Court Opinion

ID: 9462135
Source: CourtListenerOpinion
Date Created: 2023-08-04 22:32:48.736219+00
Date Added: 2024-06-11T17:37:25.338177
License: Public Domain

J. JOSEPH SMITH, Circuit Judge
(dissenting):
I dissent. My brother Timbers’ analysis for the majority is quite impressive, yet it seems to me to run counter to the essential thrust of National Alfalfa, particularly part IV thereof, considered in the light of the Public Utility Holding Company Act of 1935, pursuant to which the transaction here under review was structured. That Act was thought necessary to simplify the corporate structures of the companies involved, so that investors, rate-makers and consumers could determine with some hope of accuracy the underlying values involved.1 It recognized that market values of securities throughout the corporate pyramids were even for those days unusually unreliable.2 The restructuring was an attempt, under court supervision, to simplify structures in a manner as fair as could be to and between the various classes of security holders. There was here in the restructuring of Cities Service no raising of new capital but merely reshuffling of the old. The “costs” to *1294the corporation do not have sufficient reality to base a tax credit effect, even if we could with confidence agree on comparative “values” of different classes of securities substituted under the plan.
I would reverse for dismissal of the action.

. See Conference Report and Statement of the Manager on the part of the House on the Public Utility Holding Company bill (S. 2796), 79 Cong.Rec. 14600ff (1935).

. See the Act, Title I § 1(b)(1): “when such securities are issued on the basis of fictitious or unsound asset values having no fair relation to the sums invested in or the earning capacities of the properties. . .”