American Power & Light Co. v. SECURITIES AND EXCH. COM'N, 3966.

CourtUnited States Courts of Appeals. United States Court of Appeals (1st Circuit)
Citation143 F.2d 250
Docket NumberNo. 3966.,3966.
Decision Date19 June 1944

R. A. Henderson, A. J. G. Priest, James S. Regan, and Reid & Priest, all of New York City, for petitioner for review.

Homer Kripke, Asst. Sol., Roger S. Foster, Sol., and Morton E. Yohalem, Counsel, Public Utilities Division and Alfred Hill, all of Philadelphia, Pa., for respondent.

Before MAGRUDER, MAHONEY, and WOODBURY, Circuit Judges.

MAGRUDER, Circuit Judge.

This case is now before us on respondent's motion to dismiss a petition filed in this court by American Power & Light Company under § 24(a) of the Public Utility Holding Company Act of 1935, 49 Stat. 834, 15 U.S.C.A. § 79x(a), to review portions of an order of the Securities and Exchange Commission.

The Commission on July 10, 1941, instituted proceedings under §§ 11(b)(2), 12(b)(c) and (f) and 15(f) of the Act, 15 U.S.C.A. §§ 79k(b)(2), 79l(b, c, f), 79o (f), against Florida Power & Light Company, American Power & Light Company (the present petitioner) and Electric Bond & Share Company. Florida is a public utility company incorporated in the state of Florida and is engaged in the business of supplying electricity and gas to a large number of communities in that state. All the common stock of Florida is held by American, a registered holding company incorporated in the state of Maine. American in turn is controlled by Bond & Share as the top holding company.

The proceedings raised issues as to the existence of substantial write-ups in the plant account of Florida; the adequacy of its depreciation reserve; the necessity for stopping dividends on preferred and common stocks held by American and interest on the debentures owned by American; the existence of an unfair and inequitable distribution of voting power among Florida's various classes of securities and security holders; the steps necessary to cure such inequities, if found to exist, including subordination to publicly held securities of holdings by American of Florida's preferred stock and debentures; and the treatment to be accorded certain sums received by American from Florida on or about July 1, 1941, as dividends on preferred stocks.

By way of partial answer to the matters complained of by the Commission, Florida and American filed joint applications, and subsequent amendments thereto, seeking approval of proposals for recapitalization and refinancing of Florida involving, among other things, certain alterations in the securities of Florida held by American. By order of the Commission these applications were consolidated for hearing with the aforesaid proceedings which had been instituted by the Commission.

On December 28, 1943, the Commission filed its findings, opinion and order in the consolidated proceedings. The order granted the applications of Florida and American for approval of their proposals for the recapitalization and refinancing of Florida. Except in so far as it granted such applications, the order required no changes in Florida's capital structure or in American's holdings of Florida's securities.

The order did, however, in paragraphs 2 and 4, direct Florida to make certain accounting entries relating to matters not covered by the proposals contained in the applications which had been filed by Florida and American. These two paragraphs of the order are the only ones which American seeks now to have us review in the pending petition. These paragraphs of the order read as follows:

"(2) It is further ordered that Florida Power & Light Company shall classify in Account 107 and eliminate from the plant account by charge to earned surplus not later than December 31, 1944, an amount of $1,815,655 consisting of capitalized intra-system profits paid to affiliated companies as construction and engineering fees; * * *

"(4) It is further ordered that pending final determination of the amount and disposition to be made of Account 100.5 items presently in the plant account of Florida, Florida shall annually beginning with the calendar year 1944 appropriate out of earned surplus to a contingency reserve at least $700,000, such act of appropriation to be without prejudice, however, to respondents' right to contest the validity of any definitive order with respect to such items as may ultimately be issued; * * *."

Paragraph 2 of the order, above quoted, relates to certain engineering and construction fees capitalized by Florida in its plant account and paid to Phoenix Utility Company, a wholly owned construction subsidiary of Bond & Share, in connection with the construction of interconnections and additional generating facilities.

Paragraph 4 of the order, above quoted, was based on the fact that American had paid a greater sum for the properties transferred by it to Florida at the latter's organization than the original cost of those properties to the persons who had first devoted them to public service. The object of the Commission's order was to require Florida ultimately to value the properties transferred to it by American on the basis of the original cost of those properties to such persons. The same object was sought by the Commission with respect to those properties purchased by Florida itself after organization.1 It was indicated that the adjustment on account of these two items might exceed $10,000,000. With reference to this matter, the Commission stated in its opinion: "We are cognizant, however, of the fact that the exact amount includible in Account 100.5 has not been finally established and will not be until the original cost study of the company is completed and has been reviewed by us. We believe that in the interests of orderly procedure, the company should be afforded an opportunity to complete its study and to have that study reviewed by us before we take definitive action either with respect to classification in the appropriate account or with respect to a formal program of disposition. However, since all present indications are that there will be approximately $10,500,000 of such acquisition adjustments ultimately to be disposed of, conservative accounting requires that the company should begin now to make provision for such disposition. We will therefore order (subject to further order of the Commission in connection with the company's original cost study or otherwise) that commencing in 1944, the company annually appropriate out of earned surplus to a contingency reserve, the sum of at least $700,000, such act of appropriation, however, to be without prejudice to its right to contest the validity of such definitive order with respect to the matter as may ultimately be issued."

Section 24 of the Act, under which American seeks to have this court review paragraphs 2 and 4 of the Commission's order, reads as follows: "Sec. 24. (a) Any person or party aggrieved by an order issued by the Commission under this title may obtain a review of such order in the circuit court of appeals of the United States within any circuit wherein such person resides or has his principal place of business, or in the United States Court of Appeals for the District of Columbia, by filing in such court, within sixty days after the entry of such order, a written petition praying that the order of the Commission be modified or set aside in whole or in part. A copy of such petition shall be forthwith served upon any member of the Commission, or upon any officer thereof designated by the Commission for that purpose, and thereupon the Commission shall certify and file in the court a transcript of the record upon which the order complained of was entered. Upon the filing of such transcript such court shall have exclusive jurisdiction to affirm, modify, or set aside such order, in whole or in part. * * *"

Paragraphs 2 and 4 of the order are directed only to Florida; American is not mentioned therein nor required to do anything or refrain from doing anything. No doubt Florida is a "party aggrieved", entitled to have the order reviewed in the appropriate circuit court of appeals. In fact, after the Commission filed its motion to dismiss American's petition at bar, Florida filed in the Circuit Court of Appeals for the Fifth Circuit a petition in substantially identical terms seeking review of paragraphs 2 and 4 of the Commission's order. The Commission contends, in support of its motion to dismiss, that Florida is the only "party aggrieved" by the order, and that American, whose only interest in the matter is derived through its holding of the common stock of Florida, has no independent standing to seek a review of the order pursuant to § 24(a).

On the other hand, American contends: "While some of the grounds of objection to the Orders complained of are available to both Florida and American, American is the party entitled to urge that the appropriations from earned surplus required by the Orders will deprive American of dividends from the money so appropriated. Undoubtedly the Commission will contend that Florida cannot complain that American is being deprived of dividends as a result of the Orders." The Commission denies that its motion to dismiss is a procedural manœuvre designed to block the Florida-American interests out of arguments which should be available to them. In its brief the Commission states that it does not contend that "Florida lacks standing to seek judicial review of an order directing the manner in which it shall keep its accounts, and we recognize that among the matters which may properly be considered on such review is the question whether the order improperly interferes with any right of the corporation to pay dividends and of its stockholders to receive them, and with the value of its outstanding securities." This position counsel for the Commission reaffirmed in a most explicit manner at the oral argument before us.

Upon familiar principles of corporation law, whether a corporation shall institute litigation...

To continue reading

Request your trial
3 cases
  • American Power Light Co v. Securities and Exchange Commission Securities and Exchange Commission v. Okin
    • United States
    • U.S. Supreme Court
    • 4 Junio 1945
    ...REED join in that part of this dissent dealing with No. 470, the American Power & Light Co. case. 1 American Power & Light Co. v. Securities and Exchange Commission, 1 Cir., 143 F.2d 250; Okin v. Securities and Exchange Commission, 2 Cir., 143 F.2d 945. 2 15 U.S.C. § 79x(a), 15 U.S.C.A. § 7......
  • In re Electric Bond & Share Co.
    • United States
    • U.S. District Court — Southern District of New York
    • 20 Diciembre 1946
    ...terminated by the Commission on August 22, 1942. These orders were affirmed by the Circuit Court of Appeals, American Power & Light Company v. S. E. C., 1 Cir., 1944, 143 F.2d 250, and also affirmed by the United States Supreme Court, November 25, During the period of January 1, 1942, to Ju......
  • Okin v. Securities and Exchange Commission
    • United States
    • U.S. Court of Appeals — Second Circuit
    • 10 Julio 1944
    ...are confident Congress did not contemplate. The First Circuit has recently expressed the same view in American Power & Light Co. v. Securities and Exchange Commission, 1 Cir., 143 F.2d 250. Okin's petition shows no efforts to satisfy the conditions of the rule under which shareholders may s......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT