Dyer v. Securities and Exchange Commission

• Decision Date: 29 May 1961
• Docket Number: No. 16347.,16347.
• Citation: 290 F.2d 534
• Parties: Nancy Corinne DYER and J. Raymond Dyer, Petitioners, Harry J. Stadin and Cyrus L. Day, Intervenor-Petitioners, v. SECURITIES AND EXCHANGE COMMISSION, Respondent, Union Electric Company, Intervenor-Respondent.
• Court: U.S. Court of Appeals — Eighth Circuit

290 F.2d 534 (1961)

Nancy Corinne DYER and J. Raymond Dyer, Petitioners Harry J. Stadin and Cyrus L. Day, Intervenor-Petitioners, v. SECURITIES AND EXCHANGE COMMISSION, Respondent Union Electric Company, Intervenor-Respondent.

No. 16347.

United States Court of Appeals Eighth Circuit.

April 24, 1961.

Rehearing Denied May 29, 1961.

J. Raymond Dyer, St. Louis, Mo., for petitioners. Nancy Corinne Dyer was on the brief.

Harry J. Stadin, St. Louis, Mo., intervenor-petitioner, pro se.

Arthur Blasberg, Jr., Atty., S. E. C., Washington, D. C., for Securities and Exchange Commission; Thomas G. Meeker, Gen. Counsel, Solomon Freedman, Asst. Director, Aaron Levy, Asst. Chief Counsel, Div. of Corporate Regulation, Mahlon M. Frankhauser, Atty., S. E. C., Washington, D. C., on the brief.

William H. Ferrell, St. Louis, Mo., for Union Electric, intervenor-respondent. Robt. J. Keefe, St. Louis, Mo., was with him on the brief.

Before JOHNSEN, Chief Judge, and VAN OOSTERHOUT and MATTHES, Circuit Judges.

JOHNSEN, Chief Judge.

Since 1956, petitioners, as owners of 250 out of 11¼ million shares of issued stock in Union Electric Company, have been challenging, by petitions for review under 15 U.S.C.A. § 79x(a), the orders which the Securities and Exchange Commission has made on the declarations filed by management for purposes of the Public Utility Holding Company Act of 1935, 15 U.S.C.A. § 79a et seq.

The proceedings which have been before us up to this point have all involved management's declarations of proxy material for the annual stockholders' meetings which have been held. See Dyer v. Securities and Exchange Commission, 8 Cir., 287 F.2d 773; Dyer v. Securities and Exchange Commission, 8 Cir., 266 F.2d 33; Dyer v. Securities and Exchange Commission, 8 Cir., 289 F.2d 242.

The present case differs from the previous ones in that it represents a challenge to an order of the Commission on a declaration filed by Union Electric in 1959, under 15 U.S.C.A. §§ 79f and 79g, for approval of an offering and sale of 1,036,602 additional shares of common stock of the corporation.

Union Electric's articles of incorporation had been amended at the annual stockholders' meeting of 1958 to increase the amount of its authorized common stock by 1½ million shares. Petitioners had at that time made attack upon the portion of the Commission's order (as well as upon all other parts of the order) which allowed management's declaration to become effective for a submission of the stock-increase amendment at the meeting and for the solicitation of proxies in relation thereto. We affirmed this aspect (as well as all other aspects) of the Commission's order in Dyer v. Securities and Exchange Commission, 8 Cir., 266 F.2d 33, 44, and that affirmance became final by the denial of certiorari, 361 U.S. 835, 80 S.Ct. 86, 4 L.Ed.2d 75, and of rehearing, 361 U.S. 911, 80 S.Ct. 253, 4 L.Ed.2d 181.

After our affirmance but before the denial of certiorari thereto, Union Electric, to enable it to carry out its financing program, filed a declaration with the Commission, as previously indicated, for authorization, under 15 U.S.C.A. §§ 79f and 79g, to make offering to its common stockholders of 1,036,602 shares of its stock, during the period from September 10, 1959, to September 30, 1959, on the basis of a right to subscribe for one share of additional common stock for each ten shares of such stock held of record on September 10, 1959. Transferable subscription warrants for the amount of stock which they would be entitled to purchase were to be issued to the stockholders, the warrants to be in tenth-of-a-share amounts. It was expected that the rights would be subject to being traded on the New York Stock Exchange.

The declaration further provided that any shares of the offering not thus subscribed for by the stockholders were to be offered to the employees (excluding elected officers). If the stock failed to be thus completely absorbed, any remaining shares were to be subject to purchase by underwriters on a competitive bid basis, as related to the fixed subscription price, in accordance with the Commission's Rule U-50, 17 CFR, § 250.50.

The price at which the offering would be made was to be subject to the determination of the board of directors on September 9, 1959, but this figure was to be "not less than 8% under the closing price per share of Union's common stock on the New York Stock Exchange on the date of such determination". The subscriptions were to be paid for in cash and, to enable employees to make such payment, arrangements had been effected with a St. Louis bank, whereby they could obtain loans on their stock, under a payroll deduction agreement, in an amount up to 90% of the purchase price.

The things which are being set out in the present paragraph have occurred since the Commission's order was made, but they may be noted informationally. The price set by the board of directors for the offering on September 9, 1959, was approximately 8% under the closing price of the stock on that date on the New York Stock Exchange. Common stockholders and purchasers of their warrants made subscription for a total of 96% of the amount of the stock offering. The 4% remaining was all taken by the employees, so that no part of the stock went to underwriters. Petitioners exercised their subscription privilege and received the 25 shares to which they were entitled under the provisions of the declaration.

Filing of the declaration with the Commission had been made on August 7, 1959. On August 17, 1959, the Commission gave notice of the filing and the terms of the declaration, through publication in the Federal Register. The essential aspects of the proposed offering, as detailed above, were set out in the notice. The corporate purposes for which the proceeds of the sale were intended to be used were stated. And it was indicated that the Public Service Commission of Missouri and the Illinois Commerce Commission, according to the declaration, also had jurisdiction over the issuance and sale of the stock. The notice further contained a provision "that any interested person may, not later than September 2, 1959, at 5:30 P.M., request in writing that a hearing be held on such matters, stating the nature of his interest, the reasons for such request, and the issues of fact or law raised by said filing which he desires to controvert; or he may request that he be notified if the Commission should order a hearing thereon".

In addition to the publication of notice made in the Federal Register, the Commission (presumably because of its past experience with petitioners) took the precaution of mailing a copy of the published notice to petitioner J. Raymond Dyer, who was attorney for his daughter and himself. Dyer made response thereto by letter dated August 20, 1959, acknowledging receipt of the copy of the notice and stating that whether or not he and his daughter might request a hearing would depend upon when it would be held; that, if the Commission would set a hearing date convenient to them, they would request a hearing; but that no date prior to September 25, 1959, would be thus convenient to them. Under Union Electric's declaration, the date on which it was desired to commence offering the stock was September 10, 1959.

The letter further stated that the basis of any hearing request which the Dyers might make would be "to permit us to make a record on the issues of fact and law we controvert"; that "these issues" were that "factually" Union Electric did not have "1,036,602 lawfully authorized and unissued shares of common stock"; that the Commission's 1958 order, which had allowed management's declaration to become effective for submitting the proposed amendment to increase the authorized common stock by 1½ million shares, and which thus underlay the adoption of the amendment, was then pending on petition for certiorari to our affirmance of the order in Dyer v. Securities and Exchange Commission, 8 Cir., 266 F.2d 33; and that legally petitioners wanted "to controvert any assumption on the part of the Commission" that it had a right to accord administrative effect to its 1958 order in this or any other respect "while the aforesaid review proceedings are pending".

The capacity under § 79x(b) of an unstayed order of the Commission to have administrative operation and effect has been twice discussed and declared by us, in Dyer v. Securities and Exchange Commission, 8 Cir., 266 F.2d 33, and in Dyer v. Securities and Exchange Commission, 8 Cir., 289 F.2d 242.

On September 3, 1959, the Commission entered an order allowing management's declaration for the issuance and sale of the stock to become effective. The order stated that the Commission had duly considered the request and objections of the Dyers and regarded them as being without any protest merit or as not presenting any contendable issue, and as thus not providing adequate grounds for holding a hearing in the situation.

We think that clearly petitioners' objections did not present any question of fact or any question of law or any mixed question which could be affective of the Commission's exercise of authority under §§ 79f and 79g, and which might require a resolution of some material controverted element in relation to it, so that there existed no possible basis in the situation for a contention that it was an abuse of discretion for the Commission not to have held a hearing.

The Commission's obligation in the matter presented by the declaration and the basis on which it was authorized to discharge that responsibility are set out in subsections (c) to (g) of § 79g. Under subsection (c), the Commission could not permit a declaration "regarding the issue or sale of a security" to become effective unless it found certain specified things as to the security. These things the Commission's order here duly covered, and all of them were warranted in being found to exist on the showing contained in the...