Dyer v. Securities and Exchange Commission

• Decision Date: 11 May 1959
• Docket Number: No. 15989.,15989.
• Citation: 266 F.2d 33
• Parties: Nancy Corinne DYER and J. Raymond Dyer, Petitioners, Cyrus L. Day, Intervenor-Petitioner, v. SECURITIES AND EXCHANGE COMMISSION, Respondent, Union Electric Company, Intervenor-Respondent.
• Court: U.S. Court of Appeals — Eighth Circuit

266 F.2d 33 (1959)

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

No. 15989.

United States Court of Appeals Eighth Circuit.

April 10, 1959.

Rehearing Denied May 11, 1959.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

J. Raymond Dyer, St. Louis, Mo., for petitioners and intervenor-petitioner.

Daniel J. McCauley, Jr., Associate Gen. Counsel, S. E. C., Washington, D. C. (Thomas G. Meeker, Gen. Counsel, Aaron Levy and Solomon B. Freedman, Sp. Counsel, and Mahlon M. Frankhauser, Atty., Washington, D. C., on the brief), for respondent.

Robert J. Keefe, St. Louis, Mo. (William H. Ferrell and Keefe, Schlafly, Griesedieck & Ferrell, St. Louis, Mo., on the brief), for intervenor-respondent.

Before JOHNSEN, VOGEL and MATTHES, Circuit Judges.

JOHNSEN, Circuit Judge.

This proceeding is one under 15 U.S. C.A. § 79x(a), to review two orders of the Securities and Exchange Commission, entered on March 21 and 25, 1958, allowing a declaration, filed by the management of Union Electric Company, of St. Louis, Missouri, to become effective, as a basis for the solicitation of proxies from stockholders, for the annual meeting of the corporation, to be held on April 21, 1958. Five series of amendments were made to the declaration before the Commission gave its final approval, four by management voluntarily and the fifth by requirement of the Commission as an approval condition.

We denied petitioners' request for a stay of the Commission's orders pending review, so that the stockholders meeting was held as scheduled.

Petitioners, who are daughter and father, are the holders of 350 shares of common stock in Union Electric, out of a total of 11¼ million voting shares, 10,500,000 common and 750,000 preferred. Another stockholder, the owner of 100 shares, has been permitted to join them in this proceeding as an intervenor-petitioner.

Union Electric is a holding company registered under the Public Utility Holding Company Act of 1935, 49 Stat. 803, 15 U.S.C.A. § 79a et seq. It has aligned itself with the Commission's position here as an intervenor-respondent.

Difficulties and disputes had previously existed between petitioners and the management of Union Electric in relation to the annual stockholders meetings of both 1956 and 1957. In October, 1957, the Commission, on the basis of § 12(e) of the Act, 15 U.S.C.A. § 79l(e), issued a notice and order, prohibiting the management of Union Electric and all other persons from soliciting proxies for the 1958 meeting, unless a declaration of the proxy material intended to be used was filed with the Commission under § 12(e) of the Act and under Rule U-62 of its implementing regulations, 17 CFR § 250.62, and unless the declaration was thereafter by order of the Commission permitted to become effective.

Petitioners meanwhile had submitted to management, under Rule X-14A-8 of the Commission's regulations, 17 CFR § 240.14a-8, eleven proposals of resolutions and amendments to by-laws, with notice of their intention to present all of these for action at the annual meeting. Management thereafter filed its declaration with the Commission, containing its proposed proxy-solicitation statement and proxy form. It included therein, for voting on at the meeting, four of petitioners' proposals, indicating that they had orginated from petitioners, setting out the supporting statement of petitioners as to each, and making expression of its own opposition thereto — all as provided for by Rule X-14A-8(b), supra.

To the declaration and the amendments thereto, as referred to above, petitioners filed a total of 35 objections. The Commission issued an order for hearing, under its Rule U-62(e), supra, and a hearing was held. Petitioners were allowed to participate, in accordance with Rule 17(c) of the Commission's Rules of Practice, 15 U.S.C.A. They (through the father, who is a lawyer) engaged in cross-examining witnesses, offering evidence, filing briefs, submitting proposed findings and conclusions, taking exceptions to the recommended findings and conclusions of the Division of Corporate Regulation (or Staff) of the Commission, and making oral argument. The Commission thereafter entered the orders which are here sought to be reviewed.

Numerous attacks are made by the petition for review on the Commission's proceedings, rulings, findings, conclusions and orders. These have been further compounded and expanded, by six separate briefs which petitioners have filed, in a use to the utmost of the privilege, which we perhaps too liberally accorded them, of making full expression of their alleged grievances. The result has been that contentions have been multiplied and refined to the point of creating artificiality and almost obsessive pitch.

In petitioners' approach to and treatment of the situation on this basis, they have, we think, allowed their vision to become obscured as to the nature of what is involved and the extent of our authority in relation thereto. The Commission was here engaged in a purely administrative task. It was simply exercising regulatory judgment in respect to the propriety, adequacy, practicality, and fairness of proxy-solicitation material generally as between management and stockholders (not as to petitioners alone), and particularly in relation to the application of its own rules and regulations for promoting and affording generally (in borrowed phrase from S.E.C. v. Transamerica Corp., 3 Cir., 163 F.2d 511, 518) "fair opportunity for the operation of corporate suffrage".

The Commission had a right to deal with the proxy material and the 35 objections of petitioners thereto, in the light cast upon the particular situation by the filings and the evidence, on the basis of natural application of its regulations; unarbitrary administrative judgment as to matters extending beyond the reach or effectiveness of the regulations; and attribution in relation thereto of such intelligence as ordinary stockholders could be presumed to have in their receipt of proxy-solicitation material.

Petitioners have gone the length of arguing that some of the Commission's regulations should abstractly be regarded as failing to promote, or as being insufficient or ineffective to carry out, the general purpose and policy of § 12(e) of the Act, to have proxy materials and solicitations afford a fair opportunity for the operation of corporate suffrage. Here, it must be borne in mind that § 12(e) is only generally declarative of proxy-solicitation policy, but not definitive or prescriptive in its terms, and that it entrusts to the Commission's judgment entirely the matter of what form and extent of general or specific commands or prohibitions may be necessary or appropriate to help give reality and substance to the policy. It contains express authorization of "such rules and regulations or orders as the Commission deems necessary or appropriate in the public interest or for the protection of investors or consumers or to prevent the circumvention of the provisions of this chapter, or the rules, regulations or orders thereunder".

This grant of legislative or regulatory power, in its relation to proxy solicitation, requires general judicial acceptance of any properly adopted rule, regulation or general order, unless it undebatably is unrelated to, non-facilitative of, or in conflict with, the policy of the Act, or unless it otherwise is so arbitrary or burdensome as to be legally unreasonable.

It is, however, not for a court to say policy-wise, as petitioners would have us do, that it feels that some relevant rule, regulation or general order as to proxy material and solicitation does not go far enough or is not sufficiently liberal in its provisions, to entitle it to general application. Equally, it is a matter fundamentally for the Commission's judgment whether its rules, regulations or general orders are adequate to promote the policy of the Act in application to the facts of some particular situation.

Only where the facts are such as to reach beyond the rules, regulations and general orders of the Commission, so that some clear evil or violation of the policy of the Act is in no way touched by their application, is there any basis at all for a court to say that the Commission has not gone far enough in the particular situation. And this basis must represent, not room for difference in judgment, but lack of room legally for any sound difference as to the need to have gone further.

Similarly, as to orders not of general character but made in relation to the facts of a particular proxy-solicitation situation, with directions going beyond the rules and regulations, must a court accept the Commission's judgment, unless it can be said that what has been done is without any rational basis on all the elements involved.

Hence, as we have indicated, neither as to a regulation nor as to a special order in a proxy situation, does it matter that there may be a judicial persuasion that a different and better judgment ought to have been exercised, if the Commission's view or judgment on necessity and appropriateness constitutes a permissible one. And any consideration of the permissibility of the Commission's view, as to resting on a rational basis, must requiredly take into account the factors of the plenary scope of authority and judgment granted the Commission in the proxy field and the administrative experience or expertness which is impliedly entitled to have its play in resolving the question of need or appropriateness.

The narrow margin thus legislatively intended to exist for judicial review has been carried even into the incidence of the Commission's determinations of questions of specific fact in a situation, which are dependent entirely upon the evidence produced before it, by the provision of the Act that "The findings of the Commission as to the facts,...