In re Community Power & Light Co.

• Decision Date: 15 June 1940
• Citation: 33 F. Supp. 901
• Parties: In re COMMUNITY POWER & LIGHT CO.
• Court: U.S. District Court — Southern District of New York

33 F. Supp. 901

In re COMMUNITY POWER & LIGHT CO.

District Court, S. D. New York.

June 15, 1940.

COPYRIGHT MATERIAL OMITTED

Chester T. Lane, Gen. Counsel, and Lawrence S. Lesser, Frank J. Gillis, and F. Arnold Daum, all of Washington, D. C., for Securities and Exchange Commission.

Albridge C. Smith and Prescott R. Andrews, both of New York City, for Community Power and Light Co.

HULBERT, District Judge.

This is an application by the Securities and Exchange Commission made at the request of Community Power and Light Company (hereinafter called "The Company") for an order pursuant to Section 11(e) of the Public Utility Holding Company Act of 1935, 49 Stat. 822, U.S.C.T. 15, Sec. 79k(e), 15 U.S.C.A. § 79k(e).

The Company is a Delaware corporation and a holding company as defined by Section 2(a) (7) (A) of the Act, 15 U.S.C.A. § 79b(a) (7) (A), and has its principal executive offices in the Borough of Manhattan, City of New York.

The Company owns, controls and holds with power to vote all of the outstanding voting securities of the following public utility companies: Arkansas Utilities Company; The Kansas Utilities Company, Missouri Utilities Company and Texas-New Mexico Utilities Company. The Company also owns, controls and holds with power to vote more than 60 per cent of the outstanding voting securities of General Public Utilities, Inc., a Florida corporation with its principal executive offices in Jersey City, N. J. The latter is not only a public utility company but is also a holding company since it owns, controls and holds with power to vote all of the voting securities of the following public utility companies: Dakota Power Company, Gothenberg Light and Power Company, Gulf Public Service Company, Nebraska Light and Power Company, Southwestern Public Service Company, Arizona Electric Power Company, Flagstaff Electric Light Company and Holbrook Light and Power Company.

The public utility companies in the Company's holding company system operate in the states of Kansas, Missouri, Arkansas, Texas, New Mexico, South Dakota, Nebraska, Louisiana and Arizona.

On December 1, 1935, the Company registered with the Commission under Section 5 of the Act, 15 U.S.C.A. § 79e, and thereby became a "registered holding company" as that term is used in Section 11(e) thereof.

On or about January 13, 1938, the Company filed with the Securities and Exchange Commission an application under the Act for a report on a Plan of Recapitalization to modify its capital structure, adjust arrearages in preferred stock dividends, and reduce preferred dividend requirements. Hearings were had on said Plan before an officer of the Securities and Exchange Commission on February 23 and 24, 1938. Subsequent to said hearings, but prior to any determination by the Securities and Exchange Commission with respect to said Plan of Recapitalization, the Company filed certain amendments thereto and hearings were again held on said Plan, as so amended, on March 13, 14, 15 and 16, 1939. Subsequent to said hearings, but prior to any determination by the Securities and Exchange Commission with respect to said Plan as so amended, the Company filed an application pursuant to Section 11(e) of the Act asking the Commission to approve a Plan of Corporate Simplification (hereinafter called the "Plan") as fair and equitable and necessary to effectuate the provisions of Section 11 (b) of the Act.

The Commission on August 7, 1939, issued a Notice of and Order for Hearing with regard to such Plan, which notice was published in the Federal Register on August 9, 1939, and the Company sent by mail, to each of its security holders a copy of a notice, which set forth details of the Plan and the date and place of the hearing to be held with regard to such Plan.

On September 6, 1939, a hearing on the Plan was held pursuant to such notice before a duly appointed officer of the Commission. At such hearing the Company appeared and presented evidence in support of the fairness of the Plan. No security holder or other person appeared at such hearing in opposition to the Plan.

On November 18, 1939, the Commission approved the Plan and entered its Findings and Opinion and Order. At the same time, the Commission issued its report on the Plan as requested by the Company. This report was sent to the Preferred and Common stockholders in connection with the solicitation of assents to the Plan. Thereafter, the Company gave notice to and solicited proxies of the Common and Preferred stockholders for a stockholders' meeting which was held in Wilmington, Delaware, on January 12, 1940. At this meeting the Plan was approved by more than two-thirds of the Preferred stockholders and by more than a majority of the Common stockholders. Certain of the minority stockholders, both Preferred and Common, objected to the Plan and voted against its approval.

On or about March 18, 1940, the Commission, at the request of the Company, made an application to this Court, pursuant to the provisions of Section 11(e) of the Act, to enforce and carry out the terms and provisions of the Plan.

On March 18, 1940, this Court made its order which brought on the hearing of this application on April 25, 1940. Notice of this proceeding, in the manner directed in said order, was given to those security holders of the Company whom the Plan affects. H. Vincent Smart, Esq., representing 112 shares of Common stock of the Company, appeared on the return day and an adjournment was taken to May 11, 1940, to enable him to file a memorandum regarding the constitutionality of the Public Utility Holding Company Act, and to cross examine such officers of the Company as he might give notice to the Company, on or before May 5, 1940, to produce on the adjourned date. Mr. Smart notified the Court on May 1, 1940, that his client desired him to withdraw from the proceeding, but he submitted, nevertheless, a memorandum upon the law, together with a communication prepared by a person connected with his client, containing his comments upon the alleged unfairness of the Plan and the enforcement thereof.

There was also informally presented to the Court, prior to May, 1, 1940, a request from the Attorney General of the State of Delaware for an adjournment to enable him to determine whether he would seek permission to intervene. Before said adjourned date the Court was advised informally that he did not intend to do so. A letter was also presented, at the adjourned hearing on May 11, 1940, from Howard Duane, Esq., of Wilmington, Delaware, advising that he had been retained by a holder, since 1930, of 340 shares of First Preferred Stock, $6 Dividend Series of the Company, and that an action had been brought by him, subsequent to the institution of this proceeding, in a Court of Chancery of the State of Delaware in and for Newcastle County upon a bill for an injunction, which apparently is still pending, a motion to restrain and for a temporary injunction pendente lite, however, having heretofore been denied.

While, as has been stated, no one appeared in opposition to this application, the Court cannot, and will not, ignore its responsibility to pass upon the objections which have been suggested by counsel who appeared and then withdrew from this proceeding.

Section 11(b) of the Act, so far as pertinent, provides:

"It shall be the duty of the Commission, as soon as practicable after January 1, 1938:

* * *

"(2) To require by order, after notice and opportunity for hearing, that each registered holding company, and each subsidiary company thereof, shall take such steps as the Commission shall find necessary to ensure that the corporate structure or continued existence of any company in the holding-company system does not unduly or unnecessarily complicate the structure, or unfairly or inequitably distribute voting power among security holders, of such holding-company system. * * *"

Section 11(e) of the Act provides in part: "If, after notice and opportunity for hearing, the Commission shall find such plan, as submitted or as modified, necessary to effectuate the provisions of subsection (b) and fair and equitable to the persons affected by such plan, the Commission shall make an order approving such plan; and the Commission, at the request of the company, may apply to a court, in accordance with the provisions of subsection (f) of section 18 79r of this chapter, to enforce and carry out the terms and provisions of such plan."

Section 24 of the Act, Title 15 U. S.C.A. § 79x, provides that any person or party aggrieved by an order issued by the Commission may obtain a review upon petition to the Court of Appeals of the United States within any circuit wherein such person resides or has his principal place of business, or in the United States Court of Appeals for the District of Columbia. Such appeal must be taken within 60 days after the entry of such order. No such appeal has been taken and the time so to do has long since expired.

Subsection (f) of Section 18, Title 15 U.S.C.A. § 79r (f), reads as follows: "Whenever it shall appear to the Commission that any person is engaged or about to engage in any acts or practices which constitute or will constitute a violation of the provisions of this title chapter, or of any rule, regulation, or order thereunder, it may in its discretion bring an action in the proper district court of the United States, the Supreme Court of the District of Columbia, or the United States courts of any Territory or other place subject to the jurisdiction of the United States, to enjoin such acts or practices and to enforce compliance with this title chapter or any rule, regulation, or order thereunder, and upon a proper showing a permanent or temporary injunction or decree or restraining order shall be granted without bond. The Commission may transmit such evidence as may be available concerning such acts or practices to the Attorney General, who, in his discretion, may institute the...