Opinion ID: 107366
Heading Depth: 1
Heading Rank: 1

Heading: Background of the Parties and the Litigation.

Text: MoPac, a Missouri corporation, is an interstate common carrier railroad. It had been in reorganization proceedings under § 77 of the Bankruptcy Act, as amended, 11 U. S. C. § 205, until January 1, 1955. [2] After those proceedings terminated, the corporation's preferred and common stock was replaced by two classes of $100 stated capital no par voting shares: Class A, which is preferentially entitled to noncumulative dividends not to exceed $5 per share annually, and Class B, which is entitled to all the earnings and the equity in excess of the Class A preferences. MoPac's Articles of Association, Art. VII, § D (3), provide that class voting shall not be required save as to four types of corporate change, none of which shall be effected without the separate consent of the record holders of a majority of the Class A and the Class B shares. The four specified changes are: (1) the issuance of additional shares; (2) the creation or issuance of any MoPac obligation or security convertible into or exchangeable for MoPac shares; (3) an alteration or change in the preferences, qualifications, limitations, restrictions and special or relative rights of the Class A Stock or of the Class B Stock; and, finally, (4) the amendment or elimination of any of the foregoing requirements. MoPac has 1,849,576 shares of Class A stock and 39,731 shares of Class B stock outstanding. T & P was incorporated by an Act of Congress in 1871 and is also an interstate railroad of which MoPac owns 82.86% of the outstanding shares of stock. Mississippi River Fuel Corporation (Mississippi) is a Delaware corporation and owns a majority (57.95%) of the Class A shares of the stock of MoPac. Alleghany Corporation (Alleghany) is a Maryland corporation and owns a majority (51%) of the Class B stock of MoPac, subject to a voting trust. T & M is a Delaware corporation organized for the purpose of being the consolidated company upon the merger of MoPac and T & P. The agreement and plan of consolidation were approved by the Board of Directors of MoPac and T & P in December of 1963. The plan provided for an exchange of each MoPac share (without regard to class) for four shares of the new corporation and for an exchange of the T & P stock (other than that owned by MoPac) on a basis of one share of T & P for 4.8 shares of the new company. In January of 1964, the three companies filed a joint application with the Interstate Commerce Commission for an order under § 5 (2) of the Act authorizing the consolidation and the issuance of securities by T & M under § 20a. In this application MoPac advised that it would submit the proposed plan to its stockholders, for approval, by May of 1964 on the basis of a collective, rather than class, vote. There are a total of six individual petitioners, each of whom owns only a nominal number of Class B shares, and Alleghany which owns, as aforesaid, a majority of those shares. The respondents are MoPac, T & P, Mississippi, and some of their directors or officers, only one of whom owns any Class B stock of MoPac. The first of the three suits which this cause involves was filed prior to the submission of the plan to the Commission; the second and third subsequent thereto. Each of the suits attacks the plans of consolidation, alleging, among other things, that the Class B stock has a much greater value than that of the Class A and that the exchange is unfair; that the collective voting plan would violate the Articles of Association, the law of Missouri (and, therefore, § 5 (11) of the Act) and would result in irreparable injury to the Class B shareholders. Each complaint prays for a declaration that the plan of consolidation requires the separate vote of each class of stock. At trial the parties agreed that the court should first pass upon the voting rights question. The District Court held that class voting was required and certified the issue to the Court of Appeals which permitted an interlocutory appeal under 28 U. S. C. § 1292 (b). Further proceedings in the District Court were stayed. As we have indicated, the Court of Appeals held that, even though MoPac's Articles of Association required a class vote on consolidation and Missouri law, therefore, demanded such a vote, it nevertheless was impressed with the significance of the national transportation policy and its emphasis on railroad consolidation, with the stated exclusive and plenary character of § 5 (11), and with its consequent preemptive nature. 359 F. 2d, at 119. The Court felt that, by virtue of the federal statute, it was compelled to conclude that it should apply the general standard as to voting rights, i. e., the majority of all voting shares, rather than honor the exception, i. e., class voting, as provided under Missouri law.