Alleghany Corporation v. Breswick & Company

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

DOCKET NO.: 36
DECIDED BY: Warren Court (1957-1958)
LOWER COURT:

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

Facts of the case

Question

  • Oral Argument – January 24, 1957 (Part 2)
  • Oral Argument – January 24, 1957 (Part 1)
  • 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.

    Whitney North Seymour:

    The — as — as Your Honor scrutinize the opinion below, I think it’s perfectly apparent that the changing basis upon which the Court justified its action all really relate to a kind of a preference for regulation under the Investment Company Act.

    Now, the Urgent Deficiencies Act, as I shall argue at greater length later, certainly does not contemplate the exercise of general equity jurisdiction by the special three-judge court, so as to permit the Court to range widely as a one-judge Court might do.

    And when the Court went so far as to try to use this occasion to enforce another statute and to impose restrictions on the stockholders in order to accomplish that, it certainly exceeded any power confided to it under the Urgent Deficiencies Act.

    Felix Frankfurter:

    And this is how I understand it.

    I’m not to infer from what you just said that if there is jurisdiction otherwise in a three-judge court, that the scope of executive powers is any less than that of a single equity judge.

    Whitney North Seymour:

    Well, I think that the three-judge court is grounded to an injunction which is squarely ancillary to the exercise of its powers under the Urgent Deficiencies Act which is to deal with Interstate Commerce Commission orders.

    Felix Frankfurter:

    All right.

    Whitney North Seymour:

    And not —

    Felix Frankfurter:

    I understand that it has to — has to have jurisdiction as defined by that here, the Urgent Deficiencies Act.

    But they form — they formed — since yes, it does then it can regulate the conformity and it — its powers would be clear, no different than a single judgment passed.

    Whitney North Seymour:

    Well, I think its powers are restricted to an exercise which is plainly ancillary to an exercise of its very limited power to review the Interstate Commerce Commission orders, and it can’t be as enterprising as equity courts generally can be in reaching out and doing a whole lot of other things.

    Now, we have before your Honors and obviously this makes the presentation a little more comparable briefs from three different Government agencies.

    There is a brief here from the Interstate Commerce Commission sustaining its jurisdiction which we think clearly exists.

    There is also a brief, sort of his friend to the Court, I guess, by the Department of Justice on behalf of the United States in our position to some of the contentions made by the appellant.

    And then there’s a very brief statement by the Securities and Exchange Commission which obviously enjoys and would like to continue the jurisdiction which it has succeeded in inheriting as a result of this decision below.

    But there are certain points made in the solicitor general’s brief or the Department of Justice brief which I think here of considerable moment in appraising the opinion below.

    First, I ought to say that the Department of Justice below supported the Commission substantially across the Board.

    And —

    William O. Douglas:

    Which Commission?

    The Interstate —

    Whitney North Seymour:

    The Interstate Commerce Commission.

    But in this — the Department of Justice brief here, it has suggested that it wouldn’t do any great harm to vacate the injunction granted below in view of the fact that the Securities and Exchange Commission has now considered this security in a limited way and that would avoid difficult questions presented by that injunction.

    Now, if the question is difficult, it’s difficult because just as I have argued, the court below issued an injunction to enforce the Investment Company Act which it had no power to do.I don’t think that can be disposed of by simply vacating the injunction.

    The — I’m trying to use these — these few minutes as effectively as I can if Your Honors will bear with me just a moment.

    After the — the reason the solicitor general’s brief is written after action by the S.E.C.is that in deference to the injunction granted by the court below and with no alternative, Alleghany made an application to the S.E.C.to exempt this — this proposed preferred stock issue from the application in the Investment Company Act.

    And the staff of the Commission in a report which has been on next I think to Mr. Levin’s brief as an appendix, approved the proposed exemption.

    But the Commission itself on considering the matter by vote of 4-to-1, considering the record too uncertain to take such action, denied the exemption and that matter is on appeal.

    Counsel on the other side have very much, I’m afraid in a natural desire to get the full benefit out of anything of that kind that might seem to squint in any direction, wrapped themselves in this decision of the S.E.C.to the point where they say that it held this stock issue grossly unfair.

    As we pointed out in a reply brief, it held no such thing.

    It was a determination as to — on a very complicated record on a matter which is not properly before this Court, and which shall have to be considered on appeal from that decision.

    Earl Warren:

    We’ll recess now.