In re Laclede Gas Light Co.

• Decision Date: 25 August 1944
• Docket Number: No. 2756.,2756.
• Citation: 57 F. Supp. 997
• Parties: In re LACLEDE GAS LIGHT CO. et al.
• Court: U.S. District Court — Eastern District of Missouri

57 F. Supp. 997

In re LACLEDE GAS LIGHT CO. et al.

No. 2756.

District Court, E. D. Missouri, E. D.

August 25, 1944.

David K. Kadane and Maurice C. Kaplan, both of Philadelphia, Pa., for Securities and Exchange Commission.

Richard Jones and Horace J. McAfee, both of New York City, for Ogden Corporation.

Henry J. Kaltenbach, of St. Louis, Mo., for Laclede Gas Light Co.

Joseph H. Grand, of St. Louis, Mo., for Laclede Power & Light Co.

Crawford Johnson, of St. Louis, Mo., for St. Louis Union Trust Co.

Samuel H. Liberman, of St. Louis, Mo., for Mississippi Valley Trust Co.

J. F. Handy, of Springfield, Mass., and Roscoe Anderson and W. R. Gilbert, both of St. Louis, Mo., for Massachusetts Mut. Life Ins. Co., John Hancock Mut. Life Ins. Co., New York Life Ins. Co., and Columbian Nat. Life Ins. Co.

HULEN, District Judge.

The Securities and Exchange Commission¹ by this action seeks an order to enforce and carry out a plan initiated before the Commission under Section 11(e) of the Public Utility Holding Company Act of 1935 by the Laclede Gas Light Company, Laclede Power & Light Company, and Ogden Corporation.² Certain of the security holders and Trustee in a mortgage, of Laclede Gas are the sole objectors to the plan before this Court. Ogden is a holding company, Laclede Gas and Laclede Electric are public utility companies.

As of December 31, 1943, among other public utility holdings, Ogden owned in excess of 73% of the Laclede Gas voting securities and in excess of 99% of the common stock of Laclede Electric. As a registered holding company Ogden has come under the ban of the Act.

Reference is here made to certain sections of the Act involved in this action. Under the issues raised by the objectors we are concerned chiefly with Sections 11 (b), (e) and 26(c) of the Act and their effect upon Laclede Gas, Laclede Electric and Ogden in the filing of the plan under consideration.

Section 1 of the Act, after reciting history and illustrations that constitute an indictment of the holding company system in general, concludes:³

"(c) When abuses of the character above enumerated become persistent and wide-spread the holding company becomes an agency which, unless regulated, is injurious to investors, consumers, and the general public; and it is hereby declared to be the policy of this title, in accordance with which policy all the provisions of this title shall be interpreted, to meet the problems and eliminate the evils as enumerated in this section, connected with public-utility holding companies which are engaged in interstate commerce or in activities which directly affect or burden interstate commerce; and for the purpose of effectuating such policy to compel the simplification of public-utility holding-company systems and the elimination therefrom of properties detrimental to the proper functioning of such systems, and to provide as soon as practicable for the elimination of publicutility holding companies except as otherwise expressly provided in this title. * * *"⁴

Paragraph 11 (b) of the Act reads in part as follows:

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

"(1) To require by order, after notice and opportunity for hearing, that each registered holding company, and each subsidiary company thereof, shall take such action as the Commission shall find necessary to limit the operations of the holdingcompany system of which such company is a part to a single integrated public-utility system, and to such other businesses as are reasonably incidental, or economically necessary or appropriate to the operation of such integrated public-utility system. * * *

"(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. In carrying out the provisions of this paragraph the Commission shall require each registered holding company (and any company in the same holding-company system with such holding company) to take such action as the Commission shall find necessary in order that such holding company shall cease to be a holding company with respect to each of its subsidiary companies which itself has a subsidiary company which is a holding company. Except for the purpose of fairly and equitably distributing voting power among the security holders of such company, nothing in this paragraph shall authorize the Commission to require any change in the corporate structure or existence of any company which is not a holding company, or of any company whose principal business is that of a public-utility company."

Paragraph 11(e) of the Act provides:

"(e) In accordance with such rules and regulations or order as the Commission may deem necessary or appropriate in the public interest or for the protection of investors or consumers, any registered holding company or any subsidiary company of a registered holding company may, at any time after January 1, 1936, submit a plan to the Commission for the divestment of control, securities, or other assets, or for other action by such company or any subsidiary company thereof for the purpose of enabling such company or any subsidiary company thereof to comply with the provisions of subsection (b). 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, to enforce and carry out the terms and provisions of such plan. If, upon such application, the court, after notice and opportunity for hearing, shall approve such plan as fair and equitable and as appropriate to effectuate the provisions of section 11, the court as a court of equity may, to such extent as it deems necessary for the purpose of carrying out the terms and provisions of such plan, take exclusive jurisdiction and possession of the company or companies and the assets thereof, wherever located; and the court shall have jurisdiction to appoint a trustee, and the court may constitute and appoint the Commission as sole trustee, to hold or administer, under the direction of the court and in accordance with the plan theretofore approved by the court and the Commission, the assets so possessed."⁵

Subparagraph (c) of Section 26 of the Act reads in part as follows:

"(c) Nothing in this title shall be construed (1) to affect the validity of any loan or extension of credit (or any extension or renewal thereof) made or of any lien created prior or subsequent to the enactment of this title."⁵

The Act was passed by Congress in 1935. The Commission was without power to order compliance with Section 11(b) prior to 1938. As a gesture of cooperative compulsion, it was provided by Section 11(e) of the Act that any registered holding company or a subsidiary thereof could at any time after January 1, 1936, submit a plan "for the purpose of enabling such company or any subsidiary company thereof" to comply with the provisions of Subsection (b) of Section 11. If the plan so submitted was found necessary to effect the provisions of Subsection (b) and was fair and equitable to those affected by such plan, the Commission could approve the plan and "at the request of the company apply to a court, in accordance with the provisions of Subsection (f) of Section 18 of the Act to enforce and carry out the terms and provisions of such plan".⁶

In the year 1941, Laclede Gas, Laclede Electric and Ogden filed a plan with the Commission designed to effect compliance with Section 11(b) of the Act and to meet certain financial problems confronting them. While the plan was pending before the Commission, the Commission (on March 23, 1943) acting under Section 11(b) of the Act, instituted a proceeding directed to Ogden and its subsidiaries which include Laclede Gas and Laclede Electric. There was also pending before the Commission (filed February, 1943) at that time a plan which had been filed by Ogden and its subsidiaries, the purpose of which was to effect compliance by Ogden and its subsidiaries with the provisions of the Act and the terms of an amended plan of reorganization dated July 10, 1939 of Utilities Power & Light Corporation, predecessor in reorganization of Ogden. These three proceedings were consolidated. On May 20, 1943, the Commission issued its finding, opinion and order in the consolidated proceeding, which order, among other things, pursuant to Section 11(b) of the Act, directed Ogden to divest itself of all interests in public utility companies; directed that Laclede Gas take such steps as may be necessary to recapitalize, so as to distribute voting power fairly and equitably among the security holders of such company; and approved that portion of the Ogden plan which proposed that the Laclede Gas would be recapitalized in such a manner as to reduce substantially its outstanding debt, eliminate its preferred stock dividend arrears and convert its preferred and common stock into a single class of stock. The plan now before this Court, filed by Laclede Gas, Laclede Electric and Ogden is designed to comply with requirements of the order made in the consolidated case and to effect a reorganization of Laclede Gas as set out in the Ogden plan. In the proceeding before the Commission briefs and oral argument were waived except on the question raised by objectors to the provisions of the plan filed by Laclede Gas, Laclede...