Securities and Exchange Commission v. Louisiana Public Service Commission

PETITIONER:Securities and Exchange Commission
RESPONDENT:Louisiana Public Service Commission
LOCATION:Railroad Crossing

DOCKET NO.: 466
DECIDED BY: Warren Court (1957-1958)
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: 353 US 368 (1957)
ARGUED: Apr 30, 1957 / May 01, 1957
DECIDED: May 13, 1957

Facts of the case

Question

  • Oral Argument – April 30, 1957
  • Audio Transcription for Oral Argument – April 30, 1957 in Securities and Exchange Commission v. Louisiana Public Service Commission

    Audio Transcription for Oral Argument – May 01, 1957 in Securities and Exchange Commission v. Louisiana Public Service Commission

    Robert A. Ainsworth, Jr.:

    — Chief Justice, may it please the Court.

    On yesterday, may it please the Court, we considered and sketched briefly the Louisiana Public Service Commission, its powers, its duties and its obligations and compared them on parallel courses as far as practical with the functions of the S. E. C.

    We also discussed the right of judicial review of any order made under subsection 11 of the Public Utility Holding Company Act.

    Today, I should like to discuss the merits of the case with particular reference to the Louisiana Public Service Commission, applying the principles of Section 11, subsection 1 (a), (b) and (c) of the Act because we feel that the objectives, the obligations and duties of that Commission do not conflict with those of the S. E. C.

    That their orbits of influence need not necessarily clash, that the Congress when it enacted the Public Utility Holding Company Act and particularly when it inserted the proviso which I shall read in a moment in Section 11 (b) (1), that it intended to take care of a situation exactly such as we described on the merits of this case.

    And so it is our feeling that a reasonable interpretation of the provisions of the Act would bring the same conclusion here, we hope, that the Fifth Circuit thought was justified under the provisions of the Act.

    In other words, that to get change in circumstances, it relates to circumstances justified on the basis of circumstances would be in existence prior to the time to the Commission’s original order?

    Robert A. Ainsworth, Jr.:

    Or at the time of the Commission’s original order and subsequent thereto.

    Well, there are two things indifferent (Inaudible)

    Robert A. Ainsworth, Jr.:

    Yes, sir.

    But you do — you do (Inaudible) I take it to support the Fifth Circuit (Voice Overlap) —

    Robert A. Ainsworth, Jr.:

    I — I do but I don’t find it entirely necessary to do so.

    Yes, I do — I made the point to the Fifth Circuit and they agreed with the point which we raised, but I find that there has been and we have alleged a change of circumstances.

    You can take it on either premise if you will.

    If you feel that the circumstances at the time based on the erroneous legal interpretations as such that the S. E. C. has committed error, you could find on that basis or if you felt that the facts and circumstances which have occurred subsequent to the earlier order was such that it required a reversal.

    You could do it on either point.

    Well, there might be a different position (Inaudible) change of circumstances with subsequent change of circumstances that such an order was appealable and after I would suppose it might be doing that, was it not?

    Robert A. Ainsworth, Jr.:

    Well, that’s — we have nothing in mind except to remand on any set of circumstances.

    We don’t ask this Court to decide the case.

    The Fifth Circuit remanded the case to the S. E. C. and directed the S. E. C. to try it on the basis of the legal interpretations which it had given.

    So we — one of the points I intend to raise here today, the Louisiana Commission seeks to cooperate with the S. E. C., the Louisiana Commission seeks to work with the S. E. C. on this particular proposition.

    It feels it has some peculiar knowledge and information about this particular utility that gives it a better opportunity to regulate it.

    As a matter of fact, the S. E. C. can’t regulate it beyond whether or not it fits into a — a holding company system.

    The Louisiana —

    Earl Warren:

    Well, Mr — Mr. Ainsworth, on the question of finality of the S. E. C. order.

    How long after the time for appeal has expired, would you say that your Commission in these circumstances would have the right to — to have the case reopened?

    Robert A. Ainsworth, Jr.:

    Well, if your —

    Earl Warren:

    This is 19 months after the time for appeal —

    Robert A. Ainsworth, Jr.:

    Yes.

    Earl Warren:

    — has expired as I recall.

    Robert A. Ainsworth, Jr.:

    May it please the Court.

    The Act doesn’t put any particular limitation you — as I see it, you have to go to the provisions of the Act which allow you the petition for revocation and modification that you are able to state, the conditions upon which the order was predicated do not exist.

    Earl Warren:

    Would —

    Robert A. Ainsworth, Jr.:

    Now, —

    Earl Warren:

    — that lead you to the conclusion that there is no finality to this order of the S. E. C.?

    Robert A. Ainsworth, Jr.:

    No — no, Mr. Chief Justice.

    The 11 (b) orders must be carried out within one year after they are — are issued by the S. E. C., unless the S. E. C. extends them and then they may only extend them for one year and we don’t have a proposition where for an indefinite period the — the utility is allowed to fail to comply, it must comply within that particular time limit.

    Now, we have petitioned for revocation or modification using the words of the statute and we think allegations which — which fit within the statute and ask for a revocation or modification before the 11 (b) order has actually gone into effect.

    Earl Warren:

    Well, does the — does the Section that you rely on say that you may petition?

    Robert A. Ainsworth, Jr.:

    Well, may I —

    Earl Warren:

    Or a modification?

    Robert A. Ainsworth, Jr.:

    May I read it, sir?

    It’s (Voice Overlap) —

    Earl Warren:

    Yes, (Voice Overlap)

    The language as you —

    Robert A. Ainsworth, Jr.:

    The Section follows — it’s the Section 11 (b) (1) — it’s Section 11 (b) as it is indented in the —

    Earl Warren:

    Yes.

    Robert A. Ainsworth, Jr.:

    — copy of the Act which I have.

    It’s actually the last two sentences of Section 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.”

    Followed immediately behind that is the sentence, “Any order made under this subsection shall be subject to — to judicial review as provided in Section 24.”

    Earl Warren:

    Well now, do you find definite authority in that Section for saying that anybody who has an interest in the matter may — may apply to the Commission for an order to revoke or modify its original order regardless of the time that — for appeal?

    Robert A. Ainsworth, Jr.:

    Well, Mr. Chief Justice, I won’t say anybody because I am not — I don’t know whether it be proper to say so.

    I will say that a State Commission under the peculiar circumstances here, where we were asked to submit an offer of proof, where we submitted an elaborate offer of proof which we think would prove the situation, where we allege that the — that there are erroneous legal interpretations which supported the Commission’s later order, that under the circumstances here you must determine whether you think there has been an abuse of the Commission’s discretion.

    So I say that I would rather pitch my case on the facts of my case rather than to make the broad generality that any person that come in.

    I can only apply it to Louisiana Commission, the state regulatory commission which has come in under the peculiar circumstances here and submitted all of its information, had a very lengthy argument before the S. E. C. in consideration of those premises.

    And based again on what the Fifth Circuit held to be and which we think in reason and in logic would support the view that they were erroneous legal interpretations, it remanded it for consideration consistent with those legal interpretations.

    I don’t know whether I answered your question or not, sir, but that’s — that’s the best (Inaudible) that I can deal with it.

    Earl Warren:

    Well, it — in all events it’s your answer but it — it seems to me that you put a burden on the S. E. C. because they were responsive enough to your telegram to say, well, on what grounds do you — do you believe that this order should — should be modified?

    It seems to me that that — that that isn’t the same as — as the Commission initiating a request to your Commission to go out and investigate this thing and —

    Robert A. Ainsworth, Jr.:

    Well, I admit that.

    Earl Warren:

    — and ask them to do something about it.

    Robert A. Ainsworth, Jr.:

    Well, I must concede that Your Honor is right about that.

    The S. E. C. did not initiate this petition, we did initiate it.

    The S. E. C. gave sufficient deference to the Louisiana Commission and to say, what is the basis upon which you would care to come in here —

    Earl Warren:

    Yes.

    I —

    Robert A. Ainsworth, Jr.:

    I did —

    Earl Warren:

    — think that’s —

    Robert A. Ainsworth, Jr.:

    — did so.

    Earl Warren:

    — about all we (Voice Overlap) —

    Robert A. Ainsworth, Jr.:

    No, I don’t attempt to say that the S. E. C. initiated the investigation because I assume that they were content with their order, they still are with there March 20th, 1953 order.

    But I say that you must examine the facts of this case and see whether or not you think there has been an abuse of discretion particularly where we hold with the Fifth Circuit that the conclusions were based on — on erroneous legal interpretations.

    And if you would apply those erroneous legal interpretations, we say you couldn’t make out a case under the provisions of this Act because the Commission has so narrowly construed the Clause (a) provisions of the subsection that it would be impossible to do so.

    If I may, I would like to develop briefly the offer of proof.Before doing so may I point out that the proviso which I promised I would read that and I haven’t done so and I would like just to sketch the proviso for a moment.

    Section —

    Earl Warren:

    Where is that, Mr. —

    Robert A. Ainsworth, Jr.:

    That’s in the pamphlet, part of the Act which the S. E. C. gave you in the blue bound copy.

    It’s the first document, I believe.

    Yes, Mr. Meeker points out that it is and the first — it’s the first —

    Earl Warren:

    Oh — oh, yes.

    Robert A. Ainsworth, Jr.:

    — pamphlet here.

    Earl Warren:

    Yes.

    Robert A. Ainsworth, Jr.:

    It’s on page 20 of that pamphlet.

    Section 11 (b), I will paraphrase or not repeat all of the words of the first subsection 1, but when I get the proviso, I’ll read every word that it shall be the duty of the Commission to require by order that each registered holding company shall take such action as the Commission shall find necessary to limit its operations to a single integrated public utility system.”

    Now, provided — I have skipped several words there, but I don’t think they’re pertinent particularly, provided, however, that the Commission shall permit a registered holding company to continue to control one or more additional integrated public utility systems if after notice and opportunity to — for a hearing it finds that (a), each of such additional systems cannot be operated as an independent system without the loss of substantial economies which can be secured by the retention of control by such holding company of such system.

    And then the (b) and (c) provisions, I don’t believe are — are at issue here but they are interesting to see whether or not we are — we fit with them and (b) states that all of such additional systems are located in one state or in an adjoining states or in a contiguous foreign country.

    The Louisiana Power System is entirely located within the State of Louisiana.

    The (c) provision states that the contingent combination of such systems under the control of the holding company, I skipped a few words, is not so large as to impair the advantages of localized management, efficient operation or the effectiveness of regulation.

    Now, may it please the Court, the proviso in the Act somewhat softened the impact of the directive to the S. E. C. which Congress had passed in this particular Act and there was a reason for that, there had been a disagreement.

    The legislative history shows there had been a disagreement between the Senate and the House as to what the provisions of the Act should be.

    Robert A. Ainsworth, Jr.:

    The Senate passed a version.

    The House passed a version with amendments.

    The amendments were not concurred in by the Senate and it was necessary that the matter go to conference.

    And after the conference, there was an attempt made in the House to adopt the Conference Report which in effect would adopt the Senate bill which did not have this proviso.

    That — the House rejected the agreement to — to the Conference Report and another Conference Report was prepared which contains the provisions which are now in the Act and which we are adopted.

    Now, the Conference Report of the House, which I find on page 20 of the Louisiana Power’s brief and I will borrow that paragraph from their brief makes this significant statement, “The conference substitute meets the House’s desire to provide for a further flexibility by the statement of additional definite and concrete circumstances under which exception should be made to the form of one integrated system.”

    I ask Your Honors to note the word “flexibility” and that was what the proviso was designed to do and that’s what we think it did do.

    “Definite exceptions not only provide a satisfactory constitutional standard but also an effective standard for the guidance of both the Securities and Exchange Commission and those holding companies which wished voluntary — voluntarily to comply with congressional policy.”

    It’s the end of the quotation.

    So we — we think that the proviso as a matter of fact one of the Circuit Judges said, I think, perhaps on a dissenting opinion that the Act would not have passed had the proviso not been inserted in it.

    And I think we may imply that from the legislative history because of the failure of the first Conference Report, they have been concurred in by the House of Representatives.

    So I think we may fairly say that this Public Utility Holding Company Act would not have passed had this proviso not been inserted in it.

    Now, in —

    Earl Warren:

    Well, Mr. Ainsworth, is it subject also to — might it be subject to the interpretation that Congress says, “Well now, even after making an order which has become final, the Commission may, in its discretion by order, revoke or modify that order but if it does, anyone who is injured by that action on its part shall have the right of judicial review.”

    Robert A. Ainsworth, Jr.:

    It’s susceptible to that construction and I think it is (Voice Overlap) —

    Earl Warren:

    Well, is that — is that an unreasonable construction?

    Robert A. Ainsworth, Jr.:

    No, I don’t think it’s unreasonable but I again say that I’m not seeking that interpretation here.

    I ask only — and I’m not trying to be illogical about it, I ask only that — that this Court hold under these particular facts and circumstances and this particular State Commission coming here whether it is entitled any greater consideration or not is something that I am not prepared to say.

    But I have in sketching the background of the Act upon yesterday, attempted to show Your Honors that Congress in passing the Act felt that — that the word of the State Commission under certain circumstances was very vital.

    In fact, they wouldn’t give approval of certain types of transactions without State Commission approval.

    Now, that is purely an analogy, I agree and I’m just trying to — to bring it by analogy but for any person, Mr. Chief Justice, I wouldn’t — I say it’s susceptible to that construction but I don’t ask for it here, I ask only that you hold that this Commission can come in and do so.

    Now, the offer of proof which the Louisiana Commission filed stated that it had exercised jurisdiction over the retail electric and gas rates of this company of — for residential, commercial and so forth uses that the Commission requires Louisiana Power to file annual reports that it had fixed the electric rate base of Louisiana Power back in 1946, had prescribed its allowable rate of return, that its electric — at Louisiana Power’s electric accounts are classified on the uniform systems of accounts as or the gas accounts.

    And then in the offer of proof, Louisiana Commission used the language of the (a), (b), (c) provisions of the proviso which I have just read and alleged that the facts would say — would show in the offer of proof, fitted into those particular provisions.

    And it said that there is no law of the State of Louisiana which prohibits the ownership by utility of both an electric and gas system.

    That Louisiana Power has the express approval of the Louisiana Commission to have both an electric and gas system.

    That the public interest would best be served by the continued operation of Louisiana Power of both in electric and gas system and it supported that by a letter from the Governor of the State and by letters from the officials of 28 of the 30 towns and cities which this company serves and 14 of the 15 parishes or counties which are involved in this particular system, which are covered and embraced in this particular system.

    It further supported its offer of proof by a separation study, a detail separation study which you will find in the record at pages — beginning at page 16.

    And it showed that the total additional cost to consumers and customers of Louisiana Power would be $957,000 a year of which $684,000 would be lost to the electric system and $272,000 would be lost to the gas system.

    The separation study was — was made by taking the operations of this company for 1954 and extracting from the electric system of accounts all charges that had heretofore the — extracting from the books, I’d better say.

    Those charges which had heretofore been made for the gas system and set — setting up and projecting two separate corporations just as if they had operated separately on that particular year.

    Robert A. Ainsworth, Jr.:

    And it was natural that there should be and the — the loss of $957,000 came from the fact that you were going to have two overhead cost where you had one before.

    And because of the fact that this particular company’s gas, customers are largely also its electric customers there’s going to be a duplication of activity, duplication of billing, of reading the meters, of — duplication of administrative officers and so forth.

    And the total that’s shown in the record here, the exact amount is actually computed by the Louisiana Commission’s own staff and it comes out to what Louisiana Commission considered a very large sum of money which would be lost to customers of Louisiana Power by divestiture of the gas system in a separation of the gas system from the electric system.

    Earl Warren:

    Mr. Ainsworth, is there anything in the record which would indicate why the utility itself did not take an appeal or was not the moving party in this situation?

    Robert A. Ainsworth, Jr.:

    No, sir.

    I — and I — I’m not prepared to say.

    I don’t — there is nothing in the record on that subject.

    Now, another thing that was brought in the offer of proof was that under the peculiar facts and circumstances and based somewhat upon the climatic conditions of the State of Louisiana that been — that the gas and electric systems tended to compliment each other, that in the summer you had a higher use of electricity, in the winter you had a higher use of gas.

    And there’s an exhibit in this record that shows that by combining the two on six months basis beginning in November through April and from May through October that they balanced out the total revenues from the two systems, averaged out about 50% each time.

    So that the company, by virtue of having the two systems, tended to have a complete operation from the very nature of things inherent in the operation of the company.

    Louisiana Commission said that it — in it’s offer of proof that it had — had long experience with this utility, that it believed it to be an efficient operation, that it had found its regulation in Louisiana Power to be most effective that that company had never had been given a rate increase.

    On the other hand, it had given electric rate reductions that the only gas increase that had ever occurred was one equal to the amount of the increase in the wholesale cost of gas to this particular company.

    And so, on the basis and on the predicate of — and I have skimmed through it only very briefly, they held the Louisiana Commission felt that the facts justified a holding that giving a reasonable interpretation to the Section 11 (b) (1), particular Clause (a), that the loss of economies was a substantial one, the Courts have held that substantial means important economies.

    That’s the Circuit — the Second Circuit held that, the Fifth Circuit held it in our own case.

    We say substantial is a relative and an elastic term.

    The S. E. C. interprets substantial to mean that the losses must be so great that the severed system, here the gas system, could not continue to operate independently, economically.

    Now, we say that that conclusion is simply not justified by the language of the statute and that is an erroneous interpretation and it — it confines this proviso so tight that it would be practically impossible to fit within it.

    In other words, that it has the effect of nullifying the proviso.

    We also say that the loss of substantial economies should relate not only to the severed system, the gas system, but also to the principal system, the electric system, that it would be blinding one’s eyes to reality as the brief of the Louisiana Commission says when it — which was submitted to the S. E. C.

    You did not take the total loss into consideration.

    But aren’t all of those arguments, matters which had you appeared in the original proceedings you would have addressed to the Commission.

    And what — I haven’t heard anything that you said that supports this allegation in your supplemental petition where you allege that since the — subsequent to the issuance of the order herein there have occurred substantial and important changes in the condition and so forth.

    Robert A. Ainsworth, Jr.:

    Well, actually, may it please the Court, there are a number of things shown in the offer of proof whether you consider them substantial changes in circumstances.

    That’s why a moment ago when you asked me the question, I didn’t want to confine it only to that, I also feel that we have to go back to the conditions that existed at the time the original order was issued which were based upon erroneous legal interpretations.

    But to answer your question more directly, the order was issued in 1953, the early order, the separation study was based on facts and circumstances in 1954.

    Since the order of 1953 had been issued, it had been possible to find out that the — the severed or gas system would have to pay a larger amount for a debt service because Louisiana Power had actually gone into the market and sought that financing for the company that was to be set up to take over the gas system.

    That in addition to that the Louisiana Commission had the benefit of the studies of the operations of the Arkansas Power & Light Company and the Mississippi Power & Light Company which has severed their gas systems to show what the increase cost had been to those companies or no longer being able to allocate part of their overhead expenses to gas system.

    And the — the running of time was necessary in order to have that information before the Commission, it could not have been obtained, it could not have been submitted to the S. E. C. at the time because those systems had only then been severed and it — the information wasn’t then available.

    So we put it on two premises as the Fifth Circuit said that it could — that the Court could examine the conditions that truly prevailed at the time the original order was made.

    We ask Your Honors to consider these legal interpretations which the S. E. C. has given, which we respectfully suggest are erroneous.

    Robert A. Ainsworth, Jr.:

    We ask you also to examine the offer of proof and decide whether or not in your exercise of judicial authority and discretion, whether or not the facts and circumstances which were shown subsequent to the time of the March 20, 1953 order justify the allegation which you find in the supplemental petition.

    That’s our case, we stand or fall on it, if Your Honors please.

    And we are anxious that the Louisiana Commission to have the opportunity of cooperating and working with the S. E. C., but we can see no compensating advantages which accrue from the separation of this gas system in Louisiana, it’s contrary to the state policy and we feel that if haven’t — if — if given the opportunity on a remand to go back to the S. E. C., we would hope to persuade our brothers there.

    Thank you.

    Earl Warren:

    Mr. Monroe?

    J. Raburn Monroe:

    Yes, Your Honor.

    May it please the Court.

    The issues in this case are principally between two — the two commissions, the Louisiana Commission and the Securities and Exchange Commission.

    My client file — finds itself very much in the position of a patient being operated on by two doctors, each with a different diagnosis.

    So I would like to say a few words from the way point of view of the patient.

    First, to clear up a question that was raised —

    Earl Warren:

    If the patient — why didn’t the patient object an appeal from the first operation?

    J. Raburn Monroe:

    If Your Honor please.

    The patient appeared at the original hearing in 1953 and sincerely believing that the gas and electric systems could not be operated separately without the loss of substantial economies.

    Introduced documentary and oral testimony which purported to show savings of approximately $450,000, I mean increased cost of that amount in the electric properties in the separate operation and about $250,000 in the gas properties.

    The S. E. C. held that that was not a showing of a sufficient — of a loss of substantial economies sufficient to make the conditions.

    We felt at — at that time at — on the basis of the record and without the official nonpartisan findings of a Commission or with that or — and also there not having been a complete separation study made that our chances on appeal were not very good.

    And that’s the reason we did not appeal.

    But we sincerely believe that we are right in the position that we took and we felt perhaps we had not made a sufficiently good record.

    William J. Brennan, Jr.:

    Did you make any effort at the time to have the Louisiana Commission come in?

    J. Raburn Monroe:

    No, we did not, Your Honor.

    We were before the Securities and Exchange Commission and not before the Louisiana Commission.

    Now, at that time there was no outstanding order which the Louisiana Commission later entered.

    In June the 16th, 1953, the Louisiana Commission entered a general order that no disposition of properties could be made by any utility under its jurisdiction without its permission and if — if that general order had been in effect we probably would’ve sought to get them to come in and state their position at that time but that order was only entered later.

    Charles E. Whittaker:

    Mr. Monroe, was not the Securities and Exchange Commission the proper place to make this factual showing that you’ve just related?

    J. Raburn Monroe:

    Yes, we did — we did endeavor —

    Charles E. Whittaker:

    And —

    J. Raburn Monroe:

    — to make that factual.

    Charles E. Whittaker:

    — and they had jurisdiction to determine the controversy, did they not?

    J. Raburn Monroe:

    Oh, yes.

    Charles E. Whittaker:

    And they did determine it, did they not?

    J. Raburn Monroe:

    Oh, yes.

    Charles E. Whittaker:

    You had a certain time within which to appeal, did you not?

    J. Raburn Monroe:

    That’s right.

    Charles E. Whittaker:

    No appeal was taken.

    J. Raburn Monroe:

    That’s correct.

    Charles E. Whittaker:

    Now, then is it your argument that the Louisiana Commission, a year-and-a-half later can come to this proceeding on a motion to reopen and without showing change of condition and limit itself to those changes of condition, have a rehearing of the matter heard and determined by the Commission a year-and-a-half before?

    J. Raburn Monroe:

    Mr. Justice Whittaker, that is a — an argument of the Commission — of the Louisiana Commission.

    We have simply confined ourselves to an argument of the substantive questions here but because we — we failed to appeal, however, we — we do believe that until the Act that the order of the Commission is carried out.

    In other words, until the — the death sentence is executed then a body such as the Louisiana Commission, which is primarily concerned with the regulation of the rights of Louisiana, should be allowed to come in and to show, one, that the — that the order of the Commission was based on erroneous interpretations of law.

    Charles E. Whittaker:

    In other words, that it was wrong?

    J. Raburn Monroe:

    Yes.

    That it was wrong —

    Charles E. Whittaker:

    Even though findings?

    J. Raburn Monroe:

    That it — that the — the interpretations of law were wrong and all — and that — that they were so wrong that they within themselves constitute a change of convictions.

    And I say to Your Honor also the fact that — that the Public Service Commission and the — the governing bodies of all the — of all but one of the parishes in which we operate and the — and all the municipalities, all of them gave expression that it was against the public interest to sever these properties is a new fact which should be taken into consideration when entering this severance order.

    Felix Frankfurter:

    Your claim — your claim is wholly derivative.

    You impress whatever claim you press merely if the Louisiana Commission has standards.

    J. Raburn Monroe:

    That’s right.

    We — we are — we are really here just arguing the substantive question (Voice Overlap) —

    Felix Frankfurter:

    That was not about that can bring you in if you can come in.

    J. Raburn Monroe:

    That is right.

    I’ve been brought here.

    [Laughs]

    Earl Warren:

    Well, what are the conditions that are so changed now as to make you think that these findings of the Commission, the S. E. C. Commission are so erroneous that this Court should take judicial notice of it and — and permit the reopening, when at the time your — your minds were charged with it and you had just had the hearing, you were of the opinion that they — they were so close to being right that you didn’t think you had any chance of appeal?

    J. Raburn Monroe:

    Well, as — let me answer you in two stages.

    First; we don’t think that you are limited to showing a change of conditions, as the statue says you simply are showing that the conditions upon which said order do not exist.

    And we say that the — one of the conditions on which the order were issued were erroneous interpretations of a meaning of — of proviso (a) — Section 11 (a) (Voice Overlap) —

    Earl Warren:

    It seems to me that — it seems to me that makes the question more pertinent even and as I stated if — if they were so near right at the time they were made that you felt that there was no chance of you — of you getting a review of the case.

    Why do you now think that those —

    J. Raburn Monroe:

    Well —

    Earl Warren:

    — same findings based —

    J. Raburn Monroe:

    Well —

    Earl Warren:

    — upon those same conditions are so wrong that this Court should take judicial notice of it and upset the whole procedure and — and go into it again?

    J. Raburn Monroe:

    All right.

    I’d like to answer that question, Mr. Chief Justice.

    At the time in 1953, in examining the — the decisions of the Courts of Appeal, we found certain dicta from — in at least two cases which would indicate that the interpretations of the S. E. C. might be upheld.

    They were the Engineers Public Service case and the Philadelphia case.

    Since that time, you have another decision directly in point by the Fifth Circuit court below and so —

    William O. Douglas:

    In this case?

    J. Raburn Monroe:

    In this case it, directly on these points and so I say there is a different situation here.

    When we were considering appeal, we were considering the state of the law and then — and we were also considering state of our record.

    Now, you asked about the changed conditions, as I said, I think the fact that an examination into whether the public interest would be served by this and — and that’s one of the standards by which the Act should be interpreted.

    That has been more or less determined by a — a careful examination of it by the Louisiana Public Service and the impartial body and also by expressions from the — from the governing authorities of the parishes and cities where this gas system operates and — does that answer your question, Mr. Chief Justice?

    Earl Warren:

    Well, it’s — it’s your answer that’s —

    J. Raburn Monroe:

    [Laughter]

    Well, as I said, our point of view is one that we — we do not have to show changed conditions, that number two that there are — there are changes.

    Felix Frankfurter:

    You don’t have to, meaning you can’t if you were here alone without the (Voice Overlap) —

    J. Raburn Monroe:

    No, no —

    Felix Frankfurter:

    — you wouldn’t be here.

    J. Raburn Monroe:

    I should not be making this argument —

    Felix Frankfurter:

    All right.

    J. Raburn Monroe:

    — Mr. —

    Felix Frankfurter:

    That’s the point.

    J. Raburn Monroe:

    — to the Chief Justice.

    I didn’t intend to bring it.

    [Laughs] But getting back to — to Louisiana, I want to point out that Louisiana Power & Light Company is an operating company and it’s always been an operating company and it operates both the gas and electric systems entirely within the State of Louisiana.

    Mr. Justice Douglas asked whether it was registered, yesterday.

    It’s not registered because it is not a holding company but it is a subsidiary of a registered holding company and as such is subject to the Act.

    Now, and I want to point out too that it — there is no problem here involved of the use of a holding company device to permit the joint operation of gas and electric properties where it’s against the policy of the State.

    J. Raburn Monroe:

    Now, that was one of the considerations in writing the Holding Company Act.

    Here, always that Louisiana Power & Light has operated both gas and electric properties so there’s no — and in Louisiana, the other comparable electric companies who were not subject to the Holding Company Act also operate gas and the Commission has had experience with this joint operation.

    Now, we submit, if Your Honor please, that on the state of the record in this case, it must be assumed that if this separation is or complied with that there will be a loss of $957,000, a minimum of that — a year.

    That there will be a additional cost to a separated gas properties in the form of a higher interest rate, it was estimated by the Commission at approximately $28,000 a year.

    Also there will be loss, the other advantages of combined operation.

    It must also be assumed that there are no compensating advantages of any sort in the natural course of events, this additional cost of operation is bound to be born by the — the rate payers of Louisiana’s gas customers and electric customers.

    Now, this seems to be admittedly a highly undesirable result and therefore in approaching the interpretation of Section 11 (b) (1) (a), we ask ourselves does that — do those words require this result?

    Now, those words which have been quoted by — by counsel for the Commission are these.

    The — in order to retain the system this is the first requirement, each such additional system cannot be operated as an independent system without the loss of substantial economies which can be secured by the retention of control by such holding company of such system.

    Now, the S. E. C. says that requires this result because you can only take into account the cost to the gas system.

    William O. Douglas:

    The additional system?

    J. Raburn Monroe:

    Yes, to the system that you — you’re severing, can’t take into the question of fact that there’s a great loss of economy to the — the remaining system, the electric system.

    I don’t see that anywhere in this — in the language because the language says the loss of substantial economies which can be secured by retention.

    Now, it also — S. E. C. also says, the loss to this system to be severed must be so great that the severed system is incapable of economic operation.

    Well, that — that is nowhere in the statute and that is reading the exception into — reading it practically out of the statute.

    We submit that in the — from the ordinary meaning of the words, those interpretations are not justified.

    We also point out that —

    William O. Douglas:

    You — you would read (a) as — as if it read each of such additional systems cannot be operated as an independent system without the loss of substantial economies to the holding company system?

    J. Raburn Monroe:

    Loss of substantial economies of any sort.

    William O. Douglas:

    To the holding company system?

    J. Raburn Monroe:

    Yes.

    Well, that’s right.

    This can be secured.

    William O. Douglas:

    And the S. E. C. reached at this — each of such additional systems cannot be operated as an independent system without the loss of substantial economies to the additional system.

    J. Raburn Monroe:

    That’s one of their interpretations but I — in order to — in order to expressly give the meaning that S. E. C. wants to give to this language, you’ll have to add 15 words — 15 words to this Section.

    There’s — and this Section only has 34.

    You have to add the words loss of substantial economies “to such independent systems so great as to make them incapable of independent economic operation.”

    All those words would have to be added for Congress to expressly state that the interpretations of S. E. C. in regard.

    Now, we point out that the express intent of Congress in — is in accordance with the ordinary meaning of these words, 70 times in the — in the statute of the public interest and for the protection of consumers and investors is repeated throughout the statute.

    And we submit that measuring the facts of this case against the public interest and the interest of consumers is very clear that — that in — the interpretation should be in accordance with the actual words of the statute.

    J. Raburn Monroe:

    Also, in Section 1 (c) of the Act, it — there it — it is stated as the declared purpose of the Act in accordance with which all the section should be interpreted that this Act is intended to — to cure certain enumerated evils and if you — we have printed Section 1 (b) where those evils are enumerated in — in the appendix to our brief and after careful consideration of them we’ll indicate that there’s — there are none of those involved here at all.

    In the reply brief filed yesterday, the S. E. C. suggested that — that the Section 11 (b) (4) — 11 (b) (4) might be here involved.

    Now, 11 (b) (4) is one of the evils that is when the growth and extension of holding companies bears no relation to economy of management and operation or the integration of coordinated — coordination of related progress.

    There is no question here involved of growth or extension.

    We have had these gas properties since 1927.

    There’s — there is no question here about integration or coordination.

    The gas properties are entirely within the electric territory which we said, so that — that there’s no evil in there that would be cured by this order.

    William O. Douglas:

    What — what do you say to Senator Wheeler’s —

    J. Raburn Monroe:

    If Your Honor —

    William O. Douglas:

    — comment on this —

    J. Raburn Monroe:

    Yes.

    William O. Douglas:

    — proviso?

    J. Raburn Monroe:

    Yes, if Your Honor please.

    The history of the enactment of the Act shows that Senator Wheeler’s statement was — stands alone of anything to support this interpretation by the S. E. C.

    It was made two days after the crucial vote in the House.

    The House vote — the crucial vote in the House came on —

    William O. Douglas:

    It was on a — a report of the — of the Congress —

    J. Raburn Monroe:

    Yes.

    William O. Douglas:

    — wasn’t it, to the Senate?

    J. Raburn Monroe:

    Not — No.

    His — his statement was on the Senate floor after the Senate had passed — passed it and the Senate had passed the bill earlier that day without objection, had passed the — agreed to the Conference Report.

    But two days before — two days before, the House on a motion to inspect the — the conferees, to agree to the compromise had — had voted.

    That was the crucial thing, the House agreement to the — so I say that it has no bearing on the interpretation of what this compromise language had meant as far as the House — what the House was referring to.

    William O. Douglas:

    And I don’t suppose there’s anyone more important than this legislation that Senator Wheeler unless it was Mr. Rabu?

    J. Raburn Monroe:

    It — well, if Your Honor please.

    Senator Wheeler was a strong advocate of the Senate version.

    He — he was not an impartial man in this prize at all.

    He was — he was advocating no exceptions whatsoever to the one integrated system and it be rather natural that he would intend to interpret it in the narrowest sense.

    The compromise was known as the (Inaudible) compromise and — and that — thank you very much.

    Earl Warren:

    Mr. Meeker.

    Thomas G. Meeker:

    Mr. Chief Justice, may it please the Court.

    With respect to Clause (a) which has been discussed here this morning again, the Commission rests on the interpretation found on page 40 in the Conference Report —

    William O. Douglas:

    40 of your brief?

    Thomas G. Meeker:

    Page 40 of our brief, Mr. Justice Douglas, on the reports of the Conference Committee found right at the top of page 40.

    We believe that is the substantial legislative history for the interpretation which we have given to the meaning of Clause (a).

    The respondents have indicated that it cost money to raise money and with that we agree cost money to raise money.

    In 1953, they didn’t bring any evidence in as to the cost of raising money and — and introduce it before the Commission then and we think it’s too late for them to raise that question now.

    I think it’s interesting to note also from the record, page 106, that one commission testified in this 1953 proceeding.

    A representative of the New Orleans City Commission, Public Utilities Commission, was testified in our 1953 proceeding apparently they had an opportunity to get prepared to appear in that proceeding and did actually so appear and testified, at least a representative of that Commission testified in the support of the company’s position in that proceeding.

    Felix Frankfurter:

    In the history of the death sentence, Mr. Meeker, has there been any — what has been the experience as to revision of the terms of the sentence before it actually was carried out into execution in time?

    Thomas G. Meeker:

    In terms of modification of —

    Felix Frankfurter:

    Yes.

    Thomas G. Meeker:

    — a prior order —

    Felix Frankfurter:

    Yes.

    Thomas G. Meeker:

    — Mr. Justice Frankfurter, there are found in — in page, I believe it’s 16 of our brief.

    There — I think I have the wrong — on page 18 of our brief, Footnote 16, we have collected the cases in which this problem has been before the Commission —

    Felix Frankfurter:

    And what — what is the tale in the sentences as to —

    Thomas G. Meeker:

    I didn’t —

    Felix Frankfurter:

    What is — what does it — what does it amount to?

    What’s the experience?

    Thomas G. Meeker:

    The —

    Felix Frankfurter:

    It summarizes?

    Thomas G. Meeker:

    The Commission has in the past modified on application in the showing of change of conditions of prior order.

    Felix Frankfurter:

    And it — on its own sua sponte and its own organizations?

    Thomas G. Meeker:

    No.

    Generally on the application —

    Felix Frankfurter:

    Generally?

    Well, I mean at any — at any —

    Thomas G. Meeker:

    Well, I would say I — I’m not absolutely certain but its my — my best judgment that it’s been almost exclusively on the basis of some application made to the Commission and not on its —

    Felix Frankfurter:

    It’s always —

    Thomas G. Meeker:

    — own motion.

    Felix Frankfurter:

    And always by the potential victims or the prospective victims?

    Thomas G. Meeker:

    I think that’s a fair statement.

    Felix Frankfurter:

    And the time within which those applications were made, have you got any — laid eyes on that?

    Thomas G. Meeker:

    I would like to submit that to Your Honor, I don’t have it in mind at the moment.

    Felix Frankfurter:

    (Inaudible) or at easy would it be too — too much of a burden on the Commission because —

    Thomas G. Meeker:

    Not at all, Your Honor.

    I will submit a memorandum promptly.

    Yesterday, Mr. Chief Justice, you inquired as to the nature of the prior proceedings and I would just like to point out at this time that it was in February of 1940 that the Commission instituted the 11 (b) (1) proceedings against Electric Bond and Share as has been mentioned by respondents counsel here today, including Louisiana which then was a subsidiary of Electric Power & Light Corporation which at that time was a subholding company of Electric Bond and Share.

    And its interesting to note also that Electric Power & Light became registered a day after this Court’s decision in 1938 which sustained the constitutionality of the registration provisions of the Public Utility Holding Company Act.

    Felix Frankfurter:

    May I ask you this, what do you say to the suggestion that the passage of time and the actual experience of what was decreed in the order of — of dissolution or the extermination of chain, the actual experience?

    Nothing happened except but that which was abstractly assumed turned out not to be so as a matter of experience.

    I’m thinking out to the exact words running through my head.

    This Court has sustained the constitutionality of rates, the famous (Inaudible) case said, “Well, we sustained it on what we know now to get experience on that come in and we’ll change it.”

    Just in other words, experience versus forecast, is there anything like that in this case?

    Thomas G. Meeker:

    Well, I don’t believe that there is in this case.

    I don’t believe there’s any indication that there’s been a change of any conditions or circumstances —

    Felix Frankfurter:

    Well —

    Thomas G. Meeker:

    — which would —

    Felix Frankfurter:

    — I think it was — made from some specific — gave us some specific data.

    Thomas G. Meeker:

    Not of the data which Mr. Ainsworth gave this Court or as — or the Commission has submitted in the offer of proof found at the (Inaudible) of the record.

    We contend shows a change of condition which would be the basis for the modification of — of the prior order.

    Felix Frankfurter:

    Well, before the qualification, was there change of condition in the sense that now was established that which previously had to be nearly speculated or guessed at or an expert judgment?

    Thomas G. Meeker:

    Oh, I think would have —

    Felix Frankfurter:

    What if they — what if in a well-known phrase of an earlier opinion in this Court, it’s an appeal from judgment by speculation to judgment by experience, anything like that?

    Thomas G. Meeker:

    I think what it amounts to, Mr. Justice Frankfurter, is this.

    There’s some additional evidence which they should have produced at the early hearing.

    In other —

    Felix Frankfurter:

    What if they should?

    They are two different from my point of view.

    Felix Frankfurter:

    They are two totally different parties.

    The Commission is one thing and the — and the utility is another as the counsel for the — the Committee for the utility indicated.

    Thomas G. Meeker:

    But —

    Felix Frankfurter:

    He couldn’t be here except on the tail — he is a tail to the Commission’s kite, if there is a kite.

    Thomas G. Meeker:

    But the Commission —

    Felix Frankfurter:

    Rather an unfortunate phrase in connection with utility matters.

    Thomas G. Meeker:

    The Commission had notice of the hearing at which —

    Felix Frankfurter:

    Well, I’m —

    Thomas G. Meeker:

    — it did not appear.

    Felix Frankfurter:

    I’m not — I’m not suggesting they foreclose.

    All I’m saying they, in my mind has to be differentiated and I can well conceive that the Commission have a standing that the utility wouldn’t.

    Thomas G. Meeker:

    Well, it’s certainly as obvious from reading the decision of the Fifth Circuit that that Court agreed with the Commission that there wasn’t any showing of change of conditions or else there wouldn’t — that Court wouldn’t have gone to the trouble of construing the sentence as it did.

    Felix Frankfurter:

    From your point of view it wouldn’t matter if it — if there were change of conditions, well you think the time is for — time therefore close, they shouldn’t have come in.

    Thomas G. Meeker:

    Well, we — we believe they have to — both, we believe they have to show a change of condition —

    Felix Frankfurter:

    Yes.

    Thomas G. Meeker:

    — but in any event we believe it’s much too late (Voice Overlap) —

    Felix Frankfurter:

    But the other way around — the other way around.

    If it isn’t too late then one — one has one attitude until the finding changes position.

    If therefore closed by time, I don’t care about changes.

    Thomas G. Meeker:

    Well, may it please the Court.

    It is the position of the Commission that this is a case where the Court’s interest in finality of litigation need not yield to any other interest of justice.

    Felix Frankfurter:

    I understand that initiative.