Court Opinion

ID: 9419886
Source: CourtListenerOpinion
Date Created: 2023-08-02 22:51:57.238405+00
Date Added: 2024-06-11T17:22:21.084556
License: Public Domain

Mr. Justice Rutledge,
concurring.
I concur in the result and in the Court’s opinion, except those portions of Part V dealing with the Commission’s procedure in treating the alternative plans filed under § 11 (e) of the Act by American and Electric.
*122Although, for reasons to be stated, I think the Commission's action in entering its § 11 (b) (2) order must be sustained, I do not think its procedure in respect to making provision for dealing with the alternative plans was in compliance with § 11 (e) or the rights to notice and hearing on such plans which it assured. Because the matter may be of considerable importance for the future, I desire to state my reasons for difference from the views expressed by the Court in this respect.
Section 11 (b) (2) makes it the Commission’s duty “as soon as practicable after January 1, 1938,” to require by order each registered holding company and each subsidiary thereof, after notice and opportunity for hearing, to take such steps as the Commission shall find necessary to ensure “that the corporate structure or continued existence of any company in the holding-company system does not unduly or unnecessarily complicate the structure, or unfairly or inequitably distribute voting power among security holders, of such holding-company system.” 49 Stat. 803, 821. If this section stood alone and unqualified in the Act, the Commission’s power would be unquestionable to require the necessary steps to be taken to accomplish the section’s stated purposes without reference to voluntary plans submitted by the companies affected.
But § 11 (b) (2) does not stand alone or unqualified in this respect. Section 11 (e)1 expressly provides for the *123submission of plans to effectuate the objects of § 11 (b) (2) by “any registered holding company or any subsidiary company of a registered holding company.” This is to be done “in accordance with such rules and regulations or order as the Commission may deem necessary or appropriate in the public interest or for the protection of investors or consumers.” Moreover, “if, after notice and opportunity for hearing, the Commission shall find such plan, as submitted or as modified, necessary to effectuate the provisions of subsection (b) and fair and equitable to the persons affected by such plan, the Commission shall make an order approving such plan . . . .” (Emphasis added.)
1 do not think that § 11 (e) simply provides a procedure alternative to that of § 11 (b) which the Commission is free to follow or disregard at its pleasure. Both the terms of the Act and the legislative history show that the purpose of § 11 (e) was to allow companies affected “to work out a plan of reorganization to make unnecessary the issuance of an involuntary order for its reorganization . . .,” which could only be issued under § 11 (b). S. Rep. No. 621, 74th Cong., 1st Sess., 33; Commonwealth & Southern Corp. v. S. E. C., 134 F. 2d 747, 751. In my opinion this purpose, together with the provision for voluntary plans to be submitted “in accordance with such rules and regulations or order as the Commission may deem necessary or appropriate in the public interest or for the protection of investors,” 2 assures the right to submit such plans for *124the Commission’s consideration and to have them considered and determined “after notice and opportunity for hearing.” See Chicago Junction Case, 264 U. S. 258, 264-265.
Furthermore, although the section gives the Commission broad discretion concerning the procedure to be followed, it would seem clear, both from the section’s purpose and from its terms, that the Act contemplates that it shall make the required determination, concerning such a voluntary plan properly submitted, prior to the entry of any order under § 11 (b). Cf. Ashbacker Radio Corp. v. F. C. C., 326 U. S. 327. Only in this way could the legislative purpose “to make unnecessary issuance of an involuntary order” be made effective. This being true, the section cast upon the Commission the duty of providing the appropriate procedure for submitting voluntary plans, by rules, regulations or order comporting with the specified standards, including those for notice and hearing.
The record does not disclose that the Commission at any time complied with those requirements in these cases. So far as appears no general rules or regulations were issued. Nor was any order made or entered providing for such a procedure. On the contrary, the procedure followed was not, in its initial stages, in accordance with the statutory provisions, as the following chronology demonstrates.
On May 10, 1940, notice of hearing under § 11 (b) (2) was served on the petitioners. The notice made no reference to § 11 (e) or any possible alternative proceedings under it. The hearing was set for June 10, 1940, scarcely time for the petitioners to prepare both a voluntary plan, *125even if opportunity for filing and hearing were to be afforded, and a defense on the § 11 (b) (2) hearing. Indeed, petitioners recognized that the time was inadequate for preparing their defense, for they applied for postponement of the hearing and other relief.3 The Commission postponed the hearing one week, but found no adequate ground for further extension.
The hearing was commenced on June 18,1940. On July 23, 194.1, American submitted its voluntary plan under § 11 (e). On December 3, 1941, Electric filed its plan. And on December 6, 1941, both companies moved to consolidate their applications with the pending § 11 (b) (2) proceedings.4 By agreement of counsel consideration of the motion was delayed for the Commission to pass upon *126at the end of the § 11 (b) (2) hearing5 and on July 22, 1942, "that hearing was closed as to petitioners by stipulation.
On August 31, 1942, the Commission filed its opinion in support of the orders which are now enforced. In the same opinion it denied the motion to consolidate and also denied petitioners any hearing on their voluntary plans. The motion was denied on the stated ground: “It appears that if consolidation were granted, the result would be to inject into the present proceeding issues of fact and law in many respects different from, and unrelated to, those here involved. In consequence, no useful purpose would be served by permitting the consolidation of the 11 (e) plans with the present proceeding, but on the contrary, delay and confusion would inevitably result.” 6 Consistently, separate hearing was denied as to the voluntary plans apparently on the grounds that consideration of them would delay the § 11 (b) proceeding, so as to defeat the *127statutory policy of prompt action,7 and that the plans were incomplete and ineffective.
It is apparent from this recital that the Commission did not at any time comply with the requirement of §11 (e) that it provide by rules, regulations or order an orderly procedure to carry out the section’s command and purpose for the submission and consideration of voluntary plans. And if petitioners had stood upon their rights in this respect, by timely action taken in good faith, the Commission’s failure to observe them would have given ground for reversal.
But it is equally obvious that the petitioners did not assert their rights in a manner which invalidates the Com*128mission’s action in entering its § 11 (b) (2) order or made the denial of the motion for hearing reversible error. The petitioners had notice that the Commission would proceed with the § 11 (b) (2) hearing from the time such notice was given in May, 1940. They applied for a continuance. But the record does not disclose that they sought it in order to have time to prepare and submit a voluntary plan or indeed that they took any action toward securing a hearing on such a plan until they submitted their plans. In one case this was more than a year after the § 11 (b) hearing began, in the other nearly a year and a half after that time. When shortly after the latter submission the motions to consolidate were made, consideration was deferred by agreement of counsel until the end of the § 11 (b) (2) hearing; and about seven months later that hearing was closed as to the petitioners by stipulation.
Although in my opinion it was the Commission’s duty initially to make provision for notice and hearing on voluntary plans, in accordance with § 11 (e), the petitioners hardly can be considered to have been ignorant either of this duty or of the Commission’s failure to perform it. By standing by through the long period of the § 11 (b) proceedings prior to the time of submitting their plans without taking earlier action to secure preservation of their rights to hearing on such plans, the petitioners should be taken to have waived their rights to such hearings. They were not entitled to assert them for the first time at so late a stage in the § 11 (b) proceedings. Nor, in my opinion, is the Commission required to givé further consideration to such plans in these cases, unless in its own discretion it sees fit to do so.8

 “In accordance with such rules and regulations or order as the Commission may deem necessary or appropriate in the public interest or for the protection of investors or consumers, any registered holding company or any subsidiary company of a registered holding company may, at any time after January 1, 1936, submit a plan to the Commission for the divestment of control, securities, or other assets, or for other action by such company or any subsidiary company thereof for the purpose of enabling such company or any subsidiary company thereof to comply with the provisions of subsection (b). If, after notice and opportunity for hearing, the Commission shall find such plan, as submitted or as modified, necessary to effectuate the *123provisions of subsection (b) and fair and equitable to the persons affected by such plan, the Commission shall make an order approving such plan; and the Commission, at the request of the company, may apply to a court, in accordance with the provisions of subsection (f) of section 18, to enforce and carry out the terms and provisions of such plan. . . 49 Stat. 803,822. (Emphasis added.)

 The requirement obviously is not a permission to the Commission to dispense altogether with such rules, regulations or order in its dis*124cretion. It is rather a statutory direction to make them in accordance with the standards prescribed. Any other view would contradict the stated purpose of the section and make of it, in effect, a dead letter.

 The application stated in part: “It is obvious from the nature of the proceeding . . . that the matters to be dealt with at the hearing are of vital import to the respondents and their subsidiaries, as well as to the hundreds of thousands of investors in securities of companies in the Electric Bond and Share Company system and the millions of consumers presently receiving necessary publie utility service from the operating companies in said system. In the circumstances, respondents believe, first, that they should be given adequate time not only to check and verify the numerous factual allegations contained in the order, but also to develop and correlate for presentation all other facts having a bearing upon the problems and issues presented by the notice and order . . . .”

 At the same time American, which previously had filed its plan with the Commission, sought to introduce the plan as an exhibit into the § 11 (b) (2) hearing. The company’s attorney stated, “This plan which has been filed by American Power & Light Company with the Commission sets forth a proposal for the compliance with Section 11 of the Act, and I think that it is material and relevant in this proceeding.” The reply of the trial examiner, sustaining an objection to its admission, apparently typifies the attitude of the Commission toward the requirements of § 11 (e): “Quite possibly it relates to Section 11; quite possibly it is a matter which the Commission will want to consider before it finally makes up its mind. It is quite probable. But, nevertheless, we are here restricted to this particular proceeding *126and not the power of the Commission or the action of the Commission. The hearing is restricted to 11 (b) (2)
The Commission at no time before or during the hearing recognized that § 11 (e) plans not only were relevant to whether action should be taken under § 11 (b) (2), but also were required to be considered by hearing before such action is taken. Its view apparently is to the contrary. See Matter of Electric Bond & Share Co., 11 S. E. C. 1146, 1217-1218, quoted in note 7 infra; Matter of Commonwealth & Southern Corp., 11 S. E. C. 138, 154-156. The examiner, of course, could not help himself. The hearing had been limited to § 11 (b) (2). 7 S.E. C. 391.

 The record does not disclose what the agreement was or for what reasons it was made. To delay consideration of the motion to consolidate was in effect to deny it insofar as it sought a joint hearing, though it was always possible for the Commission to order a hearing on the voluntary plans before it issued its § 11 (b) (2) order.

 11 S. E. C. 1146, 1152. The Commission noted that “these plans were filed at a time when the record in the present proceeding was nearing completion.” Ibid.

 “With respect to the former point, that of promptness, it need only be considered that it would be necessary for respondents and the Public Utilities Division to formulate and present, and for us to explore, detailed and very extensive evidence on a number of extremely complex subjects before it would be possible for us to determine even the preliminary question of whether the 11 (e) plans do in fact constitute acceptable alternative courses of action for achieving the objectives of Section 11. In the event it were necessary to determine the question in the negative, presumably we should be free (even under respondents’ contention) to enter our order of dissolution herein following the lengthy delay, unless respondents in the meantime proposed a new 11 (e) plan which would necessitate a repetition of this process. On the other hand, in the event we were ultimately able to approve the plans, they would still not become effective unless and until ratified by vote of the companies’ stockholders.
“Considering that 7 years have now gone by since the effective date of the Act, that 4% years have elapsed since the date after which action under Section 11 was to be required 'as soon as practicable,’ and that more than 2 years have been consumed since the present proceeding was instituted, it is evident that respondents’ program is too fraught with potentialities of delay to be acceptable as a substitute for a dissolution order to meet the problems existing under Section 11 (b) (2). Section 11 (e) which provides a medium for voluntary compliance with Section 11 (b) was not intended to oust the Commission of its jurisdiction, or relieve it of its obligation, to enforce the provisions of 11 (b).” (Emphasis added.) 11 S. E. C. 1146, 1217-1218. Compare notes 4 and 6, supra.

 Cf. § 11 (b): “The Commission may by order revoke or modify any order previously made under this subsection, if, after notice and opportunity for hearing, it finds that the conditions upon which the order was predicated do not exist.” 49 Stat. 803,821.