Newfield v. Ryan

• Decision Date: 22 July 1937
• Docket Number: No. 8458-8460.,8458-8460.
• Citation: 91 F.2d 700
• Parties: NEWFIELD v. RYAN et al. (two cases). BALLENTINE v. FLORIDA TEX OIL CO. et al.
• Court: U.S. Court of Appeals — Fifth Circuit

91 F.2d 700 (1937)

NEWFIELD v. RYAN et al. (two cases).^*

BALLENTINE v. FLORIDA TEX OIL CO. et al.

Nos. 8458-8460.

Circuit Court of Appeals, Fifth Circuit.

July 22, 1937.

Allen E. Throop, Gen. Counsel, Securities and Exchange Commission, Robert E. Kline, Jr., and William A. McClain, Assts. to Gen. Counsel, Securities and Exchange Commission, all of Washington, D. C., for appellants Newfield and Ballentine.

Wm. C. Pierce and W. K. Zewadski, both of Tampa, Fla., for appellees.

Before FOSTER, SIBLEY, and HUTCHESON, Circuit Judges.

HUTCHESON, Circuit Judge.

These three appeals, while brought up in separate records, present the same question and may be disposed of in one opinion. They are from interlocutory orders restraining appellants, agents of the Securities and Exchange Commission, from enforcing subpoenas duces tecum issued to the Postal and Western Union Telegraph Companies, under authority of the Securities Act of 1933, as amended, 15 U.S.C.A. § 77a et seq.

In the Ballentine case the subpœna required the bringing and production of "Any and all telegrams or copies thereof in your custody or control, sent or received between the dates of January 1, 1937, and March 12, 1937, by Florida Tex Oil Co. Lewis Sacker, Edmund A. Aldridge and Income Royalties, Inc. which mention or refer or relate to the Class A common stock of Florida Tex Oil Company or to interests in oil royalties, or oil leases in the Walker farm or tract of the Crescent pool, Oklahoma, the Fitts pool, Oklahoma, or the Jacob pool, Texas, or to any transactions or proposed transactions in any such securities, and particularly any and all telegrams or copies thereof, sent to or received from George C. Creager, Oklahoma City, or M. A. Childers, San Antonio, Texas."

In the Newfield cases the subpœnas required the bringing and production of "Any and all telegrams or copies thereof in your custody or control, sent or received between the dates of May 1, 1936, and March 30, 1937, by Ryan-Florida Corporation, Frank J. Ryan, Thomas J. McReynolds, Jr. and J. E. Stillman, which mention or refer to or relate to investment contracts or certificates of participation in profit sharing agreements, pertaining to oil royalties or interests in oil rights or leases, or to any transaction or proposed transaction in any of said securities, and pertaining particularly to oil royalties or interests in oil rights or leases in the Wilmauna Section of Hillsborough County, Florida."

Each of the bills claimed that the act itself under which the subpœnas were issued was violative of the Fourth and Fifth Amendments in that (a) it purported to compel persons to be witnesses against themselves; (b) it purported to authorize general, and therefore unreasonable searches and seizures. Each of the bills attacked the subpœnas themselves, urging that if the act was valid the subpœnas in question were not supported by its authority, in that (a) they command the production of telegrams without distinction between interstate and intrastate messages; (b) they are not sufficiently specific to confine their demands within the scope of the act; (c) they compel the production of plaintiffs' messages by their agents, the telegraph companies, without affording plaintiffs an opportunity to contest the demand; (d) the subpœnas are too general, too wanting in specification, and constitute but exploratory fishing expeditions; (e) no hearing to which the documents are relevant is being held by the commission, and no proper investigation is going forward which would authorize the issuance of the subpœnas; (f) they violate amended rule IV — 6, of the rules and practices of the commission, "Subpœnas for the production of documentary evidence will issue upon application in writing, which must specify as nearly as may be, the documents desired and the facts to be proven by them."

All the bills aver that plaintiffs have no adequate remedy at law, for that unless restrained by the court the defendants telegraph companies will obey the subpœnas, and furnish the information desired. The commission defendants, Newfield and Ballentine, answered the bills, insisting that the Securities Act was valid, and that the subpœnas were issued in accordance with its provisions and by authority of the commission in a matter pending before it for investigation. They answered that the practice rule referred to in plaintiffs' bills applies not to investigations of the kind here being conducted, but only to hearings had before the commission. They also pleaded fully; that activities of defendants in connection with the interstate offering of securities, investments, contracts, and interests in oil rights are under survey and investigation by the commission; and that the commission has reason to believe that the provisions of section 5 (a) and section 17 (a) of the Securities Act (as amended, 15 U.S.C.A. §§ 77e (a), 77q (a) have been, are being, and are about to be violated by the defendants, who are in the course of obtaining money and property by means of false and fraudulent representations in connection with the issuance, offer, and sale in interstate commerce of fraudulent securities.

The District Judge thought it unnecessary to rule upon the constitutionality of the Securities Act of 1933 (as amended, 15 U.S.C.A. § 77a et seq.) or the Securities Exchange Act of 1934 (as amended, 15 U.S.C.A. § 78a et seq.). Of the opinion that plaintiffs had a property right in the privacy of their telegrams, though in the possession of the companies, and a standing to attack the form and content of the subpœnas; that the subpœnas described the documents in such indefinite terms as to constitute an unreasonable search and seizure under the Fourth Amendment; and that they sought to deprive plaintiffs of their property without due process, he granted the interlocutory injunctions prayed.

Appellants, denying that the subpœnas are in any respect exceptionable, are here insisting that they constitute a "demand of other lawful authority" which, under the Federal Communications Act of 1934, § 605, 47 U.S.C.A. § 605, at once requires and justifies disclosure of telegraph messages;¹ that therefore no right of privacy, if plaintiffs had any, in the telegrams was violated; and that the subpœnas, being directed not to plaintiffs but to the companies, plaintiffs had no standing to invoke either the Fourth or the Fifth Amendments, particularly no standing to complain of the form and content of the subpœnas.

We agree with appellants that the subpœnas in themselves are unexceptionable; that they are not unduly indefinite; and that they do not constitute unreasonable searches and seizures.

The subpœna in the Ballentine case was definitely limited to a period of less than three months; those in the Newfield cases to a period of less than one year. The subpœnas in all the cases were limited to the persons and corporations under investigation and to the schemes being investigated. In each of the subpœnas attention was called to the subjects under particular investigation. None of the subpœnas could in any sense be regarded as dragnets for fishing expeditions. All of them are well within the specific limits approved in the cases. Hale v. Henkel, 201 U.S. 43, 26 S.Ct. 370, 50 L.Ed. 652; Consolidated Rendering Co. v. Vermont, 207 U.S. 541, 28 S.Ct. 178, 52 L.Ed. 327, 12 Ann. Cas. 658; Wilson v. United States, 221 U. S. 361, 31 S.Ct. 538, 55 L.Ed. 771, Ann. Cas.1912D, 558; Wheeler v. United States, 226 U.S. 478, 33 S.Ct. 158, 57 L.Ed. 309; Brown v. United States, 276 U.S. 134, 48 S.Ct. 288, 72 L.Ed. 500; McMann v. Securities and Exchange Comm. (C.C.A.) 87 F. (2d) 377, 379.

But we think it plain, that in enacting the securities legislation in question, Congress was well within its constitutional powers, and that the investigations and subpœnas under attack are fully supported by that legislation. We agree, therefore, with appellants in the broader view they take of this case, that the assailed subpœnas constitute a "demand of other lawful authority," justifying and requiring the telegraph companies to furnish and disclose the messages called for. We agree with them, therefore, that the subpœnas do not take plaintiffs' property, nor invade their right of privacy in the messages, inspection of which is demanded. We agree, too, that, directed not to them, but to the companies, plaintiffs have no standing to invoke the Fourth or the Fifth Amendments against, and particularly none to complain of, the form and content of the subpœnas.

This is not to say, as appellants argue, that plaintiffs, as senders of telegraphic messages, have no standing in equity to prevent an unauthorized publishing and disclosure of their contents, that is, disclosures made by the companies, except upon the demand of lawful authority. Upon the plainest principles we think they do. Statutes, both state, section 7984, Compiled Laws of Florida 1927, and the Federal Communications Act, supra, forbid such disclosures, and equity is always competent to preserve rights conferred to prevent the breach of duties affixed, by statutes. Texas & N. O. R. Co. v. Brotherhood of Ry. and Steamship Clerks (C.C.A.) 33 F. (2d) 13, 16; De Lima v. Bidwell, 182 U.S. 1, 21 S.Ct. 743, 45 L.Ed. 1041. If, therefore, defendants were private persons, mere interlopers, seeking information for their own ends, and not persons having authority, plaintiffs should have their writs. Ex parte Jackson, 96 U.S. 727, 24 L.Ed. 877; Board of Trade v. Christie Grain & Stock Co., 198 U.S. 236, 25 S.Ct. 637, 49 L. Ed. 1031; Cocke v. Western Union Tel. Co., 84 Miss. 380, 36 So. 392; Jones on Telegraph and Telephone Companies, § 311, 62 C.J. 169; High on Injunctions, Vol. 1, § 19; Baker v. Libbie, 210 Mass. 599, 97 N. E. 109, 37 L.R.A.(N.S.) 944, Ann.Cas. 1912D, 551; Hearst v. Black, 66 App.D. C. 313, 87 F.(2d) 68.

The cases appellants cite against plaintiff's standing to be heard are not at all in point. Here is no...