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329 U.S. 29
67 S.Ct. 1
91 L.Ed. 22
CHAMPLIN REFINING COv.UNITED STATES et al.
No. 21.
Argued Oct. 18, 21, 1946.
Decided Nov. 18, 1946.
Rehearing Denied Dec. 16, 1946.
See 329 U.S. 831, 67 S.Ct. 363.
Appeal from the District Court of the United States for the Western District of Oklahoma.
Messrs.Dan Moody, of Austin, Tex., and Harry O. Glasser, of Enid, Okla., for appellant.
Mr. Edward Dumbauld, of Washington, D.C., for appel-
[Argument of Counsel from page 30 intentionally omitted]
lees. Mr. Justice JACKSON delivered the opinion of the Court.
1
The Interstate Commerce Commission, acting under § 19a of the Interstate Commerce Act,1 ordered the appellant to furnish certain inventories, schedules, maps and charts of its pipe line property.2 Champlin's objections that the Act does not authorize the order, or if it be construed to do so is unconstitutional, were overruled by the Commission and again by the District Court which dismissed the company's suit for an injunction.3 These questions of law are brought here by appeal. Judicial Code, § 238, 28 U.S.C. § 345, 28 U.S.C.A. § 345.
2
Champlin owns and operates a line of six-inch pipe 516 miles in length lying in five states. Originating at Champlin's Enid, Oklahoma refinery, it crosses Kansas, Nebraska, a part of South Dakota, and ends in Iowa. It is used only to convey the company's own refinery products to its own terminal stations at Hutchinson, Kansas; Superior, Nebraska, and Rock Rapids, Iowa, at each of which the line connects with storage facilities from which deliveries are made.
3
The statute, so far as relevant, says that it shall apply 'to common carriers engaged in,' 'transportation of oil or other commodity' by pipe line from one state to another. It provides also, that 'common carrier' includes 'all pipe-line companies.'4 This language on its face would seem to cover the appellant's operation.
4
Champlin contends, however, that the 'transportation' mentioned in the Act does not refer to the carriage of one's own goods. The District Court has found that Champlin is the sole owner of the products transported through its pipe line; it has never transported, offered to transport, or been asked to transport any products belonging to any other company or person; its pipe line does not connect with any other pipe line but only with storage tanks at the three terminal points; there are no facilities for putting any petroleum product into the line other than at the Enid refinery; delivery of the products at the three terminal points is made from Champlin's storage tanks by means of truck racks or railroad tank car racks and is not made directly from the pipe line in any instance; no tariffs stating transportation charges have been filed with the Interstate Commerce Commission or with any State commission or regulatory body.
5
Because of these facts the appellant suggests that the language and holding of this Court concerning the Uncle Sam Oil Company in The Pipe Line Cases, 234 U.S. 548, 34 S.Ct. 956, 58 L.Ed. 1459, approved in Valvoline Oil Company v. United States, 308 U.S. 141, 60 S.Ct. 160, 84 L.Ed. 151, govern this case. The Uncle Sam Company operation is described as 'simply drawing oil from its own wells across a state line to its own refinery, for its own use, and that is all, * * *.' The Pipe Line Cases, 234 U.S. 548, 562, 34 S.Ct. 956, 959, 58 L.Ed. 1459. The Court considered this was not 'transportation' within the meaning of the Act.
6
But we think it would expand the actual holding of that case to apply its conclusion to Champlin. The controlling fact under the statute is transporting commodities from state to state by pipe line. Admittedly Champlin is not a common carrier in the sense of the common law carrier for hire. However, the Act does not stop at this but goes on to say that its use of the term 'common carrier' is to include all pipe line companies—a meaningless addition if it thereby included only what the term without more always had included. While Champlin technically is transporting its own oil, manufacturing processes have been completed; the oil is not being moved for Champlin's own use. These interstate facilities are operated to put its finished products in the market in interstate commerce at the greatest economic advantage.
7
Examination of Champlin's pricing methods supports the view that appellant is engaged in transportation even though the products are still its own when moved. The District Court found that price at the terminal points includes f.o.b. price at the Enid refinery and an additional sum called a differential. The differential is the through railroad freight rate from Enid to the final destination (usually the purchaser's place of business) less the carrying charges from the pipe line terminal to final destination. The District Court found, however, that competitive and other conditions 'sometimes cause departures from the prices arrived at in accordance with the formula above described.' Appellant states that as to some deliveries 'rail rates were used merely as a basis for calculating a delivered price, not as a charge for transportation.' Even so, and even though departures from the calculated differential are substantial and frequent, we think this practice points up a significant distinction from the Uncle Sam case.
8
We hold that Champlin's operation is transportation within the meaning of the Act and that the statute supports the Commission's order to furnish information.
9
Appellant further contends that, as so construed, the Act exceeds the commerce power of Congress and violates the due process clause of the Fifth Amendment because it is argued that this interpretation converts a private pipe line into a public utility and requires a private carrier to become a common carrier. But our conclusion rests on no such basis and affords no such implication. The power of Congress to regulate interstate commerce is not dependent on the technical common carrier status but is quite as extensive over a private carrier. This power his yet been invoked only to the extent of requiring Champlin to furnish certain information as to facilities being used in interstate marketing of its products. The commerce power is adequate to support this requirement whether appellant be considered a private carrier or a common carrier.
10
The contention that the statute as so construed violates the due process clause by imposing upon a private carrier the obligations of a conventional common carrier for hire is too premature and hypothetical to warrant consideration on this record. The appellant in its entire period of operation has never been asked to carry the products of another and may never be. So far, the Commission has made no order which changes the appellant's obligations to any other company or person. If it does, it will be timely to consider concrete requirements and their specific effects on appellant. At present, appellant is asked only to provide information about a subject within the power possessed by Congress and delegated to the Commission, and that cannot be considered a taking of property even if it arouses appellant's premonitions.
11
We hold that the order before us is authorized by statute and that in this respect the statute is within the commerce power and does not offend the Fifth Amendment.
12
Affirmed.
13
Mr. Justice REED, with whom Mr. Justice FRANKFURTER, Mr. Justice DOUGLAS and Mr. Justice BURTON join dissenting.
14
This appeal brings into question the extent to which the Interstate Commerce Act covers pipe lines by virtue of the provisions of § 1 and § 19a.1 Acting under the authority of these sections, the Interstate Commerce Commission called upon the appellant, Champlin Refining Company, for reports deemed appropriate for it to make, if it is a common carrier under the act. The appellant challenged the Commission's order on the ground that it was not covered by the sections.
15
Champlin owns a pipe line for the carriage of oil or other similar commodity from its refinery in Oklahoma to various distributing points in other states. It carries no commodities except its own produced in its own refinery and delivered at the ends of the pipe line into its own storage or holding tanks for sale to its customers. It also is sole owner of the stock of the Cimarron Valley Pipe Line Company, admittedly an intrastate common carrier, that supplies the Champlin refinery with its crude oil. The Commission's orders for valuation reports do not treat Champlin and Cimarron as a unitary operation. The Commission, at this bar, disclaimed expressly any intention to test the subjection of Champlin's distributing pipe line to Commission power by Champlin's ownership of the Cimarron stock. As the Court treats the situation as though Champlin's distributing pipe line, between the refinery and the sale tanks only, were involved, we accept for the purpose of this dissent the Commission's view of the test to be applied to Champlin.
16
Section 1 of the act applies its provisions to 'common carriers engaged in—* * * the transportation of oil' or similar commodities. In The Pipe Line Cases, 234 U.S. 548, 34 S.Ct. 956, 58 L.Ed. 1459, and Valvoline Oil Co. v. United States, 308 U.S. 141, 60 S.Ct. 160, 84 L.Ed. 151, this Court interpreted the term 'common carrier' to include all interstate pipe line companies that are engaged, within the purview of the act, in the transportation of oil. In these cases, pipe line companies that carried only their own oil, although all or a large part of it was purchased from producers prior to its carriage in the pipe lines, were held common carriers within the meaning and purpose of the act, though not common carriers in the technical sense of holding one's self out to carry indiscriminately all oil offered, because the act's evident purpose was to bring within its scope all pipe lines that would carry all oil offered 'if only the offerers would sell' at the carrier's price. In the Valvoline case, this interpretation of the 1906 Act, 34 Stat. 584, was found to have been carried into the act, as amended in 1920, 41 Stat. 474, despite certain changes in language. 308 U.S. at page 145, 60 S.Ct. at page 162, 84 L.Ed. 151.
17
It is to be noted, however, that the Pipe Line and Valvoline cases did not bring within the scope of the Interstate Commerce Act all pipe lines that carried oil interstate. If the companies were common carriers in substance, the act made them so in form. Those pipe lines held covered by the act in The Pipe Line Cases and Valvoline were found common carriers in substance because they purchased and carried all oil offered. The Interstate Commerce Act continually has required such carriers to be engaged in the transportation of oil or other commodities. In The Pipe Line Cases, a company, Uncle Sam Oil Company, though a pipe line carrying oil, was held beyond the act's reach because not engaged in the transportation of oil as a common carrier within the purpose of the act.
18
'When, as in this case, a company is simply drawing oil from its own wells across a state line to its own refinery, for its own use, and that is all, we do not regard it as falling within the description of the act, the transportation being merely an incident to use at the end.' 234 U.S. at page 562, 34 S.Ct. at page 959, 58 L.Ed. 1459.
19
There has been no change bearing on this question in the applicable acts since The Pipe Line Cases. As a matter of statutory construction, we see no reason to change from this Court's long standing interpretation. If Congress desires to undertake regulation of the transportation of an interstate carrier, in substance a private carrier, it understands the method of approach. 49 U.S.C. § 304(a)(3), 49 U.S.C.A § 304(a)(3). There is no pertinent legislative history to support so broad an interpretation of pipe line legislation. The evil sought to be remedied was the mastery of oil through control of the gathering facilities.2 If a line does not carry oil of others, it is not transporting within the contemplation of the act.
20
In the Uncle Sam case it was said that the transportation of oil from well to refinery was 'merely an incident to use at the end.' We see no difference between the use contemplated by the Uncle Sam Company and this company. Each carries its own oil for the same ultimate purpose—to reach the market.
21
Nor can we see any significant distinction from the Uncle Sam case in the practice of Champlin to use frequently the freight rate from Enid to the final destination as a measure of the addition to Enid refinery, f.o.b. price that it will charge at its distributing tanks. This practice is departed from to meet competition. Naturally some transportation cost must be added to the refinery price for deliveries elsewhere. How much it is or how it is calculated does not seem to us to bear upon the question of whether Champlin is a 'common carrier engaged in—* * * the transportation of oil' within the scope of the act.
22
We would have a very different case than the one before us if Congress had provided that all owners of pipe lines carrying oil in interstate commerce should give appropriate information to the Interstate Commerce Commission. This is not what § 19a does. It requires reports only from 'every common carrier subject to the provisions' of the act. When an enterprise is 'subject to the provisions' of the act is defined by § 1(1)(b) and § 1(3). Therefore, it is not § 19a but § 1 that must be construed. The definition of § 1 flows not only into § 19a but also into various other sections. Once an enterprise is found to be included in § 1, the Interstate Commerce Act subjects it to § 19a and other provisions dealing with common carriers 'subject to' the act. Thus, to give several instances, it must provide equal and reasonable transportation to all comers, (§ 1(4—6)); and it must file a schedule of rates (§ 6(1). If, therefore, any doubt is felt about the applicability of some of these requirements, the doubts are properly to be taken into account in determining the scope of § 1. The range of servitudes to which this pipe line is subjected by including it in § 1 bears vitally upon whether such a construction should be given to § 1.
23
For the reasons detailed above, we do not think that Champlin is covered by the act and we would reverse the decree of the District Court.
1
'* * * the commission shall, * * * investigate, ascertain, and report the value of all the property owned or used by every common carrier subject to the provisions of this act. * * * The commission shall make an inventory which shall list the property of every common carrier subject to the provisions of this act in detail, and show the value thereof as hereinafter provided, and shall classify the physical property, as nearly as practicable, in conformity with classification of expenditures for road and equipment, as prescribed by the Interstate Commerce Commission.' 37 Stat. 701, 49 U.S.C. § 19a, 49 U.S.C.A. § 19a.
2
On May 15, 1941, the Interstate Commerce Commission, by letter addressed to the president of the Champlin Refining Company, requested that the company prepare and file with the Commission 'a complete inventory of the pipe line property of the Champlin Refining Company, except land, showing the quantities, units, classes, kinds, and condition thereof.' The Commission enclosed with its letter copies of its Valuation Orders Nos. 26 and 27, with which the inventory was to comply. The Champlin company did not respond to the request in a manner satisfactory to the Commission, and on June 12, 1944, the Commission made the order of which the company here complains. It directed the company to comply with the provisions of Valuation Orders Nos. 26 and 27 within 90 days of the service of the order.
3
In response to the Commission's letter of May 15, 1941, the Champlin company filed with the Commission information and charts which it believed would satisfy the Commission's request. The Commission, however, returned that report to the company, because in it the company had not recognized that it was a statutory common carrier and had not compiled the report from that viewpoint. The company then requested a hearing before the Commission to determine its status. On December 14, 1942, and on reargument, June 12, 1944, the Commission decided that appellant is a common carrier subject to the provisions of the Act. After the Commission had issued its supplementary order of June 12, 1944, appellant petitioned the district court for an injunction against the order. In accordance with §§ 46 and 47 of Title 28 U.S.C., 28 U.S.C.A. §§ 46, 47, the district judge convened a three judge court, which heard the case and dismissed appellant's petition.
4
§ 1. '(1) (That) the provisions of this act shall apply to common carriers engaged in—* * *
'(b) The transportation of oil or other commodity, * * * by pipe line, * * * from one State * * * to any other State * * *.
'(3) (a) The term 'common carrier' as used in this act shall include all pipeline companies; * * * express companies; sleeping-car companies; and all persons, natural or artificial, engaged in such transportation or transmission as aforesaid as common carriers for hire.' 41 Stat. 474, as amended, 48 Stat. 1102, 49 U.S.C. § 1, 49 U.S.C.A. § 1. The last words of § 1(3)(a), 'engaged in such transportation or transmission as aforesaid as common carriers for hire', do 'not affect the generality of the first clause as to pipe line companies.' Valvoline Oil Co. v. United States, 308 U.S. 141, 146, 60 S.Ct. 160, 162, 84 L.Ed. 151.
1
49 U.S.C. § 1, 49 U.S.C.A. § 1:
'(1) * * * The provisions of this chapter shall apply to common carriers engaged in—
'(b) The transportation of oil or other commodity, except water and except natural or artificial gas, by pipe line, or partly by pipe line and partly by railroad or by water;
'(3) (a) The term 'common carrier' as used in this chapter shall include all pipe-line companies; * * * express companies; sleeping-car companies; and all persons, natural or artificial, engaged in such transportation as aforesaid as common carriers for hire. * * *'
49 U.S.C. § 19a, 49 U.S.C.A. § 19a:
'* * * The Commission shall * * * investigate, ascertain, and report the value of all the property owned or used by every common carrier subject to the provisions of this chapter. * * * The Commission shall * * * make an inventory which shall list the property of every common carrier subject to the provisions of this chapter in detail, and show the value thereof as hereinafter provided, and shall classify the physical property, as nearly as practicable, in conformity with the classification of expenditures for road and equipment, as prescribed by the Interstate Commission.'
2
234 U.S. at pages 558, 559, 34 S.Ct. at page 958, 58 L.Ed. 1459: 'By the before-mentioned and subordinate lines the Standard Oil Company had made itself master of the only practicable oil transportation between the oil fields east of California and the Atlantic Ocean, and carried much the greater part of the oil between those points.'
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329 U.S. 1
67 S.Ct. 6
91 L.Ed. 3
HALLIBURTON OIL WELL CEMENTING CO.v.WALKER, et al.
No. 24.
Argued Oct. 23, 24, 1946.
Decided Nov. 18, 1946.
Mr.Earl Babcock, of Duncan, Okl. (Harry C. Robb, of Washington, D.C., on the brief), for petitioner.
Mr. Harold W. Mattingly, of Los Angeles, Cal., for respondents.
Mr. Justice BLACK delivered the opinion of the Court.
1
Cranford P. Walker, owner of Patent No. 2,156,519, and the other respondents, licensees under the patent, brought this suit in a federal district court alleging that petitioner, Halliburton Oil Well Cementing Company, had infringed certain of the claims of the Walker patent. The district court held the claims in issue valid and infringed by Halliburton. The circuit court of appeals affirmed, 9 Cir., 146 F.2d 817, and denied Halliburton's petition for rehearing. 149 F.2d 896. Petitioner's application to this Court for certiorari urged, among other grounds, that the claims held valid failed to make the 'full, clear, concise, and exact' description of the alleged invention required by Rev.Stat. § 4888, 35 U.S.C. § 33, 35 U.S.C.A. § 33,1 as that statute was interpreted by us in General Electric Co. v. Wabash Appliance Corporation, 304 U.S. 364, 58 S.Ct. 899, 82 L.Ed. 1402.2 This statutory requirement of distinctness and certainty in claims is important in patent law. We granted certiorari to consider whether it was correctly applied in this case. 326 U.S. 705, 66 S.Ct. 90.3
2
The patent in suit was sustained as embodying an improvement over a past patent of Lehr and Wyatt (No. 2,047,974) upon an apparatus designed to facilitate the pumping of oil out of wells which do not have sufficient natural pressures to force the oil to gush. An outline of the background and setting of these patents is helpful to an understanding of the problem presented.
3
In order to operate a pump in an oil well most efficiently, cheaply, and with the least waste, the pump must be placed in an appropriate relationship to the fluid surface of the oil. Properly to place the pump in this relationship requires knowledge of the distance from the well top to the fluid surface. At least by the latter 1920's problems of waste and expense in connection with non-gusher oil wells pressed upon the industry. See Railroad Commission of Texas v. Rowan & Nichols Oil Co., 310 U.S. 573, 60 S.Ct. 1021, 84 L.Ed. 1368; Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424. It became apparent that inefficient pumping, one cause of waste, was in some measure attributable to lack of accurate knowledge of distance from well top to fluid surface. Ability to measure this distance in each separate non-gusher oil well became an obvious next step in the solution of this minor aspect of the problem of waste.
4
The surface and internal machinery and the corkscrew conformation of some oil wells make it impractical to measure depth by the familiar method of lowering a rope or cable. In casting about for an alternative method it was quite natural to hit upon the possibility of utilizing a sound-echo-time method. Unknown distances had frequently been ascertained by this method. Given the time elapsing between the injection of a sound into an oil well and the return of its echo from the fluid surface, and assuming the velocity of the sound to be about 1,100 feet per second, as it is in the open air, it would be easy to find the distance. Not only had this sound-echo-time method been long known and generally used to find unknown distances, but in 1898 Batcheller, in Patent No. 602,422, had described an apparatus to find a distance in a tubular space. Obviously an oil well is such a space. He described a device whereby the noise from a gun might be injected into a tube; the returning echoes from obstructions agitated a diaphragm, which in turn moved a stylus. The stylus recorded on a piece of paper a graph or diagram showing the variant movements of the diaphragm caused by its response to all the different echo waves.
5
In the late 1920's the oil industry began to experiment in the use of this same sound-echo-time method for measuring the distance to the fluid surface in deep oil wells. A product of this experimentation was the Lehr and Wyatt patent, upon which the present patent claims to be an improvement. It proposed to measure the distance by measuring the time of travel of the echo of 'an impulse wave' generated by a 'sudden change in pressure.' The apparatus described included a gas cylinder with a quick operating valve by means of which a short blast of gas could be injected into a well. It was stated in the patent that the time elapsing between the release of the gas and the return of the echo of the waves produced by it could be observed in any desired manner. But the patentee's application and drawings noted that the wave impulses could be recorded by use of a microphone which might include an amplifier and an appropriate device to record a picture of the wave impulses.
6
This Lehr and Wyatt patent, it is therefore apparent, simply provided an apparatus composed of old and well-known devices to measure the time required for pressure waves to move to and back from the fluid surface of an oil well. But the assumption that sound and pressure waves would travel in oil wells at open-air velocity of 1,100 feet per second proved to be erroneous. For this reason the timevelocity computation of Lehr and Wyatt for measuring the distance to the fluid surface produced inaccurate results.
7
After conferences with Lehr, Walker undertook to search for a method which would more accurately indicate the sound and pressure wave velocity in each well. Walker was familiar with the structure of oil wells. The oil flow pipe in a well, known as a tubing string, is jointed and where these joints occur there are collars or shoulders. There are also one or more relatively prominent projections on the oil flow pipe known as tubing catchers. In wells where the distance to the tubing catcher is known, Walker observed that the distance to the fluid surface could be measured by a simple time-distance proportion formula.4 For those wells in which the distance to the tubing catcher was unknown, Walker also suggested another idea. The sections of tubing pipe used in a given oil well are generally of equal length. Therefore the shoulders in a given well ordinarily are at equal intervals from each other. But the section length and therefore the interval may vary from well to well. Walker concluded that he could measure the unknown distance to the tubing catcher if he could observe and record the shoulder echo waves. Thus multiplication of the number of shoulders observed by the known length of a pipe section would produce the distance to the tubing catcher. With this distance, he could solve the distance to the fluid surface by the same proportion formula used when the distance to the tubing catcher was a matter of record. The Lehr and Wyatt instrument could record all these echo waves. But the potential usefulness of the echoes from the shoulders and the tubing catcher which their machine recorded had not occurred to Lehr and Wyatt and consequently they had made no effort better to observe and record them. Walker's contribution which he claims to be invention was in effect to add to Lehr and Wyatt's apparatus a well-known device which would make the regularly appearing shoulder echo waves more prominent on the graph and easier to count.
8
The device added was a mechanical acoustical resonator. This was a short pipe which would receive wave impulses at the mouth of the well. Walker's testimony was, and his specifications state, that by making the length of this tubal resonator one-third the length of the tubing joints, the resonator would serve as a tuner, adjusted to the frequency of the shoulder echo waves. It would simultaneously amplify these echo waves and eliminate unwanted echoes from other obstructions thus producing a clearer picture of the shoulder echo waves. His specifications show, attached to the tubal resonator, a coupler, the manipulation of which would adjust the length of the tube to one-third of the interval between shoulders in a particular well. His specifications and drawings also show the physical structure of a complete apparatus, designed to inject pressure impulses into a well, and to receive, note, record and time the impulse waves.
9
The District Court held the claims here in suit valid upon its finding that Walker's 'apparatus differs from and is an improvement over the prior art in the incorporation in such apparatus of a tuned acoustical means which performs the functions of a sound filter * * *.' The circuit court of appeals affirmed this holding, stating that the trial court had found 'that the only part of this patent constituting invention over the prior art is the 'tuned acoustical means which performs the functions of a sound filter."
10
For our purpose in passing upon the sufficiency of the claims against prohibited indefiniteness we can accept without ratifying the findings of the lower court that the addition of '(a) tuned acoustical means' performing the 'functions of a sound filter' brought about a new patentable combination, even though it advanced only a narrow step beyond Lehr and Wyatt's old combination.5 We must, however, determine whether, as petitioner charges, the claims here held valid run afoul of Rev.Stat. § 4888 because they do not describe the invention but use 'conveniently functional language at the exact point of novelty.' General Electric Co. v. Wabash Appliance Corporation supra, 304 U.S. at page 371, 58 S.Ct. at page 903, 82 L.Ed. 1402.
11
Walker, in some of his claims, e.g., claims 2 and 3, does describe the tuned acoustical pipe as an integral part of his invention, showing its structure, its working arrangement in the alleged new combination, and the manner of its connection with the other parts. But no one of the claims on which this judgment rests has even suggested the physical structure of the acoustical resonator.6 No one of these claims describes the physical relation of the Walker addition to the old Lehr and Wyatt machine. No one of these claims describes the manner in which the Walker addition will operate together with the old Lehr and Wyatt machine so as to make the 'new' unitary apparatus perform its designed function. Thus the claims failed adequately to depict the structure, mode, and operation of the parts in combination.
12
A claim typical of all of those held valid only describes the resonator and its relation with the rest of the apparatus as 'means associated with said pressure responsive device for tuning said receiving means to the frequency of echoes from the tubing collars of said tubing section to clearly distinguish the echoes of said couplings from each other.'7 The language of the claim thus describes this most crucial element in the 'new' combination in terms of what it will do rather than in terms of its own physical characteristics or its arrangement in the new combination apparatus. We have held that a claim with such a description of a product is invalid as a violation of Rev.Stat. § 4888. Holland Furniture Co. v. Perkins Glue Co., 277 U.S. 245, 256, 257, 48 S.Ct. 474, 478, 479, 72 L.Ed. 868; General Electric Co. v. Wabash Appliance Corporation, supra. We understand that the circuit court of appeals held that the same rigid standards of description required for product claims is not required for a combination patent embodying old elements only. We have a different view.
13
Rev.Stat. § 4888 pointedly provides that 'in the case of a machine, he (the patentee) shall explain the principle thereof, and the best mode in which he has contemplated applying that principle, so as to distinguish it from other inventions; and he shall particularly point out and distinctively claim the part, improvement, or combination which he claims as his invention or discovery.' It has long been held that the word 'machine' includes a combination. Corning et al. v. Burden, 15 How. 252, 267, 14 L.Ed. 683. We are not persuaded that the public and those affected by patents should lose the protection of this statute merely because the patented device is a combination of old elements.
14
Patents on machines which join old and well-known devices with the declared object of achieving new results, or patents which add an old element to improve a preexisting combination, easily lend themselves to abuse. And to prevent extension of a patent's scope beyond what was actually invented, courts have viewed claims to combinations and improvements or additions to them with very close scrutiny. Cf. Lincoln Engineering Co. of Illinois v. Stewart Warner Corporation, 303 U.S. 545, 549—551, 58 S.Ct. 662, 82 L.Ed. 1008. For the same reason, courts have qualified the scope of what is meant by the equivalent of an ingredient of a combination of old elements. Gill v. Wells, 22 Wall. 1, 28, 29, 22 L.Ed. 699. Fuller v. Yentzer, 94 U.S. 288, 297, 298, 24 L.Ed. 103. It is quite consistent with this strict interpretation of patents for machines which combine old elements to require clear description in combination claims. This view, clearly expressed in Gill v. Wells, supra, is that
15
'Where the ingredients are all old the invention * * * consists entirely in the combination, and the requirement of the Patent Act that the invention shall be fully and exactly described applies with as much force to such an invention as to any other class, because if not fulfilled all three of the great ends intended to be accomplished by that requirement would be defeated. * * * (1.) That the Government may know what they have granted and what will become public property when the term of the monopoly expires. (2.) That licensed persons desiring to practice the invention may know, during the term, how to make, construct, and use the invention. (3.) That other inventors may know what part of the field of invention is unoccupied.
16
'Purposes such as these are of great importance in every case, but the fulfillment of them is never more necessary than when such inquiries arise in respect to a patent for a machine which consists of a combination of old ingredients. Patents of that kind are much more numerous than any other, and consequently it is of the greatest importance that the description of the combination, which is the invention, should be full, clear, concise, and exact.' Gill v. Wells, supra, 22 Wall. at pages 25, 26, 22 L.Ed. 699.
17
These principles were again emphasized in Merrill v. Yeomans, 94 U.S. 568, 570, 24 L.Ed. 235, where it was said that '* * * in cases where the invention is a new combination of old devices, he (the patentee) is bound to describe with particularity all these old devices, and then the new mode of combining them, for which he desires a patent.' This view has most recently been reiterated in General Electric Co. v. Wabash Appliance Corporation, supra, 304 U.S. at pages 368, 369, 58 S.Ct. at pages 901, 902, 82 L.Ed. 1402. Cogent reasons would have to be presented to persuade us to depart from this established doctrine. The facts of the case before us, far from undermining our confidence in these earlier pronouncements, reinforce the conclusion that the statutory requirement for a clear description of claims applies to a combination of old devices.
18
This patent and the infringement proceedings brought under it illustrate the hazards of carving out an exception to the sweeping demand Congress made in Rev.Stat. § 4888. Neither in the specification, the drawing, nor in the claims here under consideration, was there any indication that the patentee contemplated any specific structural alternative for the acoustical resonator or for the resonator's relationship to the other parts of the machine. Petitioner was working in a field crowded almost, if not completely, to the point of exhaustion. In 1920, Tucker, in Patent No. 1,451,356, had shown a tuned acoustical resonator in a sound detecting device which measured distances. Lehr and Wyatt had provided for amplification of their waves. Sufficient amplification and exaggeration of all the different waves which Lehr and Wyatt recorded on their machine would have made it easy to distinguish the tubing catcher and regular shoulder waves from all others. For, even without this amplification, the echo waves from tubing collars could by proper magnification have been recorded and accurately counted, had Lehr and Wyatt recognized their importance in computing the velocity. Cf. General Electric Co. v. Jewel Incandescent Lamp Co., 326 U.S. 242, 66 S.Ct. 81.
19
Under these circumstances the broadness, ambiguity, and overhanging threat of the functional claim of Walker become apparent. What he claimed in the court below and what he claims here is that his patent bars anyone from using in an oil well any device heretofore or hereafter invented which combined with the Lehr and Wyatt machine performs the function of clearly and distinctly catching and recording echoes from tubing joints with regularity. Just how many different devices there are of various kinds and characters which would serve to emphasize these echoes, we do not know. The Halliburton device, alleged to infringe, employs an electric filter for this purpose. In this age of technological development there may be many other devices beyond our present information or indeed our imagination which will perform that function and yet fit these claims. And unless frightened from the course of experimentation by broad functional claims like these, inventive genius may evolve many more devices to accomplish the same purpose. See United Carbon Co. et al. v. Binney & Smith Co., 317 U.S. 228, 236, 63 S.Ct. 165, 170, 87 L.Ed. 232; Burr v. Duryee, 1 Wall. 531, 568, 17 L.Ed. 650; O'Reilly et al. v. Morse et al., 15 How. 62, 112, 113, 14 L.Ed. 601. Yet if Walker's blanket claims be valid, no device to clarify echo waves, now known or hereafter invented, whether the device be an actual equivalent of Walker's ingredient or not, could be used in a combination such as this, during the life of Walker's patent.
20
Had Walker accurately described the machine he claims to have invented, he would have had no such broad rights to bar the use of all devices now or hereafter known which could accent waves. For had he accurately described the resonator together with the Lehr and Wyatt apparatus, and sued for infringement, charging the use of something else used in combination to accent the waves, the alleged infringer could have prevailed if the substituted device (1) performed a substantially different function; (2) was not known at the date of Walker's patent as a proper substitute for the resonator; or (3) had been actually invented after the date of the patent. Fuller v. Yentzer, supra, 94 U.S. at pages 296, 297, 24 L.Ed. 1003; Gill v. Wells, supra, 22 Wall. at page 29, 22 L.Ed. 699. Certainly, if we are to be consistent with Rev.Stat. § 4888, a patentee cannot obtain greater coverage by failing to describe his invention than by describing it as the statute commands.
21
It is urged that our conclusion is in conflict with the decision of Continental Paper Bag Co. v. Eastern Paper Bag Co., 210 U.S. 405, 28 S.Ct. 748, 52 L.Ed. 1122. In that case, however, the claims structurally described the physical and operating relationship of all the crucial parts of the novel combination.8 The court there decided only that there had been an infringement of this adequately described invention. That case is not authority for sustaining the claims before us which fail adequately to describe the alleged invention.
22
Reversed.
23
Mr. Justice FRANKFURTER concurs with the Court's opinion in so far as it finds this claim lacking in the definiteness required by Rev.Stat. § 4888, 35 U.S.C. § 33, 35 U.S.C.A. § 33, but reserves judgment as to considerations that may be peculiar to combination patents in satisfying that requirement.
24
Mr. Justice BURTON dissents.
1
'33. Application for Patent; Description; Specification and Claim. Before any inventor or discoverer shall receive a patent for his invention or discovery he shall make application therefor, in writing, to the Commissioner of Patents, and shall file in the Patent Office a written description of the same, and of the manner and process of making, constructing, compounding, and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art or science to which it appertains, or with which it is most nearly connected, to make, construct, compound, and use the same; and in case of a machine, he shall explain the principle thereof, and the best mode in which he has contemplated applying that principle, so as to distinguish it from other inventions; and he shall particularly point out and distinctly claim the part, improvement, or combination which he claims as his invention or discovery. * * *'
2
Other alleged errors were urged in the application for certiorari and have been argued here, but since we find the question of definiteness of the claim decisive of the controversy, we shall not further advert to the other contentions.
3
This case was previously affirmed by a divided court, 326 U.S. 696, 66 S.Ct. 482, and upon petition for rehearing was restored to the docket for reargument. 327 U.S. 812, 66 S.Ct. 677.
4
The known distance from well top to the tubing catcher is to the unknown distance from well top to the fluid surface as the time an echo requires to travel from the tubing catcher is to the time required for an echo to travel from the fluid surface.
Walker's patent emphasizes that his invention solves the velocity of sound waves in wells of various pressures in which sound did not travel at open-air or a uniform speed. Mathematically, of course, his determination of the distance by proportions determines the distance to the fluid surface directly without necessarily considering velocity in feet per second as a factor.
5
See Hailes v. Van Wormer, 20 Wall. 353, 22 L.Ed. 241; Knapp v. Morss, 150 U.S. 221, 227, 228, 14 S.Ct. 81, 83, 84, 37 L.Ed. 1059; Textile Machine Works v. Louis Hirsch Textile Machines, Inc., 302 U.S. 490, 58 S.Ct. 291, 82 L.Ed. 382; Lincoln Engineering Co. of Illinois v. Stewart-Warner Corp., 303 U.S. 545, 549, 550, 58 S.Ct. 662, 664, 665, 82 L.Ed. 1008.
6
Halliburton does not challenge the adequacy of the description of any other features of the 'new combination.' The elements of Walker's apparatus other than the filter are so nearly identical to what Lehr and Wyatt patented that we can speak of these other elements as the 'Lehr and Wyatt machine.'
7
Both parties have used Claim 1 as a typical example for purposes of argument throughout the litigation. Other claims need not be set out. Claim 1 is as follows: 'In an apparatus for determining the location of an obstruction in a well having therein a string of assembling tubing sections inter-connected with each other by coupling collars, means communicating with said well for creating a pressure impulse in said well, echo receiving means including a pressure responsive device exposed to said well for receiving pressure impulses from the well and for measuring the lapse of time between the creation of the impulse and the arrival at said receiving means of the echo from said obstruction, and means associated with said pressure responsive device for tuning said receiving means to the frequency of echoes from the tubing collars of said tubing sections to clearly distinguish the echoes from said couplings from each other.'
8
The typical claim there in suit was as follows: '2. In a paper bag machine, the combination of the rotating cylinder provided with one or more pairs of sidefolding fingers adapted to be moved toward or from each other, a forming plate also provided with side-forming fingers adapted to be moved toward or from each other, means for operating said fingers at definite times during the formative action upon the bag tube, operating means for the forming plate adapted to cause the said plate to oscillate about its rear edge upon the surface of the cylinder during the rotary movement of said cylinder for the purpose of opening and forming the bottom of the bag tube, a finger moving with the forming plate for receiving the upper sheet of the tube and lifting it during the formative action, power devices for returning the forming plate to its original position to receive a new bag tube, and means to move the bag tube with the cylinder.' Continental Paper Bag Co. v. Eastern Paper Bag Co., 210 U.S. 405, 417, n. 1, 28 S.Ct. 748, 750, 52 L.Ed. 1122.
| 78
|
329 U.S. 14
67 S.Ct. 13
91 L.Ed. 12
CLEVELAND et al.v.UNITED STATES (three cases). DARGER v. SAME. JESSOP v. SAME. DOCKSTADER v. SAME. STUBBS v. SAME. PETTY v. SAME.
Nos. 12 to 19.
Argued Oct. 17, 1946.
Decided Nov. 18, 1946.
Rehearing Denied Dec. 16, 1946.
See 329 U.S. 830, 67 S.Ct. 361.
Mr.Claude T. Barnes, of Salt Lake City, Utah, for petitioners.
Mr. Robert M. Hitchcock, of Washington, D.C., for respondent.
[Argument of Counsel from page 15 intentionally omitted]
Mr. Justice DOUGLAS delivered the opinion of the Court.
1
Petitioners are members of a Mormon sect, known as Fundamentalists. They not only believe in polygamy; unlike other Mormons,1 they practice it. Each of petitioners, except Stubbs, has, in addition to his lawful wife, one or more plural wives. Each transported at least one plural wife across state lines2 either for the purpose of cohabiting with her, or for the purpose of aiding another member of the cult in such a project. They were convicted of violating the Mann Act, 36 Stat. 825, 18 U.S.C. § 398, 18 U.S.C.A. § 398, on a trial to the court, a jury having been waived. D.C. 56 F.Supp. 890. The judgments of conviction were affirmed on appeal. 10 Cir., 146 F.2d 730. The cases are here on petitions for certiorari which we granted in view of the asserted conflict between the decision below and Mortensen v. United States, 322 U.S. 369, 64 S.Ct. 1037, 88 L.Ed. 1331.
2
The Act makes an offense the transportation in interstate commerce of 'any woman or girl for the purpose of prostitution or debauchery, or for any other immoral purpose'. The decision turns on the meaning of the latter phrase, 'for any other immoral purpose'.
3
United States v. Bitty, 208 U.S. 393, 28 S.Ct. 396, 52 L.Ed. 543, involved a prosecution under a federal statute making it a crime to import an alien woman 'for the purpose of prostitution, or for any other immoral purpose.' 34 Stat. 898, 899, § 3. The act was construed to cover a case where a man imported an alien woman so that she should live with him as his concubine. Two years later the Mann Act was passed. Because of the similarity of the language used in the two acts the Bitty case became a forceful precedent for the construction of the Mann Act. Thus one who transported a woman in interstate commerce so that she should become his mistress or concubine was held to have transported her for an 'immoral purpose' within the meaning of the Mann Act. Caminetti v. United States, 242 U.S. 470, 37 S.Ct. 192, 61 L.Ed. 442, L.R.A. 1917F, 502, Ann.Cas. 1917B, 1168.
4
It is argued that the Caminetti decision gave too wide a sweep to the Act; that the Act was designed to cover only the white slave business and related vices; that it was not designed to cover voluntary actions bereft of sex commercialism; and that in any event it should not be construed to embrace polygamy which is a form of marriage and, unlike prostitution or debauchery or the concubinage involved in the Caminetti case, has as its object parenthood and the creation and maintenance of family life. In support of that interpretation an exhaustive legislative history is submitted which, it is said, gives no indication that the Act was aimed at polygamous practices.
5
While Mortensen v. United States, supra, 322 U.S. at page 377, 64 S.Ct. at page 1041, 88 L.Ed. 1331, rightly indicated that the Act was aimed 'primarily' at the use of interstate commerce for the conduct of the white slave business we find no indication that a profit motive is a sine qua non to its application. Prostitution, to be sure, normally suggests sexual relations for hire.3 But debauchery has no such implied limitation. In common understanding the indulgence which that term suggests may be motivated solely by lust.4 And so we start with words which by their natural import embrace more than commercialized sex. What follows is 'any other immoral urpose'. Under the ejusdem generis rule of construction the general words are confined to the class and may not be used to enlarge it. But we could not give the words a faithful interpretation if we confined them more narrowly than the class of which they are a part.
6
That was the view taken by the Court in the Bitty and Caminetti cases. We do not stop to re-examine the Caminetti case to determine whether the Act was properly applied to the facts there presented. But we adhere to its holding which has been in force for almost 30 years,5 that the Act, while primarily aimed at the use of interstate commerce for the purposes of commercialized sex, is not restricted to that end.
7
We conclude, moreover, that polygamous practices are not excluded from the Act. They have long been outlawed in our society. As stated in Reynolds v. United States, 98 U.S. 145, 164, 25 L.Ed. 244: 'Polygamy has always been odious among the northern and western nations of Europe, and, until the establishment of the Mormon Church, was almost exclusively a feature of the life of Asiatic and of African people. At common law, the second marriage was always void (2 Kent, Com. 79), and from the earliest history of England polygamy has been treated as an offense against society.' As subsequently stated in Mormon Church v. United States, 136 U.S. 1, 49, 10 S.Ct. 792, 805, 34 L.Ed. 481; 'The organization of a community for the spread and practice of polygamy is, in a measure, a return to barbarism. It is contrary to the spirit of Christianity and of the civilization which Christianity has produced in the western world.' And see Davis v. Beason, 133 U.S. 333, 10 S.Ct. 299, 33 L.Ed. 637. Polygamy is a practice with far more pervasive influences in society than the casual, isolated transgressions involved in the Caminetti case. The establishment or maintenance of polygamous households is a notorious example of promiscuity. The permanent advertisement of their existence is an example of the sharp repercussions which they have in the community. We could conclude that Congress excluded these practices from the Act only if it were clear that the Act is confined to commercialized sexual vice. Since we cannot say it is, we see no way by which the present transgressions can be excluded. These polygamous practices have long been branded as immoral in the law. Though they have different ramifications, they are in the same genus as the other immoral practices covered by the Act.
8
The fact that the regulation of marriage is a state matter does not, of course, make the Mann Act an unconstitutional interference by Congress with the police powers of the States. The power of Congress over the instrumentalities of interstate commerce is plenary; it may be used to defeat what are deemed to be immoral practices; and the fact that the means used may have 'the quality of police regulations' is not consequential. Hoke v. United States, 227 U.S. 308, 323, 33 S.Ct. 281, 284, 57 L.Ed. 523, 43 L.R.A.,N.S. 906, Ann.Cas.1913E, 905; see Athanasaw v. United States, 227 U.S. 326, 33 S.Ct. 285, 57 L.Ed. 528, Ann.Cas.1913E, 911; Wilson v. United States, 232 U.S. 563, 34 S.Ct. 347, 58 L.Ed. 728.
9
Petitioners' second line of defense is that the requisite purpose was lacking. It is said that those petitioners who already had plural wives did not transport them in interstate commerce for an immoral purpose. The test laid down in the Mortensen case was whether the transportation was in fact 'the use of interstate commerce as a calculated means for effectuating sexual immorality.' 322 U.S. page 375, 64 S.Ct. page 1041, 88 L.Ed. 1331. There was evidence that this group of petitioners in order to cohabit with their plural wives found it necessary or convenient to transport them in interstate commerce and that the unlawful purpose was the dominant motive. In one case the woman was transported for the purpose of entering into a plural marriage. After a night with this petitioner she refused to continue the plural marriage relationship. But guilt under the Mann Act turns on the purpose which motivates the transportation, not on its accomplishment. Wilson v. United States, supra, 232 U.S. at pages 570, 571, 34 S.Ct. 349, 350, 58 L.Ed. 728.
10
It is also urged that the requisite criminal intent was lacking since petitioners were motivated by a religious belief. That defense claims too much. If upheld, it would place beyond the law any act done under claim of religious sanction. But it has long been held that the fact that polygamy is supported by a religious creed affords no defense in a prosecution for bigamy. Reynolds v. United States, supra. Whether an act is immoral within the meaning of the statute is not to be determined by the accused's concepts of morality. Congress has provided the standard. The offense is complete if the accused intended to perform, and did in fact perform, the act which the statute condemns, viz., the transportation of a woman for the purpose of making her his plural wife or cohabiting with her as such.
11
We have considered the remaining objections raised and find them without merit.
12
Affirmed.
13
Mr. Justice BLACK and Mr. Justice JACKSON think that the cases should be reversed. They are of opinion that affirmance requires extension of the rule announced in the Caminetti case and that the correctness of that rule is so dubious that it should at least be restricted to its particular facts.
14
Mr. Justice RUTLEDGE, concurring.
15
I concur in the result. Differences have been urged in petitioners' behalf between these cases and Caminetti v. United States, 242 U.S. 470, 37 S.Ct. 192, 61 L.Ed. 442, L.R.A.1917F, 502, Ann.Cas.1917B, 1168.1 Notwithstanding them, in my opinion it would be impossible rationally to reverse the convictions, at the same time adhering to Caminetti and later decisions perpetuating its ruling.2
16
It is also suggested, though not strongly urged, that Caminetti was wrongly decided and should be overruled. Much may be said for this view. In my opini n that case and subsequent ones following it extended the Mann Act's coverage beyond the congressional intent and purpose, as the dissenting opinion of Mr. Justice McKenna convincingly demonstrated. 242 U.S. at page 496, 37 S.Ct. at page 198.3 Moreover as I also think, this legislation and the problems presented by the cases arising under it are of such a character as does not allow this Court properly to shift to Congress the responsibility for perpetuating the Court's error.
17
Notwithstanding recent tendency, the idea cannot always be accepted that Congress, by remaining silent and taking no affirmative action in repudiation, gives approval to judicial misconstruction of its enactments. See Girouard v. United States, 328 U.S. 61, 66 S.Ct. 826. It is perhaps too late now to deny that, legislatively speaking as in ordinary life, silence in some instances may give consent.4 But it would be going even farther beyond reason and common experience to maintain, as there are signs we may be by way of doing, that in legislation any more than in other affairs silence or nonaction always is acquiescence equivalent to action.
18
There are vast differences between legislating by doing nothing and legislating by positive enactment, both in the processes by which the will of Congress is derived and stated5 and in the clarity and certainty of the expression of its will.6 And there are many reasons, other than to indicate approval of what the courts have done, why Congress may fail to take affirmative action to repudiate their misconstruction of its duly adopted laws. Among them may be the sheer pressure of other and more important business. See Moore v. Cleveland R. Co., 6 Cir., 108 F.2d 656, 660. At times political considerations may work to forbid taking corrective action. And in such cases, as well as others, there may be a strong and proper tendency to trust to the courts to correct their own errors, see Girouard v. United States, supra, 328 U.S. 69, 66 S.Ct. at page 830, as they ought to do when experience has confirmed or demonstrated the errors' existence.
19
The danger of imputing to Congress, as a result of its failure to take positive or affirmative action through normal legislative processes, ideas entertained by the Court concerning Congress' will, is illustrated most dramatically perhaps by the vacillating and contradictory courses pursued in the long line of decisions imputing to 'the silence of Congress' varied effects in commerce clause cases.7 That danger may be and often is equally present in others. More often than not the only safe assumption to make from Congress' inaction is simply that Congress does not intend to act at all. Cf. United States v. American Trucking Ass'n, 310 U.S. 534, 550, 60 S.Ct. 1059, 1067, 84 L.Ed. 1345. At best the contrary view can be only an inference, altogether lacking in the normal evidences f legislative intent and often subject to varying views of that intent.8 In short, although recognizing that by silence Congress at times may be taken to acquiesce and thus approve, we should be very sure that, under all the circumstances of a given situation, it has done so before we so rule and thus at once relieve ourselves from and shift to it the burden of correcting what we have done wrongly. The matter is particular, not general, notwithstanding earlier exceptional treatment and more recent tendency. Just as dubious legislative history is at times much overridden, so also is silence or inaction often mistaken for legislation.
20
I doubt very much that the silence of Congress in respect to these cases, notwithstanding their multiplication and the length of time during which the silence has endured, can be taken to be the equivalent of bills approving them introduced in both houses, referred to and considered by committees, discussed in debates, enacted by majorities in both places, and approved by the executive. I doubt, in other words, that, in view of all the relevant circumstances including the unanticipated consequences of the legislation,9 such majorities could have been mustered in approval of the Caminetti decision at any time since it was rendered. Nor is the contrary conclusion demonstrated by Congress' refusal to take corrective action.10
21
The Caminetti case, however, has not been overruled and has the force of law until a majority of this Court may concur in the view that this should be done and take action to that effect. This not having been done, I acquiesce in the Court's decision.
22
Mr. Justice MURPHY, dissenting.
23
Today another unfortunate chapter is added to the troubled history of the White Slave Traffic Act. It is a chapter written in terms that misapply the statutory language and that disregard the intention of the legislative framers. It results in the imprisonment of individuals whose actions have none of the earmarks of white slavery, whatever else may be said of their conduct. I am accordingly forced to dissent.
24
The statute in so many words refers to transportation of women and girls across state lines 'for the purpose of prostitution or debauchery, or for any other immoral purpose.' The issue here is whether the act of taking polygamous or plural wives across state lines or taking girls across state borders for the purpose of entering into plural marriage, constitutes transportation 'for any other immoral purpose' so as to come within the interdict of the statute.
25
The Court holds, and I agree that under the ejusdem generis rule of statutory construction the phrase 'any other immoral purpose' must be confined to the same class of unlawful sexual immoralities as that to which prostitution and debauchery belong. But I disagree with the conclusion that polygamy is 'in the same genus' § prostitution and debauchery and hence within the phrase 'any other immoral purpose' simply because it has sexual connotations and has 'long been branded as immoral in the law' of this nation. Such reasoning ignores reality and results in an unfair application of the statutory words.
26
It is not my purpose to defend the practice of polygamy or to claim that it is morally the equivalent of monogamy. But it is essential to understand what it is as well as what it is not. Only in that way can we intelligently decide whether it falls within the same genus as prostitution or debauchery.
27
There are four fundamental forms of marriage: (1) monogamy; (2) polygamy, or one man with several wives; (3) polyandry, or one woman with several husbands; and (4) group marriage. The term 'polygamy' covers both polygyny and polyandry. Thus we are dealing here with polygyny, one of the basic forms of marriage. Historically, its use has far exceeded that of any other form. It was quite common among ancient civilizations and was referred to many times by the writers of the Old Testament; even today it is to be found frequently among certain pagan and non-Christian peoples of the world. We must recognize, then, that polygyny, like other forms of marriage, is basically a cultural institution rooted deeply in the religious beliefs and social mores of those societies in which it appears. It is equally true that the briefs and mores of the dominant culture of the contemporary world condemn the practice as immoral and substitute monogamy in its place. To those beliefs and mores I subscribe, but that does not alter the fact that polygyny is a form of marriage built upon a set of social and moral principles. It must be recognized and treated as such.
28
The Court states that polygamy is 'a notorious example of promiscuity.' The important fact, however, is that, despite the differences that may exist between polygamy and monogamy, such differences do not place polygamy in the same category as prostitution or debauchery. When we use those terms we are speaking of acts of an entirely different nature, having no relation whatever to the various forms of marriage. It takes no elaboration here to point out that marriage, even when it occurs in a form of which we disapprove, is not to be compared with prostitution or debauchery or other immoralities of that character.
29
The Court's failure to recognize this vital distinction and its insistence that polygyny is 'in the same genus' as prostitution and debauchery do violence to the anthropological factors involved. Even etymologically, the words 'polygyny' and 'polygamy' are quite distinct from 'prostitution,' 'debauchery' and words of that ilk. There is thus no basis in fact for including polygyny within the phrase 'any other immoral purpose' as used in this statute.
30
One word should be said about the Court's citation of United States v. Bitty, 208 U.S. 393, 28 S.Ct. 396, 52 L.Ed. 543, and the statement that the interpretation of the statute there involved is a forceful precedent for the construction of the White Slave Traffic Act. The thought apparently is that the phrase 'any other immoral purpose' appearing in the White Slave Traffic Act, was derived from the identical phrase used in the statute regulating the immigration of aliens into the United States, the statute which was under consideration in the Bitty case. 34 Stat. 898. That case concerned itself with the portion of the immigration statute forbidding 'the importation into the United States of any alien woman or girl for the purpose of prostitution, or for any other immoral purpose.' Significantly, however, the statute made separate provision for the exclusion of 'polygamists, or persons who admit their belief in the practice of polygamy.' Thus the phrase 'any other immoral purpose,' following the reference to prostitution, certainly did not comprehend polygamy. And if that statute, or the interpretation given it in the Bitty case, is to be any authority here, the conclusion t be drawn is inconsistent with the result reached by the Court today. As a matter of fact, Congress has always referred to polygamy by name when it desired to deal with that subject, as distinguished from immoralities in the nature of prostitution. See, for example, 8 U.S.C. § 364, 8 U.S.C.A. § 364; 18 U.S.C. § 513, 18 U.S.C.A. § 513.
31
The result here reached is but another consequence of this Court's long-continued failure to recognize that the White Slave Traffic Act, as its title indicates, is aimed solely at the diabolical interstate and international trade in white slaves, 'the business of securing white women and girls and of selling them outright, or of exploiting them for immoral purposes.' H.Rep. No. 47, 61st Cong., 2d Sess., p. 11; S.Rep. No. 886, 61st Cong., 2d Sess., p. 11. The Act was suggested and proposed to meet conditions which had arisen in the years preceding 1910 and which had revealed themselves in their ugly details through extensive investigations. The framers of the Act specifically stated that it is not directed at immorality in general; it does not even attempt to regulate the practice of voluntary prostitution, leaving that problem to the various states. Its exclusive concern is with those girls and women who are 'unwillingly forced to practice prostitution' and to engage in other similar immoralities and 'whose lives are lives of involuntary servitude.' Ibid. A reading of the legislative reports and debates makes this narrow purpose so clear as to remove all doubts on the matter. And it is a purpose that has absolutely no relation to the practice of polygamy, however much that practice may have been considered immoral in 1910.
32
Yet this Court in Caminetti v. United States, 242 U.S. 470, 37 S.Ct. 192, 61 L.Ed. 442, L.R.A.1917F, 502, Ann.Cas.1917B, 1168, over the vigorous dissent of Justice McKenna in which Chief Justice White and Justice Clarke joined, closed its eyes to the obvious and interpreted the broad words of the statute without regard to the express wishes of Congress. I think the Caminetti case can be factually distinguished from the situation at hand since it did not deal with polygamy. But the principle of the Caminetti case is still with us today, the principle of interpreting and applying the White Slave Traffic Act in disregard of the specific problem with which Congress was concerned. I believe the issue should be met squarely and the Caminetti case overruled. It has been on the books for nearly 30 years and its age does not justify its continued existence. Stare decisis certainly does not require a court to perpetuate a wrong for which it was responsible, especially when no rights have accrued in reliance on the error. Cf. Helvering v. Hallock, 309 U.S. 106, 121, 122, 60 S.Ct. 444, 452, 453, 84 L.Ed. 604, 125 A.L.R. 1368. Otherwise the error is accentuated; and individuals, whatever may be said of their morality, are fined and imprisoned contrary to the wishes of Congress. I shall not be a party to that process.
33
The consequence of prolonging the Caminetti principle is to make the federal courts the arbitrers of the morality of those who cross state lines in the company of women and girls. They must decide what is meant by (242 U.S. 470, 37 S.Ct. 195) 'any other immoral purpose' without regard to the standards plainly set forth by Congress. I do not believe that this falls within the legitimate scope of the judicial function. Nor does it accord the respect to which Congressional pronouncements are entitled.
34
Hence I would reverse the judgments of conviction in these cases.
1
The Church of Jesus Christ of Latter-Day Saints has forbidden plural marriages since 1890. See Toncray v. Budge, 14 Idaho 621, 654, 655, 95 P. 26.
2
Petitioners' activities extended into Arizona, California, Colorado, Idaho, Utah and Wyoming.
3
'Of women: The offering of the body to indiscriminate lewdness for hire (esp. as a practice or institution); whoredom, harlotry.' 8 Oxford English Dictionary 1497.
4
'Vicious indulgence in sensual pleasures.' 3 Oxford English Dictionary 79; 'Excessive indulgence in sensual pleasures of any kind; gluttony; intemperance; sexual immorality; unlawful indulgence of lust.' 3 Century Dict.Rev.Ed. 1477.
5
Blackstock v. United States, 8 Cir., 261 F. 150; Carey v. United States, 8 Cir., 265 F. 515; Elrod v. United States, 6 Cir., 266 F. 55; Burgess v. United States, 54 App.D.C. 71, 294 F. 1002; Corbett v. United States, 9 Cir., 299 F. 27; Hart v. United States, 9 Cir., 11 F.2d 499; Ghadiali v. United States, 9 Cir., 17 F.2d 236; United States v. Reginelli, 3 Cir., 133 F.2d 595; Poindexter v. United States, 8 Cir., 139 F.2d 158; Simon v. United States, 4 Cir., 145 F.2d 345; Qualls v. United States, 5 Cir., 149 F.2d 891; Sipe v. United States, 80 U.S.App.D.C. 194, 150 F.2d 984; United States v. Chaplin, D.C., 54 F.Supp. 682.
1
Counsel has emphasized the religious aspect presented by these cases and has stressed the familial aspect and purpose of so-called 'celestial marriage' in the Mormon conception as distinguishing the relation in fact and in consequence from such as were involved in the Caminetti and other Mann Act cases. The argument from religious motivation has been foreclosed, so far as legislative power is concerned, since Reynolds v. United States, 98 U.S. 145, 25 L.Ed. 244. Apropos of the Mann Act's application, the relationship is not only illegal under state law but also as regular and continuous as that involved in Caminetti, or more so.
2
See e.g., Gebardi v. United States, 287 U.S. 112, 53 S.Ct. 35, 77 L.Ed. 206, 84 A.L.R. 370; United States v. Reginelli, 3 Cir., 133 F.2d 595; Christian v. United States, 8 Cir., 28 F.2d 114, Compare United States v. Beach, 324 U.S. 193, 65 S.Ct. 602, 89 L.Ed. 865; Mortensen v. United States, 322 U.S. 369, 64 S.Ct. 1037, 88 L.Ed. 1331.
3
See also the dissenting opinion of Mr. Justice Murphy herein. The dissenting opinion in the Caminetti case was joined by the Chief Justice and Mr. Justice Clarke. Only five justices adhered to the majority opinion, Mr. Justice McReynolds not participating. Cf. the opinion of Mr. Justice McKenna in Athanasaw v. United States, 227 U.S. 326, 33 S.Ct. 285, 57 L.Ed. 528, Ann.Cas. 1913E, 911.
4
As an original matter, in view of the specific and constitutional procedures required for the enactment of legislation, it would seem hardly justifiable to treat as having legislative effect any action or nonaction not taken in accordance with the prescribed procedures.
5
See note 4. Legislative intent derived from nonaction or 'silence' lacks all the supporting evidences of legislation enacted pursuant to prescribed procedures, including reduction of bills to writing, committee reports, debates, and reduction to final written form, as well as voting records and executive approval. Necessarily also the intent must be derived by a form of negative inference, a process lending itself to much guesswork.
6
See note 5.
7
See Prudential Ins. Co. v. Benjamin, 328 U.S. 408, 424, 66 S.Ct. 1142, 1152; Ribble, State and National Power Over Commerce (1937) c. X; Bikle , The Silence of Congress (1927) 41 Harv.L.Rev. 200; Powell, The Validity of State Legislation under the Webb-Kenyon Law (1917) 2 So.L.Rev. 112. An example of judicial interpretation of the silence of Congress as giving consent to state legislation is Wilson v. McNamee, 102 U.S. 572, 575, 26 L.Ed. 234.
8
Cf. note 5.
9
See opinion of Mr. Justice McKenna, 242 U.S. at page 502, 37 S.Ct. at page 201, 61 L.Ed. 442, L.R.A.1917F, 502. Ann.Cas.1917B, 1168, dissenting in Caminetti v. United States; see also the dissenting opinion in United States v. Beach, 324 U.S. 193, 199, 200, 65 S.Ct. 602, 605, 89 L.Ed. 865.
10
Since the Caminetti decision two bills have been introduced to limit the effect of that case. S. 2438, 73d Cong., 2d Sess.; S. 101, 75th Cong., 1st Sess. Neither was reported out of committee. In such circumstances the failure of Congress to amend the Act raises no presumption as to its intent. Order of Railway Conductors of America v. Swan, 7 Cir., 152 F.2d 325, 329.
| 01
|
329 U.S. 40
67 S.Ct. 167
91 L.Ed. 29
UNITED STATESv.ALCEA BAND OF TILLAMOOKS et al.
No. 26.
Reargued Oct. 25, 1946.
Decided Nov. 25, 1946.
Mr.
Walter J. Cummings, Jr., of Washington, D.C., for petitioner.
Mr.Everett Sanders, of Washington, D.C., for respondents.
The CHIEF JUSTICE announced the judgment of the Court and delivered an opinion, in which Mr. Justice FRANKFURTER, Mr. Justice DOUGLAS, and Mr. Justice MURPHY joined.
1
Eleven Indian tribes have sued the United States in the Court of Claims under the Act of 1935,1 which gives that court jurisdiction to hear and adjudicate cases involving 'any and all legal and equitable claims arising under or growing out of the original Indian title, claim, or rights in * * * the lands * * * occupied by the Indian tribes and bands described in' certain unratified treaties negotiated with Indian tribes in the Territory of Oregon.
2
Four of the tribes,2 he Tillamooks, Coquilles, Too-too-to-neys and Chetcos, successfully identified themselves as entitled to sue under the Act, proved their original Indian title3 to designated lands, and demonstrated an involuntary and uncompensated taking of such lands. The Court of Claims thereupon held that original Indian title was an interest the taking of which without the consent of the Indian tribes entitled the latter to compensation. In answer to government contentions that original Indian title, in the absence of some form of official 'recognition', could be appropriated without liability upon the part of the sovereign, the Act of 1848,4 establishing the Territory of Oregon, was cited by the Court of Claims as affording any recognition required to support the claim for compensation. The issues decided, not previously passed upon by this Court and being of importance to the administration of Indian affairs, prompted this Court to grant certiorari. The case was argued during the 1945 term and on April 1, 1946, was restored to the docket for reargument before a full bench.
3
The events giving rise to the claims here occurred as part of the opening and development of the Territory of Oregon. After creating a government for that territory by the Act of 1848,5 Congress in 1850 authorized the negotiation of treaties with Indian tribes in the area. Under the latter Act,6 Anson Dart, later succeeded by General Joel Palmer, was appointed Superintendent of Indian Affairs for the Oregon region and was instructed to negotiate treaties for the extinguishment of Indian claims to lands in that district. On August 11, 1855, Palmer and respondent tribes concluded a treaty providing for the cession of Indian lands in return for certain money payments and the creation of a reservation. The treaty was to be operative only upon ratification. It was not submitted to the Senate until February, 1857, and was never ratified.
4
Pending expected ratification, and following recommendations from Palmer, the President on November 9, 1855, created a reservation, subject to future diminution and almost identical with that provided for in the treaty. A large part of this reservation, called the Coast or Siletz Reservation, consisted of lands to which the Tillamook Tribe held original Indian title. Almost immediately the Tillamooks were con ined to that portion of their land within the reservation, and the other three respondent tribes, as well as other tribes, were moved from their original possessions to the reservation. In 1865 an Executive Order reduced the size of the reservation; in 1875 Congress by statute approved the Executive Orders of 1855 and 1865, and in order to open more land for public settlement, removed additional land from the reservation. By an Act of 1894,7 Congress officially accepted and approved the reservation as it then existed, and thenceforward did not take reservation lands without compensation.
5
The claims of respondent tribes are for the wrongful taking which occurred when they were deprived of their original possessions by the Executive Order of November 9, 1855. Even as to the Tillamooks, the Court of Claims found the taking complete as of November 9, 1855, since this tribe was forced to share its former lands with other Indians, and since the reservation was, in any event, only a conditional one, subject to being opened for public settlement at the will of the President. Petitioner disputes neither this finding nor the proof of original Indian title as of 1855.
6
Other than the benefits flowing from the Act of 1894,8 none of the four respondent tribes has received any compensation for the loss of its lands. Until the present jurisdictional act of 1935, these tribes, lacking consent of the United States to be sued, were forbidden access to the courts. They alone of the tribes with whom Dart and Palmer negotiated some twenty-odd treaties between 1850 and 1855 have yet to receive recognition for the loss of lands held by original Indian title.9
7
Until now this Court has had no opportunity or occasion to pass upon the precise issue presented here. In only one act prior to 1935 has Congress authorized judicial determination of the right to recover for a taking of nothing more than original Indian title; and no case under that act,10 passed in 1929, reached this Court.11 In 193012 Congress again authorized adjudication of Indian claims arising out of original Indian title, but expressly directed an award of damages if a taking of lands held by immemorial possession were shown. This act thus eliminated any judicial determination of a right to recover, once original Indian title was established.
8
Prior to 1929, adjudications of Indian claims against the United States were limited to issues arising out of treaties, statutes, or other events and transactions carefully designated by Congress. This Court has always strictly construed such jurisdictional acts and has not offered judicial opinion on the justness of the handling of Indian lands, except in so far as Congress in specific language has permitted its justiciable recognition.
9
The language of the 1935 Act is specific, and its consequences are clear. By this Act Congress neither admitted nor denied liability. The Act removes the impediments of sovereign immunity and lapse of time and provides for judicial determination of the designated claims. No new right or cause of action is created. A merely moral claim is not made a legal one. The cases are to be heard on their merits and decided according to legal principles pertinent o the issues which might be presented under the Act.13 Accordingly the 1935 statute permits judicial determination of the legal and equitable claims growing out of original Indian title. That which was within the power of Congress to withhold from judicial scrutiny has now been submitted to the courts. If, as has many times been said,14 the manner of extinguishing Indian title is usually a political question and presents a non-justiciable issue, Congress has expressly and effectively directed otherwise by seeking in the 1935 Act judicial disposition of claims arising from original Indian title. 'By consenting to be sued, and submitting the decision to judicial action, they have considered it as a purely judicial question, which we are now bound to decide, as between man and man. * * *' United States v. Arredondo, 1832, 6 Pet. 691, 711, 8 L.Ed. 547.
10
It has long been held that by virtue of discovery the title to lands occupied by Indian tribes vested in the sovereign.15 This title was deemed subject to a right of occupancy in favor of Indian tribes, because of their original and previous possession. It is with the content of this right of occupancy, this original Indian title, that we are concerned here.
11
As against any but the sovereign, original Indian title was accorded the protection of complete ownership;16 but it was vulnerable to affirmative action by the sovereign, which possessed exclusive power to extinguish the right of occupancy at will. Termination of the right by sovereign action was complete and left the land free and clear of Indian claims. Third parties could not question the justness or fairness of the methods used to extinguish the right of occupancy.17 Nor could the Indians themselves prevent a taking of tribal lands or forestall a termination of their title. However, it is now for the first time asked whether the Indians have a cause of action for compensation arising out of an involuntary taking of lands held by original Indian title.
12
We cannot but affirm the decision of the Court of Claims. Admitting the undoubted power of Congress to extinguish original Indian title compels no conclusion that compensation need not be paid. In speaking of the original claims of the Indians to their lands, Marshall had this to say: 'It is difficult to comprehend the proposition * * * that the discovery * * * should give the discoverer rights in the country discovered which annulled the pre-existing rights of its ancient possessors. * * * It gave the exclusive right to purchase, but did not found that right on a denial of the right of the possessor to sell. * * * The king purchased their lands, * * * but never coerced a surrender of them.' Worcester v. Georgia, 1832, 6 Pet. 515, 543, 544, 547, 8 L.Ed. 483. In our opinion, taking original Indian title without compensation and without consent does not satisfy the 'high standards for fair dealing' required of the United States in controlling Indian affairs. United States v. Santa Fe R. Co., 1941, 314 U.S. 339, 356, 62 S.Ct. 248, 256, 86 L.Ed. 260. The Indians have more than a merely moral claim for compensation.18
13
A contrary decision would ignore the plain import of traditional methods of extinguishing original Indian title. The early acquisition of Indian lands in the main progressed by a process of negotiation and treaty. The first treaties reveal the striking deference paid to Indian claims, as the analysis in Worcester v. State of Georgia, supra, clearly details. It was usual policy not to coerce the surrender of lands without consent and without compensation.19 The great drive to open Western lands in the 19th Century, however productive of sharp dealing, did not wholly subvert the settled practice of negotiated extinguishment of original Indian title.20 In 1896, this Court noted that '* * * nearly every tribe and band of Indians within the territorial limits of the United States was under some treaty relations with the government.' Marks v. United States, 1896, 161 U.S. 297, 302, 16 S.Ct. 476, 478, 40 L.Ed. 706. Something more than sovereign grace prompted the obvious regard given to original Indian title.
14
Long before the end of the treaty system of Indian government and the advent of legislative control in 1871,21 Congress had evinced its own attitude toward Indian relations. The Ordinance of 1787 declared, 'the utmost good faith shall always be observed toward the Indians; their land and property shall never be taken from them without their consent * * *.' 1 Stat. 50, 52. When in 1848 the territorial government of Oregon was created, § 14 of that Act22 secured to the inhabitants of the new territory all the rights and privileges guaranteed by the Ordinance of 1787. Nor did Congressional regard for Indian lands change in 1871. In providing for the settlement of Dakota Territory, Congress in 1872 directed the extinguishment of the interests of Indians in certain lands and the determination of what 'compensation ought, in justice and equity, to be made to said bands * * * for the extinguishment of whatever title they may have to said lands.' 17 Stat. 281; Buttz v. Northern Pacific Railroad, 1886, 119 U.S. 55, 59, 7 S.Ct. 100, 102, 30 L.Ed. 330. The latest indicia of Congressional regard for Indian claims is the Indian Claims Commission Act, Pub. No. 726, 79th Cong.2d Sess., 25 U.S.C.A. § 70 et seq., 28 U.S.C.A. § 259a, in which not only are claims similar to those of the case at bar to be heard, but 'claims based upon fair and honorable dealings that are not recognized by any existing rule of law or equity' may be submitted to the Commission with right of judicial review.
15
Congressional and executive action consistent with the prevailing idea of non-coercive, compensated extinguishment of Indian title is clear in the facts of the present case. The Act of 1848 declared a policy of extinguishing Indian claims in Oregon only by treaty. The statute of 1850 put in motion the treaty-making machinery. Respondent tribes were among those with whom treaties were negotiated. In many cases, expected ratification did not follow. In the case of respondent tribes alone have no steps been taken to make amends for the taking of Indian lands pending treaty ratification. To determine now that compensation ust be paid is only a fair result.
16
Petitioner would admit liability only if, in addition to clear proof of original Indian title, some act of official 'recognition' were shown. Original Indian title would not attain the status of a compensable interest until some definite act of sovereign acknowledgment followed. Apparently petitioner has seized upon language of the Court of Claims in Duwamish et al. Indians v. United States, 1934, 79 Ct.Cl. 530, and from it has fashioned a fullblown concept of 'recognized Indian title.' The jurisdictional act in that case authorized suits on 'all claims of whatever nature, both legal and equitable.'23 Claims based solely on original Indian title were held to be outside the limits of the act; and unless a treaty or act of Congress recognizing the Indians' title by right of occupancy were shown, recovery could not be had.24 A more specific jurisdictional act was deemed necessary to authorize a suit based upon original Indian title alone.
17
Petitioner reads into the Duwamish case far too much. When the first jurisdictional act specifically allowing suit on original Indian title in language identical with that of the 1935 Act later came before the Court of Claims in Coos Bay, Lower Umpqua and Siuslaw Indian Tribes et tl. v. United States, 1938, 87 Ct.Cl. 143, the court clearly recognized the specific directives of the act and denied recovery solely because original Indian title had not been proved. 'Recognition' appeared to count only as a possible method of proving Indian title itself, not as a requisite in addition to proof of that title. Furthermore, in the case at bar, the unmistakable language of the Court of Claims stands squarely against the significance petitioner would attach to the Duwamish decision: 'The Duwamish case did not hold or intend to hold that an Indian tribe could not recover compensation on the basis of original Indian use and occupancy title as for a taking if the jurisdictional act authorized the bringing of suit and rendition of judgment for compensation on the basis of such original title.' Alcea Band of Tillamooks et al. v. United States, 1945, 59 F.Supp. 934, 965, 103 Ct.Cl. 494, 556.
18
Authority for petitioner's position is not found in Northwestern Bands of Shoshone Indians v. United States, 1945, 324 U.S. 335, 65 S.Ct. 690, 89 L.Ed. 985. The jurisdictional act there limited suits to those claims 'arising under or growing out of the treaty of July 2, 1863 * * *.'25 Suits based upon original Indian title were not authorized, but we thought a claim would properly arise under the treaty if it were based upon a taking of land which the treaty had in any way 'recognized' or acknowledged as belonging to the Indians. The Court thrice noted that claims based upon original Indian title were not involved, and made no attempt to settle controversies brought under other jurisdictional acts authorizing the litigation of claims arising from the taking of original Indian title.26
19
Nor do other cases in this Court lend substance to the dichotomy of 'recognized' and 'unrecognized' Indian title which petitioner urges. Many cases recite the paramount power of Congress to extinguish the Indian right of occupancy by methods the justice of which 'is not open to inquiry in the courts.' United States v. Sante Fe Pacific R. Co., supra, at page 347 of 314 U.S., at page 252 of 62 S.Ct., 86 L.Ed. 260.27 Lacking a jurisdictional act permitting judicial inquiry, such language cannot be questioned where Indians are seeking payment for appropriated lands; but here in the 1935 statute Congress has authorized decision by the courts upon claims arising out of original Indian title. Furthermore, some cases speak of the unlimi ed power of Congress to deal with those Indian lands which are held by what petitioner would call 'recognized' title;28 yet it cannot be doubted that, given the consent of the United States to be sued, recovery may be had for an involuntary, uncompensated taking of 'recognized' title.29 We think the same rule applicable to a taking of original Indian title. 'Whether this tract * * * was properly called a reservation * * * or unceded Indian country, * * * is a matter of little moment * * * the Indians' right of occupancy has always been held to be sacred; something not to be taken from him except by his consent, and then upon such consideration as should be agreed upon.' State of Minnesota v. Hitchcock, 1902, 185 U.S. 373, 388, 389, 22 S.Ct. 650, 656, 46 L.Ed. 954.30
20
Requiring formal acknowledgment of original Indian title as well as proof of that title would nullify the intended consequences of the 1935 Act. The rigors of 'recognition', according to petitioner's view, would appear to require in every case some definite act of the United States guaranteeing undisturbed, exclusive and perpetual occupancy, which, for example, a treaty or statute could provide. Yet it was the very absence of such acknowledgment which gave rise to the present statute.
21
Congress was quite familiar with the precision advisable when drafting statutes giving jurisdiction to the Court of Claims in Indian cases. In 1925 an act authorizing the litigation of any and all claims of certain Indian tribes was passed. In June, 1934, that act was held, for lack of specificity, not to extend to claims based on original title.31 The following year Congress passed the present act, employing the specific language used once before in the act of 1929,32 under which Coos Bay Lower Umpqua and Siuslaw Indian Tribe et al. v. United States, supra, arose. The considered attention given to the many ramifications of Indian affairs in the 1930's33 suggests that Congress well realized the import of the words used in the jurisdictional act of 1935, and that Congress did not expect respondent tribes to be turned out of court either because Congressional power over Indian title was deemed to have no limits or because there was, as was obvious to all, no formal guarantee of perpetual and exclusive possession prior to the taking of respondents' lands in 1855.
22
Respondents have satisfactorily proved their claim of original Indian title and an involuntary taking thereof. They are entitled to compensation under the jurisdictional act of 1935. The power of Congress over Indian affairs may be of a plenary nature; but it is not absolute.34 It does not 'enable the United States to give the tribal lands to others, or to appropriate them to its own purposes, without rendering, or assuming an obligation to render, just compensation for them.' United States v. Creek Nation, 1935, 295 U.S. 103, 110, 55 S.Ct. 681, 684, 79 L.Ed. 1331.
23
In view of the grounds upon which decision rests, it is not necessary to consider the alternate holding of the court below relative to the 1848 act affording sufficient 'recognition' of respondents' Indian title.
24
Affirmed.
25
Mr. Justice JACKSON took no part in the consideration or decision of this case.
26
Mr. Justice BLACK, concurring.
27
Before Congress passed the special Act under which this suit was brought, I think that the Government was under no more legal or equitable obligation to pay these respondents than it was under obligation to pay whatever descendants are left of the numerous other tribes whose lands and homes have been taken from them since the Nation was founded. See Northwestern Bands of Shoshone Indians v. United States, 324 U.S. 335, 354—358, 65 S.Ct. 690, 699—701, 89 L.Ed. 985, concurring opinion. It seems pretty clear to me, however, that Congress in the Act of 1935, 49 Stat. 801, created an obligation on the part of the Government to pay these Indians for all lands to which their ancestors held an 'original Indian title.' This interpretation of the Act is not only consistent with the unusually broad language Cong ess used, but also fits into the pattern of congressional legislation which has become progressively more generous in its treatment of Indians. The capstone of this type of legislation was an Act passed by the last Congress, which established an Indian Claims Commission with sweeping powers to pay old Indian claims growing out of seizure of their lands, among other things. This Commission is given power to make awards, subject to review by the Court of Claims, with and without regard to previous rules of law or equity courts. The Commission is even given a blanket power to make awards upon finding, for example, that the land of Indians was taken by the Government in a way that did not comport with 'fair and honorable dealings.' Pub.L. No. 726, 79th Cong., 2d Sess., § 2(5), 25 U.S.C.A. § 70a(5). Since whatever our action here, these Indians could, I assume, pursue, their claims under this broad recent legislation, and since the language of the Act before us does not preclude a similarly broad interpretation, I see no reason why it should be otherwise interpreted. This leads me to concur in affirmance of the judgment.
28
Mr. Justice REED, with whom Mr. Justice RUTLEDGE and Mr. Justice BURTON join, dissenting.
29
This case presents directly for the first time in this Court the question of whether an Indian band is legally entitled to recover compensation from the United States for the taking by the Government of the aboriginal lands of the Indians when there has been no prior recognition by the United States through treaty or statute of any title or legal or equitable right of the Indians in the land. The Court allows compensation. The importance of the issue persuades us that we should express the reasons for our dissent. It is difficult to foresee the result of this ruling in the consideration of claims by Indian tribes against the United States. We do not know the amount of land so taken. West of the Mississippi it must be large. Even where releases of Indian title have been obtained in return for recognition of Indian rights to smaller areas, charges of unfair dealings may open up to consideration again legal or equitable claims for taking aboriginal lands.1
30
The Court rightly states the effect of the jurisdictional act in these words:
31
'The Act removes the impediments of sovereign immunity and lapse of time and provides for judici l determination of the designated claims. No new right or cause of action is created. A merely moral claim is not made a legal one. (329 U.S. 45, 67 S.Ct. 169.) 'Lacking a jurisdictional act permitting judicial inquiry, such language cannot be questioned where Indians are seeking payment for appropriate lands; but here in the 1935 statute Congress has authorized decision by the courts upon claims arising out of original Indian title.' 329 U.S. 51, 67 S.Ct. 172.
32
This means, and the Court so treats the claims, that the Indians here get no money by grace or charity or for reasons of honorable dealings with helpless peoples.2 The recovery by them under this act will be because they have had valid claims against the United States on account of their ouster from these lands in 1855. These Indians have not been paid the sums owing them, one deduces from the Court's opinion, because the sovereign, our nation, kept the courts closed to them. The jurisdictional act, the Court holds, removes this bar to recovery. This conclusion conflicts with our understanding of this Government's right in the public lands of the nation.
33
The character of Indian occupancy of tribal lands is at least of two kinds: first, occupancy as aborigines until that occupancy is interrupted by governmental order; and, second, occupancy when by an act of Congress they are given a definite area as a place upon which to live. When Indians receive recognition of their right to occupy lands by act of Congress, they have a right of occupancy which cannot be taken from them without compensation.3 But by the other type of occupancy, it may be called Indian title, the Indians get no right to continue to occupy the lands; and any interference with their occupancy by the United States has not heretofore given rise to any right of compensation, legal or equitable.4
34
This distinction between rights from recognized occupancy and from Indian title springs from the theory under which the European nations took possession of the lands of the American aborigines. This theory was that discovery by the Christian nations gave them sovereignty over and title to the lands discovered. Johnson v. McIntosh, 8 Wheat. 543, 572—586, 5 L.Ed. 681; 1 Story, Commentaries on the Constitution (5th Ed.) § 152. While Indians were permitted to occupy these lands under their Indian title,5 the conquering nations asserted the right to extinguish that Indian title without legal responsibility to compensate the Indian for his loss.6 It is not for the courts of the conqueror to question the propriety or validity of such an assertion of power. Indians who continued to occupy their aboriginal homes, without definite recognition of their right to do so are like paleface squatters on public lands without compensable rights if they are evicted. Tenure for Indian tribes specifically recognized by Congress developed along different lines in the original states, the Louisiana Purchase, the Mexican Session or the lands obtained by the Northwest Boundary Treaty. But there is no instance known to us where there has been intimation or holding that Congressional power to take Indian title to lands is limited. Whenever the lands to which the Indians had only Indian title were required for settlement or public use, the sovereign without legal obligation could extinguish that title by purchase or the sword.7
35
In Barker v. Harvey, 181 U.S. 481, 21 S.Ct. 690, 45 L.Ed. 963 Mission Indians claimed a right of permanent occupancy in former Mexican lands ceded to the United States by the treaty of Guadalupe Hidalgo. They made this claim against a right arising by virtue of a patent that was issued by the United States in confirmation of grants by the Mexican Government in derogation of the Indian title. This Court said as to this Indian title, 181 U.S. p. 491, 21 S.Ct. 694, 'that a claim of a right to permanent occupancy of land is one of far reaching effect, and it could not well be said that lands which were burdened with a right of permanent occupancy were a part of the public domain and subject to the full disposal of the United States.'8 This Court confirmed title contrary to the Indian claim. Rights of occupancy given to Indians by an executive order may be withdrawn without compensation to the Indians where their title was not recognized by Congressional act. The Indians do not hold such lands by the same tenure as they do the lands by the terms of a ratified treaty or statute. Sioux Tribe of Indians v. United States, 316 U.S. 317, 326—328, 62 S.Ct. 1095, 1099—1100, 86 L.Ed. 1501.
36
As we understand the present holding of the Court, it is that the manner of terminating his Indian title by the United States is limited by the duty to pay compensation. Therein, we think, lies the fundamental error of the Court's opinion. It is true that distinctions have been made between plenary authority over tribal lands and absolute power, with the suggestion that Congressional power over Indian title was not unlimited. See Cohen, Handbook of Indian Law, 94, 291, 309, 310, 311. Examination of the authorities cited, however, will show, we think, in every instance that where reference is made to the protection of Indian lands by the Fifth Amendment or to the legal obligation of the United States to compensate Indians for lands taken, the lands under discussion were lands held by the Indians under titles recognized by specific acts of Congress.9
37
When Chief Justice Marshall expounded for the Court the power of the United States to extinguish Indian title, this doctrine was laid down for the nation's guidance in dealing with the Indians:
38
'The United States, then, have unequivocally acceded to that great and broad rule by which its civilized inhabitants now hold this country. They hold, and assert in themselves, the title by which it was acquired. They maintain, as all others have maintained, that discovery gave an exclusive right to extinguish the Indian title of occupancy, either by purchase or by conquest; and gave also a right to such a degree of sovereignty as the circumstances of the people would allow them to exercise.
39
'* * * All our institutions recognize the absolute title of the crown, subject only to the Indian right of occupancy, and recognized the absolute title of the crown to extinguish that right. This is incompatible with an absolute and complete title in the Indians.
40
'* * * Conquest gives a title which the courts of the conqueror cannot deny, whatever the private and speculative opinions of individuals may be, respecting the original justice of the claim which has been successfully asserted. * * *
41
'The title by conquest is acquired and maintained by force. The conqueror prescribes its limits. * * * Where this incorporation is practicable, humanity demands, and a wise policy requires, that the rights of the conquered to property should remain unimpaired; that the new subjects should be governed as equitably as the old, and that confidence in their security should gradually banish the painful sense of being separated from their ancient connections, and united by force to strangers.
42
'* * * the tribes of Indians inhabiting this country were fierce savages, whose occupation was war, and whose subsistence was drawn chiefly from the forest. To leave them in possession of their country, was to leave the country a wilderness; to govern them as a distinct people was impossible, because they were as brave and as high spirited as they were fierce, and were ready to repel by arms every attempt on their independence.
43
'What was the inevitable consequence of this state of things? The Europeans were under the necessity either of abandoning the country, and relinquishing their pompous claims to it, or of enforcing those claims by the sword, and by the adoption of principles adapted to the condition of a people with whom it was impossible to mix, and who could not be governed as a distinct society, or of remaining in their neighborhood, and exposing themselves and their families to the perpetual hazard of being massacred.
44
'Frequent and bloody wars, in which the whites were not always the aggressors, unavoidably ensued. European policy, numbers, and skill, prevailed. As the white population advanced, that of the Indians necessarily receded. The country in the immediate neighborhood of agriculturists became unfit for them. The game fled into thicker and more unbroken forests, and the Indians followed. The soil, to which the crown originally claimed title, being no longer occupied by its ancient inhabitants, was parcelled out according to the will of the sovereign power, and taken possession of by persons who claimed immediately from the crown, or mediately, through its grantees or deputies.' 8 Wheat. 587—591, 5 L.Ed. 681.
45
It is unnecessary for this case to undertake at this late date to weigh the rights and wrongs of this treatment of aboriginal occupancy. Where injustices have been done to friendly peoples, Congress has sought to soften their effect by acts of mercy. Never has there been acknowledgment before of a legal or equitable right to compensation that springs from the appropriation by the United States of the Indian title.
46
'Extinguishment of Indian title based on aboriginal possession is of course a different matter. The power of Congress in that regard is supreme. The manner, method and time of such extinguishment raise political not justiciable issues. Buttz v. Northern Pacific Railroad, supra, 119 U.S. at page 66, 7 S.Ct. at page 104, 30 L.Ed. 330. As stated by Chief Justice Marshall in Johnson v. McIntosh, supra, 8 Wheat. at page 586, 5 L.Ed. 681, 'the exclusive right of the United States to extinguish' Indian title has never been doubted. and whether it be done by treaty, by the sword, by purchase, by the exercise of complete dominion adverse to the right of occupancy, or otherwise, its justness is not open to inquiry in the courts. Beecher v. Wetherby, 95 U.S. 517, 525, 24 L.Ed. 440.' United States v. Santa Fe Pacific R. Co., 314 U.S. 339, 347, 62 S.Ct. 248, 252, 86 L.Ed. 260.
47
The colonies, the states and the nation alike by their e rly legislation provided that only the respective sovereigns could extinguish the Indian title.10 The way in which it was to be extinguished has been held, continually, a political matter.11 The jurisdictional act now under consideration does not purport to change a political matter to a justiciable one.
48
When this present jurisdictional act was considered by Congress, nothing in the reports or the debates12 indicates that Congress intended to create a new liability because Indian title had been taken. This Court relies upon no change of attitude in Congress, but finds that this liability has always existed and that this act merely removes the bar against suit. This we think is contrary to the whole course of our relations with the Indians.
49
The Court finds a basis for this action in that this nation should not take the Indian title without compensation because such a taking would not satisfy the "high standards for fair dealing' required of the United States in controlling Indian affairs.' The language used by the Court is taken from United States v. Santa Fe Pacific R. Co., 314 U.S. 339 at page 356, 62 S.Ct. 248 at page 256, 86 L.Ed. 260. It there referred to an act unauthorized by Congress and not to such takings as here occurred when Congress opened the original home of these respondents for settlement.
50
In Worcester v. State of Georgia, 6 Pet. 515, 543, 544, 547, 556, 8 L.Ed. 483, lands had been specifically set apart for the Cherokees. Therefore Chief Justice Marshall's comments were directed at a situation that does not exist here.
51
A concurring opinion has been filed which holds that Congress in the act here involved 'created an obligation on the part of the Government to pay these Indians' for their Indian title. We do not think this present act is susceptible of that interpretation. We read the act, as we understand the opinion of the Court does, to permit recovery of compensation only in case there were rights in the Indians prior to its passage 'arising under or growing out of the original Indian title.' We think no rights arose from this Indian title. Therefore no compensation is due.
52
As we are of the opinion that the jurisdictional act permitted judgment only for claims arising under or growing out of the original Indian title and are further of the opinion that there were no legal or equitable claims that grew out of the taking of this Indian title, we would reverse the judgment of the Court of Claims and direct that the bill of the respondents should be dismissed. Cf. Northwestern Bands of Shoshone Indians v. United States, 324 U.S. 335, 65 S.Ct. 690, 89 L.Ed. 985.
1
49 Stat. 801. The pertinent section in full provides: 'That jurisdiction is hereby conferred on the Court of Claims with the right of appeal to the Supreme Court of the United States by either party, as in other cases, to hear, examine, adjudicate, and render final judgment * * * (b) any and all legal and equitable claims arising under or growing out of the original Indian title, claim, or rights in, to, or upon th whole or any part of the lands and their appurtenances occupied by the Indian tribes and bands described in the unratified treaties published in Senate Executive Document Numbered 25, Fifty-third Congress, first session (pp. 8 to 15), at and long prior to the dates thereof, except the Coos Bay, Lower Umpqua, and Siuslaw Tribes, it being the intention of this Act to include all the Indian tribes or bands and their descendants, with the exceptions named, residing in the then Territory of Oregon west of the Cascade Range at and long prior to the dates of the said unratified treaties, some of whom, in 1855, or later, were removed by the military authorities of the United States to the Coast Range, the Grande Ronde, and the Siletz Reservations in said Territory.'
2
The remaining seven plaintiff tribes failed to state a cause of action under the jurisdictional act and the rules of the Court of Claims.
3
'Original Indian title' is used to designate the Indian right of occupancy based upon aboriginal possession.
4
9 Stat. 323. The Act created a territorial government and declared: 'That nothing in this act contained shall be construed to impair the rights of person or property now pertaining to the Indians in said Territory, so long as such rights shall remain unextinguished by treaty between the United States and such Indians, or to affect the authority of the government of the United States to make any regulation respecting such Indians, their lands, property, or other rights, by treaty, law, or otherwise, which it would have been competent to the government to make if this act had never passed.'
5
9 Stat. 323.
6
9 Stat. 437.
7
28 Stat. 286, 323.
8
28 Stat. 286, 323.
9
In 1851 Dart and Palmer negotiated treaties with nineteen tribes other than respondents. None of these treaties was ratified; but twelve of the nineteen tribes were included in further treaties made in 1853, 1854, and 1855, and Congress in 1897 and 1912 provided for paying the remaining seven tribes for their lands taken under the unratified treaties.
10
45 Stat. 1256, as amended in respects immaterial here, 47 Stat. 307.
11
Coos Bay, Lower Umpqua and Siuslaw Indian Tribe et al. v. United States, 1938, 87 Ct.Cl. 143, discussed infra 67 S.Ct. 172, arose under the 1929 Act.
12
46 Stat. 531, amending 44 Stat. 1263. Assiniboine Indian Tribe v. United States, 1933, 77 Ct.Cl. 347, was litigated under this jurisdictional act.
13
United States v. Mille Lac Chippewa Indians, 1913, 229 U.S. 498, 500, 33 S.Ct. 811, 812, 57 L.Ed. 1299; Sac and Fox Indians of the Mississippi in Iowa v. Sac and Fox, etc., 1911, 220 U.S. 481, 489, 31 S.Ct. 473, 476, 55 L.Ed. 552.
14
United States v. Santa Fe Pacific R. Co., 1941, 314 U.S. 339, 347, 62 S.Ct. 248, 252, 86 L.Ed. 260, and cases note 27 infra.
15
Johnson v. McIntosh, 1823, 8 Wheat. 543, 573—574, 5 L.Ed. 681.
16
United States v. Santa Fe Pacific R. Co., 1941, 314 U.S. 339, 62 S.Ct. 248, 86 L.Ed. 260.
17
Beecher v. Wetherby, 1877, 95 U.S. 517, 24 L.Ed. 440.
18
The 'moral' obligation upon Congress, of which the cases speak, refers more to the obligation to open the courts to suit by the Indians. It does not mean that there is no substantive right in the Indians. So in United States v. Blackfeather, 1894, 155 U.S. 180, 194, 15 S.Ct. 4, 70, 39 L.Ed. 114, it was held that, 'While there may be a moral obligation on the part of the government to reimburse the money embezzled by the Indian superintendent * * *.', the jurisdictional act in point did not extend to such a claim. Yet, given consent to suit, it would hardly be said that there was no substantive right against the United States for embezzlement of Indian funds.
19
'The practical admission of the European conquerors of this country renders it unnecessary for us to speculate on the extent of that right which they might have asserted from conquest. * * * The conquerors have never claimed more than the exclusive right of purchase from the Indians * * *.' 1821, 1 Op.Atty.Gen. 465, 466 (William Wirt).
20
See the analysis in Cohen, Handbook of Federal Indian Law (1945) 51—66.
21
16 Stat. 544.
22
9 Stat. 323, 329, § 14.
23
43 Stat. 886.
24
Duwamish et al. Indians v. United States, 1934, 79 Ct.Cl. 530, 600.
25
45 Stat. 1407.
26
Northwestern Bands of Shoshone Indians v. United States, 1945, 324 U.S. 335, 337, 339, 354, 65 S.Ct. 690, 691, 692, 699, 89 L.Ed. 985.
27
The statements in many cases are directed to disputes between third parties, one of whom attempts to raise a defect in the other's title by tracing it to a government grant out of Indian territory and attacking the power or the method used by the sovereign to convey Indian lands. Beecher v. Wetherby, 1877, 95 U.S. 517, 525, 24 L.Ed. 440; Buttz v. Northern Pacific Railroad, 1886, 119 U.S. 55, 66, 7 S.Ct. 100, 104, 30 L.Ed. 330; Martin v. Waddell's Lessee, 1842, 16 Pet. 367, 409, 10 L.Ed. 997; Clark v. Smith, 1839, 13 Pet. 195, 201, 10 L.Ed. 123. And in other cases, the issue was not the right of Indian tribes to be compensated for an extinguishment of original Indian title by the United States. Northwestern Bands of Shoshone Indians v. United States, 1945, 324 U.S. 335, 65 S.Ct. 690, 89 L.Ed. 985; United States v. Santa Fe Pacific R. Co., 1941, 314 U.S. 339, 62 S.Ct. 248, 86 L.Ed. 260; Conley v. Ballinger, 1910, 216 U.S. 84, 30 S.Ct. 224, 54 L.Ed. 393; Lone Wolf v. Hitchcock, 1903, 187 U.S. 553, 23 S.Ct. 216, 47 L.Ed. 299; Cherokee Nation v. Hitchcock, 1902, 187 U.S. 294, 23 S.Ct. 115, 47 L.Ed. 183.
28
Lone Wolf v. Hitchcock, 1903, 187 U.S. 553, 566, 23 S.Ct. 216, 221, 47 L.Ed. 299; Beecher v. Wetherby, 1877, 95 U.S. 517, 525, 24 L.Ed. 440. The Lone Wolf case was properly assessed in Shoshone Tribe of Indians of the Wind River Reservation in Wyoming v. United States, 1937, 299 U.S. 476, 497, 57 S.Ct. 244, 251, 81 L.Ed. 360: 'Power to control and manage the property and affairs of Indians in good faith for their betterment and welfare may be exerted in many ways and at times in derogation of the provisions of a treaty.' See also State of Oklahoma v. State of Texas, 1922, 258 U.S. 574, 592, 42 S.Ct. 406, 413, 66 L.Ed. 771.
In Barker v. Harvey, 1901, 181 U.S. 481, 21 S.Ct. 690, 45 L.Ed. 963, the Indian claims were deemed extinguished by non-presentment to the land commission, and this was true even if the claims had been 'recognized' by the Mexican government prior to the cession of lands to the United States.
29
United States v. Klamath Indians, 1938, 304 U.S. 119, 58 S.Ct. 799, 82 L.Ed. 1219; Chippewa Indians of Minnesota v. United States, 1937, 301 U.S. 358, 57 S.Ct. 826, 81 L.Ed. 1156; Shoshone Tribe v. United States, 1937, 299 U.S. 476, 57 S.Ct. 244, 81 L.Ed. 360; United States v. Creek Nation, 1935, 295 U.S. 103, 55 S.Ct. 681, 79 L.Ed. 1331.
30
Other cases also draw no distinction between original Indian title and 'recognized' Indian title. 'The Indian title, as against the United States, was merely a title and right to the perpetual occupancy of the land, with the privilege of using it in such mode as they saw fit until such right of occupation had been surrendered to the government. When Indian reservations were created, either by treaty or executive order, the Indians held the land by the same character of title, to wit, the right to possess and occupy the lands for the uses and purposes designated.' Spalding v. Chandler, 1896, 160 U.S. 394, 403, 16 S.Ct. 360, 364, 40 L.Ed. 469. Of similar tenor is Conley v. Ballinger, 1910, 216 U.S. 84, 90, 91, 30 S.Ct. 224, 225, 54 L.Ed. 393.
The older cases explaining and giving substance to the Indian right of occupancy contain no suggestion that only 'recogniz d' Indian title was being considered. Indeed, the inference is quite otherwise. Mitchel v. United States, 1835, 9 Pet. 711, 746, 9 L.Ed. 283; Worcester v. Georgia, 1832, 6 Pet. 515, 543—548, 8 L.Ed. 483; Johnson v. McIntosh, 1823, 8 Wheat. 543, 573, 574, 5 L.Ed. 681.
31
Duwamish et al. Indians v. United States, 1934, 79 Ct.Cl. 530.
32
45 Stat. 1256, as amended in respects immaterial here, 47 Stat. 307.
33
'The decade from 1930 to 1939 is as notable in the history of Indian legislation as that of the 1830's or the 1880's.' Cohen, Handbook of Federal Indian Law (1945) 83.
34
Stephens v. Cherokee Nation, 1899, 174 U.S. 445, 478, 19 S.Ct. 722, 734, 43 L.Ed. 1041.
1
See Indian Claims Commission Act, approved August 13, 1946, Pub. No. 726, 79th Cong., 2d Sess.:
'Sec. 2. The Commission shall hear and determine the following claims against the United States on behalf of any Indian tribe, band, or other identifiable group of American Indians residing within the territorial limits of the United States or Alaska: (1) Claims in law or equity arising under the Constitution, laws, treaties of the United States, and Executive orders of the President; (2) all other claims in law or equity, including those sounding in tort, with respect to which the claimant would have been entitled to sue in a court of the United States if the United States was subject to suit; (3) claims which would result if the treaties, contracts, and agreements between the claimant and the United States were revised on the ground of fraud, duress, unconscionable consideration, mutual or unilateral mistake, whether of law or fact, or any other ground cognizable by a court of equity; (4) claims arising from the taking by the United States, whether as the result of a treaty of cession or otherwise, of lands owned or occupied by the claimant without the payment for such lands of compensation agreed to by the claimant; and (5) claims based upon fair and honorable dealings that are not recognized by any existing rule of law or equity. No claim accruing after the date of the approval of this Act shall be considered by the Commission.
'All claims hereunder may be heard and determined by the Commission notwithstanding any statute of limitations or laches, but all other defenses shall be available to the United States.' 25 U.S.C.A. § 70a.
2
There are sound reasons for Congressional generosity toward the remnants of the aborigines. Such reasons as lead the Nation to succor the vanquished in any contest. Cf. United States v. Realty Co., 163 U.S. 427, 16 S.Ct. 1120, 41 L.Ed. 215; Pope v. United States, 323 U.S. 1, 65 S.Ct. 16, 89 L.Ed. 3; and Public No. 726, 79th Cong., 2d Sess., § 24, 28 U.S.C.A. § 259a.
3
Chippewa Indians of Minnesota v. United States, 301 U.S. 358, 375, 376, 57 S.Ct. 826, 833, 81 L.Ed. 1156; United States v. Klamath Indians, 304 U.S. 119, 58 S.Ct. 799, 82 L.Ed. 1219; Shoshone Tribe v. United States, 299 U.S. 476, 497, 57 S.Ct. 244, 251, 81 L.Ed. 360; United States v. Creek Nation, 295 U.S. 103, 109—110, 55 S.Ct. 681, 684, 79 L.Ed. 1331.
4
See Northwestern Band of Shoshone Indians v. United States, 324 U.S. 335, 339, 65 S.Ct. 690, 692, 89 L.Ed. 985.
5
See Mitchel v. United States, 9 Pet. 711, 745, 9 L.Ed. 283.
6
The Treaty of Paris, 1783, confirmed the sovereignty of the United States without reservation of Indian rights.
7
Johnson v. McIntosh, supra, 8 Wheat. at pages 587—589, 5 L.Ed. 681; Lone Wolf v. Hitchcock, 187 U.S. 553, 568, 23 S.Ct. 216, 222, 47 L.Ed. 299; Missouri, Kansas & Texas Ry. Co. v. Roberts, 152 U.S. 114, 117, 14 S.Ct. 496, 497, 38 L.Ed. 377; See Tiger v. Western Investment Co., 221 U.S. 286, 311, 31 S.Ct. 578, 584, 55 L.Ed. 738.
8
Cf. Duwamish et al. Indians v. United States, 79 Ct.Cl. 530, 597—600.
9
E.g. Lane v. Pueblo of Santa Rosa, 249 U.S. 110, 113, 39 S.Ct. 185, 186, 63 L.Ed. 504; United States v. Creek Nation, 295 U.S. 103, 109, 55 S.Ct. 681, 684, 79 L.Ed. 1331; Shoshone Tribe of Indians of Wind River Reservation in Wyoming v. United States, 299 U.S. 476, 496, 57 S.Ct. 244, 251, 81 L.Ed. 360; Chippewa Indians of Minnesota v. United States, 301 U.S. 358, 375—377, 57 S.Ct. 826, 833, 834, 81 L.Ed. 1156.
10
See passim, Laws of the Colonial and State Governments, Relating to Indians and Indian Affairs, from 1633 to 1831, inclusive: With an Appendix Containing the Proceedings of the Congress of the Confederation and the Laws of Congress, from 1800 to 1830, on the Same Subject.
11
Lone Wolf v. Hitchock, 187 U.S. 553, 565, 23 S.Ct. 216, 221, 47 L.Ed. 299; Tiger v. Western Investment Co., 221 U.S. 286, 311, 31 S.Ct. 578, 584, 55 L.Ed. 738.
12
See S.Reps. Nos. 571, 795, 1134, 74th Cong., 1st Sess.; H.Rep. No. 1085, 74th Cong., 1st Sess.; 79 Cong.Rec. 7806, 11188, 12520.
| 12
|
329 U.S. 90
67 S.Ct. 133
91 L.Ed. 103
AMERICAN POWER & LIGHT CO.v.SECURITIES & EXCHANGE COMMISSION. ELECTRIC POWER & LIGHT CORPORATION v. SAME.
Nos. 4, 5.
Reargued Oct. 14, 15, 1946.
Decided Nov. 25, 1946.
[Syllabus from pages 90-94 intentionally omitted]
Mr. Arthur A. Ballantine, of New York City, for American Power & Light co.
Mr. Daniel James, of New York City, for Electric Power & Light corporation.
Mr. Roger S. Foster, of Philadelphia, Pa., for respondent.
Mr. Justice MURPHY delivered the opinion of the Court.
1
We are concerned here with the constitutionality of § 11(b)(2) of the Public Utility Holding Company Act of 19351 and its application to the petitioners, the American Power & Light Company and the Electric Power & Light Corporation.
2
American and Electric are two of the subholding companies in the Electric Bond and Share Company holding company system, certain aspects of which were considered by this Court in Electric Bond & Share Co. v. S.E.C., 303 U.S. 419, 58 S.Ct. 678, 82 L.Ed. 936, 115 A.L.R. 105. This system is a pyramid-like structure of which Bond and Share itself constitutes the apex, five subholding companies (including American and Electric) create an intermediate tier,2 and approximately 237 direct and indirect subsidiaries of the latter form the base. From the standpoint of book capitalization and assets, number of customers and areas served by the operating companies, and quantity of electricity generated and gas sold, the Bond nd Share system constitutes the largest single public utility holding company system registered under the Act.
3
The proceeding now under review was instituted by the Securities and Exchange Commission under § 11(b)(2) of the Act. After appropriate notice and hearing, the Commission found that the corporate structure and continued existence of American and Electric unduly and unnecessarily complicated the Bond and Share system and unfairly and inequitably distributed voting power among the security holders of that system, in violation of the standards of § 11(b)(2). 11 S.E.C. 1146. Orders were accordingly entered requiring the dissolution of both American and Electric and requiring them to submit plans for the effectuation of these orders. The First Circuit Court of Appeals sustained the Commission's action in all respects and affirmed its orders, while refusing to consider certain contentions of American and Electric which had not been raised before the Commission. 141 F.2d 606. We granted certiorari because of the obvious public importance of the issues presented. 325 U.S. 846, 65 S.Ct. 1400, 89 L.Ed. 1968.
I.
4
At the outset, we reject the claim that § 11(b)(2), viewed from the standpoint of the commerce clause, is unconstitutional.
5
So far as here pertinent,3 § 11(b)(2) directs the Securities and Exchange Commission, as soon as practicable after January 1, 1938, '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. * * * 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.'
6
Like § 11(b)(1) its statutory companion, § 11(b)(2) applies only to registered holding companies and their subsidiaries. We noted in North American Co. v. S.E.C., 327 U.S. 686, 66 S.Ct. 785, that by making certain interstate transactions unlawful unless a holding company registers with the Commission § 4(a), and by extending § 11(b)(1) to registered holding companies, Congress has effectively applied § 11(b)(1) to those holding companies that are in fact in the stream of interstate activity or that affect commerce in more states than one. The identical observations can be made as to § 11(b)(2). Its impact is likewise limited by reference to the registration requirements, to those holding companies which depend for their very existence upon the constan and systematic use of the mails and the instrumentalities of interstate commerce. Effect is thereby given to the legislative policy set forth in § 1(c) of interpreting all provisions of the Act to meet the problems and to eliminate the evils 'connected with public-utility holding companies which are engaged in interstate commerce or in activities which directly affect or burden interstate commerce.' 15 U.S.C.A. § 79a(c).
7
The Bond and Share system including American and Electric, possesses an undeniable interstate character which makes it properly subject from the statutory standpoint, to the provisions of § 11(b)(2). This vast system embraces utility properties in no fewer than 32 states from New Jersey to Oregon and from Minnesota to Florida, as well as in 12 foreign countries. Bond and Share dominates and controls this system from its headquarters in New York City.4 As was the situation in the North American case, the proper control and functioning of such an extensive multi-state network of corporations necessitates continuous and substantial use of the mails and the instrumentalities of interstate commerce. Only in that way can Bond and Share, or its subholding companies or service subsidiary, market and distribute securities, control and influence the various operating companies, negotiate inter-system loans, acquire or exchange property, perform service contracts, or reap the benefits of stock ownership. See § 1(a). See also International Textbook Co. v. Pigg, 217 U.S. 91, 30 S.Ct. 481, 54 L.Ed. 678, 27 L.R.A.,N.S., 493, 18 Ann.Cas. 1103. Moreover, many of the operating companies on the lower echelon sell and transmit electric energy or gas in interstate commerce to an extent that cannot be described as spasmodic or insignificant. Electric Bond & Share Co. v. S.E.C., supra, 303 U.S. 432, 433, 58 S.Ct. 681, 682, 82 L.Ed. 936, 115 A.L.R. 105.5 Such activities serve to augment the interstate nature of the Bond and Share system. And they make even plainer the fact that this system falls within the intended scope of § 11(b)(2).
8
Congress, of course, has undoubted power under the commerce clause to impose relevant conditions and requirements on those who use the channels of interstate commerce so that those channels will not be conduits for promoting or perpetuating economic evils. North American Co. v. S.E.C., supra; United States v. Darby, 312 U.S. 100, 657, 61 S.Ct. 451, 85 L.Ed. 609, 132 A.L.R. 1430; Brooks v. United States, 267 U.S. 432, 45 S.Ct. 345, 69 L.Ed. 699, 37 A.L.R. 1407. Thus to the extent that corporate business § transacted through such channels, affecting commerce in more states than one, Congress may act directly with respect to that business to protect what it conceives to be the national welfare. It may prescribe appropriate regulations and determine the conditions under which that business may be pursued.6 It may compel changes in the voting rights and other privileges of stockholders.7 It may order the divestment or rearrangement of properties.8 It may order the reorganization or dissolution of corporations.9 In short, Congress is completely uninhibited by the commerce clause in selecting the means considered necessary for bringing about the desired conditions in the channels of interstate commerce. Any limitations are to be found in other sections of the Constitution. Gibbons v. Ogden, 9 Wheat. 1, 196, 6 L.Ed. 23.
9
Since the mandates of § 11(b)(2) are directed solely to public utility holding company systems that use the channels of interstate commerce, the validity of that section under the commerce clause becomes apparent. It is designed to prevent the use of those channels to propagate and disseminate the evils which had been found to flow from unduly complicated systems and from inequitable distributions of voting power among security holders of the systems. Such evils are so inextricably entwined around the interstate business of the holding company systems as to present no serious question as to the power of Congress under the commerce clause to eradicate them.
10
In the extensive studies which preceded the passage of the Public Utility Holding Company Act, 15 U.S.C.A. § 79 et seq., it had been found that 'The most distinctive characteristic, and perhaps the most serious defect of the present holding-company organization is the pyramided structure which is found in all of the important holding-company groups examined.'10 The pyramiding device in its most common form consisted of interposing one or more subholding companies between the holding company and the operating companies and issuing, at each level of the structure, different classes of stock with unequal voting rights. Most of the financing of the various companies in the structure occurred through the sale to the public of bonds and preferred stock having low fixed returns and generally carrying no voice in the managements. Under such circumstances, a relatively small but strategic investment in common stock (with voting privileges) in the higher levels of a pyramided structure often resulted in absolute control of underlying operating companies with assets of hundreds of millions of dollars.11 A tremendous 'leverage' in relation to that stock was thus produced; the earnings of the top holding company were greatly magnified by comparatively small changes in the earnings of the operating companies. The common stock of the top holding company might quickly rise in value and just as quickly fall, making it a natural object for specul tion and gambling. In many instances this created financially irresponsible managements and unsound capital structures.12 Public investors in such stock found themselves the innocent victims, while those who supplied most of the capital through the purchase of bonds and preferred stock likewise suffered in addition to being largely disfranchised. Prudent management of the operating companies became a minor consideration, with pressure being placed on them to sustain the excessive capitalization to the detriment of their service to consumers. Reduction of rates was firmly resisted. The conclusion was accordingly reached by those making the studies that the highly pyramided system 'is dangerous and has no justification for existence'13 and 'represents the holding-company system at its worst.'14
11
Such was the general nature of the problem to which Congress addressed itself in § 11(b)(2). Various abuses traceable in substantial measure to the use of the pyramiding device were enumerated in § 1(b). And it was specifically found in § 1(b)(3) that the national public interest and the interests of the investors and consumers are or may be adversely affected 'when control of such (subsidiary) companies is exerted through disproportionately small investment.'
12
The problem which underlies § 11(b)(2), therefore, deals with the very essence of holding company systems. Their pyramided structures and the resulting abuses, like their other characteristics, rest squarely upon an extensive use of the mails and the instrumentalities of interstate commerce. Conversely, every interstate transaction of such systems is impregnated in one degree or another with the effects of complicated corporate structures and inequitable distribution of voting power. Many of these effects may be intangible and indistinct, but they are nonetheless real.
13
To deny that Congress has power to eliminate evils connected with pyramided holding company systems, evils which have been found to be promoted and transmitted by means of interstate commerce, is to deny that Congress can effectively deal with problems concerning the welfare of the national economy. We cannot deny that power. Rather we reaffirm once more the constitutional authority resident in Congress by virtue of the commerce clause to undertake to solve national problems directly and realistically, giving due recognition to the scope of state power. That follows from the fact that the federal commerce power is as broad as the economic needs of the nation. North American Co. v. S.E.C., supra.
II.
14
We likewise reject the claim that § 11(b)(2) constitutes an unconstitutional delegation of legislative power to the Securities and Exchange Commission because of an alleged absence of any ascertainable standards for guidance in carrying out its functions.
15
Section 11(b)(2) itself provides that the Commission shall act so as to ensure that the corporate structure or continued existence of any company in a particular holding company system does not 'unduly or unnecessarily complicate the structure' or 'unfairly or inequitably distribute voting power among security holders.' It is argued that these phrases are undefined by the Act, are legally meaningless in themselves and carry with them no historically defined concepts. As a result, it is said, the Commission is forced to use its unlimited whim to determine compliance or non-compliance with § 11(b)(2); and in framing its orders, the Commission has unfettered discretion to decide whose property shall be taken or destroyed and to what extent. Objection is also made on the score that no standards have been developed or announced by the Commission which justify its action in this case.
16
These contentions are without merit. Even standing alone, standards in terms of unduly complicated corporate structures and inequitable distributions of voting power cannot be said to be utterly without meaning, especially to those familiar with corporate realities. But these standards need not be tested in isolation. They derive much meaningful content from the purpose of the Act, its factual background and the statutory context in which they appear. See Intermountain Rate Cases, 234 U.S. 476, 34 S.Ct. 986, 58 L.Ed. 1408. From these sources—From the manifold evils revealed by the legislative investigations, the express recital of evils in § 1(b) of the Act, the general policy declarations of Congress in § 1(c), the standards for new security issues set forth in § 7, the conditions for acquisitions of properties and securities prescribed in § 10, and the nature of the inquiries contemplated by § 11(a)—a veritable code of rules reveals itself for the Commission to follow in giving effect to the standards of § 11(b)(2). These standards are certainly no less definite in nature than those speaking in other contexts in terms of 'public interest,' 'just and reasonable rates,' 'unfair methods of competition' or 'relevant factors.' The approval which this Court has given in the past to those standards thus compels the sanctioning of the ones in issue. See New York Central Securities Corp. v. United States, 287 U.S. 12, 24, 25, 53 S.Ct. 45, 48, 77 L.Ed. 138; Yakus v. United States, 321 U.S. 414, 419-427, and cases cited, 64 S.Ct. 660, 665-669, 88 L.Ed. 834.
17
The judicial approval accorded these 'broad' standards for administrative action is a reflection of the necessities of modern legislation dealing with complex economic and social problems. See Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 381, 398, 60 S.Ct. 907, 914, 84 L.Ed. 1263. The legislative process would frequently bog down if Congress were constitutionally required to appraise before-hand the myriad situations to which it wishes a particular policy to e applied and to formulate specific rules for each situation. Necessity therefore fixes a point beyond which it is unreasonable and impracticable to compel Congress to prescribe detailed rules; it then becomes constitutionally sufficient if Congress clearly delineates the general policy, the public agency which is to apply it, and the boundaries of this delegated authority. Private rights are protected by access to the courts to test the application of the policy in the light of these legislative declarations. Such is the situation here.
18
Under these circumstances, it is of no constitutional significance that the Commission, in executing the policies of § 11(b)(2), also has discretion to fashion remedies of a civil nature necessary for attaining the desired goals. See Phelps Dodge Corp. v. National Labor Relations Board, 313 U.S. 177, 194, 61 S.Ct. 845, 85 L.Ed. 1271, 133 A.L.R. 1217. The legislative policies and standards being clear, judicial review of the remedies adopted by the Commission safeguards against statutory or constitutional excesses.
19
Nor is there any constitutional requirement that the legislative standards be translated by the Commission into formal and detailed rules of thumb prior to their application to a particular case. If that agency wishes to proceed by the more flexible case-by-case method, the Constitution offers no obstacle. All that can be required is that the Commission's actions conform to the statutory language and policy.
III.
20
Our decision in North American Co. v. S.E.C., supra, largely disposes of the objections to § 11(b)(2) on the basis of the due process clause of the Fifth Amendment.
21
Section 11(b)(2), like 11(b)(1), materially affects many property interests of holding companies and their investors; it may even destroy whatever right there is to continued corporate existence on the part of a holding company that is found to complicate a system unnecessarily and to serve no useful function. But Congress carefully considered these various interests and found them 'outweighed by the political and general economic desirability of breaking up concentrations of financial power in the utility field too big to be effectively regulated in the interest of either the consumer or the investor and too big to permit the functioning of democratic institutions.'15 It is not our function to reweigh these diverse factors or to question the conclusion reached by Congress. Nor can we say that § 11(b)(2) on its face authorizes or necessarily involves any destruction of any valuable interests without just compensation. The legislative policy and the statutory safeguards pointed out in the North American case negative that argument.
22
Equally groundless is the contention that § 11(b)(2) is void in the absence of an express provision for notice and opportunity for hearing as to security holders regarding proceedings under that section. The short answer is that such a contention can be raised properly only by a security holder who has suffered injury due to lack of notice or opportunity for hearing. No security holder of that type is now before us. The managements of American and Electric admittedly were notified and participated in the hearings as required by § 11(b)(2); and they possess no standing to assert the invalidity of that section from the viewpoint of the security holders' constitutional rights to notice and hearing. See Tyler v. Judges of Court of Registration, 179 U.S. 405, 410, 21 S.Ct. 206, 208, 45 L.Ed. 252; People of State of New York ex rel. Hatch v. Reardon, 204 U.S. 152, 160, 27 S.Ct. 188, 190, 51 L.Ed. 415, 9 Ann.Cas. 736.
23
However the Commission in this instance actually gave all security holders of American and Electric public notice of the pendency of the § 11(b)(2) proceedings and invited them to file applications for intervention before a stated time. This was done pursuant to § 19, which permits the Commission, in accordance with § ch rules and regulations as it may prescribe, to admit any representative of interested consumers or investors, or any other appropriate person, as a party to any proceeding before that body. These security holders thus received everything which the Constitution could possibly guarantee them in this respect.
24
That the statute does not expressly insist upon what in fact has been given the security holders is without constitutional relevance under these circumstances. Wherever possible, statutes must be interpreted in accordance with constitutional principles. Here, in the absence of definite contrary indications, it is fair to assume that Congress desired that § 11(b)(2) be lawfully executed by giving appropriate notice and opportunity for hearing to all those constitutionally entitled thereto. And when that assumption is added to the provisions of § 19, it becomes quite evident that the Commission is bound under the statute to give notice and opportunity for hearing to consumers, investors and other persons whenever constitutionally necessary. See The Japanese Immigrant Case, 189 U.S. 86, 100, 101, 23 S.Ct. 611, 614, 47 L.Ed. 721.
25
But should the Commission neglect to follow the necessary procedure in a particular case, such failure would at most justify an objection to the administrative determination rather than to the statute itself. It would then be needless to do more than nullify the action taken in disregard of the constitutional rights to notice and opportunity for hearing. Since we do not have that situation here, however, we need only reiterate that § 11(b)(2), fairly construed, neither expressly nor impliedly authorizes unconstitutional procedure. It is thus immune to attack on that basis. See Kentucky Railroad Tax Cases, 115 U.S. 321, 6 S.Ct. 57, 29 L.Ed. 414; Bratton v. Chandler, 260 U.S. 110, 43 S.Ct. 43, 67 L.Ed. 157; Toombs v. Citizens' Bank of Waynesboro, 281 U.S. 643, 50 S.Ct. 434, 74 L.Ed. 1088; Cf. Coe v. Armour Fertilizer Works, 237 U.S. 413, 35 S.Ct. 625, 59 L.Ed. 1027; Wuchter v. Pizzutti, 276 U.S. 13, 48 S.Ct. 259, 72 L.Ed. 446, 57 A.L.R. 1230.
IV.
26
Turning to the Commission's action under § 11(b)(2) with respect to American and Electric, we find that the record amply supports the finding that their corporate structures and continued existence unduly and unnecessarily complicate the Bond and Share system and unfairly and inequitably distribute voting power among the security holders of that system. We need do no more here than state the major facts before the Commission underlying this crucial finding.
27
Bond and Share organized these two subholding companies under the laws of Maine in 1909 and 1925, respectively. Until 1935, American and Electric had neither offices nor employees; their books were kept by Bond and Share employees in Bond and Share's offices in New York City. Their officers were employed by and paid by Bond and Share. Their subsidiaries were managed in every detail by Bond and Share. And whenever they dealt with their parent they were represented solely by employees and counsel of Bond and Share. Functionally, the Commission found, American and Electric were mere sets of books in Bond and Share's office.
28
In 1935, shortly before the effective date of the Public Utility Holding Company Act, certain superficial changes were made in the organizational set-up of the Bond and Share system. A separate service subsidiary, Ebasco Services Incorporated, was created to continue functions formerly carried out by the Bond and Share service department. Each of the subholding companies, including American and Electric, was given its own set of officers and employees as well as a separate suite of offices in the Bond and Share office building. Other minor changes took place, but the system in effect continued to operate precisely as it had prior to 1935. Bond and Share still had complete and unquestioned control over American, Electric and their operating subsidiaries.
29
There is an absence of substantial evid nce that either American or Electric is presently able to perform any useful role in the operations of its subsidiaries, such as organizing them into integrated systems or furnishing them with capital or cash. Both companies currently have vast accumulations of unpaid preferred dividends in arrears, not having been able to meet dividend requirements in the ten years preceding 1941. Instances of past functions relating to subsidiaries reveal either harmful results or the guiding hand of Bond and Share.
30
The real purpose of American and Electric, as the Commission found, is to act as the leverage and pyramiding device whereby Bond and Share can amass control over vast sums contributed by others and realize for itself large earnings and profits without proportionate investment—the prime evil at which § 11(b)(2) is directed.
31
Bond and Share holds 20.7% of the total voting stock of American, this holding having a book value of nearly $10,000,000 or 3.68% of American's total capitalization of $270,000,000. Through this investment, Bond and Share controls not only American but also American's 21 subsidiaries with a total capitalization of $29,000,000. An investment of $10,000,000 thus controls $729,000,000, a ratio of 1 to 73.
32
Bond and Share also holds 46.8% of Electric's total voting stock; the book equity of this holding amounts to $17,500,000 or 9.14% of Electric's total capitalization of $192,000,000. Bond and Share is thereby enable to control not only Electric but also Electric's 11 direct and 11 indirect subsidiaries with a total capitalization of $654,000,000. An investment of $17,500,000 thus controls $654,000,000, a ratio of 1 to 37.
33
The Commission, however, made alternative calculations which gave American and Electric the benefit of a more favorable assumption. It adjusted upward the book figures for Bond and Share's common stock interests in these companies to reflect the amount by which the values on the books of the subsidiaries exceeded corresponding values at which American and Electric carried their stock interest in those subsidiaries. But even after such adjustments, Bond and Share's investment equals only 8.2% of American's capitalization and only 3.42% of the book values of American's subsidiaries; and its investment in Electric is the equivalent of only 22.25% of Electric's capitalization and 8.72% of the book values of Electric's subsidiaries.16
34
This disproportion between Bond and Share's investment and the value of the property controlled is even more acute if further adjustments are made to reflect the unconscionable write-ups and inadequate depreciation which the Commission found in the book figures of the various operating companies. American and Electric disagree with many of these adjustments and urge that the book values can be justified; and complaint is made that the Commission refused to consider certain valuation testimony offered by American in this respect. We deem it unnecessary, however, to enter into these disputed matters. Even with the use of the book values, the attenuated investment ratio is such as to justify the Commission's conclusion that Bond and Share's control of the operating companies is achieved 'through disproportionately small investment.' On that basis, over 96% of the investment in American's subsidiaries is without effective voting representation, while over 91% of the book values of Electric's subsidiaries is similarly disfranchised.17
35
Such evidence is more than enough to support the finding that American and Electric are but paper companies without legitimate functional purpose. They serve merely as the mechanism by which Bond and Share maintains a pyramided structure containing the seeds of all the attendant evils condemned by the Act. It was reasonable, therefore, for the Commission to conclude that American and Electric are undue and unnecessary complexities in the Bond and Share system and that their existence unfairly and inequitably distributes voting power among the security holders of the system.
V.
36
The major objection raised by American and Electric relates to the Commission's choice of dissolution as 'necessary to ensure' that the evils would be corrected and the standards of § 11(b)(2) effectuated. Emphasis is placed upon alternative plans which are less drastic in nature and which allegedly would meet the statutory standards.
37
It is a fundamental principle, however, that where Congress has entrusted an administrative agency with the responsibility of selecting the means of achieving the statutory policy 'the relation of remedy to policy is peculiarly a matter for administrative competence.' Phelps Dodge Corp. v. National Labor Relations Board, supra, 313 U.S. 194, 61 S.Ct. 852, 85 L.Ed. 1271, 133 A.L.R. 1217. In dealing with the complex problem of adjusting holding company systems in accordance with the legislative standards, the Commission here has accumulated experience and knowledge which no court can hope to attain. Its judgment is entitled to the greatest weight, while recognizing that the Commission's discretion must square with its responsibility. Only if the remedy chosen is unwarranted in law or is without justification in fact should a court attempt to intervene in the matter. Neither ground of intervention is present in this instance.
38
Dissolution of a holding company or a subholding company plainly is contemplated by § 11(b)(2) as a possible remedy. It directs the Commission to take such steps as it finds necessary to ensure that 'the corporate structure or continued existence of any company in the holding-company system' does not violate the standards set forth. American and Electric argue that the phrase 'in the holding-company system' limits the authority of the Commission to orders removing a particular company from the holding company system of which it is a part and does not permit an order terminating its corporate existence. Grammatically, this contention is without merit. The phrase 'in the holding-company system' no more modifies 'continued existence' than it does 'corporate structure.' It relates, rather, to the word 'company,'18 as though the phrase read 'the corporate structure or continued existence of any company which is in the holding-company system.'
39
Such a construction accords with the policy as well as other provisions of the Act. Section 1(c) declares it to be one of the policies of the Act, in accordance with which all provisions shall be interpreted, 'to provide as soon as practicable for the elimination of public-utility holding companies except as otherwise expressly provided in this title.' The last sentence of § 11(b) (2) provides that 'Except for the purpose of fairly and equitably distributing voting power among the security holders of such company, nothing in this paragraph hall authorize the Commission to require any change in the corporate structure or existence of any company which is not a holding company, * * *.' Moreover, §§ 11(f) and 11(g) specifically refer to dissolution or plans for dissolution of registered holding companies or their subsidiaries in accordance with § 11.19 Such statements would be meaningless and unnecessary were dissolution not contemplated as a possible remedy under § 11(b)(2).
40
The legislative history supports this interpretation. The original bill which passed the Senate (S. 2796, 74th Cong., 1st Sess.) contained a provision quite similar to the present first sentence of § 11(b)(2), except that it was mandatory that the Commission require each registered holding company and subsidiary 'to be reorganized or dissolved' when the Commission found that it violated the standards of that section. In addition, § 11(e) as then written permitted a voluntary plan 'for the divestment of control, securities, or other assets, or for the reorganization or dissolution, of such company or any subsidiary company.' The bill also contained a § 11(b)(3), providing that within five years all holding companies should cease to be holding companies unless the equivalent of a certificate of convenience and necessity were obtained from the Federal Power Commission. But the House of Representatives insisted upon the elimination of § 11(b)(3) and the bill finally reported out by the joint conference committee deleted that provision. A further change was made at this time so that § 11(b)(2), instead of specifying reorganization or dissolution as the remedies, gave the Commission power to require 'such steps' as it might find necessary to ensure compliance. Section 11(e) was also changed to permit a voluntary plan 'for the divestment of control, securities, or other assets, or for other action by such company or any subsidiary company thereof.'
41
Thus the compromise bill which became law omitted the unconditional provision of § 11(b)(3) for the elimination of all holding companies within five years, substituting therefor the 'great-grand-father clause' of § 11(b)(2), and gave the Commission discretion to determine the necessary steps for compliance instead of specifying reorganization or dissolution. There is nothing to indicate that the framers of the compromise bill meant to forbid reorganization or dissolution as remedies which the Commission might choose. Indeed, the fact that these two remedies had been previously specified is strong evidence that they were in the minds of those who wrote the portion of § 11(b)(2) now under consideration and that those persons merely wished not to restrict the Commission to those two remedies; they thus gave the Commission discretion to choose whatever remedy it felt necessary. This legislative history, when combined with various references to dissolution in other parts of § 11, compels the conclusion that dissolution is one of the remedies contemplated by § 11(b) (2) and that its choice falls within the allowable area of the Commission's discretion.
42
Nor can we say that the Commission's choice of dissolution with respect to American and Electric is so lacking in reasonableness as to constitute an abuse of its discretion. The Commission chose dissolution because it felt that such action is calculated to correct the situation 'most effectively and quickly, ever bearing in mind the stated policy of the Act to provide as soon as practicable for the elimination of all holding companies except as expressly provided in the Act.' 1 S.E.C. at 1215. It stated that while some measure of amelioration in the statutory offensiveness of American and Electric might be afforded by other approaches, 'in our opinion no approach presently available holds out the promise of effectuating the statute's requirements fully or promptly.' Ibid., p. 1215. Cf. Jacob Siegel Co. v. Federal Trade Commission, 327 U.S. 608, 66 S.Ct. 758. That this choice of dissolution in preference to other remedies is not lightly to be disregarded is shown by the statement of Dr. Walter Splawn, much relied upon by Congress in shaping this statute, that 'The most effective means of preventing pyramiding is to eliminate the so-called intermediary company interposed between the operating company and the company at the top.'20
43
Without attempting to invade the domain of the Commission's discretion, we can readily perceive a factual basis underlying the choice of dissolution in this instance. The Commission reasonably could conclude from the record that American and Electric perform no justifiable function; they are unnecessary complexities enabling Bond and Share to perpetuate its pyramided system. The actual and potential evils resulting from their continued existence may well be said to outweigh any of their claimed advantages, especially since many of the latter seem impossible of attainment due to the unsound financial structures of the companies. The Commission was thus warranted in feeling that dissolution of these companies is necessary to the attainment of the standards of § 11(b) (2).
44
We are unimpressed, moreover, by the claim that dissolution is so drastic a remedy as to be unreasonable. Elimination of useless holding companies may be carried out by fair and equitable methods so as to destroy nothing of real value. American and Electric, the Commission found, are little more than a set of books and a portfolio of securities. And we cannot say that the Commission was without basis for its belief that dissolution under these circumstances would harm no one. It may well have considered the fact brought out in the argument before us that, so far as Bond and Share and the public security holders are concerned, dissolution would mean little more than the receipt of securities of the operating companies in lieu of their present shares in American and Electric. Any number of benefits might thereafter accrue to these security holders. Their equities in the Bond and Share system would be materially strengthened by the removal of the useless and costly subholding companies and their voting power would tend to be more in proportion to their investment. The financial weaknesses of the various companies remaining in the system would be easier to correct, with numerous benefits to the consumers and the general public as well as the investors.21 'In short, the individual investors should receive the kind of a security he thought he was buying in the first place. The actual clearing up, through clean reorganizations, of the tangle in which holding-company finance has left the industry and those who have invested in it, can reestablish a confident, stable market for good utility securities.' Senate Report No. 621, 74th Cong., 1st Sess., p. 17. These factors lend substance to the Commission's conclusion that 'the dissolution of these companies which not only have never served any useful purpose but have been a medium of much harm, will effectuate the provisions and policies of the Act and will in all respects be beneficial to the public interest and the interest of investors and consumers; and we so find.' 11 S.E.C. at 1215.
45
In view of the rational basis for the Commission's choice, the fact that other solutions might have been selected becomes immaterial. The Commission is the body which has the statutory duty of considering the possible solutions and choosing that which it considers most appropriate to the effectuation of the policies of the Act. Our review is limited solely to testing the propriety of the remedy so chosen from the standpoint of the Constitution and the statute. We would be impinging upon the Commission's rightful discretion were we to consider the various alternatives in the hope of finding one that we consider more appropriate. Since the remedy chosen by the Commission in this instance is legally and factually sustainable, it matters not that American and Electric believe that alternative orders should have been entered. It is likewise irrelevant that they feel that Bond and Share is the principal offender against the statutory standards and that the Commission should merely have required Bond and Share to divest itself of its interests in American and Electric. The Commission found that American and Electric violate the statutory standards, a finding that is supportable whatever may be the shortcomings of Bond and Share.
46
Finally, lengthy objections have been made relative to the Commission's procedure in treating alternative plans filed under § 11(e) by American and Electric. These plans were designed to adjust the companies to the standards of § 11(b)(2) without the necessity of dissolution. Motions were made to consolidate the applications for approval of these plans with the proceedings instituted by the Commission under § 11(b)(2), the hearings then having been in progress for more than a year and the record approaching completion. The Commission deferred consideration of the motions until it entered the § 11(b) (2) orders now under review; it then denied the motions and refused to grant hearings on the plans in advance of its orders of dissolution. It did this, however, only after thorough examination of the proposed plans and after finding that they failed to hold out any real promise of effectuating the standards of § 11(b)(2).
47
We fail to perceive any error in this procedure. The filing of the § 11(e) plans, of course, did not oust the Commission of jurisdiction to enter its orders under § 11(b)(2). That jurisdiction grows out of the statutory command that the Commission declare by order, as soon as practicable, what each holding company system requires by way of integration and simplification. Section 11(e) merely permits the holding companies to formulate their own programs for compliance with § 11(b) or to submit plans in conformity with prior Commission orders under § 11(b), appropriate notice and hearing being contemplated. It does not necessarily give such plans the effect of staying proceedings under § 11(b)(2) where such proceedings are initiated prior to the filing of the plans. Any other conclusion would permit the filing of dilatory plans so as to render impotent the power and duty of the Commission to enter § 11(b)(2) orders as soon as practicable.
48
We assume that the Commission will give due consideration to any plans that are filed under § 11(e) before it enters a § 11(b)(2) order. If it finds that such plans may have merit and may effectuate the policies of § 11(b)(2), the principles of orderly administration would dictate that entry of the § 11(b)(2) order be deferred until full hearings are had with respect to the plans.22 It might then become apparent that an involuntary order under § 11(b)(2) would be unnecessary and statutory comp iance could be worked out solely under § 11(e). But where consideration leads the Commission to the conclusion that the plans on their face are incomplete, inadequate and unlikely to satisfy the statutory standards, or where the plans are found to have been filed solely for purposes of delay, it would be contrary to the statutory policy of prompt action to require the Commission to hold hearings on the plans before entering a § 11(b)(2) order. The Commission then would have no reasonable statutory alternative but to enter the § 11(b)(2) order as soon as practicable, especially where the unsatisfactory plans are filed long after the institution of the § 11(b)(2) proceedings. And it is proper for the Commission to make an adverse determination of this nature in regard to the § 11(e) plans at the time of entry of the § 11(b)(2) order, such matter lying within the sound discretion of the Commission.
49
Here the Commission gave due consideration to the § 11(e) plans and found them to be incomplete and inadequate on their face. It pointed out that seven years had elapsed since the effective date of the Act, four and a half years since the date after which action under § 11 was to be required 'as soon as practicable' and more than two years since the present proceedings had been instituted. These factors of time and the lack of substance in the § 11(e) plans led the Commission to conclude that a delay in the entry of the § 11(b) (2) orders which it felt necessary to the effectuation of the statutory standards would not be justified. And our examination of the situation reveals an adequate basis in fact for the Commission's action. Note should be made of the fact that the Commission did not refuse by order to hold hearings on the § 11(e) plans. But to the extent that the entry of the § 11(b)(2) orders has made the plans moot or the hearings unnecessary, the result is one that is inevitable if proper accommodation is to be made for the different sections of the Act and for the various statutory policies.
50
Moreover, a § 11(b)(2) proceeding leads only to the expression of the Commission's view of what must be done to ensure compliance with the statutory standards. Actual compliance comes later. In the meantime, nothing precludes American or Electric from seeking revocation of the dissolution orders on a showing that the conditions upon which the orders were predicated do not exist, thereby making some other type of order more appropriate. Section 11(b) expressly envisages such a procedure, with provision for notice and hearing. American and Electric thus are not yet foreclosed from attacking the Commission's orders under § 11(b)(2).
51
From what we have said it follows that we must affirm the judgment of the court below and sustain the action of the Commission. The other points that have been raised either do not merit discussion or have been adequately answered in the opinion of the court below.
52
Affirmed.
53
Mr. Justice FRANKFURTER agrees with this opinion except that he believes that consideration of the requirements of notice and hearing under § 11(e) does not arise, in view of the particular circumstances under which the §§ 11(b)(2) orders were here made.
54
Mr. Justice REED, Mr. Justice DOUGLAS and Mr. Justice JACKSON took no part in the consideration or decision of these cases.
55
Mr. Justice RUTLEDGE, concurring.
56
I concur in the result and in the Court's opinion, except those portions of Part V dealing with the Commission's procedure in treating the alternative plans filed under § 11(e) of the Act by American and Electric.
57
Although, for reasons to be stated, I think the Commission's action in ent ring its § 11(b)(2) order must be sustained, I do not think its procedure in respect to making provision for dealing with the alternative plans was in compliance with § 11(e) or the rights to notice and hearing on such plans which it assured. Because the matter may be of considerable importance for the future, I desire to state my reasons for difference from the views expressed by the Court in this respect.
58
Section 11(b)(2) makes it the Commission's duty 'as soon as practicable after January 1, 1938:' to require by order each registered holding company and each subsidiary thereof, after notice and opportunity for hearing, to 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.' 49 Stat. 803, 821, 15 U.S.C.A. § 79k(b)(2). If this section stood alone and unqualified in the Act, the Commission's power would be unquestionable to require the necessary steps to be taken to accomplish the section's stated purposes without reference to voluntary plans submitted by the companies affected.
59
But § 11(b)(2) does not stand alone or unqualified in this respect. Section 11(e)1 expressly provides for the submission of plans to effectuate the objects of § 11(b)(2) by 'any registered holding company or any subsidiary company of a registered holding company.' This is to be done '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.' Moreover, '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 * * *.' (Emphasis added.)
60
I do not think that § 11(e) simply provides a procedure alternative to that of § 11(b) which the Commission is free to follow or disregard at its pleasure. Both the terms of the Act and the legislative history show that the purpose of § 11(e) was to allow companies affected 'to work out a plan of reorganization to make unnecessary the issuance of an involuntary order for its reorganization * * *,' which could only be issued under § 11(b). S.Rep.No.621, 74th Cong., 1st Sess., 33; Commonwealth & Southern Corp. v. S.E.C., 3 Cir., 134 F.2d 747, 751. In my opinion this purpose, together with the provision for voluntary plans to be submitted '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,'2 assu es the right to submit such plans for the Commission's consideration and to have them considered and determined 'after notice and opportunity for hearing.' See Chicago Junction Case, 264 U.S. 258, 264, 265, 44 S.Ct. 317, 319, 68 L.Ed. 667.
61
Furthermore, although the section gives the Commission broad discretion concerning the procedure to be followed, it would seem clear, both from the section's purpose and from its terms, that the Act contemplates that it shall make the required determination, concerning such a voluntary plan properly submitted, prior to the entry of any order under § 11(b). Cf. Ashbacker Radio Corp. v. Federal Communications Commission, 326 U.S. 327, 66 S.Ct. 148. Only in this way could the legislative purpose 'to make unnecessary issuance of an involuntary order' be made effective. This being true, the section cast upon the Commission the duty of providing the appropriate procedure for submitting voluntary plans, by rules, regulations or order comporting with the specified standards, including those for notice and hearing.
62
The record does not disclose that the Commission at any time complied with those requirements in these cases. So far as appears no general rules or regulations were issued. Nor was any order made or entered providing for such a procedure. On the contrary, the procedure followed was not, in its initial stages, in accordance with the statutory provisions, as the following chronology demonstrates.
63
On May 10, 1940, notice of hearing under § 11(b)(2) was served on the petitioners. The notice made no reference to § 11(e) or any possible alternative proceedings under it. The hearing was set for June 10, 1940, scarcely time for the petitioners to prepare both a voluntary plan, even if opportunity for filing and hearing were to be afforded, and a defense on the § 11(b)(2) hearing. Indeed, petitioners recognized that the time was inadequate for preparing their defense, for they applied for postponement of the hearing and other relief.3 The Commission postponed the hearing one week, but found no adequate ground for further extension.
64
The hearing was commenced on June 18, 1940. On July 23, 1941, American submitted its voluntary plan under § 11(e). On December 3, 1941, Electric filed its plan. And on December 6, 1941, both companies moved to consolidate their applications with the pending § 11(b)(2) proceedings.4 By agreement of counsel consideration of the motion was delayed for the Commission to pass upon at the end of the § 11(b)(2) hearing5 and on July 228 1942, that hearing was closed as to petitioners by stipulation.
65
On August 31, 1942, the Commission filed its opinion in support of the orders which are now enforced. In the same opinion it denied the motion to consolidate and also denied petitioners any hearing on their voluntary plans. The motion was denied on the stated ground: 'It appears that if consolidation were granted, the result would be to inject into the present proceeding issues of fact and law in many respects different from, and unrelated to, those here involved. In consequence, no useful purpose would be served by permitting the consolidation of the 11(e) Plans with the present proceeding but on the contrary, delay and confusion would inevitably result.'6 Consistently, separate hearing was denied as to the voluntary plans apparently on the grounds that consideration of them would delay the § 11(b) proceeding, so as to defeat the statutory policy of prompt action,7 and that the plans were incomplete and ineffective.
66
It is apparent from this recital that the Commission did not at any time comply with the requirement of § 11(e) that it provide by rules, regulations or order an orderly procedure to carry out the section's command and purpose for the submission and consideration of voluntary plans. And if petitioners had stood upon their rights in this respect, by timely action taken in good faith, the Commission's failure to observe them would have given ground for reversal.
67
But it is equally obvious that the petitioners did not assert their rights in a manner which invalidates the Commission's action in entering its § 11(b)(2) order or made the denial of the motion for hearing reversible error. The petitioners had notice that the Commission would proceed with the § 11(b)(2) hearing from the time such notice was given in May 1940. They applied for a continuance. But the record does not disclose that they sought it in order to have time to prepare and submit a voluntary plan or indeed that they took any action toward securing a hearing on such a plan until they submitted their plans. In one case this was more than a year after the § 11(b) hearing began, in the other nearly a year and a half after that time. When shortly after the latter submission the motions to consolidate were made, consideration was deferred by agreement of counsel until the end of the § 11(b)(2) hearing; and about seven months later that hearing was closed as to the petitioners by stipulation.
68
Although in my opinion it was the Commission's duty initially to make provision for notice and hearing on voluntary plans, in accordance with § 11(e), the petitioners hardly can be considered to have been ignorant either of this duty or of the Commission's failure to perform it. By standing by through the long period of the § 11(b) proceedings prior to the time of submitting their plans without taking earlier action to secure preservation of their rights to hearing on such plans, the petitioners should be taken to have waived their rights to such hearings. They were not entitled to assert them for the first time at so late a stage in the § 11(b) proceedings. Nor, in my opinion, is the Commission required to give further consideration to such plans in these cases, unless in its own discretion it sees fit to do so.8
1
49 Stat. 803, 821, 15 U.S.C. § 79k(b)(2), 15 U.S.C.A. § 79k(b)(2).
2
The other three subholding companies are the American & Foreign Power Company, Inc., the National Power & Light Company and the American Gas & Electric Company. Bond and Share also has a wholly-owned service subsidiary, Ebasco Services Incorporated. The organizational set-up is more fully explained in the Commission's opinion in this proceeding, 11 S.E.C. 1146, and in In re Electric Bond and Share Company, 9 S.E.C. 978.
3
The so-called 'great-grandfather clause' of § 11(b)(2) is not involved in this case. That provides that '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.' See Otis & Co. v. S.E.C., 323 U.S. 624, 65 S.Ct. 483, 89 L.Ed. 511.
4
The Commission found that 'This control of the subholding companies by Bond and Share is not limited in operation to the mere casting of a certain percentage of votes at stockholders' meetings. It permeates every stratum and unit of the holding company system in the most comprehensive manner. * * * Through the concentrated voting power of the securities owned by Bond and Share, it is able to elect the directors of the subholding companies and thus govern selection of the respective managements. Through the managements of the subholding companies it is able to govern selection of the directors and managements of each of the operating company subsidiaries of each of the subholding companies. The latter are in turn responsive to Bond and Share's wishes respecting entry into service contracts with Ebasco Services Incorporated, and the details of the operations of their companies.' 11 S.E.C. at 1203—1204.
5
The record before this Court in the Bond and Share case revealed that more than 31% of the total electric energy generated by Bond and Share subsidiaries is transmitted across state lines, while more than 25% of all the electric energy transmitted across state lines in the United States is handled by Bond and Share companies. Approximately 47% of the gas handled by Bond and Share companies is transported across state lines, this amount constituting more than 20% of all the gas transported across state lines in the United States.
6
United States v. Darby, 312 U.S. 100, 657, 61 S.Ct. 451, 85 L.Ed. 609, 132 A.L.R. 1430; Electric Bond & Share Co. v. S.E.C., 303 U.S. 419, 58 S.Ct. 678, 82 L.Ed. 936, 115 A.L.R. 105.
7
Northern Securities Co. v. United States, 193 U.S. 197, 24 S.Ct. 436, 48 L.Ed. 679; Standard Oil Co. of New Jersey v. United States, 221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619, 34 L.R.A.,N.S., 834, Ann.Cas.1912D, 734; United States v. American Tobacco Co., 221 U.S. 106, 31 S.Ct. 632, 55 L.Ed. 663.
8
North American Co. v. S.E.C., 327 U.S. 686, 66 S.Ct. 785.
9
Northern Securities Co. v. United States, supra; Standard Oil Co. v. United States, supra; United States v. Reading Co., 253 U.S. 26, 40 S.Ct. 425, 64 L.Ed. 760; United States v. Delaware & Hudson Co., 213 U.S. 366, 29 S.Ct. 527, 53 L.Ed. 836. See also Breckenridge, 'Legal Study on Constitutional Power of Congress to Regulate Stock Ownership in Railroads Engaged in Interstate Commerce,' House Report No. 2789, 72st Cong., 3d Sess., Vol. 1, p. 1.
10
Federal Trade Commission Report to the Senate, 'Utility Corporations,' S. Doc. 92, Part 72—A, 70th Cong., 1st Sess., p. 858. See also Bonbright and Means, The Holding Company (1932), p. 147; Barnes, The Economics of Public Utility Regulation (1942), pp. 71—81, 143—148.
11
'By the pyramiding of holdings through numerous intermediate holding companies and by the issue, at each level of the structure, of different classes of stock with unequal voting rights, it has frequently been possible for relatively small but powerful groups with a disproportionately small investment of their own to control and to manage solely in their own interest tremendous capital investments of other people's money.' Report of the National Power Policy Committee on Public-Utility Holding Companies, H.Doc. 137, 74th Cong., 1st Sess., pp. 4, 5.
'The effect of such pyramiding is to multiply greatly the control that can be exercised by the dominant parties through their personal resources. For example, in the illustration just given, an investment of $1 in common stock of Corporation Securities Co. of Chicago would exercise control over about $2,000 invested in properties of some of the operating companies at the bottom of the pyramid. It seems very unsafe to have any form of pyramiding which has such a financial basis not only on account of the excessive concentration of control over immense masses of property but also because of the opportunity it offers to financial adventurers to have too much influence over the general economic interests of the country.' Federal Trade Commission Report, supra, note 10, p. 161.
12
The Federal Trade Commission Report, supra, note 10, p. 860, found that the highly pyramided holding company system tends to make those few in control at the top '(1) neglect good management of operating companies, especially by failing to provide for adequate depreciation; (2) exaggerate profits by unsound, deceptive accounting; (3) seek exorbitant profits from service fees exacted from subsidiaries; (4) disburse unearned dividends, because the apparent gains, so obtained, greatly magnify the rate of earnings for the top holding company; and (5) promote extravagant speculation in the prices of such equity stocks on the exchanges.'
13
Ibid., p. 162.
14
Ibid., p. 860.
15
Senate Report No. 621, 74th Cong., 1st Sess., p. 12.
16
Bond and Share's holdings of voting stock of all five of its subholding companies have a stated book value of only $53,337,600, after adjustment for preferred arrearages, which is equal to about 1.85% of the combined consolidated capitalization of the five subholding company systems. This results, after adjustments, in rendering completely ineffectual whatever voting power remains for the securities in the hands of the public investors who have contributed over 80% of the total capitalizations.
17
We do not understand the Commission to co tend that the percentage of voting power and the percentage of investment should necessarily be equal. Its view simply is that no process of weighting could render fair and equitable a distribution of voting power by which Bond and Share controls all of American's subsidiaries by an investment representing at best 3.42% of their capitalization, or 8.72% in the case of Electric's subsidiaries. See In re Electric Bond and Share Company, 9 S.E.C. 978, 992.
18
The words 'any company in the holding-company system' were substituted for the words 'such company' in an earlier draft of § 11(b)(2). No change in substance was thereby indicated.
19
Section 11(f) refers to fees, expenses and remuneration paid in connection with any reorganization, dissolution, liquidation, bankruptcy or receivership of a registered holding company or a subsidiary thereof. Section 11(g) speaks of proxies, etc., used 'in respect of any plan under this section for the divestment of control, securities, or other assets, or for the dissolution of any registered holding company or any subsidiary company thereof.'
20
Splawn Report, Pt. 2, p. VII, made pursuant to H.J.Res. 572, 72d Cong., 2d Sess., referred to in § 1(d) of the Act.
21
'It is thus apparent that though Section 11 is on occasions still referred to as a 'death sentence,' the sophisticated observer no longer regards even the directed reorganization or liquidation of a holding company as a step to be feared by investo s. There is increased recognition that these steps in the enforcement of the Act have been 'akin to a surgical operation, through which the dead skin (the top holding company) was being cut away from the pores (the operating companies) in order to allow the latter to breathe." Blair-Smith and Helfenstein, 'A Death Sentence or a New Lease on Life?' 94 Univ. of Pa.L.Rev. 148, 201.
22
With reference to S. 2796, it was said: 'Subsection (e) expressly authorizes a holding company subject to the approval of the Commission and the court to work out a plan of reorganization to make unnecessary the issuance of an involuntary order fer its reorganization by the Commission, * * *.' Senate Report No. 621, 74th Cong., 1st Sess., p. 33.
1
'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 * * *.' 49 Stat. 801, 822, 15 U.S.C.A. § 79k(e). (Emphasis added.)
2
The requirement obviously is not a permission to the Commission to dispense altogether with such rules, regulations or order in its discretion. It is rather a statutory direction to make them in accordance with the standards prescribed. Any other view would contradict the stated purpose of the section and make of it, in effect, a dead letter.
3
The application stated in part: 'It is obvious from the nature of the proceeding * * * that the matters to be dealt with at the hearing are of vital import to the respondents and their subsidiaries, as well as to the hundreds of thousands of investors in securities of companies in the Electric Bond and Share Company system and the millions of consumers presently receiving necessary public utility service from the operating companies in said system. In the circumstances, respondents believe, first, that they should be given adequate time not only to check and verify the numerous factual allegations contained in the order, but also to develop and correlate for presentation all other facts having a bearing upon the problems and issues presented by the notice and order. * * *'
4
At the same time American, which previously had filed its plan with the Commission, sought to introduce the plan as an exhibit into the § 11(b)(2) hearing. The company's attorney stated, 'This plan which has been filed by American Power & L ght with the Commission sets forth a proposal for the compliance with Section 11 of the Act, and I think that it is material and relevant in this proceeding.' The reply of the trial examiner, sustaining an objection to its admission, apparently typifies the attitude of the Commission toward the requirements of § 11(e): 'Quite possibly it relates to Section 11; quite possibly it is a matter which the Commission will want to consider before it finally makes up its mind. It is quite probable. But, nevertheless, we are here restricted to this particular proceeding and not the power of the Commission or the action of the Commission. The hearing is restricted to 11(b) (2).'
The Commission at no time before or during the hearing recognized that § 11(e) plans not only were relevant to whether action should be taken under § 11(b) (2), but also were required to be considered by hearing before such action is taken. Its view apparently is to the contrary. See Matter of Electric Bond and Share Company, 11 S.E.C. 1146, 1217, 1218, quoted in note 7 infra; Matter of The Common-wealth & Southern Corporation, 11 S.E.C. 138, 154—156. The examiner of course, could not help himself. The hearing had been limited to § 11(b)(2). 7 S.E.C. 391.
5
The record does not disclose what the agreement was or for what reasons it was made. To delay consideration of the motion to consolidate was in effect to deny it insofar as it sought a joint hearing, though it was always possible for the Commission to order a hearing on the voluntary plans before it issued its § 11(b)(2) order.
6
11 S.E.C. 1146, 1152. The Commission noted that 'these plans were filed at a time when the record in the present proceeding was nearing completion.' Ibid.
7
'With respect to the former point, that of promptness, it need only be considered that it would be necessary for respondents and the Public Utilities Division to formulate and present, and for us to explore, detailed and very extensive evidence on a number of extremely complex subjects before it would be possible for us to determine even the preliminary question of whether the 11(e) plans do in fact constitute acceptable alternative courses of action for achieving the objections of Section 11. In the event it were necessary to determine the question in the negative, presumably we should be free (even under respondents' contention) to enter our order of dissolution herein following the lengthy delay, unless respondents in the meantime proposed a new 11(e) plan which would necessitate a repetition of this process. On the other hand, in the event we were ultimately able to approve the plans, they would still not become effective unless and until ratified by vote of the companies' stockholders.
'Considering that 7 years have now gone by since the effective date of the Act, that 4 1/2 years have elapsed since the date after which action under Section 11 was to be required 'as soon as practicable', and that more than 2 years have been consumed since the present proceeding was instituted, it is evident that respondents' program is too fraught with potentialities of delay to be acceptable as a substitute for a dissolution order to meet the problems existing under Section 11(b)(2). Section 11(b)(2) which provides a medium for voluntary compliance with Section 11(b) was not intended to oust the Commission of its jurisdiction, or relieve it of its obligation, to enforce the provisions of 11(b).' 11 S.E.C. 1146, 1217—1218. Compare notes 4 and 6, supra.
8
Cf. § 11(b): 'The Commission may by order revoke or modify and order previously made under this subsection, if, after notice and opportunity for hearing, it finds that the conditions upon which the order was predicated do not exist.' 49 Stat. 803, 821, 15 U.S.C.A. § 79k(b).
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"329 U.S. 64\n67 S.Ct. 154\n91 L.Ed. 44\nUNITED STATESv.HOWARD P. FOLEY CO., Inc.\nNo. 50.\nArgued O(...TRUNCATED) | 78
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"329 U.S. 69\n67 S.Ct. 156\n91 L.Ed. 80\nRICHFIELD OIL CORPORATIONv.STATE BOARD OF EQUALIZATION.\nNo(...TRUNCATED) | 78
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"329 U.S. 187\n67 S.Ct. 261\n91 L.Ed. 181\nBALLARD et al.v.UNITED STATES.\nNo. 37.\nArgued Oct. 15, (...TRUNCATED) | 12
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"329 U.S. 143\n67 S.Ct. 245.\n91 L.Ed. 136\nUNEMPLOYMENT COMPENSATION COMMISSION OF TERRITORY OF AL(...TRUNCATED) | 67
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"329 U.S. 211\n67 S.Ct. 224\n91 L.Ed. 196\nFISWICK et al.v.UNITED STATES.\nNo. 51.\nDec. 9, 1946.\nA(...TRUNCATED) | 01
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