Securities and Exchange Commission v. New England Electric System

PETITIONER: Securities and Exchange Commission
RESPONDENT: New England Electric System
LOCATION: Baconsfield Park

DECIDED BY: Warren Court (1965-1967)
LOWER COURT: United States Court of Appeals for the First Circuit

CITATION: 384 US 176 (1966)
ARGUED: Mar 23, 1966
DECIDED: May 16, 1966

Facts of the case


Media for Securities and Exchange Commission v. New England Electric System

Audio Transcription for Oral Argument - March 23, 1966 in Securities and Exchange Commission v. New England Electric System

Earl Warren:

Number 636, Securities and Exchange Commission, Petitioner, versus New England Electric System et al.

Mr. Loomis.

Philip A. Loomis, Jr.:

May it please the Court.

This case is the final stage of fairly extensive proceedings to determine what action if any was needed to bring the public utility system of respondent New England Public -- New England Electric System into compliance with the requirements for Section 11 of the Public Utility Holding Company Act of 1935.

Section 11 in turn is the integration and simplification provision which has been characterized by this Court and in the congressional reports as the heart of the Act.

In prior proceedings it was determined that the principle system of respondent is its electric system which meets the requirements of Section 11.

The issue in the present proceeding is whether it could also retain its gas system.

This in turn was found to depend upon whether or not within the meaning of a proviso contained in Clause A of Section 11 (b) (1) of the Act, the gas system cannot be operated as an independent system without the loss of substantial economies which can be secured by the retention of such control by such pol -- public -- such holding company of said system.

As the case comes to this Court, the question presented is whether the Court of Appeals for the First Circuit erred in rejecting the Commission's established and theretofore judicially approved interpretation of Clause A in specifically of the phrase substantial economies and in substituting it's own noble and far more lenient interpretation.

The Commission held in line with its prior cases and with decisions of the Court of Appeals for the District of Columbia, substantial economies means not a mere saving and expenses which in almost every instance will recur -- occur from combined operations but rather economies which are substantial in relation to the ability of the gas companies to operate independently in a sound and economical way without significant impairment.

The Commission concluded that respondent's evidence which rested largely on the so-called severance study made by Ebasco Services Inc. did not demonstrate that there would be such a loss of substantial economies.

Earl Warren:

Could you speak a little louder --

Philip A. Loomis, Jr.:


Earl Warren:

-- Mr. Loomis please or move closer to the microphone.

Philip A. Loomis, Jr.:


Excuse me.

The First Circuit reversed not upon the ground that the Commission's decision was not supported by a substantial evidence but rather upon the ground that substantial economies means merely economies which “In ordinary business parlance and by ordinary business standards are of substantial nature.”

We believe that this question of interpretation as to substantial economies is the only question before this Court for two principle reasons.

First, that was the question which we presented in our petition for certiorari and respondents agreed that that was the question, although, they endeavored to rephrase it.

And secondly, because the court below did not accept the respondent's argument, its primary argument to that court that the Commission's decision was wrong.

That it misconstrued the evidence.

That it didn't analyze the evidence properly.

And it didn't -- and the fact that it wasn't supported by the record.

The Court of Appeals didn't choose to decide on that ground.

It did not find that the Commission's findings were not supported by substantial evidence under the Commission's test or even under its own new test remanding the case of the Commission for determination as to that latter feature.

Consequently, I think the question of the Commission's analysis of the evidence which is discussed here and there in respondents brief is at pages 5, 7, 40 and 41 is not here.

In considering this question, some discussion of the statutory background and provisions maybe helpful, the primary --

William J. Brennan, Jr.:

If I understand that Mr. Loomis, what you're suggesting is the only issue is whether the Commission standards or that suggested by the First Circuit is --

Philip A. Loomis, Jr.:

Is the correct one.

William J. Brennan, Jr.:

-- is the proper stand.