Alleghany Corp. v. Breswick & Co., 353 U.S. 151 (1957)

Alleghany Corporation v. Breswick & Co.

Argued January 23-24, 1957
Decided April 22, 1957 *
353 U.S. 151

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF NEW YORK

Syllabus

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 noncarrier 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:

1. As common stockholders whose equity might be "diluted" by the issuance of the new preferred stock, appellees had sufficient financial interest to give them standing to sue to set aside the Commission’s orders. Pp. 159-160.

2. Since the Commission’s order conferring on Alleghany the status of a noncarrier to be "considered as a carrier" gave the Commission jurisdiction to approve the preferred stock issue, appellees could attack that order. P. 160.

3. The Commission had jurisdiction over Alleghany under §§ 5 (2) and 5(3). Pp. 160-172.

(a) It is unnecessary to decide whether Commission approval of acquisition of control of a single integrated railroad system is required; if Alleghany in fact controlled Central, that was sufficient to meet the statutory requirement of "a person which is not a carrier and which has control of one or more carriers." Pp. 161-162.

(b) The Commission’s findings amply support its conclusion that "control" of Central was in Alleghany. Pp. 162-165.

(c) The Commission was justified in finding that the merger of one of Central’s subsidiaries into another involved an "acquisition of control" of a "carrier" by Central and Alleghany within the meaning of § 5(2). Pp. 165-171.

(d) The failure to join two stockholders alleged to control Alleghany did not oust the Commission of jurisdiction. Pp. 171-172.

4. Appellees were not entitled to a hearing in the proceedings in which the Commission approved the merger of two of Central’s subsidiaries and granted Alleghany he status of a noncarrier to be "considered as a carrier" under § 5(2), since they were not "interested parties" within the meaning of § 5(2)(b). Pp. 172-175.

(a) The fact that appellees were common stockholders of Alleghany is insufficient "interest," since that proceeding had no special effect on appellees, and did not pose any individualized threat to their welfare. P. 174.

(b) That assertion of jurisdiction by the Commission would deprive appellees of the benefits of the Investment Company Act of 1940 did not give them sufficient "interest" in that proceeding. Pp. 174-175.

5. Appellees’ claim that they were entitled to a hearing in the preferred stock proceeding is governed by § 20a(6), which provides that "The Commission may hold hearings, if it sees fit, to enable it to determine its decision on application for authority." P. 175.

6. The judgment of the District Court is reversed, and the case is remanded for consideration by the District Court of appellees’ claim that the preferred stock issue, as approved by the Commission, was in violation of the Interstate Commerce Act. P. 175.

138 F.Supp. 123 reversed and remanded.