Alleghany Corporation v. Breswick Co Gruss v. Breswick Co Interstate Commerce Commission v. Breswick Co

• Decision Date: 27 January 1958
• Docket Number: No. 617,No. 618,No. 616,616,617,618
• Citation: 355 U.S. 415,78 S.Ct. 421,2 L.Ed.2d 374
• Parties: ALLEGHANY CORPORATION, appellant, v. BRESWICK & CO., Randolph Phillips and Myron Neisloss, as Common Stockholders of Alleghany Corporation. Joseph S. GRUSS, Charles H. Blatt, Albert B. Cohen, et al., appellants, v. BRESWICK & CO., Randolph Phillips and Myron Neisloss, as Common Stockholders of Alleghany Corporation, etc. INTERSTATE COMMERCE COMMISSION, appellant, v. BRESWICK & CO. et al
• Court: U.S. Supreme Court

355 U.S. 415

78 S.Ct. 421

2 L.Ed.2d 374

ALLEGHANY CORPORATION, appellant,

v BRESWICK & CO., Randolph Phillips and Myron Neisloss, as Common Stockholders of Alleghany Corporation.

No. 616.

Joseph S. GRUSS, Charles H. Blatt, Albert B. Cohen,

et al., appellants,

v BRESWICK & CO., Randolph Phillips and Myron Neisloss,

as Common Stockholders of Alleghany Corporation, etc.

No. 617.

INTERSTATE COMMERCE COMMISSION, appellant,

v BRESWICK & CO. et al.

No. 618.

Supreme Court of the United States

January 27, 1958

Messrs. Whitney North Seymour, David Hartfield, Jr. and Edward K. Wheeler, for appellant Alleghany Corporation.

Mr. Edward M. Garlock, for appellants Baker, Weeks & Co. and others.

Messrs. Harold H. Levin, Joseph M. Proskauer, Marvin E. Frankel and Allen L. Feinstein, for appellants Gruss and others.

Mr. Robert W. Ginnane, for appellant Interstate Commerce Commission.

Mr. George Brussel, Jr., for appellees Breswick & Co. and others.

PER CURIAM.

The judgment of the District Court is reversed and the case is remanded for consideration by that court of the only claim that was left open at this Court's prior disposition of this litigation, to wit, whether 'the preferred stock issue as approved by the [Interstate Commerce] Commission was in violation of the Interstate Commerce Act.' Alleghany Corp. v. Breswick & Co., 353 U.S. 151, 175, 77 S.Ct. 763, 1 L.Ed.2d 726.

Mr. Justice DOUGLAS, with whom The CHIEF JUSTICE and Mr. Justice BLACK concur, dissents.

These cases are a sequel to Alleghany Corporation v. Breswick & Co., 353 U.S. 151, 77 S.Ct. 763. There, the decision of the District Court was reversed and the case was remanded for further proceedings. Now, the decision of the District Court on remand is being summarily reversed on the ground that the basis of the decision below was precluded by the mandate and opinion of this Court. For the reasons which follow, it is my opinion that probable jurisdiction should be noted in these cases.

First. I do not agree that the decision below went beyond the scope of the opinion and mandate of this Court.

Alleghany Corporation acquired control of the New York Central Railroad Co., the parent of an integrated system of carriers. Subsequent to the acquisition of control by Alleghany, two of the corporate subsidiaries of the Central system were merged. Alleghany is basically sub- ject to the control of the Securities and Exchange Commission under the Investment Company Act of 1940, 54 Stat. 789, 15 U.S.C. § 80a-1 et seq., U.S.C.A. § 80a-1 et seq. Section 3(c)(9) of that Act exempts companies which are subject to regulation by the Interstate Commerce Commission. The question thus arose as to whether Alleghany, although not a carrier as that term is used in the Interstate Commerce Act, was subject to regulation by the Interstate Commerce Commission because of the merger of the subsidiaries of Central of which Alleghany acquired control and therefore exempt from supervision by the Securities and Exchange Commission. The determination of the Interstate Commerce Commission that Alleghany was under its jurisdiction was reversed by the District Court but this Court then reversed the District Court. 353 U.S. 151, 77 S.Ct. 763. The scope of that holding is the present issue.

In order to attain the status of a carrier the noncarrier must satisfy the requirements of § 5(2)(a) of the Interstate Commerce Act. The pertinent portions of that section provide:

'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).

The operation of this section is more easily understood if the two clauses pertaining to a person not a carrier are numbered as follows:

Clause I. 'A person which is not a carrier to acquire control of two or more carriers through ownership of their stock or otherwise.'

Clause II. '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.'

It is clear that a person not a carrier must acquire at least two carriers before being subject to regulation by the Interstate Commerce Commission. There may be one transaction acquiring control of two carriers under Clause I or control may be acquired consecutively under Clause II. Whichever Clause is applicable to the particular facts, § 5(2)(b) requires the Commission to find that the proposed acquisition is in the public interest.

The District Court held in its first decision that the Interstate Commerce Commission did not have jurisdiction under Clause II because, even if Alleghany had control of a carrier, Central, it did not 'acquire control of another carrier' by the device of merging two of the subsidiaries. That court also held that there was no jurisdiction in the Interstate Commerce Commission under Clause I because the Commission had not approved of the acquisition of control of Central. D.C., 138 F.Supp. 123.

On appeal, this Court reversed. In deciding 'the substantive issues in the litigation,' viz., '* * * the jurisdiction of the Commission under §§ 5(2) and 5(3) of the Act * * *' The Court held that the order granting Alleghany the status of a carrier was valid. Alleghany Corp. v. Breswick & Co., supra, 353 U.S. at pages 160-161, 77 S.Ct. at page 769. The Court based its decision on Clause II and reasoned that Alleghany controlled Central and had 'acquired' another carrier because of the merger. All of the requirements of Clause II of § 5(2)(a) were satisfied because the Commission had found the merger to be in the public interest within the meaning of § 5(2)(b). Louisville & J. B. & R. Co. Merger, 295 I.C.C. 11, 17.

Because the jurisdiction of the Interstate Commerce Commission could be sustained on this ground, the Court found it unnecessary to decide if acquisition of a system required approval because it was the acquisition of 'two or more carriers' under Clause I.

The Court stated:

'The Commission and Alleghany contend that Commission approval of the acquisition of a single, integrated system is not necessary. We need not decide this question, however, and intimate no opinion on it * * *.' Alleghany Corp. v. Breswick & Co., supra, 353 U.S. at page 161, 77 S.Ct. at page 770.

The Court then held that approval under Clause I was not necessary to sustain the jurisdiction of the Commission.

Alleghany had not only obtained a status order declaring it to be a carrier but the Commission had also approved a request by Alleghany to issue preferred stock. Accordingly, the Court 'remanded for consideration by the District Court of appellees' claim, not previously discussed, that the preferred stock issue as approved by the Commission was in violation of the Interstate Commerce Act.' Id., 353 U.S. at page 175, 77 S.Ct. at page 777 [Italics added.]

On remand, the District Court sustained the stock issue against various attacks on its basic fairness but enjoined the order approving the issue on the theory that the Commission was required by Clause I of § 5(2)(a) of the Act to approve Alleghany's acquisition of control of Central before the stock issue could be approved. Breswick v. U. S., D.C., 156 F.Supp. 227.

That holding was based on the premise that § 5(4) of the Act,^* which was not construed in our earlier opinion made it necessary for the Commission to consider the legality of the acquisition of control under Clause I, as well as Clause II, of § 5(2)(a). For § 5(4) makes it 'unlawful' without Commission approval for any person 'to enter into any transaction within the scope' of § 5(2)(a)—whether Clause I or Clause II. And § 5(7) authorizes the Commission to investigate and determine whether § 5(4) has been violated.

The holding of the District Court on remand did not question the basis of our earlier holding that the Interstate Commerce Commission, not the Securities and Exchange Commission, had jurisdiction of these transactions. It only determined the issue which we held to be open on remand—whether the transactions were 'in violation of the Interstate Commerce Act.' 353 U.S. at page 175, 77 S.Ct. at page 776. That issue included not only the legality of the preferred stock issue but also the legality of the acquisition of Central by Alleghany. In other words the force of § 5(4) and § 5(7) makes Clause I of § 5(2)(a) applicable as well as Clause II. That at least is the force of the argument under § 5(4) and § 5(7), and I for one cannot say it is frivolous or unsubstantial.

This Court decided the conflicting jurisdictional claims of two governmental agencies and remanded the case without precluding the District Court, as I see it, from...