In re United Corp., Civ. A. No. 1146.

• Decision Date: 02 March 1954
• Docket Number: Civ. A. No. 1146.
• Citation: 119 F. Supp. 524
• Parties: In re UNITED CORP.
• Court: U.S. District Court — District of Delaware

119 F. Supp. 524

In re UNITED CORP.

Civ. A. No. 1146.

United States District Court D. Delaware.

March 2, 1954.

COPYRIGHT MATERIAL OMITTED

David F. Anderson (of Berl, Potter & Anderson), Wilmington, Del., Patrick H. Sullivan and William T. Farley (of Whitman, Ransom, Coulson & Goetz), New York City, for United Corp.

Myron S. Isaacs, Chief Counsel, Division of Public Utilities, W. R. Nowlin and Herbert D. Miller, Washington, D. C., for Securities and Exchange Commission.

Louis Boehm, New York City, John F. Davis, Washington, D. C., and Randolph Phillips, pro se.

LEAHY, Chief Judge.

In 1948, the Securities and Exchange Commission approved¹ a plan for the involuntary retirement of preference stock filed by the United Corporation under § 11 (e) of the Public Utility Holding Company Act of 1935, 15 U.S.C.A. § 79 et seq. Upon the Commission's application, this court in 1949 enforced the plan as approved.² Subsequently, all appeals were either withdrawn or dismissed, and the plan was consummated. Jurisdiction over further proceedings incident to the plan including the payment of fees and expenses was reserved by both the Commission and this court. Fourteen fee applications were made to the SEC, public hearings held, and the SEC decision³ issued on June 4, 1952, granting three in the sums requested, awarding substantially reduced sums to eight applicants, and wholly denying three applications. In the present proceeding, the SEC seeks court enforcement of its fee determinations under §§ 11(e) and 18(f) of the Act. Two applicants have objected to the amounts of the fees allowed them. Cross-objections have been made by various parties to allowances granted to eight fellow fee applicants. The issues are thus joined. The three applicants whose requests were denied have not appeared to contest the SEC decision, and, therefore, no issues have been raised as to them.

A capsule recapitulation of United's recent history under the Act is appropriate. In August 1943, the SEC issued an order in proceedings brought under § 11 (b) (2) of the Act directing United to change its existing capitalization to one class of stock and to take such action as would terminate its existence as a holding company.⁴ Thereafter, United filed two plans providing for the voluntary exchange of its $3 cumulative preference stock (entitled to $50 per share upon liquidation and $55 per share upon redemption plus accrued dividends) for portfolio securities and cash.⁵ Through these two exchange plans, United reduced the amount of preference stock outstanding to somewhat more than a million shares.

A third plan (the "retirement plan"), with respect to which the instant applications for fees and expenses have been made,⁶ was filed by United in June 1947 providing for the retirement of the remaining outstanding preference stock by exchanging for each share a package of portfolio securities and cash.

Various stockholders opposed this plan. A preference stockholders committee, through counsel,⁷ objected to its fairness and proposed the exchange be voluntary rather than compulsory. Counsel⁸ for certain institutional holders of preference stock offered testimony and exhibits of an expert witness in opposition to the plan, and counsel⁹ for certain individual preference shareholders also introduced evidence with respect to fairness. A beneficial owner¹⁰ of common stock proposed retirement of the preferred by cash derived from the sale of portfolio securities to United's common stockholders through the use of purchase warrants. However, after an amendment by United slightly changing the contents of the original exchange package, the SEC approved and this court enforced the plan proposed by United.¹¹

The applicable standards which the Commission set for itself to gauge the amount of compensation due the applicants are identical with those set in the Engineers Public Service Company fee decision,¹² with the addition of the factor of applicants' trafficking in United's stock. Opinion on the fee aspects of the Engineers case has recently been filed. See In the Matter of Engineers Public Service Company, D.C.Del., 116 F.Supp. 930. Reference is made to that decision for treatment of the standards there applied by SEC and equally applicable here. The application of the legal standards of Engineers to the dissimilar factual matter of United's retirement phase results in awards immune to dollar comparison. Basic dissimilarities in the two cases portend the difference in results. Engineers' complexity and pioneering in legal problem for which there was no precedent are not found here. Engineers' contribution to development of reorganization law in general was, according to the profession, epochal in comparison with United's personal problem in valuation of the exchange package. Engineers ran the gauntlet from the SEC to the Supreme Court, success alternating among the contestants, as the litigation swung its way. United proceeded from the SEC to this court without prosecution of appeal or change in result. United did not present a legal challenge of Engineers' calibre. More than that, the cross-objections of fee claimants raise issues having no counterpart in Engineers, wherein neither management nor applicants objected to the fees requested. Separation of the pertinent issues governs the order in which the applicants have been grouped, their applications and the cross-objections considered.

Phillips and Davis

1. Fees in the aggregate amount of $46,000 and reimbursement of expenses totaling $42,201.14 were requested by Phillips. The SEC awarded him a fee of $2,000 and $370.84 for expenses. The principal reason for the great divergence between requests and the allowance is the SEC denied Phillips' request for compensation based on his activities relating to United's 1944 plan and on his proxy contests with United's management in 1943, 1944, and 1947. Upon this decision the SEC then narrowed its consideration to Phillips' allocation of $6,000 of his total fee request and $370.84 of the total expenses to the proceedings relating to the retirement plan. Thus, of the prorated request for a $6,000 fee, $2,000 was allowed plus all of the $370.84 prorated expenses.

The record shows Phillips' activities pertaining to the retirement plan consisted of opposition to United's plan before the SEC, profert of a substitute plan of his own, a motion in this court for a change of venue in the enforcement proceedings, a brief and argument in this court opposing enforcement, and a motion for stay of enforcement of the court approved plan in the Court of Appeals and argument thereon. Success did not attend any of these efforts to which Phillips approximates devotion of 300 hours. For a part of the proceedings before the SEC,¹³ Phillips' counsel, Davis, was his "voice", as the attorney himself characterized his role at the hearing. As such counsel, Davis himself applied for a $5,000 fee for his approximated 20 days activity and was allowed $2,000 by the SEC. However, despite his retention of counsel, the services rendered by Phillips were those ordinarily performed by an attorney-at-law. This factor is the foundation of the first objection made by United in its opposition to any allowance to Phillips. Commissioner Millonzi also placed emphasis on Phillips' lay status in his dissent¹⁴ to the Commission's allowance of a fee to the applicant.

2. The second of the SEC's Rules of Practice¹⁵ provides that "An individual may appear in his own behalf" and further "A person may be represented in any proceeding by an attorney at law", with no other manner of representation permissible. For part of the proceedings before the SEC, Phillips utilized both types of representation. In its findings,¹⁶ the SEC adverts to Phillips as "the beneficial owner of 1,100 shares of United's common stock who appeared on his own behalf" and to his counsel as one "who also represented him (Phillips) in his stated capacity as attorney-in-fact for other common stockholders". A footnote clarifies this reference by citing Rule 2, explaining, "Phillips is not a lawyer and, therefore, while he could appear on his own behalf, he could not represent others even though he held authorizations to act as attorney-in-fact." In the light of its allowances, the SEC would seem to be compensating Phillips for his self representation and Davis for representing Phillips in the latter's capacity as attorney-in-fact for other common shareholders. Since SEC can best interpret and police its own rules of practice, I must accept its majority decision on this point.¹⁷ Phillips' fee application is delimited to his efforts before the SEC and the courts as a lay representative of "Phillips the stockholder".

3. Likewise, I sustain the SEC in its findings¹⁸ that the present proceeding is not the appropriate one to fix Phillips' fees for services directed to the 1944 plan or to the 1943-47 proxy contests. Only services relating to the retirement plan are here being evaluated. The SEC had ample evidence in which to root its denial of any allowance to Phillips "in these proceedings"¹⁹ for his activities in other phases of United's transformation. Applicant's activities even antedated the filing of the retirement plan. Phillips' insistence of some wholesome, overall effect on the retirement plan from his other activities is quite nebulous and without demonstrable connection. I construe HCAR 11290 as properly deciding Phillips' prior activities were not compensable in the instant retirement plan fee applications.²⁰

4. There remains Phillips' allocated fee request of $6,000 and $370.84 of expenses directly attributed to his retirement plan services. All of the prorated expenses were allowed by the SEC. I, too, approve $370.84 disbursement as being equitable. Of the $6,000 request, $2,000 was awarded for fees. The reasons for this are given in the Commission's words:²¹ "Thus in the proceedings on the retirement plan Phillips was entirely...