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
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,
Shortly thereafter, under the provisions of § 3 (c) (9) of the Investment Company Act,
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
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.
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
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
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.
This brings us to the substantive issues in the litigation. In the main, these involve the jurisdiction of the Commission
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
Control in fact then is sufficient to satisfy the requirement of § 5 (2). Division 4 of the Commission reported the following:
Division 4 recognized that "the present control of the Central system has passed to Alleghany by regular corporate procedures . . . ." Id., at 741.
The District Court, however, held that "if the Commission's opinions contain a conclusion that Alleghany is in control of New York Central, those opinions lack sufficient findings to support that conclusion." 134 F. Supp., at 147. It noted that the order of Division 4 "discloses the fact that Alleghany's beneficial holdings of the Central stock are less than the combined individual holdings of Kirby, Young, Richardson and the Murchison group," and concluded that "the findings do no more than say that Alleghany, with someone else, controls New York Central. They do not even say whether the someone else, alone, has control." Ibid.
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.
That Act also added § 1 (3) (b) to the Interstate Commerce Act, providing:
Section 1 (3) (a) provides:
The Commission's findings, setting forth the events surrounding the proxy fight for control of Central, the common directors in both, the stockholdings of Alleghany's officers and stockholders in Central, and the sworn statement of Central in the Central-Alleghany application that Central is controlled by Alleghany amply support its conclusion that "control" of Central was in Alleghany. See footnote 7, supra.
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:
We think that this is too narrow a reading of the statute. Not labels but the nature of the changed relation is crucial in determining whether a rearrangement within a railroad system constitutes an "acquisition of control" under § 5 (2).
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 that case the order of the Commission permitting the New York Central Railroad to acquire control, by lease,
The Transportation Acts of 1933, 48 Stat. 211, and 1940, 54 Stat. 898, rewrote § 5 but retained the "acquisition of control" language, except that the phrase relating to method of acquisition—"under a lease or by the purchase of stock or in any other manner not involving the consolidation of such carriers into a single system"— became, for acquisitions by both carriers and non-carriers, an all-inclusive phrase in the 1940 Act—"through ownership of their stock or otherwise." These changes do not lessen the authority of the New York Central Securities case in the scope to be given to an "acquisition of control."
In other words, a non-carrier may not gain "control" over carriers free of Commission regulation merely by operating through subsidiaries.
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
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
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
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:
Section 17 (3) provides, in part, that "All hearings before the Commission, a division, individual Commissioner, or board shall be public upon the request of any party interested." 54 Stat. 914, 49 U. S. C. § 17 (3).
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
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
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.
Reversed and remanded.
MR. JUSTICE WHITTAKER took no part in the consideration or decision of this case.
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
"Control" as used in § 5 is defined in § 1 (3) (b):
"Control" thus means "actual" as well as "legal" control and includes the exercise of "indirect" as well as "direct" means. It seems obvious, therefore—so obvious as to be beyond the realm of dispute or argument—that if one has "actual" control through "indirect" means and changes the means whereby he commands that power, he has only retained "control," not acquired it within the meaning of § 5 (3). For one who has "control," as defined, does not acquire it when he merely changes the method or means of its exercise. Yet it is clear that Alleghany did no more than that.
Alleghany has control of the New York Central.
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
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
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."
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
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.
". . . Any company subject to regulation under the Interstate Commerce Act, or any company whose entire outstanding capital stock is owned or controlled by such a company: Provided, That the assets of the controlled company consist substantially of securities issued by companies which are subject to regulation under the Interstate Commerce Act." 54 Stat. 789, 799, 15 U. S. C. § 80a-3 (c) (9).