Alleghany Corporation v. Breswick Co Baker, Weeks Co v. Breswick Co Interstate Commerce Commission v. Breswick Co
| Decision Date | 22 April 1957 |
| Docket Number | 82,114,Nos. 36,s. 36 |
| Citation | 1 L.Ed.2d 726,77 S.Ct. 763,353 U.S. 151 |
| Parties | ALLEGHANY CORPORATION et al., Appellants, v. BRESWICK & CO., et al., as Common Stockholders of Alleghany Corporation, etc. BAKER, WEEKS & CO. et al., Appellants, v. BRESWICK & CO. et al. INTERSTATE COMMERCE COMMISSION, Appellant, v. BRESWICK & CO. et al |
| Court | U.S. Supreme Court |
See 353 U.S. 989, 77 S.Ct. 1278.
Mr. Whitney North Seymour, New York City, for appellant Alleghany corp'n.
Mr. Robert W. Ginnane, Washington, D.C., for the appellant Interstate Commerce Commission.
Mr. Harold H. Levin, New York City, for the appellants Joseph S. Gruss, et al.
Mr. Alexander Kahan, for the appellant Adelaide Neuwirth.
Mr. George Brussel, Jr., New York City, for appellees Breswick & Co. and Myron Neisloss.
Mr. Randolph Phillips, appellee, pro se.
These are direct appeals under 28 U.S.C. § 1253, 28 U.S.C.A. § 1253, from a final judgment of a three-judge District Court for the Southern District of New York setting aside orders of the Interstate Commerce Commission and restraining appellant Alleghany Corporation from issuing a new class of preferred stock that had been approved by the Commission. The case raises numerous questions regarding the jurisdiction and powers of the Commission, especially under § 5 of the Interstate Commerce Act, 49 U.S.C.A. § 5, for the understanding of which a rather detailed statement of the facts is necessary.
Section 5(2)(a), in its pertinent portions, provides: 'It shall be lawful with the approval and authorization of the Commission * * * (i) * * * for a person which is not a carrier to acquire control of two or more carriers through ownership of their stock or otherwise; or for a person which is not a carrier and which has control of one or more carriers to acquire control of another carrier through ownership of its stock or otherwise * * *.' 54 Stat. 899, 905. 49 U.S.C. § 5(2)(a), 49 U.S.C.A. § 5(2)(a).1
Appellant Alleghany Corporation is a Maryland corporation whose charter provides for extensive powers of investment under no express limitation. After the passage of the Investment Company Act of 1940, 54 Stat. 789, 15 U.S.C. § 80a—1 et seq., 15 U.S.C.A. § 80a—1 et seq., Alleghany registered as an investment company with the Securities and Exchange Commission. In 1944, in connection with an application by the Chesapeake & Ohio Railroad for approval by the Interstate Commerce Commission of acquisition of the property of the Norfolk Terminal & Transportation Com- pany, Alleghany, alleging that it controlled the Chesapeake & Ohio, filed a supplementary application with the Commission joining the Chesapeake & Ohio's application and seeking approval of its own acquisition of control of the Terminal Company through the action of the Chesapeake & Ohio. In 1945, the Commission approved 'acquisition of control' of the Terminal Company by the Chesapeake & Ohio and Alleghany as a transaction within § 5(2) and further found that Alleghany 'shall be considered as a carrier subject to the (reporting and securities) provisions of section 20(1) to (10) and section 20a(2) to (11) of the act (49 U.S.C.A. §§ 20(1—10), 20a(2—11)).' 261 I.C.C. 239, 262.
Shortly thereafter, under the provisions of § 3(c)(9) of the Investment Company Act,2 the Securities and Exchange Commission held that Alleghany was no longer an investment company within the meaning of the Investment Company Act. 20 S.E.C. 731.
In March, April, and May 1954, several petitions and complaints were filed with the Interstate Commerce Commission by the New York Central Railroad, a stockholder, a protective committee, and bondholder creditors of the Central, assering violations of the law in Alleghany's purchases of New York Central stock. In view of statements by Alleghany and Chesapeake & Ohio officials that Alleghany had disposed of its holdings of Chesapeake stock, that Commission, in June, ordered Alleghany to show cause why the 1945 order providing that Alleghany should be 'considered as a carrier' should not be set aside. Allegheny replied that it would accept an order terminating its control of the Chesapeake & Ohio but requested delay until it could file a new application which, it alleged, would require the Commission's approval and continuance of its status as a noncarrier to be 'considered as a carrier' under the Interstate Commerce Act.
The present proceedings were commenced by the filing of such an application by Alleghany and Central—after the ousting of the old Central management in May in a proxy fight. The contents of the application were described fully in the Report of Division 4 of the Commission:
'The Cleveland, Cincinnati, Chicago and St. Louis Railway Company (the Big Four), the Louisville & Jeffersonville Bridge and Railroad Company (the Bridge Company or the Jeffersonville), The New York Central Railroad Company, and the Alleghany Corporation * * * on September 20, 1954, jointly applied under section 5(2) of the Interstate Commerce Act * * * for approval and authorization of (1)(a) merger of the properties and franchises of the Jeffersonville into the Big Four for ownership management, and operation; and (b) modification of the lease of January 2, 1930, under which Central, as lessee, operates the property of Big Four, lessor, to give effect to the acquisition of additional property pursuant to the proposed merger of Jeffersonville into Big Four; (2) acquisition by Central and Alleghany, by virtue of their control of Big Four, of control of the properties of Jeffersonville; and (3) continuation of Alleghany's status as a carrier subject to the provisions of section 20(1) to (10), inclusive, and 20a(2) to (11), inclusive, of the act, as provided by section 5(3) thereof.' 290 I.C.C. 725—726.
The Big Four already owned all the capital stock of the Jeffersonville. The Big Four itself had ceased to be an operating carrier in 1930; since then the New York Central has operated it as lessee. In addition, the New York Central owns 98.98% of the common, and 86.45% of the preferred, stock of the Big Four.
On March 2, 1955, Division 4 of the Commission approved and authorized the merger of the Jeffersonville into the Big Four; approved continued control of the properties and franchises of the Jeffersonville by the Central and Alleghany; modified the lease between the Big Four and the Central; continued Alleghany as a non-carrier to be 'considered as a carrier' subject to the reporting and securities provisions of the Act; and terminated the effective portions of the 1945 order in the Chesapeake & Ohio proceeding. 290 I.C.C. 725.
On reconsideration, the whole Commission on May 24, 1955, affirmed the conclusions of Division 4. It held that Alleghany had acquired control over Central; that at the time the present application was filed, Alleghany was in fact 'a person not a carrier which controlled an established system'; that the acquisition of control over the Central was not within § 5(2)'s requirement of Commission approval; that the rearrangement by Central of its ownership or control of its subsidiaries was within § 5(2)'s requirement of approval by the Commission and that Alleghany as the controlling party was a necessary party; and that the terms and conditions of the transactions were fair and reasonable. Rejecting the suggestion of the Securities and Exchange Commission, which had intervened, the whole Commission also held that it had no discretion to yield jurisdiction over Alleghany to the former agency.3 295 I.C.C. 11.
Subsequent to their application with respect to the Jeffersonville, Alleghany and Central, on December 17, 1954, filed an application under § 5(2) to 'acquire control' of the Boston & Albany Railroad Company, the Pittsfield and North Adams Railroad Corporation, and the Ware River Railroad Company through purchase by Central of their capital stock. The Central owned a little more than 16% of the Pittsfield's capital stock and none of the capital stock of the other two railroads. It operated the properties of the Boston & Albany, the Pittsfield, and the Ware River under leases due to expire in 1999, 1975, and 2873 respectively. On March 22, 1955, less than three weeks after it had approved the application in the Jeffersonville proceeding, Division 4 of the Commission approved the acquisition of such control by Alleghany and Central. (Opinion not reported.)
A third application filed by Alleghany, on February 18, 1955, sought permission from the Commission to issue a new 6% convertible preferred stock pursuant to a charter amendment, approved by all classes of Alleghany's stockholders, that permitted consummation of Alleghany's proposed plan of allowing its outstanding cumulative 5 1/2% preferred stock to be exchanged for the new stock. On May 26, 1955, two days after the whole Commission affirmed Division 4's orders in the Jeffersonville proceeding, Division 4 approved the new stock issue (conditioning its approval on modification of one term), and on June 22, the full Commission denied reconsideration.
An action was then brought before a three-judge District Court by minority common stockholders of Alleghany to require the Commission to set aside its order granting Alleghany the status of a non-carrier to be 'con- sidered as a carrier' and its subsequent order approving the new class of preferred stock and to restrain Alleghany from issuing the new preferred stock. The three- judge District Court, convened under the Urgent Deficiencies Act, 28 U.S.C. §§ 1336, 1337, 2321 2325, 28 U.S.C.A. §§ 1336, 1337, 2321—2325, granted first a preliminary injunction, Breswick & Co. v. United States, D.C., 134 F.Supp. 132 (Circuit Judge Hincks, dissenting), and then a permanent injunction setting aside the Commission's order designating Alleghany as a 'carrier' and also its order approving Alleghany's new class of preferred...
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