In a suit by appellees, who are minority common stockholders of Alleghany Corporation (an investment company), a three-judge District Court set aside orders of the Interstate Commerce Commission granting Alleghany the status of a non-carrier to be "considered as a carrier" under 5 (2) and 5 (3) of the Interstate Commerce Act and approving Alleghany's issuance of new preferred stock convertible into common stock. It also enjoined Alleghany from issuing the new preferred stock. The Commission's orders were based on its holding that Alleghany, being in control of the New York Central Railroad, needed Commission approval under 5 (2) to merge one subsidiary of the New York Central into another. Held:
[ Footnote * ] Together with No. 82, Baker, Weeks & Co. et al. v. Breswick & Co. et al., and No. 114, Interstate Commerce Commission v. Breswick & Co. et al., also on appeals from the same court.
Whitney North Seymour argued the cause for the Alleghany Corporation, appellant in No. 36. With him on the brief were David Hartfield, Jr., Edward K. Wheeler, Robert G. Seaks and Morton Moskin.
Harold H. Levin argued the cause for Gruss et al., appellants in No. 36. With him on the brief were Joseph M. Proskauer and Allen L. Feinstein. [353 U.S. 151, 153]
Alexander Kahan argued the cause for Neuwirth, appellant in No. 36. With him on the brief was Arthur W. Lichtenstein.
Robert W. Ginnane argued the cause for the Interstate Commerce Commission, appellant in No. 114. With him on the brief was B. Franklin Taylor, Jr.
George Brussel, Jr. argued the cause for Breswick & Co. et al., appellees. Randolph Phillips, appellee, argued the cause pro se. They filed a brief in Nos. 36 and 114.
Edward M. Garlock filed a Statement in Opposition to Appellees' Motion to Dismiss for Baker, Weeks & Co. et al., appellants in No. 82.
Solicitor General Rankin, Assistant Attorney General Hansen and Daniel M. Friedman filed a brief for the United States.
Thomas G. Meeker, Joseph B. Levin and Aaron Levy filed a brief for the Securities and Exchange Commission, as amicus curiae.
MR. JUSTICE FRANKFURTER delivered the opinion of the Court.
These are direct appeals under 28 U.S.C. 1253 from a final judgment of a three-judge District Court for the Southern District of New York setting aside orders of the Interstate Commerce Commission and restraining appellant Alleghany Corporation from issuing a new class of preferred stock that had been approved by the Commission. The case raises numerous questions regarding the jurisdiction and powers of the Commission, especially under 5 of the Interstate Commerce Act, for the understanding of which a rather detailed statement of the facts is necessary.
Section 5 (2) (a), in its pertinent portions, provides: "It shall be lawful, with the approval and authorization [353 U.S. 151, 154] of the Commission . . . (i) . . . for a person which is not a carrier to acquire control of two or more carriers through ownership of their stock or otherwise; or for a person which is not a carrier and which has control of one or more carriers to acquire control of another carrier through ownership of its stock or otherwise . . . ." 54 Stat. 899, 905, 49 U.S.C. 5 (2) (a). 1
Appellant Alleghany Corporation is a Maryland corporation whose charter provides for extensive powers of investment under no express limitation. After the passage of the Investment Company Act of 1940, 54 Stat. 789, 15 U.S.C. 80a-1 et seq., Alleghany registered as an investment company with the Securities and Exchange Commission. In 1944, in connection with an application by the Chesapeake & Ohio Railroad for approval by the Interstate Commerce Commission of acquisition of the property of the Norfolk Terminal & Transportation Company, [353 U.S. 151, 155] Alleghany, alleging that it controlled the Chesapeake & Ohio, filed a supplementary application with the Commission joining the Chesapeake & Ohio's application and seeking approval of its own acquisition of control of the Terminal Company through the action of the Chesapeake & Ohio. In 1945, the Commission approved "acquisition of control" of the Terminal Company by the Chesapeake & Ohio and Alleghany as a transaction within 5 (2) and further found that Alleghany "shall be considered as a carrier subject to the [reporting and securities] provisions of section 20 (1) to (10) and section 20a (2) to (11) of the act." 261 I. C. C. 239, 262.
Shortly thereafter, under the provisions of 3 (c) (9) of the Investment Company Act, 2 the Securities and Exchange Commission held that Alleghany was no longer an investment company within the meaning of the Investment Company Act. 20 S. E. C. 731.
In March, April, and May 1954, several petitions and complaints were filed with the Interstate Commerce Commission by the New York Central Railroad, a stockholder, a protective committee, and bondholder creditors of the Central, asserting violations of the law in Alleghany's purchases of New York Central stock. In view of statements by Alleghany and Chesapeake & Ohio officials that Alleghany had disposed of its holdings of Chesapeake stock, that Commission, in June, ordered Alleghany to show cause why the 1945 order providing that Alleghany [353 U.S. 151, 156] should be "considered as a carrier" should not be set aside. Alleghany replied that it would accept an order terminating its control of the Chesapeake & Ohio but requested delay until it could file a new application which, it alleged, would require the Commission's approval and continuance of its status as a non-carrier to be "considered as a carrier" under the Interstate Commerce Act.
The present proceedings were commenced by the filing of such an application by Alleghany and Central - after the ousting of the old Central management in May in a proxy fight. The contents of the application were described fully in the Report of Division 4 of the Commission:
On March 2, 1955, Division 4 of the Commission approved and authorized the merger of the Jeffersonville into the Big Four; approved continued control of the properties and franchises of the Jeffersonville by the Central and Alleghany; modified the lease between the Big Four and the Central; continued Alleghany as a non-carrier to be "considered as a carrier" subject to the reporting and securities provisions of the Act; and terminated the effective portions of the 1945 order in the Chesapeake & Ohio proceeding. 290 I. C. C. 725.
On reconsideration, the whole Commission on May 24, 1955, affirmed the conclusions of Division 4. It held that Alleghany had acquired control over Central; that at the time the present application was filed, Alleghany was in fact "a person not a carrier which controlled an established system"; that the acquisition of control over the Central was not within 5 (2)'s requirement of Commission approval; that the rearrangement by Central of its ownership or control of its subsidiaries was within 5 (2)'s requirement of approval by the Commission and that Alleghany as the controlling party was a necessary party; and that the terms and conditions of the transactions were fair and reasonable. Rejecting the suggestion of the Securities and Exchange Commission, which had intervened, the whole Commission also held that it had no discretion to yield jurisdiction over Alleghany to the former agency. 3 295 I. C. C. 11. [353 U.S. 151, 158]
Subsequent to their application with respect to the Jeffersonville, Alleghany and Central, on December 17, 1954, filed an application under 5 (2) to "acquire control" of the Boston & Albany Railroad Company, the Pittsfield and North Adams Railroad Corporation, and the Ware River Railroad Company through purchase by Central of their capital stock. The Central owned a little more than 16% of the Pittsfield's capital stock and none of the capital stock of the other two railroads. It operated the properties of the Boston & Albany, the Pittsfield, and the Ware River under leases due to expire in 1999, 1975, and 2873 respectively. On March 22, 1955, less than three weeks after it had approved the application in the Jeffersonville proceeding, Division 4 of the Commission approved the acquisition of such control by Alleghany and Central. (Opinion not reported.)
A third application filed by Alleghany, on February 18, 1955, sought permission from the Commission to issue a new 6% convertible preferred stock pursuant to a charter amendment, approved by all classes of Alleghany's stockholders, that permitted consummation of Alleghany's proposed plan of allowing its outstanding cumulative 5 1/2% preferred stock to be exchanged for the new stock. On May 26, 1955, two days after the whole Commission affirmed Division 4's orders in the Jeffersonville proceeding, Division 4 approved the new stock issue (conditioning its approval on modification of one term), and on June 22, the full Commission denied reconsideration.
An action was then brought before a three-judge District Court by minority common stockholders of Alleghany to require the Commission to set aside its order granting Alleghany the status of a non-carrier to be "considered [353 U.S. 151, 159] as a carrier" and its subsequent order approving the new class of preferred stock and to restrain Alleghany from issuing the new preferred stock. The three-judge District Court, convened under the Urgent Deficiencies Act, 28 U.S.C. 1336, 1337, 2321-2325, granted first a preliminary injunction, 134 F. Supp. 132 (Circuit Judge Hincks, dissenting), and then a permanent injunction setting aside the Commission's order designating Alleghany as a "carrier" and also its order approving Alleghany's new class of preferred stock, restraining its issue. 138 F. Supp. 123. 4
Alleghany moved for a new trial based on the "acquisition of control" involved in the Boston & Albany proceeding. The District Court held that the Commission's order in that proceeding gave no validity to the orders in the Jeffersonville proceeding because of the Commission's failure to provide specifically in its Boston & Albany order that Alleghany should be "considered as a carrier." 138 F. Supp., at 138. On appeal here from the final judgment below, we noted probable jurisdiction. 351 U.S. 903, 352 U.S. 816.
Alleghany urges initially that the Commission's orders dealing with its status under the Interstate Commerce Act and dealing with its new preferred stock were not reviewable at the suit of appellees, that appellees had no standing. We find that appellees do have standing to challenge these orders. This is not a case where "the order under attack does not deal with the interests of [353 U.S. 151, 160] investors," or where the "injury feared is the indirect harm which may result to every stockholder from harm to the corporation." Pittsburgh & W. Va. R. Co. v. United States, 281 U.S. 479, 487 . The appellees are common stockholders of Alleghany. The new preferred stock issue approved by the Commission is convertible, and under relevant notions of standing, the threatened "dilution" of the equity of the common stockholders provided sufficient financial interest to give them standing. See American Power & Light Co. v. SEC, 325 U.S. 385, 388 -389.
Having acquired standing to institute proceedings in the District Court by virtue of the threatened financial injury, appellees could also attack the order of the Commission conferring on Alleghany the status of a person not a carrier but to be "considered as a carrier." The status order was a source of the threatened financial injury. If the Commission acted out of bounds in decreeing its status order, it had no power to approve the new preferred stock issue and the plaintiffs would be entitled to relief. 5
This brings us to the substantive issues in the litigation. In the main, these involve the jurisdiction of the Commission [353 U.S. 151, 161] under 5 (2) and 5 (3) of the Act, defining its powers. 6 The validity of the status order under 5 (3) turns on compliance with the statutory requirement of 5 (2) of Commission approval "for a person which is not a carrier and which has control of one or more carriers to acquire control of another carrier through ownership of its stock or otherwise . . . ." Appellants Alleghany and the Commission contend that the Jeffersonville and the Boston & Albany transactions both support the Commission's assertion of jurisdiction. The District Court disagreed with respect to the former and, as we have seen, p. 159, supra, found it unnecessary to pass on the latter.
Whether the Jeffersonville transaction met the statutory requirement of 5 (2) raises three questions. (1) Was Commission approval of Alleghany's acquisition of control over Central required? (2) Did Alleghany in fact control Central? (3) Did the Jeffersonville transaction involve an acquisition of control by Alleghany over the properties of the Jeffersonville?
The District Court held that whatever control Alleghany had over Central did not fit within the statutory requirement of "a person which is not a carrier and which has control of one or more carriers" because the Commission had not given the approval necessary for acquisition of control of Central and its subsidiaries, "two or more carriers."
The Commission and Alleghany contend that Commission approval of the acquisition of a single, integrated system is not necessary. We need not decide this question, however, and intimate no opinion on it, for even if such approval is necessary, the statutory requirement of "a person which is not a carrier and which has control of one or more carriers" refers to "control" and not [353 U.S. 151, 162] to "approved control." There seems to be no reason to read in the word "approved." Such a holding would mean that the failure of a company engaging in a transaction requiring Commission approval to apply for that approval would deprive the Commission of jurisdiction. Remedies against a violator are provided by 5 (7), (8), and (9) of the Act. To punish a violator by depriving the Commission of jurisdiction over it would be indeed quixotic. As the Commission points out, the problem would appear clearer were Alleghany contesting, rather than acquiescing in, its jurisdiction.
Control in fact then is sufficient to satisfy the requirement of 5 (2). Division 4 of the Commission reported the following:
The full Commission reached this conclusion:
We think that the District Court took too restricted a view of what constitutes "control." In 1939, in Rochester Telephone Corp. v. United States, 307 U.S. 125, 145 -146, arising under the Federal Communications Act, 48 Stat. 1064, 1065, 47 U.S.C. 152 (b), this Court rejected artificial tests for "control," and left its determination in a particular case as a practical concept to the agency charged with enforcement. 7 This was the broad scope [353 U.S. 151, 164] designed for "control" as employed by Congress in the Transportation Act of 1940, 54 Stat. 899-900, 49 U.S.C. 1 (3) (b). 8 See United States v. Marshall Transport Co., 322 U.S. 31, 38 .
That Act also added 1 (3) (b) to the Interstate Commerce Act, providing:
The question remains whether the second portion of the statutory requirement of Commission approval "for a person which is not a carrier and which has control of one or more carriers to acquire control of another carrier through ownership of its stock or otherwise . . ." has been met. What constitutes an acquisition of control? The District Court gave this restricted interpretation:
The Court has already considered twice what constitutes an "acquisition of control" under the Interstate Commerce Act. In New York Central Securities Corp. v. United States, 287 U.S. 12 , the Court interpreted 5 (2) as it read in the Transportation Act of 1920, 41 Stat. 456, 481:
In United States v. Marshall Transport Co., 322 U.S. 31 , the Court interpreted 5, as amended by the 1940 Act, 54 Stat. 899, 905, 49 U.S.C. 5. The Court held that the non-carrier parent (Union) of a carrier (Refiners) that proposed to purchase the property and franchises of another carrier (Marshall) "acquired control" of the property and franchises of the vendor and was therefore subject to the Commission's jurisdiction. The substantive issues in that case were of course different from those of the present case, since there had been no prior relation between the non-carrier parent and the vendor-carrier. In reaching its decision, however, the Court was explicit regarding the purpose of 5:
The crux of each inquiry to determine whether there has been an "acquisition of control" is the nature of the change in relations between the companies whose proposed transaction is before the Commission for approval. Does the transaction accomplish a significant increase in the power of one over the other, for example, an increased voice in management or operation, or the ability to accomplish financial transactions or operational changes with greater legal ease? This is the issue, and not the immediacy or remoteness of the parent from the proposed transaction, for, as we said in the Marshall Transport case, the parent can always, by operating through subsidiaries, make itself more remote. In deciding this type of issue, of course, the finding of the Commission that a given transaction does or does not constitute a significant increase in the power of one company over another is not to be overruled so long as "there is warrant in the record for the judgment of the expert body . . . ." Rochester Telephone Corp. v. United States, 307 U.S. 125, 146 .
The principal issue, therefore, in the Jeffersonville proceeding is not Alleghany's remoteness from, or closeness to, the proposed transaction but rather the nature of the proposed transaction itself. The Big Four, whose stock was largely owned by Central, owned all the stock of the Jeffersonville. (By agreement between the Big Four and the Central, this stock was held by the Central.) The proposal was to merge the Jeffersonville into the Big [353 U.S. 151, 170] Four. While the immediate practical effects of the merger on the operation of the Jeffersonville might be small, even minimal, a merger is the ultimate in one company obtaining control over another. So long as the Jeffersonville existed as a separate company, there was always the possibility that the Big Four, through the Central, might sell, or be forced to divest itself of, the Jeffersonville stock, and that the control of the Jeffersonville might thus pass to another railroad. In considering this possibility, it is important to note that the Jeffersonville does not connect physically with the Big Four but connects with it only by virtue of the Big Four's trackage rights over the Baltimore & Ohio, and that the Jeffersonville, with its few miles of track, also connects with the Pennsylvania, Baltimore & Ohio, Louisville & Nashville, Illinois Central, and Chesapeake & Ohio Railroads.
The merger of the Jeffersonville into the Big Four virtually precludes any change in the relation of the Jeffersonville lines to the Central system. The Jeffersonville will be no more. In view of this, it cannot reasonably be said that there has been no increase in the power of the Big Four, the Central, and, through its relation with them, Alleghany over the Jeffersonville. While it is not always profitable to analogize "fact" to "fiction," La Fontaine's fable of the crow, the cheese, and the fox demonstrates that there is a substantial difference between holding a piece of cheese in the beak and putting it in the stomach.
Denial of power to the Commission to regulate the elimination of the Jeffersonville from the national transportation scene would be a disregard of the responsibility placed on it by Congress to oversee combinations and consolidations of carriers and "to promote safe, adequate, economical, and efficient service and foster sound economic conditions in transportation and among the several carriers . . ." and the further requirement that "All of the provisions of this Act shall be administered [353 U.S. 151, 171] and enforced with a view to carrying out the above declaration of policy." National Transportation Policy, 54 Stat. 899, 49 U.S.C., preceding 1. We hold that the Commission was justified in finding that the merger of the Jeffersonville into the Big Four involved an "acquisition of control" of the Jeffersonville by Central and Alleghany within the meaning of 5 (2) of the Act. Since the status order of the Commission is supportable by virtue of the Jeffersonville proceeding, we need not consider the District Court's denial of Alleghany's motion, based on the Boston & Albany proceeding, for a new trial.
Several other matters urged by appellees remain to be considered. Appellees contend that Alleghany did not acquire control of any carrier in the Jeffersonville proceeding since the application was made by the Big Four as lessor and the Central as lessee and that therefore the Big Four was a statutory lessor and not a carrier within 5. We need not discuss the distinction that appellees seek to assert between lessors and carriers, for the Jeffersonville, the railroad whose control we have held was acquired by Alleghany, was an operating carrier.
Appellees also urge that the Marshall Transport case, 322 U.S. 31 , requires dismissal of Alleghany's application because two stockholders, alleged to dominate Alleghany, did not join in the application and therefore in the absence of those two indispensable parties, the Commission had no jurisdiction to proceed. But in the Marshall Transport case, the Commission was refusing to approve a subsidiary's application to acquire control of the property and operating rights of another carrier unless the non-carrier parent submitted itself to the Commission's jurisdiction, and the Court upheld the Commission's power to refuse to approve the application.
Although the Court in that case used language of "jurisdiction," the problem is not strictly jurisdictional in the sense that if the Commission wrongly decides that [353 U.S. 151, 172] corporation or person A does not "control" non-carrier B (which is "considered as a carrier") and therefore that A need not join B's application to acquire control of C, the Commission loses jurisdiction over B, the power to regulate B. The Commission's jurisdiction over a non-carrier depends on whether the activities of the non-carrier fall within 5 (2) and (3) and does not depend on the action of the parent. For example, if Alleghany were contending that it could reshuffle the whole Central system without Commission approval, alleging that the Commission had no jurisdiction over it through failure to join two stockholders controlling it in the original status order proceedings, this whole problem would appear in a clearer context. The basis of the Commission's jurisdiction in the present case is Alleghany's status as "a person which is not a carrier and which has control of one or more carriers," seeking permission "to acquire control of another carrier through ownership of its stock or otherwise . . . ." The failure to join two stockholders alleged to control Alleghany does not oust the Commission of jurisdiction. Since that is so, the status order submitting Alleghany to the Commission's jurisdiction cannot be attacked on that basis.
Appellees further argue, and the District Court held, 134 F. Supp., at 147-149 and 138 F. Supp., at 136-137, that under 5 (2) (b) and 17 (3), appellees were entitled to an evidentiary hearing of some sort in the merger-status order proceeding (as distinguished from the subsequent preferred stock proceeding) even though the Commission had discretion to dispense with a "public hearing." Section 5 (2) (b), in its relevant portion, provides:
We need not determine the bounds of the Commission's power to dispense with, or limit, hearings under 5 (2) (b), for appellees' claim of a right to a hearing in the merger-status order proceeding must fail for another reason - lack of the requisite interest of "interested parties."
The reference in 5 to "interested parties," like the reference in 1 (20) to "party in interest," must be interpreted in accordance with the rules relevant to standing to become parties in proceedings under the Interstate Commerce Act. A hearing under that Act is not like a legislative hearing and "interest" is not equivalent to "concern." It may not always be easy to apply in particular cases the usual formulation of the general principle governing such standing - e. g., "the complaint must show that plaintiff has, or represents others having, a legal right or interest that will be injuriously affected by the order." Moffat Tunnel League v. United States, 289 U.S. 113, 119 . In each case, the sufficiency of the "interest" in these situations must be determined with reference to the particular context in which the party seeks to assert its position.
Appellees assert three grounds of interest in the merger-status order proceeding: that they were common stockholders [353 U.S. 151, 174] of Alleghany, that the assertion of jurisdiction by the Interstate Commerce Commission would deprive them of the benefits of the Investment Company Act, 54 Stat. 789, 15 U.S.C. 80a-1 et seq., and that the proposed preferred stock issue was unfair.
The fact that appellees were common stockholders of Alleghany is insufficient "interest." The proceeding before the Commission was to determine whether the Jeffersonville-Big Four merger was a transaction requiring Commission approval as an acquisition of control by "a person which is not a carrier and which has control of one or more carriers" of "another carrier through ownership of its stock or otherwise . . . ." 54 Stat. 905, 49 U.S.C. 5 (2) (a) (i). Unlike the subsequent preferred stock order whose threatened financial injury to appellees was sufficient to confer standing to bring the present proceedings, the merger agreement had no special effect on appellees or on common stockholders of Alleghany. See New York Central Securities Corp. v. United States, 287 U.S. 12, 19 -20. Nor did the proposed status order that Alleghany should be "considered as a carrier" and therefore regulated by the Interstate Commerce Commission by itself pose any individualized threat to the welfare of the appellees.
Reliance on the alleged benefits of protection under the Investment Company Act subtly begs the question. Alleghany would be subject to regulation under the Investment Company Act only if the Interstate Commerce Commission lacked jurisdiction to regulate it under 5 of the Interstate Commerce Act. The fact that there may be another Act that gives appellees greater protection as investors is immaterial to the appellees' right to a hearing in the merger-status order proceeding. The question here is whether the proposed transaction falls within the Interstate Commerce Commission's jurisdiction, not what the consequences will be if it does not. No special threat [353 U.S. 151, 175] to appellees arises from the mere assertion of Commission jurisdiction to regulate Alleghany. When subsequent Commission action in approving the Alleghany's new preferred stock issue did present a special threat to appellees, that provided the "interest" sufficient to attack the Commission's jurisdiction in the present proceeding. But this threat could not retroactively confer upon them the right to a hearing in the merger-status order proceeding, in which they had no "interest."
Appellees' claim that they were entitled to a hearing in the preferred stock proceeding is governed by 20a (6) of the Act, which provides that "The Commission may hold hearings, if it sees fit, to enable it to determine its decision upon the application for authority." 41 Stat. 495, 49 U.S.C. 20a (6).
For all these reasons, the judgment of the District Court must be reversed and the case remanded for consideration by the District Court of appellees' claim, not previously discussed, that the preferred stock issue as approved by the Commission was in violation of the Interstate Commerce Act. This disposition renders it needless to pass on appellees' motion to dismiss in No. 82.
[ Footnote 2 ] "Notwithstanding subsections (a) and (b), none of the following persons is an investment company within the meaning of this title:
[ Footnote 3 ] On this appeal, the Securities and Exchange Commission, as amicus, took no position on whether the District Court "correctly construed the relevant provisions of the Interstate Commerce Act [353 U.S. 151, 158] or orders of the ICC thereunder; nor on the extent of the jurisdiction of the court below." The views of the Securities and Exchange Commission were set forth only in relation to issues under the Investment Company Act.
[ Footnote 4 ] After the preliminary injunction was granted, Alleghany moved in the District Court for suspension of the injunction pending appeal to this Court. The two judges who heard the motion divided, and the motion was therefore denied. On application to Circuit Justice Harlan, a stay was granted with respect to that portion of the new preferred stock that had been issued before the District Court's injunction was granted. 75 S. Ct. 912. The New York Stock Exchange, however, continued to suspend trading in the new preferred stock.
[ Footnote 5 ] See Rochester Telephone Corp. v. United States, 307 U.S. 125, 144 , where the fact that the "contested order determining the status of the Rochester necessarily and immediately carried direction of obedience to previously formulated mandatory orders addressed generally to all carriers . . . in conjunction with the other orders, made determination of the status of the Rochester a reviewable order of the Commission." Whether reviewability of a status order, without more, be deemed a matter of standing to review or a matter of finality of administrative action, the basis for decision is the same: has the action of the administrative agency threatened the interests of the complainant, whether corporation or, as here, stockholder otherwise qualified to sue, sufficiently to allow attack? (This does not mean of course that the same agency action that allows attack by one allows attack by the other.)
[ Footnote 6 ] A brief summary of the history of 5 is set forth in St. Joe Paper Co. v. Atlantic Coast Line R. Co., 347 U.S. 298, 315 (appendix).
[ Footnote 7 ] "Investing the [Federal Communications] Commission with the duty of ascertaining `control' of one company by another [as the basis for the Commission's jurisdiction], Congress did not imply [353 U.S. 151, 164] artificial tests of control. This is an issue of fact to be determined by the special circumstances of each case. So long as there is warrant in the record for the judgment of the expert body it must stand. The suggestion that the refusal to regard the New York ownership of only one third of the common stock of the Rochester as conclusive of the former's lack of control of the latter should invalidate the Commission's finding, disregards actualities in such intercorporate relations. Having found that the record permitted the Commission to draw the conclusion that it did, a court travels beyond its province to express concurrence therewith as an original question. `The judicial function is exhausted when there is found to be a rational basis for the conclusions approved by the administrative body.' Mississippi Valley Barge Line Co. v. United States, 292 U.S. 282, 286 -287; Swayne & Hoyt, Ltd. v. United States, 300 U.S. 297, 303 , et seq." 307 U.S., at 145 -146.
[ Footnote 8 ] "This phrase ["control"] has been used because it has recently had the benefit of interpretation by the Supreme Court in the case of Rochester Telephone Corp. v. United States ( 307 U.S. 125 , decided April 17, 1939)." H. R. Rep. No. 2832, 76th Cong., 3d Sess. 63. (This was the Conference Report.)
[ Footnote 9 ] The United States, which had supported the orders of the Interstate Commerce Commission in the District Court proceedings, on this appeal has taken the position that the judgment of the District Court should be affirmed because the merger of the Jeffersonville into the Big Four did not involve an "acquisition of control" over the Jeffersonville by Alleghany.
MR. JUSTICE DOUGLAS, with whom THE CHIEF JUSTICE and MR. JUSTICE BLACK concur, dissenting.
Alleghany Corporation, though not a carrier as that term is used in the Interstate Commerce Act, is subject to supervision by the Interstate Commerce Commission, 49 U.S.C. 5 (3), and exempt from the control of the Securities and Exchange Commission under the Investment Company Act of 1940, 15 U.S.C. 80a-3 (c) (9), if [353 U.S. 151, 176] it has the approval of the Interstate Commerce Commission to "acquire control of two or more carriers through ownership of their stock or otherwise." 49 U.S.C. 5 (2) (a) (i).
Most of the stock of the Big Four (Cleveland, Cincinnati, Chicago, & St. Louis R. Co.) is owned by Central. The lines of the Big Four are operated by Central as lessee.
There is a Bridge Company (the Louisville & Jeffersonville Bridge & R. Co.) whose stock, prior to the transaction about to be discussed, was owned by the Big Four and held by Central under the lease.
Alleghany, Central, the Big Four, and the Bridge Company applied to the Interstate Commerce Commission for [353 U.S. 151, 177] permission to merge the Bridge Company into the Big Four and for Central thereafter to operate the properties of the Bridge Company under the Big Four lease. The merger was an intra-system rearrangement of properties that did not affect one whit Alleghany's "control" in the statutory sense of the Bridge Company. Before the merger Alleghany had "control" of the Bridge Company. It therefore did not "acquire control" but only retained it as a result of the merger.
There was another transaction which Alleghany says caused it to "acquire control" of a carrier within the meaning of 5 (3) and therefore to have a carrier status under the Interstate Commerce Act. Alleghany and Central applied to the Commission for permission to acquire the stock of Boston & Albany R. Co., Pittsfield & North Adams R. Corp., and Ware River R. Co. Central was operating the properties of those three roads under leases - two of the leases being for 99 years each and one for 999 years. The Commission approved this stock acquisition by Central.
There are two reasons why this transaction did not give Alleghany a carrier status. In the first place, 5 (3) gives a noncarrier the status of a carrier only "to the extent provided by the Commission in such order." The Commission made no such order in connection with the acquisition of the stock of the three New England carriers.
In the second place Alleghany, through Central, had "actual control" of those three carriers prior to the acquisition of their stock. That "control" was evident by the long-term leases over the properties of those carriers. Alleghany, therefore, did not "acquire control" when Central acquired the stock of the three companies. The form of Alleghany's control changed by the stock acquisition. But the financial master of the three New England carriers was the same before Central acquired [353 U.S. 151, 178] their stock, as it was afterwards. As stated by the District Court, where a noncarrier is "already in indirect control of a carrier" and the transaction relied upon "still leaves the non-carrier in indirect control of such property, no acquisition by the non-carrier results from the merger." 138 F. Supp. 123, 127-128.
The court that made that ruling had as one of its members the late Judge Frank, who had no superior when it came to an understanding of the ways of high finance and to an analysis of regulatory measures dealing with it. I see no answer to what Judge Frank and his colleagues concluded on this phase of the case.
That view of 5 (2) is plainly reflected in the legislative history. This control over noncarriers who acquired control of carriers was introduced in 1933. Commissioner Eastman pointed out to Congress the evil which was to be remedied - "holding companies have been bringing carriers under common control and hence combining them without any supervision or approval by the commission." 1 The Senate Report stated that the amendment gave the Commission control over holding companies that "effect consolidations without approval of the commission." 2 To "acquire control" within the meaning of 5 (2) means then to put under common control carriers that previously were separate. We would strain to find a construction which would enable holding companies to run for shelter under the Act merely because, within the system they control, there have been corporate rearrangements or readjustments that change the internal structure of the system.
Alleghany points with alarm to the loopholes in the law that will be created if it is held that Alleghany did not "acquire" control in connection with the Bridge [353 U.S. 151, 179] Company merger and the acquisition of the stock of the New England carriers. No loopholes will be created. Central could do neither of those two things without the approval of the Commission, since 5 (2) (a) requires Commission approval of many intra-system transactions by carriers. That is the force of the holding in New York Central Securities Corp. v. United States, 287 U.S. 12 . The loophole that is created comes from granting Alleghany a carrier status. Then Alleghany escapes the far more rigorous supervision which is imposed on it by the Investment Company Act.
The only other means by which Alleghany could have acquired a carrier status was in connection with financial transactions long since liquidated. Alleghany had a carrier status, granted it by the Interstate Commerce Commission, when it acquired the stock of the Chesapeake & Ohio R. Co. and two other carriers. That order, issued in 1945, gave it a carrier status "unless and until otherwise ordered" by the Commission. That order was terminated by the Commission on May 24, 1955.
The approval of the preferred stock issue that is involved in this litigation did not come until later, viz. June 22, 1955. At that time it seems plain that Alleghany had no carrier status and could not obtain one on the basis of the intercorporate transactions on which it relies.
I would affirm the judgment below.
[ Footnote 1 ] Hearings, House Committee on Interstate and Foreign Commerce on H. R. 9059, 72d Cong., 1st Sess., p. 250.