American Power & Light Co. v. SECURITIES AND EXCH. COM'N, 3966.
|United States Courts of Appeals. United States Court of Appeals (1st Circuit)
|143 F.2d 250
|AMERICAN POWER & LIGHT CO. v. SECURITIES AND EXCHANGE COMMISSION.
|19 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.
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:
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:
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: 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...
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