Alleghany Corporation v. Breswick & Company

PETITIONER: Alleghany Corporation
RESPONDENT: Breswick & Company
LOCATION: Congress

DECIDED BY: Warren Court (1957-1958)

CITATION: 353 US 151 (1957)
ARGUED: Jan 23, 1957 / Jan 24, 1957
DECIDED: Apr 22, 1957

Facts of the case


Media for Alleghany Corporation v. Breswick & Company

Audio Transcription for Oral Argument - January 24, 1957 (Part 2) in Alleghany Corporation v. Breswick & Company
Audio Transcription for Oral Argument - January 24, 1957 (Part 1) in Alleghany Corporation v. Breswick & Company

Audio Transcription for Oral Argument - January 23, 1957 in Alleghany Corporation v. Breswick & Company

Earl Warren:

Number 36, Alleghany Corporation et al.versus Breswick and Company et al.Number 82, Baker, Weeks and Company et al.versus Breswick and Company et al.

Number 114, Interstate Commerce Commission versus Breswick and Company et al.

Mr. Seymour.

Whitney North Seymour:

May it please the Court.

It is my understanding that the appellant side of the case has a total of an hour and half and for convenience I got in touch with other counsel and we're going to divide the time on the basis of -- my taking 40 minutes for Alleghany in opening the case.

Mr. Ginnane taking 25 minutes for the Interstate Commerce Commission, Mr. Levin taking 15 minutes for the preferred stockholders, Mr. Kahan taking two minutes for certain common stockholders, and if that all works out I hope that we'll end up with eight minutes left for reply.

Earl Warren:

We had one of those situation just did and we're about --

Whitney North Seymour:

Well --

Earl Warren:

You better watch your time.

Whitney North Seymour:

I'm -- I'm trying to hope.

These are appeals from a judgment of a three-judge District Court in New York, convened under the Urgent Deficiencies Act.

The questions involved concerned the Interstate Commerce Act and some questions under the Investment Company Act.

The judgment, which appears at page 555, has had a very sweeping impact on I.C.C.regulation and on the company and on its stockholders.

It did three major things.

First, it enjoined part of a Commission order which continued jurisdiction over Alleghany, which is the company that controls New York Central, in connection with an application made in 1954 and decided by the Commission in 1955 by Alleghany with Central and others, continuing its control over Alleghany as a non-carrier controlling carriers.

The effect of that portion of the judgment is to oust -- oust Interstate Commerce Commission jurisdiction, not only over Alleghany but over other companies which may be carrier holding companies.

This jurisdiction over Alleghany had been exercised by the Commission continuously since 1945 and of course such a result has a far-reaching effect.

Next, it set aside and enjoined an order of the Commission under Section 20 (a) of the Interstate Commerce Act, approving after a very careful consideration, a proposed issue by Alleghany of six percent preferred stock to some 130,000 preferred stockholders, preferred stock which was intended to wipeout about $18 million in accumulated dividends.

So the dividends might have ultimately be paid on the common stock.

This was in the teeth of a decision by the Interstate Commerce Commission with -- after hearing the appellees, upholding the issue against all the contention made against it as a proper security issue to be issued by a carrier holding company.

And I think Your Honors will see as you scrutinize this record that the I.C.C.had given the most careful consideration to that question.

And finally, going beyond any injunction against orders of the Interstate Commerce Commission, it undertook also to issue in the most comprehensive terms an injunction against the effectuation of the exchange of the preferred stock which have been approved by the Commission and which was in process at the time its injunction issued with the effect that all of this stock has been substantially frozen to the great hardship of the stockholders.

When the Court issued a temporary injunction followed by its interlocutory injunction, some 900,000 of the new shares that already issued, some 400,000 remained to issue.

And ultimately an application was made to Mr. Justice Harlan to stay the injunction, and he stayed it as to 900,000 shares already issued, but did not stay it as to the balance because that might have well, mooted this appeal.

But unfortunately, that stay was ineffective, substantially ineffective because the stock exchange in the light of the temporary injunction and in the light of the lawsuit had already substantially blocked trading in the securities.

So that in effect, since this injunction -- this stock has been completely frozen and the stockholders of the company have been un -- able to enjoy their stock interest.

Now, its perfectly apparent, I submit, from the -- from the order on temporary injunction, from the opinion below, from the nature of the appellees' suit, that the Court thought it was called upon to determine whether regulation by the Securities and Exchange Commission under the Investment Company Act might be preferable to a regulation under the Interstate Commerce Act, and that this injunction was in substance a choice by the Court for a regulation under the Investment Company Act.

And that was what the plaintiffs sought, they made it perfectly clear, explicitly clear that the whole basis of this suit was to enforce the Investment Company Act, and that runs right through the opinions below.

Now, that choice was in the face, not only of outstanding orders of the Interstate Commerce Commission and of the S.E.C., recognizing that the Interstate Commerce Commission had jurisdiction here but also in face of the clear congressional choice represented by an explicit exemption in the Investment Company Act, that companies subject to regulation under the Interstate Commerce Commission Act were not within the Investment Company Act.

A recognition which also obviously carried with it a recognition of the desirability of having the Interstate Commerce Commission regulates both carriers and the companies holding carriers which fall within the statute.