Amos Treat & Co. v. Securities and Exchange Commission, No. 17002.

CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)
Writing for the CourtWILBUR K. MILLER, , and DANAHER, Circuit
Citation306 F.2d 260
PartiesAMOS TREAT & CO., Inc., et al., Appellants, v. SECURITIES AND EXCHANGE COMMISSION et al., Appellees.
Docket NumberNo. 17002.
Decision Date11 May 1962

306 F.2d 260 (1962)

AMOS TREAT & CO., Inc., et al., Appellants,
v.
SECURITIES AND EXCHANGE COMMISSION et al., Appellees.

No. 17002.

United States Court of Appeals District of Columbia Circuit.

Argued May 3, 1962.

Decided May 11, 1962.

Petition for Rehearing Denied June 14, 1962.


306 F.2d 261

Mr. James M. Landis, Washington, D. C., for appellants.

Mr. David Ferber, Associate Gen. Counsel, S.E.C., with whom Messrs. John A. Dudley and Michael Joseph, Attys., S. E.C., were on the pleadings, for appellees.

Before WILBUR K. MILLER, Chief Judge, and DANAHER, Circuit Judge.

Petition for Rehearing En Banc Denied June 14, 1962.

DANAHER, Circuit Judge.

Appellant, Amos Treat & Co., Inc., is a New York corporation registered as a broker-dealer with the Securities and Exchange Commission under section 15(b) of the Securities Exchange Act of 1934, 15 U.S.C.A. § 78o(b). Individual appellants, Treat and DeFelice, are respectively President and Secretary-Treasurer of Treat & Co. The Commission issued its order January 17, 1962 directing a public hearing looking to the possible revocation or suspension of the broker-dealer registration of Treat & Co., its possible suspension or expulsion from the National Association of Securities Dealers, Inc., § 15A(l) (2), 15 U.S.C.A. § 78o-3 (l) (2), and a determination as to whether or not the individual co-plaintiffs should be named as "causes" of any such orders, in which event they would effectively be "debarred from continuing in the securities business." § 15A(b) (4), 15 U.S.C.A. § 78o-3(b) (4).

Alleging a denial of due process for reasons to be discussed, appellants in the District Court sought an order enjoining the Commission, its individual members, and its agents, pendente lite, and permanently from further prosecution of the revocation proceeding pending in the Commission's New York Regional Office and that the appellees be ordered to vacate and discontinue that proceeding. On April 30, 1962, relief was denied on the ground that appellants had failed to exhaust their administrative remedies since a final order had not been entered in the administrative proceeding, and on the further ground that, even should a final order be entered, review might be sought in this court pursuant to § 25 of the 1934 Act, 15 U.S.C.A. § 78y. On appeal that same day, this court stayed further proceedings pending our further order, and on May 3, 1962, the parties appeared and were heard at length.

Were we confronted simply with claims of procedural irregularity in the conduct of the proceedings before the Hearing Examiner and in the action of the Commission with respect thereto, we would be bound to dismiss the instant appeal. R. A. Holman & Co. v. Securities and Exchange Commission, 112 U.S.App. D.C. 43, 299 F.2d 127, cert. denied, 370 U.S. 911, 82 S.Ct. 1257, 8 L.Ed.2d 404; UNA Chapter, Flight Eng. I. Ass'n v. National Mediation Bd., 111 U.S. App.D.C. 121, 294 F.2d 905, 909 (1961), cert. denied, 368 U.S. 956, 82 S.Ct. 394, 7 L.Ed.2d 388 (1962). Here, however, we have a problem going quite beyond the ex parte communications between

306 F.2d 262
the staff and the Commission, and the ex parte Commission action with respect to certain rulings as to some of which, at least, applications for relief had not even then been made by the appellants. Ex parte representations by the Regional Administrator and the staff without notice to the appellants, serious enough in and of themselves, nevertheless might have developed not to be of a fundamental nature, and, upon the whole record, could have resulted in rulings which we would review in ultimate course after the entry of a final Commission order. Such irregularities, subject to review upon the whole record, would have provided no basis for action by the District Court, and lacking jurisdiction, its order would have been quite correct

Here, however, we have a verified complaint, the allegations of which have not been controverted. Briefly summarized, the complaint alleges that on December 11, 1959, South Bay Industries, Inc. filed a registration statement, effective March 23, 1960, as to which Treat & Co. became managing underwriter and sold shares of South Bay stock to the public. About October 1960, the Commission's Division of Corporation Finance instituted an informal section 8(e) investigation1 as to the circumstances and events concerning South Bay's registration statement. About April 1961, the Division of Corporation Finance reported information to the Commission on the basis of which the Commission ordered the institution of a formal examination and investigation. At the times mentioned, while the informal investigation was in process and when the formal examination was initiated, and during part of the time while it was conducted, Manuel F. Cohen was director of the Commission's Division of Corporation Finance "responsible to the Commission for the initiation, conduct and supervision" of the proceedings. October 11, 1961, Mr. Cohen became a member of the Commission. December 4, 1961, the investigation having been concluded, the Commission acting on recommendations by its Division of Corporation Finance, instituted proceedings pursuant to section 8(d) of the Act, 15 U.S. C.A. § 77h(d) to suspend the effectiveness of the South Bay registration statement listing. Prosecution of that proceeding was assigned to the Commission's Division of Corporation Finance and is still pending.

The Commission on January 17, 1962 issued its order setting forth charges that Treat & Co. had wilfully violated the Act, and that the appellants had solicited persons to purchase the stock of South Bay Industries, Inc., and in doing so, had made false and misleading statements of material facts, and had omitted to set forth material facts known or which should have been known to the appellants. Similar allegations were made with respect to activities of the appellants concerning the stock of two other corporations.

A public hearing was ordered, and various rulings or actions by the Commission, it is alleged, had important impact on the proceedings before the Hearing Examiner. As of February 15, 1962, the Commission issued a ruling deemed critical by the appellants who thereupon sought information as to the identity of the Commissioners who had participated in its promulgation. They were informed that a "quorum consisting of three Commissioners had participated, and that Commissioner Cohen was one of the three." Appellants alleged that prior to that time they "had no knowledge that he was participating in, or intended to participate in, any of the quasi-judicial functions of the Commission relating to the revocation proceeding." Appellants thereupon sought permission of the Hearing Examiner to take appropriate steps with respect to "Commissioner Cohen's disqualification" and with respect to his participation in certain other matters involving questioned rulings. A recess was granted for that purpose.

306 F.2d 263

Appellants moved that the Commission discontinue the revocation proceedings "by reason of Commissioner Cohen's unlawful participation and the unlawful ex parte communications between the Commission and the members of its staff engaged in the prosecution of the case." Appellants also sought full information as to the extent and nature and the number of instances of participation by Member Cohen with respect to the matters complained of.

The Commission granted oral argument as to the motion for discontinuance, and the alternative motion of the appellants that "an evidentiary hearing be held to determine whether any members of the Commission were disqualified with respect to past or future proceedings and the facts relating to the ex parte representations, so as to enable the Commission to then determine whether to grant a discontinuance."

On April 11, 1962, the Commission denied appellants' motion for a discontinuance and alternative motion for an opportunity to adduce further evidence on the facts, and ruled that "section 5(c) of the Administrative Procedure Act" does not apply to Commissioner Cohen since "he has now become an agency member." The Commission further ruled that Commissioner Cohen was not disqualified from participation in the revocation proceeding, but expressed its intention to honor Commissioner Cohen's stated "preference" not to participate in further proceedings.

Appended to the Commission's April 11, 1962 "minute" order was a written statement prepared by Commissioner Cohen outlining his recollection and conclusions with respect to the various proceedings which had been conducted while he was the director of the Division of Corporation Finance and stating the extent to which he had participated in the actions taken by the Commission.

Appellants alleged that participation by Commissioner Cohen had rendered the proceedings void and so irrevocably tainted that any final determination which might flow from such proceedings will be invalid. It is our view that a substantial showing has been made.

Just exactly how the concept of "due process" is to be applied will vary with the type of proceeding involved, as we are well aware.

"Its exact boundaries are undefinable, and its content varies according to specific factual contexts. Thus, when governmental agencies adjudicate or make binding determinations which directly affect the
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109 practice notes
  • Associated Press v. FCC, No. 23833
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • July 12, 1971
    ...judicial 448 F.2d 1107 review of final agency action and not in advance of that action. In Amos Treat & Co. v. SEC, 113 U.S.App.D.C. 100, 306 F.2d 260 (1962), also cited by the petitioners, the respondent in a revocation proceeding before the Commission had made a "substantial showing" that......
  • Wall v. American Optometric Association, Inc., Civ. A. No. 16414
    • United States
    • United States District Courts. 11th Circuit. United States District Courts. 11th Circuit. Northern District of Georgia
    • October 21, 1974
    ...the procedures be fair, "the very appearance of complete fairness" must also be present. Amos Treat & Co. v. SEC, 113 U.S.App.D.C. 100, 306 F.2d 260, 267 (1962). These principles apply not only to trials, but equally, if not more so, to administrative proceedings. Ohio Bell Telephone Compan......
  • 43 712 Withrow v. Larkin 8212 1573, No. 73
    • United States
    • United States Supreme Court
    • April 16, 1975
    ...Schools, Inc. v. FTC, 138 U.S.App.D.C. 152, 158—161, 425 F.2d 583, 589—592 (1970); Amos Treat & Co. v. SEC, 113 U.S.App.D.C. 100, 306 F.2d 260 (1962), presented a situation in which one of the members of the Securities and Exchange Commission had previously participated as an employee in th......
  • Writers Guild of America, West, Inc. v. FCC, No. CV 75-3641-F
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Central District of California
    • November 4, 1976
    ...require that this factual dispute should be decided by a trier of fact other than the FCC. Amos Treat & Co. v. SEC, 113 U.S.App.D.C. 100, 306 F.2d 260 (1962). Basic principles of judicial administration counsel that disputed factual questions are not decided by courts of appeal. United Gas ......
  • Request a trial to view additional results
109 cases
  • Associated Press v. FCC, No. 23833
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • July 12, 1971
    ...judicial 448 F.2d 1107 review of final agency action and not in advance of that action. In Amos Treat & Co. v. SEC, 113 U.S.App.D.C. 100, 306 F.2d 260 (1962), also cited by the petitioners, the respondent in a revocation proceeding before the Commission had made a "substantial showing" that......
  • Wall v. American Optometric Association, Inc., Civ. A. No. 16414
    • United States
    • United States District Courts. 11th Circuit. United States District Courts. 11th Circuit. Northern District of Georgia
    • October 21, 1974
    ...the procedures be fair, "the very appearance of complete fairness" must also be present. Amos Treat & Co. v. SEC, 113 U.S.App.D.C. 100, 306 F.2d 260, 267 (1962). These principles apply not only to trials, but equally, if not more so, to administrative proceedings. Ohio Bell Telephone Compan......
  • 43 712 Withrow v. Larkin 8212 1573, No. 73
    • United States
    • United States Supreme Court
    • April 16, 1975
    ...Schools, Inc. v. FTC, 138 U.S.App.D.C. 152, 158—161, 425 F.2d 583, 589—592 (1970); Amos Treat & Co. v. SEC, 113 U.S.App.D.C. 100, 306 F.2d 260 (1962), presented a situation in which one of the members of the Securities and Exchange Commission had previously participated as an employee in th......
  • Writers Guild of America, West, Inc. v. FCC, No. CV 75-3641-F
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Central District of California
    • November 4, 1976
    ...require that this factual dispute should be decided by a trier of fact other than the FCC. Amos Treat & Co. v. SEC, 113 U.S.App.D.C. 100, 306 F.2d 260 (1962). Basic principles of judicial administration counsel that disputed factual questions are not decided by courts of appeal. United Gas ......
  • Request a trial to view additional results

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