Evening star., 1935-11-08
COLEMAN RULING
RAPS CONGRESS
Violated Constitution in
Passing Holding Company
Law, Decision Says.
BY DAVID LAWRENCE.

the Constitution, this time the de-
cision being rendered in a case in
volving the public utility holding COM
pany act, but really Of transcendent
Importance to the future of every in
dustry and every business.
For Judge William C. Coleman has
said that, If Congress can usurp the
postal power and regulate the business
of the user of the mails on the ground
this is the same thing as regulating
the use of the mails. then all bust
neSses could come under Federal regu-
lation and there would be an end OF
State rights.
The opinion of Judge Coleman, in
effect, tells the trustees of the utility
company that they may disregard the
utility act as unconstitutional and
need not pay any attention to its pro-
visions, which require registration
with the S. E. c. by December l
Since such advice is given by a Fed
eral Judge to trustees of a company In
receivership. it follows that presidents
Of other companies, who are trustees
for their stockholders, may accept the
same advice.
Will Retard Enforcement.
The significance of the decision Is
that it probably will put damper on
the effective enforcement of the utility
law for many months to come. The
Securities and Exchange Commission
was not party to the suit and Chair
man Lands is known to feel that the
case did not present q fair test. But
trick laws beget trick cases, and, fur.
thermore, the habit which Congress Is
developing Of passing invalid laws and
forcing the citizen to undergo hard
ships while the Government attorneys
delay court tests is not conducive to q
passive acquiencence in such statutes
by companies or individuals whose
property is affected.
If Judge Coleman's opinion is car.
ried to higher court and sustained
there is nothing Congress can do abou
rewriting the statute. For the Coleman
opinion holds Congress has no power
to use the commerce clause to regulate
holding companies. that 1t has NJ
power to use the postal clause, that II
cannot ignore the fifth amendment
known as the due process" clause. IL
order to do by indirection that wh&cf
it has no direct power to do. 1t /.
noteworthy, however, that Judge Cole,
man did not pass on the question o.
proper or improper delegation of power
to the Securities and Exchange Com
mission. declaring that this was uE.
necessary in view of the other grounds
But this may be taken to mean tha
the Securities and Exchange Commits.
sion will not be disturbed, judicially
speaking. in so far as its powers Il
regulate the sale or distribution o.
securities m interstate commerce art
concerned, a circumstance that tend
to support the theory that securitie.
control will be sustained but moi
Federal control of the management
of the companies whose securities ar,
being sold in interstate commerce.
Opinion Net Surprising.
There was nothing really surprising
in the opinion of Judge Coleman, who
by the way. enjoys a reputation as 6
fair and experienced judge and one
who has rarely been reversed by tn,
higher courts because of the lega
soundness of his opinions. The Cole
man opinion is absolutely in line with
the opinions rendered to members O.
Congress and mentioned during the
debate on the death sentence" last
Summer. But the bitterness Of feelin5
over the utility bill was so extensive
that constitutional arguments were
brushed aside as inconsequential.
Anybody who has read the prece.
dents on which Judge Coleman ha.
rendered his opinion, and they are
well known and frequently cited a,
the bar, cannot but be impressed with
the fact that the constitutional doc
trines set forth by him in this case are
in close accord with those expressed
repeatedly by the Supreme Court oi
the United States.
Drastic regulation of utilities may
be desirable thing-in fact. there
are compelling and persuasive rea-
sons for bringing it about-but neither
that reform nor abolition of the hold.
ing companies altogether can be &C.
complished by Congress at present
Tor, as Chief Justice Hughes, re-
marked in the Schechter case
1.-THE Constitution does not pro-
vide for it, If the New Dealers
wish to offer an amendment to the
Federal Constitution to cover the case
that's another matter. They have g
right to do so. But if they attempt tc
phrase such an amendment they viii
come to grips with the question ol
breaking the breathing SPELL and re-
viving Federal regulation of industry
The way to control utility holding
companies is by proper control Of
the securities they issue-these already
come under the 1888 law with refer.
Ekrce to financing-and to make sure
that the State commissions protect
the public interest either by adopting
better State laws or by electing Gov
ernors who will appoint better State
commissioners. The remedy is by nc
means ineffective, as the utilities have
cause to know in their battles with
Gov. Pinchot in Pennsylvania and
Gov. Lehman in New York.
tCopyrisht. 1935)