockholders have standing to review the order. New York Central Securities Corp. v. United States, D.C.S.D.N.Y. 1931, 54 F.2d 122, affirmed, 1932, 287 U.S. 12, 53 S.Ct. 45, 77 L.Ed. 138; Sakis v. United States, D.C.D.C.1952, 103 F. Supp. 292, appeal dismissed, 1952, 344 U.S. 801, 73 S.Ct. 4, 97 L.Ed. 625; cf. Benton v. United States, D.C.N.D.Ga. 1953, 114 F.Supp. 37; Pittsburgh & W. V. R. Co. v. United States, 1929, 281 U.S. 479, 487, 50 S.Ct. 378, 74 L.Ed. 980. This remedy is available even though plaintiffs failed to intervene or are denied intervention in both I.C.C. proceedings, for lack of status as intervenors does not preclude standing to review where the court is satisfied that the parties have a protectible legal interest. Skinner & Eddy Corp. v. United States, 1919, 249 U.S. 557, 562, 39 S.Ct. 375, 63 L.Ed. 772; Interstate Commerce Commission v. Diffenbaugh, 1911, 222 U.S. 42, 49, 32 S.Ct. 22, 56 L.Ed. 83; see Alton R. Co. v. United States, 1942, 315 U.S. 15, 19, 62 S.Ct. 432, 86 L.Ed. 586.

Plaintiffs have a right to challenge the jurisdiction of the I.C.C. They cannot be estopped by management's acquiescence to unauthorized regulation. Cf. Ashwander v. Tennessee Valley Authority, 1936, 297 U.S. 288, 56 S.Ct. 466, 80 L.Ed. 688; Carter v. Carter Coal Co., 1936, 298 U.S. 238, 56 S.Ct. 855, 80 L.Ed. 1160. They must, however, exhaust administrative remedies, including their review in appropriate court proceedings. Their application now is premature. Myers v. Bethlehem Shipbuilding Corp., supra, 1938, 303 U.S. 41, 58 S.Ct. 459; Cleveland, C. C. & St. L. R. Co. v. Jackson, 6 Cir., 1927, 22 F.2d 509; Berg v. Cincinnati, Newport & Covington R. Co., D.C.Ky.1944, 56 F.Supp. 842.

The I.C.C. and the court reviewing its determination should control all incidents...

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7 cases
  • Vitco v. Joncich
    • United States
    • U.S. District Court — Southern District of California
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  • Schwartz v. Bowman
    • United States
    • U.S. District Court — Southern District of New York
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    ...R. Merger, 290 I.C.C. 725, aff'd, 295 I.C.C. 11 (1955); Alleghany Corp., 20 S.E.C. 731 (1945), 37 S.E.C. 424 (1956); Breswick & Co. v. Briggs, 130 F.Supp. 953 (S.D.N.Y.), 135 F.Supp. 397 (S.D. N.Y. 1955); Breswick & Co. v. United States, 134 F.Supp. 132 (S.D.N.Y.1955), 138 F.Supp. 123 (S.D.......
  • Hoover v. Allen
    • United States
    • U.S. District Court — Southern District of New York
    • June 17, 1965
    ...therein, and shall remain in effect until suspended or terminated as herein provided." 19 Note 18, supra. 20 Breswick & Co. v. Briggs, 130 F.Supp. 953 (S.D.N.Y.1955); Breswick & Co. v. United States, 134 F.Supp. 132 (S.D. N.Y.1955) (three-judge court, per Dimock, J.); Breswick & Co. v. Brig......
  • Breswick & Co. v. United States
    • United States
    • U.S. District Court — Southern District of New York
    • July 21, 1955
    ...group. In a proceeding before Judge Walsh involving the application for approval of the issuance of new preferred stock, Breswick & Co. v. Briggs, 130 F.Supp. 953, supra, he filed an opinion, dated April 6, in which he noted that Alleghany's voting power was increased by a joint venture agr......
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