Legal Document

329 U.S. 441 67 Supreme Court Reporter 411 91 L.Ed. 408 BOARD OF GOVERNORS FEDERAL RESERVE SYSTEM et al.v.AGNEW al. Number 66. Argued Dec. 10, 1946. Decided Jan. 6, 1947. Mr.J. Leonard Townsend, of Washington, D.C., for petitioners. Mr. Hugh or Haw. Hawai‘i Reports KFH45 A2 Obear, respondents. [Argument Counsel from page 442 intentionally omitted] Justice DOUGLAS delivered the opinion Court. 1 This case, here on certiorari to Appeals District Columbia, presents important problems under § 30 and 32 Banking Act 1933, 48 Statutes-at-Large 162, 193, as amended, 49 704, 709, 12 United States Code KF62 §§ 77, 78, Annotated KF65 U5 78. 2 Section provides that Comptroller Currency, whenever he is a director officer national bank has violated any law relating bank, shall warn him discontinue violation and, if continues, may certify facts Board Governors Federal Reserve System. The granted power order be removed office it finds after notice reasonable opportunity heard continued violate law.1 3 prohibits, inter alia, partner employee partnership 'primarily engaged in issue, flotation, underwriting, public sale, distribution, at wholesale retail, through syndicate participation, stocks, bonds, other similar securities' serving same time an officer, director, member bank.2 4 Pursuant procedure outlined ordered respondents directors Paterson National Bank ground they were employees firm engaged' underwriting within meaning 32. Respondents brought suit Columbia review action enjoin its action. dismissed complaint. reversed by divided vote, holding exceeded authority injunction should issue. 153 Reporter, 2nd Series 785. 5 First. contends removal orders made are not subject judicial absence charge fraud. It relies express right nature federal supervisory scheme which integral part. Cf. Adams versus Nagle, 303 532, 58 687, 82 999; Switchmen's Union North America Mediation Board, 320 297, 64 95, 88 61; Estep States, 327 114, 66 423. A majority Court, however, determination extent issue authorized transcends bounds acts beyond limits statutory grant authority. See American School Magnetic Healing McAnnulty, 187 94, 23 33, 47 90; Philadelphia company Stimson, 223 605, 620, 340, 344, 56 570; Stark Wickard, 321 288, 309, 310, 559, 570, 571, 733. That being decided, seems plain claim such personal one warrants consideration controversy. columbia Broadcasting System 316 407, 62 1194, 86 1563; supra, 305, 568, 6 Second. We come then merits. number years have been Bank, banking association Since 1941 employed Eastman, Dillon & Co., partnership, holds itself out 'Underwriters, Distributors, Dealers Brokers Industrial, Railroad, Public Utility Municipal Securities.' During fiscal year ending February 28, 1943, gross income field3 was 26 per cent all sources, while brokerage business 42 sources. percentages 29, 1944, respectively; period March 1, July 31, 39 40 respectively. Of total transactions, well market value securities bought sold broker dealer indefinite prior September 20, about 15 field. active field, getting what can. In 1943 ranked ninth among 94 leading investment bankers country with respect participations underwritings bonds. For during first underwriters country. Apart municipals rails, participation amounted $14,657,000. October, 1941, done no than strictly commission customers. Nor since fall 1941. 7 These essential found Board. 8 On basis these concluded times relevant respondents, firm, disqualified bank. 9 when applied single 'primary' means first, chief, principal; standard chief principal business. this firm's did quantitative test exceed 50 business, court held busine Act. 10 take different view. true often principal. But always case. accepted common meanings 'primarily' 'essentially' (Oxford English Dictionary) 'fundamentally' (Webster's New International). An activity function sense substantial. If substantial, primary way though activity. record we would find hard say another. used suggest line specializes least two does substantial amount each. One might professional man his profession himself serve comers devotes practice but makes greater share stock market. 11 construction given And is, think, only permissible also more consonant legislative purpose adopted. Firms do engage numerous activities. indeed observed unless some activity, apply one. Moreover, evil section aimed likely emerge connected exceeds directed probability likelihood, based experience 1920's interested use influence involve customers house portfolio committed take. likelihood depend whether might, course, exist whatever proportion Congress go whole way; drew where need thought greatest. between unsubstantial us indicated words engaged.' There intrinsic evidence 1933 support our conclusion. 20 Act, 377, outlaws affiliation4 organization 'engaged principally' 19, 61, control over companies. vote controlled banks must show own, control, interest in, participating management direction hand, came deal taking checking deposits, language either 19 hand other. By 21, 378, prohibited 'engaged' 'to whatever' receiving deposits. Thus dealing several types firms—those those underwriting. inference chose marked distinction obliterate reading 'pr marily' mean 'principally'. 13 laid stress fact abolish offiliate system underwriter affiliates it.5 20. critical constituted situations comparable. problem vice versa. nexus dependent presence nor so even construed principally designed, said, remove tempting opportunities personnel banks. realistic disappear merely because activities outside happens below 51 cent. Fifty-one cent, terms irrelevant here. serves guide determining substantially 14 concerned, showing question derelict duties breached fiduciary obligation preventive prophylactic measure. scrupulous their relationships therefore immaterial. suggestion connotes substantiality, constitutes unlawful delegation think decisions substantiality guide, administrative sufficiently definite ascertainable survive challenge grounds unconstitutionality. Sunshine Anthracite Coal Adkins, 310 381, 397—400, 60 907, 914—916, 84 1263; Opp Cotton Mills Administrator, 312 126, 142—146, 657, 61 524, 531—533, 85 624; Yakus 414, 424—428, 660, 667—669, 834; Bowles Willingham, 503, 512—516, 641, 646—648, 892. 16 Reversed. 17 RUTLEDGE, concurring. 18 presented merits reviewable judicially, my abuse discretion Governors. Not system's operation hands, highly specialized technical one, requiring expert coordinated phases, N Immigration Nationality Decisions judgment conclusive upon matter which, like open difference opinion. Their gives them advantage judges cannot possibly have, raised working, ascertaining had mind prescribing standards administer it. Accordingly matters overturned there sustain exercise manner clearly case things occurred. etermination required hearing notice. 77. full thorough, including detailed findings conclusions law, followed carefully written opinion.1 'first volume comparison businesses (the employer) engages,'2 rather 'a importance,' colors planets word phrase 'the causes war.' view supported dictionary conformity Congress' intent established history. further reflecting experience, stated: 'To ranking scope statute enacted intention one.' Board's conclusion, light groundings, wanting warrant fact. considerations stated Court's dissenting filed Appeals, 785, 795, itself, confirm ones arise future, perhaps result decision, make clear concurrence disposition set forth, independent undertake reconsider, judgment, arise, without transgress mandate. More shown cause me believe respect. 21 FRANKFURTER joins provides: 'That disclosed anyone except involved involved, otherwise connection proceedings section. Any herein provided who thereafter participates fined $5,000, imprisoned five years, both, court.' material exception 'in limited classes cases allow service general regulations said unduly policies advice regarding investments.' sale retail bonds securities. Government Defined 2(b), 221a(b), direct indirect ownership voting question, stock, directors. note 4, supra. reported, pursuant prohibition, effective enforcement. Under view, involving become half (1) done; (2) profit; (3) net profit, factors phase carried amounts gross. Such discriminations seem determine instance. so, difficult see why include

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