Legal Document

384 U.S. 176 86 Supreme Court Reporter 1397 16 United States Reports Lawyer’s Edition 2d Series KF101.8 U54 456 SECURITIES AND EXCHANGE COMMISSION, Petitioner,v.NEW ENGLAND ELECTRIC SYSTEM et al. Number 636. Argued March 23, 1966. Decided May 16, Philip Atlantic Loomis, Jr., Washington, D.C., for petitioner. John R. Quarles, Boston, Mass., respondents. Mr. Justice DOUGLAS delivered the opinion of Court. 1 New England Electric System (NEES) is a holding company registered under § 5 Public Utility Holding Company Act 1935.1 Its holdings include both electric and gas utility properties. The companies serve retail customers in Hampshire, Massachusetts, Rhode Island, Connecticut. Massachusetts alone.2 Commission, proceeding 11 Act,3 held that subsidiaries NEES constituted an 'integrated system' as defined s 2(a)(29)(A).4 38 S.E.C. 193. question this case does not concern these but only NEES, which Commission agree constitute within meaning 2(a)(29) (B) Act.5 2 By 11(b)(1)6 system to be limited operations by 'to single integrated public-utility system,'7 provided, however, it may permitted control one or more additional systems' if finds, inter alia, '(e)ach such cannot operated independent without loss substantial economies can secured retention system.' 11(b)(1)(A). (Italics supplied.) It on proviso present controversy depends. found divestment NEES' utilities would result 'loss economies' construed Clause (A) require showing 'additional separate ownership so important cause serious impairment ruled was unable find could soundly economically independently NEES.' any losses offset benefits flow from healthy competition between controlled companies, promotion being purpose Act. Accordingly, ordered divested. 3 On petition review Appeals reversed ground had misinterpreted statutory phrase economies.' 346 Federal Reporter, 2nd 399. court 'called business judgment what significant loss, finding total economy efficiency' (346 F.2d, at 406), and, believing record with statute interpreted there have been favor remanded Commission. We granted certiorari, 382 953, 436, 15 358. 4 Commission's reading remand challenged order light proper term. requirement 'single integrated' 'very heart' Act.8 'additional' decidedly exception.9 As originally passed Senate, all 'geographically system.'10 House version differed make exceptions where limitation 'in public interest.'11 we deal emerged conference committee. scope exception appears bill's final form thus explained House: 6 'Section bills (i.e. Senate versions), therefore, authorizes Securities Exchange limit its over operating system. 7 'The substitute meets desire provide further flexibility statement definite concrete circumstances should made * 8 substitute, makes provision meet situation show real economic need part systems permitting keep *.' H.R.Rep.No. 1903, 74th Cong., 1st Sess., 70—71. 9 Additional shed remarks Senator Wheeler, member committee: 10 'Since accepted proposition normally system, my colleagues & N Dec. Immigration Nationality Decisions conceived our task exceptions, any, rule satisfy demand some greater flexibility. After considerable discussion conferees concluded furthest concession they permit allow than (among other tests) were same region principal small incapable economical operation 79 Cong.Rec. 14479. said 1948: legislative history Section 11(b)(1) indicates intent Congress create general confining created proven inability stand itself hardship investors consumers relationship terminated.' Philadelphia Co., 28 35, 46. 12 While has variously phrased rule, consistently adhered view.12 13 This suggests much stringent test 'a loss,' quote Appeals. 406. Promotion 'economy management operation' 'the integration coordination related properties' (§ 1(b)(4), 49 Statutes-at-Large 804, Code KF62 79a(b)(4) (italics supplied)) theme runs throughout But elimination 'restraint free competition.'13 1(b)(2), 803—804, 79a(b)(2). One evils resulted properties favoring competing forms energy other.14 14 In phase controversy: 'Although Gas Division handles sales promotional activities various matters separately authority rests top management. basic competitive position exists service locality affected vital decisions amount funds raised allocated expansion each type service.'15 Competitive advantages gained separation are difficult forecast. gains might well interest estimated operation16 resulting matter expertise situation, merely prediction whether, example, converted into regime. 17 'without admittedly crystal clear. construction seems us permissible range given those who charged giving intricate scheme practical sense application. Power Reactor Development versus International Union Electricians, etc., 367 396, 408, 81 1529, 1535, 924. And see SEC, 85 U.S.App.DC. 327, 177 720, 725. 18 Reversed remanded. 19 HARLEN, whom STEWART joins, dissenting. 20 before 406, rendering sensible view, obvious. Court's hand hold demands great enough imperil 'sound' corporate operations.2 That holding, shall indicate, odds Act's wording, little basis legitimate aims Act, sustained agency judicial precedent. 21 Inquiry naturally begins language reiterated principle words statutes possible their ordinary, everyday senses.' Crane Commissioner, 331 1, 6, 67 1047, 1051, 91 L.Ed. 1301; Malat Riddell, 383 569, 571, 1030, 1032, 102. instance plainly normal 'substantial money amount, whatever size, guarantees survival. first lawyers laymen alike automatically while second hardly imagined prompting persuasive evidence. If intended govern, easily shorter space far precision.3 addition, decision will apparently read way quite different, fashion 2(a)(29)(B), defining (see ante, n. 4, opinion). None say many subtle choices deciding sum context dictated terse See infra, 11. choice here, two broad approaches, invites repels second. 22 natural produced strange arbitrary reason hesitate; literal excellent serving very rational desirable end financial economy. importantly concerned 'intensification power beyond point proved H.R.Doc. 137, 4; §§ (5) 79a(b)(4), (1964 ed.) (policy statement), bristles provisions aimed largely attaining efficient operations. 7(d)(3), 10(c)(2), 12(d), (f), (g), 13, 79g(d)(3), 79j(c)(2), 79l(d), 79m ed.). With background, nothing plausible curtail divestiture prospect removed prime having all. There sure dangers proliferated growth besides diseconomy, played passage also clauses whose conditions must met allowed supra, 1). sum, clear burden persuasion upon displace Appeals' interpretation.4 23 Legislative purpose, heavily relied Court, furnish no departing direct explanation Congress; majority sets out full statements, Conference Committee (ante, Page 180-181) Wheeler 181).5 Report, highly authoritative unilluminating, says need' justify Indisputably, savings labeled need, since sharply lack justification combinations. Committee's compatible SEC's useless guidepost. 24 Wheeler's statement, contrast, support, indeed source of, SEC interpretation, view sponsor carries heavy weight. Here, his after bill finally Houses, arguably '(t)he views individual members legislature officially communicated prior enactment competent considered determining ought attributed statute.' Hart Sacks, Legal Process 1285 (tent. ed. 1958, Harvard Univ.). Moreover, fierce opponent allowing one-system principle, 403, minimize severely when do longer cost votes. early days, elevation exaggerated importance, took guarded worth.6 25 To support provision, relies policies whole. initially emphasized overriding aim confine 'decidedly exception' 180). mild misleading inference 'exception' minor, noticed addendum, strictly construed. truth, original, 11, popularly known 'death sentence' bitterly opposed 'ABC' A now (supra, 1) adopted compromise different versions. Ritchie, Integration Companies 16—19, 151 (1954). ABC represent price openly paid enactment, events grudging interpretation.7 26 Far weight supposed hostility toward common danger stifled competition. First all, illusion. Committees identical expressly stated field essentially State policy'; 8, 79h ed.), enacted approach using federal contrary state law. S.Rep.No. 621, 29—30; 1318, 14—15.8 stated: 'We take expresses policy against combined such.' Release 15035, 15. time now-repudiated went American Water Works Elec. 972 (1937). 27 Furthermore, constricted unsuitable responding types utilities. equally govern least abstract, hinder arrangements though rationale irrelevant them. prepared freeing improve earnings then shown, leeway rough calculations estimates based studying past separations. 143—147 dispense proof disregard undo Congress' own careful conflicting interests.9 remains answered claim 'supported consistent administrative practice' 182, 12). Analysis shows mistaken. came North 194, decided 1942 seven years effect. Rejecting assertion saving wholly nominal do, usual word 'substantial' connoting 'important.' think compelled here.' Id., 209. At four subsequent cite adopts 'importance' test, rather unusual specialized today. Cities Serv. Light 28, 37 (1943); Middle West Corp., 309, 319 (1944); 962, 984 575, 597 (1945). Also during decade enforcement decisions, including just cited, operate 'one guides others) used 62 Commonwealth Southern 464, 489 (1947). 'seriously impair effective operations.' Engineers Pub. 41, 61 (1942). 29 respondent 'concedes' 1948 articulated three cited until applying 11(b)(1), taking ones already mentioned established test. asserts stating involved percentage assets divested, even cases determinative. Brief, Pages 47—48. whether actually refute urged, certainly practice lending Before leaving precedent, noted Fifth Circuits squarely rejected interpretation Second Circuit approved gloss, District Columbia upheld reading.10 30 conclude, departure abstract legal error immediate, tangible harm most sense. annual forecast because exceed $1,000,000, figure questioned yet properly considered. respondent's analysis $800,000 electrical although deems primary did reach issue. presumably borne figures accurate occurs; noteworthy Department Utilities appeared hearings oppose divestiture. wide latitude how gauge compute freedom past.11 What right detriment interests standard Congress. Neither right. affirm decision. 812, 79e parties hereafter referred respondent. 820, 79k 810, 79b(2)(29)(A) An applied 2(a)(29)(A) consisting units generating plants and/or transmission lines distributing facilities, assets, owned physically interconnected capable physical interconnection coordinated confined area region, States, large (considering art affected) localized management, operation, effectiveness regulation.' 79b(a)(29)(B) 2(a) (29)(B) located effectuated 79k(b)(1) long 443, 462 463; Improvement 52, 77—83; 44. Respondent contest aspect 327 686, 704, 14, 66 785, 795, 90 945; S.Rep. 696—697, 792. S. 2796, 11(b), Sess. 32. Representatives, sent July 9, 1935. H.R.Rep. 17. concedes has, 1948, 'articulated' 'like test'. 46—47, 53—74; General 32 807, 814—815, 826—827, 831; South Utilities, Inc., 35 11—13. contends, previous less restrictive disagrees, urging 'some variation words,' maintained basically semantic differences due varying contentions dealing.' 208—213; Service 41; 37; 319; 984; 596—597. inconsistent 1948. applied; go further. are, sure, few requirements met; these, articulate standard. See, e.g., Traction 675, 683; Republic 451. cf. 243—244. inconsistency today applies, Under circumstances, feel justified regarding supported practice. 1(b) provides '* (I)t hereby declared national interest, securities subsidiary affiliates, manufactured gas, adversely (2) subjected excessive charges services, work, equipment, materials, enter transactions absence arm's-length bargaining restraint competition; 29; Report National Policy Committee, (Appendix Sess.). aware anti-competitive potential structures through umbrella company. situated retard discussed Hearings earlier Interstate Commerce 1725, 783. specific prohibit acquiring territory prohibits control, obtaining permission appropriate regulatory agency. reflects 10), warrant concluding exclusive effort relating problem. presence sophisticated scheme. extent, local expected prevent circumvention use 'extra-State device company.' 29—30. time, assist imposing restrictions regard combination electricity Discussing interplay future acquisitions: committee felt section essential formulation legislation unlawful retain (up divestment) businesses lawfully engaged date title.' 7. fostering promotes described 'variegated competition.' Subcommittee Antitrust Monopoly Judiciary, 89th pt. 2, 840 (1965) (statement Dr. Samuel M. Loescher). 'But distribution electricity, following geographical divorcements, remain monopoly every kind enhanced competition." Ibid. Foreign H.R. 5423, 1249, 1402—1403, 1530—1531, 2257—2277; 65. thought 79k(b)(1). subsection system,' provided if: '(A) Each system; '(B) All State, adjoining contiguous foreign country; '(C) continued 'seems' statements 179, 184-185) emphasize offsetting terms. fact accomplished simply chopping off last half present, controlling clause 1), condition omitting qualifying 'It (is) wrong deny primacy; like Cardozo's 'Method Philosophy,' 'is heir presumptive. pretender title fight way." Friendly, Frankfurter Reading Statutes, Felix Frankfurter: Judge 40 (1964). comment favors 14165—16166 (remarks Cooper), disregarded opponent's attempt blacken Labor Relations Board Fruit Vegetable Packers Warehousemen, Local 760, 377 58, 66, 84 1063, 1068, 129, brief. quoted cumulative, minor evidence another 1941, admitting 'may history' saying deserved consideration.' 764, 782—783. 1942, bearing adopted. year reveal 'one' criteria along others. 62. For characterization, cites 180, 9) 785. imparted gloss gave cursory summary passing constitutionality 11(b)(1). 184, 14) quotes above-cited report, borrowing forwarding 8. overlooks directed embodied closely 11's federally imposed simplification. quotation relevant (as reported 1935), quickly reliance misplaced. majority's citations footnote infirm. behalf allows decide remaining citation Senator's ownership's impact states reference entire hearing.' 37, 45. again remembered safeguard. Even obtain systems, must, proving economies,' unity regulation' 190) acts cases. Other sections regulate disclosure reports maintenance accounting data records. 12(f) 13(a), 15, 79l(f), 79m(a), 79n, 79o Louisiana commission 235 167. here jurisdictional grounds, 353 368, 77 855, 897, course merits. 133 148, aff'd constitutional questions, 945. U.S.App.D.C. 720; two-to-one 78 199, 138 936, cert. granted, 322 723, 64 1273, 88 1561, vacated moot, 332 788, 68 96, 92 370, ambiguous. Among examples—and mean approve disapprove cite—are rulings consider Utils. 838—839 (1951); tax factor, 985 give capital costs divestiture, Eastern Associates, 31 329, 349 (1950); predicted losses, 611

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