Court Opinion

ID: 9650880
Source: CourtListenerOpinion
Date Created: 2023-08-23 15:53:52.093686+00
Date Added: 2024-06-11T18:12:26.652329
License: Public Domain

MILLER, Associate Justice
(dissenting).
The delay in approval by the Commission of petitioners’ plan is adequately explained by the following considerations: (1) During the intervening four-year period four plans — fourteen times amended — were submitted to the Commission; (2) but only in the last plan as finally amended was provision made for the elimination of the Class B stock; (3) this Class B stock controlled the voting power of the corporation; (4) it also constituted petitioners’ main interest in the enterprise and they were the dominant stockholders because of their control of it; (5) petitioners do not now question the power of the Commission to find that the Class B stock represented no real equity and that it would have been unfair and inequitable to the other stockholders if it had not 'been eliminated; (6) whatever may have been the motive or the reason for so long delaying the elimination of the Class B stock, it was through no misconduct or nonfeasance upon the part of the Commission; (7) the law gave to petitioners the initiative in preparing and presenting to the Commission an acceptable plan; (8) and it gave to petitioners the privilege of not carrying out the plan even after approval.
The question presented for our decision is whether the Commission had power to impose, as a condition of approval of the plan as finally presented, a limitation upon the extent to which petitioners may profit from the purchase, during the intervening four-year period, of other stock of the corporation. The statute provides specifically that: “Any order permitting a declaration to become effective may contain such terms and conditions as the Commission finds necessary to assure compliance with the conditions specified in this section.”1 [Italics supplied] The Commission found it necessary to impose the protested condition in order to secure compliance with the italicized language of the following broad specification of the statute: “ * * * the Commission shall permit a declaration to become effective regarding the exercise of a privilege or right to alter the priorities, preferences, voting power, or other rights of the holders of an outstanding security unless the Commission finds that such exercise of such privilege or right will result in an unfair or inequitable distribution of voting power among holders of the securities of the declarant or is otherwise detrimental to the public interest or the interest of investors or consumers."2 [Italics supplied]
I see no reason for questioning the Commission’s finding or for limiting the broad language of the statute as the majority *312opinion proposes to do. The statute vested a large discretion in the Commission. It is a rule of long standing that the exercise of such discretion should not he disturbed except where it has been abused.3 The Supreme Court has admonished us on several occasions that the judicial function is a limited one, quickly exhausted,4 and that courts should not lightly interfere with the performance of administrative duties by the agencies which Congress has created for that purpose.5 Courts and commissions should play a coordinate role in the administration of justice.6 ,
Whether the conduct of petitioners in the present case would be proscribed or permitted by any. rule of common law or equity, declared by any court prior to adoption of the acts which created, implemented and empowered the Commission, is of small significance. While it may be entirely proper to look to the common law for definition when the context of a statute so requires,7 it is improper to do so when the statute deliberately departs from the common law definition8 or when its purpose would be defeated by adherence to a common law rule.9 A closely related example is found in the Federal Trade Commission Act. 15 U.S.C.A. § 41 et seq. Justice Stone, speaking for the Supreme Court in Federal Trade. Commission v. R. F. Keppel & Bro., Inc.,10 used language strikingly pertinent to the present case: “The common law afforded a definition of unfair competition and, 'before the enactment of the Federal Trade Commission Act, the Sherman Anti-Trust Act (15 U.S.C.A. § 1-7, 15 note) had laid its inhibition upon combinations to restrain or monopolize interstate commerce which the courts had construed to include restraints upon competition in interstate commerce. It would not have been a difficult feat of draftsmanship to have restricted the operation of the Trade Commission Act to those methods of competition in interstate commerce which are forbidden at common law or which are likely to grow into violations of the Sherman Act, if that had been the purpose of the legislation. * * * As proposed by the Senate Committee on Interstate Commerce and as introduced in the Senate, the bill which ultimately became the Federal Trade Commission Act declared ‘unfair competition’ to be unlawful. But it was because the meaning which the common law had given to those words was deemed too narrow that the broader and more flexible phrase ‘unfair methods of competition’ was substituted. Congress, in defining the powers of the Commission, thus advisedly adopted a phrase which, as this Court has said, does not ‘admit of precise definition but the meaning and application of which must be arrived at by what this Court elsewhere has called “the gradual process of judicial inclusion and exclusion.” ’ ” The broad and far-reaching standard of public interest which is de-*313dared in the present Act, has been used by Congress in earlier legislation and has been liberally interpreted by the Supreme Court to accomplish the statutory purpose. A good example is found in the Trans-' portation Act of 1920,11 as interpreted in such cases as United States v. Lowden,12 and Interstate Commerce Commission v. Railway Labor Executives Ass’n.13
In the present case, therefore, as in the instances to which reference has been made, courts are obliged to interpret statutory revisions of common law in such manner as to achieve, rather than to defeat their purposes ;14 regardless of the extent to which they may seem to depart from the old common law moorings.15 An examination of the applicable law and the Committee Reports,16 in the present case, reveals that it was the intention of Con*314gress to work sweeping changes in theretofore existing rules governing corporate management, financing and reorganization.17 Those changes are as far-reaching in their implications as was the abandonment of the common law rule of assumption of risk and the fellow-servant rule, which resulted from enactment of workmen’s compensation and industrial accident legislation.18 Here, as there, the purpose was to protect little people against the aggressions of the dominant group. Consequently, we should look for analogies to other branches of the law in which the legal relationships more nearly approximate those which Congress intended should exist henceforth in the management, administration and reorganization of public utility holding companies.
The obvious analogy, it seems to me, is the relationship which exists between the trustee and his beneficiary. And, in my. opinion, the Commission’s contention is correct, within the meaning of the Act, that those who undertake to formulate and secure approval of a plan for the readjustment of stockholders’ rights thereby assume fiduciary obligations to the stockholders whose rights the plan proposes to affect, and their judgment and conduct in such an undertaking should not be open to influences arising from the possibility of personal profit through the purchase of securities subject to the plan; consequently, that they should not profit, in the consummation of the plan, through purchases made while such fiduciary obligations continue. It is in this sense that such cases as Pepper v. Litton,19 American United Mutual Life Insurance Co. v. Avon Park,20 and Woods v. City National Bank & Trust Co.21 become applicable to the' present case. For the same reason an analogy may properly be drawn between the present case and those which prohibit dealing, 'by a committee member, in securities of the company which he is attempting to reorganize.22 It is even more important in the present situation, that the supervisory power of the Commission should be recognized, in order that the purpose of the statute may be achieved, because, while in a bankruptcy case there is opportunity for the court, before the estate is finally closed to examine every detail of its administration, in the present case the Commission cannot supervise the consummation of the plan or even require that it be consummated.23 Its duty, in approving or disapproving, is preventive *315rather iban corrective. In other words, the conventional judicial function of decision after the event may, in a case such as the present, become the least important function C'f an administrative agency. Such agencies,are required to look ahead; indeed, they are charged with the duty of prophecy.24 For this reason it is sufficient for the determination of conditions under which permission is given to enjoy a legislative privilege in the future, that the expert administrative agency in applying a public interest standard, shall find such conditions reasonably necessary to achieve the purpose and to protect the public interest in the future. To argue the contrary is no more convincing than to argue that a trustee in the conventional trust situation25 should be allowed to profit from dealings with the trust res unless it can be shown in each case that there has been overreaching upon his part. The purpose of the law is, in each case, to anticipate and prevent overreaching, rather than to discover and punish overreaching after it has occurred. Any other interpretation of the law would impose such an intolerable burden upon the Commission as to make the performance of its duties impossible.26
Petitioners contend and the majority opinion holds that the Commission’s action in the present case is an attempt to experiment in a field preempted by Congress in the enactment of Section 17 of the Act. I find nothing in Section 17 which suggests Congressional intent to limit the broad power conferred upon the Commission in Section 7. If it had been the intention of Congress that the .Commission should have no more power, in acting upon proposals such as the one here involved, than to impose, as conditions of approval, the limitations specified in Section 17, it would have been easy for it to speak in those terms.27 But it did not so speak; and there is no language in Section 17 which, directly or by implication, defines or limits the power of the Commission to impose “such terms and conditions as * * * [it] finds necessary”28 to insure that the exercise of the .privilege, granted by Congress, to file a *316declaraton with the Commission,29 shall not be detrimental to the public interest or the interest of investors or consumers.30 In fact, to limit the language of Section 7 in the manner proposed would deprive it of meaning- and defeat one of the larger purposes of the Act. Consequently, in my opinion, the petition should be denied.

 49 Stat. 817, 15 U.S.C.A. § 79g(f).

 49 Stat. 816, 15 U.S.C.A. § 79g(e).

 Interstate Commerce Commission v. Illinois Central R. R., 215 U.S. 452, 470, 80 S.Ct. 155, 54 L.Ed. 280; Alabama Power Co. v. Federal Power Commission, — App.D.C. —, 128 F.2d 280.

 Rochester Tel. Corp. v. United States, 807 U.S. 125, 189, 140, 59 S.Ct. 754, 83 L.Ed. 1147; Mississippi Valley Barge Line Co. v. United States, 292 U.S. 282, 286, 287, 54 S.Ct. 692, 78 L.Ed. 1260; Federal Communications Commission v. Pottsville Broadcasting Co., 309 U.S. 134, 145, 60 S.Ct. 437, 84 L.Ed. 656.

 Board of Trade v. United States, 314 U.S. 534, 62 S.Ct. 366, 86 L.Ed. —, decided January 5, 1942.

 Scripps-Howard Radio, Inc. v. Federal Communications Commission, 62 S.Ct. 875, 86 L.Ed. —, decided April 6, 1942; United States v. Morgan, 307 U.S. 183, 191, 59 S.Ct. 795, 83 L.Ed. 1211; Id. 313 U.S. 409, 422, 61 S.Ct. 999, 85 L.Ed. 1429; Federal Communications Commission v. Pottsville Broadcasting Co., 309 U.S. 134, 146, 60 S.Ct. 437, 84 L.Ed. 656.

 See Apex Hosiery Co. v. Leader, 310 U.S. 469, 494-498, 60 S.Ct. 982, 84 L.Ed. 1311, 128 A.L.R. 1044; United States v. American Medical Ass’n., 72 App.D.C. 12, 16, 110 F.2d 703, 707, certiorari denied, 310 U.S. 644, 60 S.Ct. 1096, 84 L.Ed. 1411; United States v. Cardish, D.C.E.D.Wis., 143 F. 640, 642; Oliver v. United States, 9 Cir., 230 F. 971, 973, certiorari denied, 241 U.S. 670, 36 S.Ct. 721, 60 L.Ed. 1230.

 Federal Trade Commission v. R. F. Keppel & Bro., Inc., 291 U.S. 304, 310-312, 54 S.Ct. 423, 78 L.Ed. 814.

 Philadelphia, Baltimore & Washington R. R. v. Tucker, 35 App.D.C. 123, 148, L.R.A.1915C, 39, affirmed, 220 U.S. 608, 31 S.Ct. 725, 55 L.Ed. 607; Commissioner of Internal Revenue v. Marshall, 2 Cir., 125 F.2d 943, 945; Missel v. Overnight Motor Transp. Co., Inc., 4 Cir., 126 F.2d 98, 102, 103.

 291 U.S. 304, 310-312, 54 S.Ct. 423, 425, 78 L.Ed. 814.

 41 Stat. 477, § 402(18), 49 U.S.C.A. § 1(18); Id. at page 481, § 407(5) (6), 49 U.S.C.A. § 5(2).

 308 U.S. 225, 231, 232, 238, 240, 60 S.Ct. 248, 84 L.Ed. 208.

 62 S.Ct. 717, 86 L.Ed. —, decided March 2, 1942. See also, Pacific Gas & Elec. Co. v. Securities & Exchange Commission, 9 Cir., 127 F.2d 378 decided April 14. 1942.

 Philadelphia, Baltimore & Washington R. R. v. Tucker, 35 App.D.C. 123, 148, L.R.A.1915C, 39, affirmed, 220 U.S. 608, 31 S.Ct. 725, 55 L.Ed. 607; United States v. American Trucking Ass’ns, Inc., 310 U.S. 534, 542, 544, 60 S.Ct. 1059, 1083, 84 L.Ed. 1345: “In the interpretation of statutes, the function of the courts is easily stated. It is to construe the language so as to give effect to the intent of Congress. * * * Emphasis should be laid, too, upon the necessity for appraisal of the purposes as a whole of Congress in analyzing the meaning of clauses or sections of general acts.”
See also, Federal Trade Commission v. Bunte Brothers, Inc., 312 U.S. 349, 351, 61 S.Ct. 580, 582, 85 L.Ed. 881: “ ® * * the construction of every such statute presents a unique problem in which words derive vitality from the aim and nature of the specific legislation.”

 Pennsylvania Indemnity Eire Corp. v. Aldridge, 73 App.D.C. 161, 117 F.2d 774, 133 A.L.R. 914.

 Sen.Rep. No. 792, 73d Cong., 2d Sess. (1934) 1-21. See particularly [p. 3]: “The record compiled by the committee for the first time exposed methods by which a relatively small number of persons have extended their operations in securities far beyond any useful economic function, to the great detriment of the investing public. * * * [p. 11] A memorandum prepared by a corporate official was introduced in evidence which discussed the alternatives of preparing the corporation’s annual report in either the ‘standard’ or the ‘understandable’ form, the decision being in favor of the former. Many other instances of ‘window dressing’ were observed, where inexcusable methods were employed to in-flate assets, obscure liabilities, and conceal deficits.”
Sen.Rep. No. 1455, 73d Cong., 2d Sess. (1934) 68: “The Securities Exchange Act of 1934 aims to protect the interests of the public against tbe predatory operations of directors, officers, and principal stockholders of corporations by preventing them from speculating in the stock of the corporations to which they owe a fiduciary duty. Every person who is the beneficial owner of more than 10 percent of any class of equity security registered on an exchange or who is a director or officer of the issuer of such security must report to the Commission whenever any change occurs in his ownership of stock in the corporation. In the event that he realizes any profits from the purchase and sale or sale and purchase of an equity security within a period of less than 6 months, he is bound to account to the corporation for such profits. It is also made unlawful for corporate insiders to sell the security of their corporations short or to make ‘sales against tbe box.’ By this section it is rendered unlawful for persons intrusted with tho administration of corporate affairs or vested with substantial control over corporations to use inside information for their own advantage.”
Sen.Rep. No. 621, 74th Cong., 1st Sess. (1935) 59: “The issuance of new securities by holding companies should be adequately supervised by the commission so that in reorganizations and rearrangements of properties an uninformed investing public shall not have foisted upon it securities which are in no sense secure and carry little or no voice in management. Security issues should be limited to purposes necessary in the public interest, which accords with the ultimate purposes of the legislation; and each security issued should bear a proper relation to tbe capital of the company, its existing securities, the securities of the companies in a geographically and economically related system, and, above all, to the prudent investment in the properties of the issuer and its underlying companies. There should be an end to the pyramiding *314of holding-company securities. Except for necessary discretionary power in the commission in the case of refunding issues, new securities should be limited to par value common stock, with appropriate voting rights, and to first-lien bonds, i. e., bonds having a first lien either on physical assets of the issuer or upon first-mortgage bonds of operating subsidiaries. In this as in almost every phase of the holding-company problem the ultimate interests of consumers and investors are identical. In a system burdened with overcapitalized and debt-ridden holding companies, the consumers of operating subsidiaries have to support the topheavy structure by paying high rates and by enduring poor service from inadequately maintained plants.”

 Public Utility Holding Company Act of 1935, 49 Stat. 803, 804, 15 U.S.C.A. § 79a(a) (b) (c).

 St. Louis v. United Railways Co., 210 U.S. 266, 294, 295, 28 S.Ct. 630, 52 L.Ed. 1054; Hartford Accident & Indemnity Co. v. Cardillo, 72 App.D.C. 52, 58, 112 F.2d 11, 17, certiorari denied, 310 U.S. 649, 60 S.Ct. 1100, 84 L.Ed. 1415.

 308 U.S. 295, 306, 307, 60 S.Ct. 238, 245, 84 L.Ed. 281: “A director is a fiduciary. Twin-Lick Oil Co. v. Marbury, 91 U.S. 587, 588, 23 L.Ed. 328. So is a dominant or controlling stockholder or group of stockholders. Southern Pacific Co. v. Bogert, 250 U.S. 483, 492, 39 S. Ct. 533, 537, 63 L.Ed. 1099. Their powers are powers in trust. See Jackson v. Ludeling, 21 Wall. 616, 624, 22 L.Ed. 492. * * * While normally that fiduciary obligation is enforceable directly by the corporation, or through a stockholder’s derivative action, it is, in the event of bankruptcy of the corporation, enforceable by the trustee. For that standard of fiduciary obligation is designed for the protection of the entire community of interests in the corporation — creditors as well as stockholders.”

 311 U.S. 138, 61 S.Ct. 157, 85 L.Ed. 91, 136 A.L.R. 860.

 312 U.S. 262, 268, 269, 61 S.Ct. 493, 85 L.Ed. 820.

 In re Paramount-Publix Corp., D.C.S.D.N.Y., 12 F.Supp. 823, 828, affirmed, 2 Cir., 85 F.2d 588, certiorari denied, Palmer v. Paramount Pictures, 300 U.S. 655, 57 S.Ct. 432, 81 L.Ed. 865; In re Republic Gas Corp., D.C.S.D.N.Y., 35 F.Supp. 300, 303, 306.

 The power to withdraw declarations filed under Section 7 is impliedly contained in Section 7(b), 49 Stat. 815, 15 U.S.O.A. § 79g(b). The Commission may apply to a court to enforce the consum*315mation of a plan for simplification of holding companies only at the request of a company. 49 Stat. 822, § 11(e), 15 U. S.O.A. § 79k(e). It has been held that an application for registration may be withdrawn at any time before it becomes effective, in the absence of prejudice to the public or to investors. Jones v. Securities & Exchange Commission, 298 U. S. 1, 18-25, 56 S.Ct. 654, 80 D.Ed. 1015, Justices Cardozo, Stone and Brandéis dissenting.

 Board of Trade v. United States, 62 S.Ct. 866, 372, 86 L.Ed. — decided January 5, 1942: “And judgment in a situation like this implies, ultimately, prophecy based on the facts in the record as illumined by the seasoned wisdom of the expert body. In this perspective, the Commission had several choices before it — but all inevitably rested upon trial and error.” See Pacific Gas & Elec. Co. v. Securities and Exchange Commission, 9 Cir., 127 F.2d 378, decided April 14, 1942.

 Michoud v. Girod, 4 How. 503, 557, 11 L.Ed. 1076: “Is it not better that the cause of the evil shall be prohibited, than that courts of equity shall be relied upon to apply the remedy in particular cases, by inquiring into all the circumstances of a ease, whether there has or has not been fraud in fact?”
Magruder v. Drury, 235 U.S. 106, 119, 35 S.Ct. 77, 82, 59 L.Ed. 151: “The intention is to provide against any possible selfish interest exercising an influence which can interfere with the faithful discharge of the duty which is owing in a fiduciary capacity.”
Meinhard v. Salmon, 249 N.Y. 458, 464, 164 N.E. 545, 546, 62 A.D.R. 1: “A trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior. As to this there has developed a tradition that is unbending and inveterate. Uncompromising rigidity,has been the attitude of courts of equity when petitioned to undermine the rule of undivided loyalty by the ‘disintegrating erosion’ of particular exceptions. * * * Only thus has the level of conduct for fiduciaries been kept, at a level higher than that trodden by the crowd. It will not consciously be lowered by any judgment of this court.”

 gee United States v. Trenton Potteries Co., 273 U.S. 392, 397, 398, 47 S.Ct. 377, 71 L.Ed. 700, 50 A.L.R. 989 ; Bethlehem Steel Co. v. National Labor Relations Board, 74 App.D.C. 52, 58, 120 F.2d 641, 647; Alabama Power Co. v. Federal Power Commission, — App.D.C. — , 128 F.2d 280.

 See Federal Trade Commission v. R. F. Keppel & Bro., Inc., 291 U.S. 304, 310, 54 S.Ct. 423, 78 L.Ed. 814.

 49 Stat. 817, § 7(f), 15 U.S.C.A. § 79g(f).

 49 Stat. 815, 814, §§ 7(a), 6(a), 15 U.S.C.A. §§ 79g(a), 79f.

 49 Stat. 816, § 7(e), 15 U.S.C.A. § 79g(e).