Court Opinion

ID: 8597132
Source: CourtListenerOpinion
Date Created: 2022-11-23 16:04:28.857333+00
Date Added: 2024-06-11T16:55:00.768973
License: Public Domain

FRIEDMAN, Chief Judge,
concurring:
Although I fully agree with everything in the court’s opinion, I add the following comments:
*44As noted, in the 1964 statute a "brother-sister controlled group” was defined as two or more corporations in which a single individual owned 80 percent or more of the stock. Under that definition no question could arise whether the same individual had to be a stockholder in all of the brother-sister controlled corporations.
When Congress in 1969 expanded the definition of brother-sister controlled corporations to cover situations where up to five people owned 80 percent of the stock, it is reasonable to assume that it intended to build on the previous law, changing only the number of persons whose stock interests would be considered and not the nature of those interests. If, when Congress broadened the number of persons from one to five, it also intended to make the definition applicable even where not all of those additional stockholders held interests in all of the corporations, presumably it would have explicitly so indicated — either in the language of the statute or in its legislative history. It did neither. Not only does the legislative history fail so to indicate, but, as shown, whatever history there is on this issue points in the opposite direction.
The defendant argues, however, that in the 50-percent provision Congress has manifested its intention to change the character of the interlocking interests. The argument is that since only the latter provision contains language specifically recognizing that the five or fewer stockholders must have stock in all of the companies, the implication is that the 80-percent provision, which does not contain similar language, does not include that requirement.
The language of the 50-percent provision upon which the defendant relies, however, does not justify that inference. It states that in determining whether five or fewer persons own 50 percent of the stock, the stock ownership of each such person is to be considered "only to the extent such stock ownership is identical with respect to each such corporation.” The purpose of this requirement is to insure that the same five or fewer individuals together control (by ownership of a majority of the stock) each of the brother-sister corporations. The situation to which this provision is addressed is illustrated in footnote 3 of the court’s opinion: one person owns 80 percent of the stock in corporation A *45and 20 percent of the stock in corporation B, and a second person owns 80 percent of corporation B and 20 percent of corporation A. Although the 80-percent test would be met, there would be no common control. The 50-percent test was necessary to prevent the two corporations in that situation from being treated as under common control.
The congressional requirement that each member of the control group must have an interest in each of the corporations, and that the members of the group together must have more than 50 percent of the stock of each corporation, cannot fairly be read as indicating a congressional intent to permit the 80-percent test to be applied to different groups of five or fewer stockholders whose only common bond is that together the stockholders in each group own at least 80 percent of the stock in their particular corporation.