Tuesday, May 21, 2013

SEC v. Chenery Corp case brief

SEC v. Chenery Corp case brief
332 U.S. 194, 67 S. Ct. 1575, 91 L. Ed. 1995 (1947)

CASE SYNOPSIS: Petitioner Securities and Exchange Commission appealed a decision of the United States Court of Appeals for the District of Columbia that reversed petitioner's decision that a proposed transaction by respondents, to convert preferred stock into common stock of a new corporation, was inconsistent with the standards of §§ 7 and 11 of the Public Utility Holding Company Act of 1935, 49 Stat. 803.

FACTS: Respondent sought approval of an amendment to a reorganization plan to provide for issuance of new common stock of the reorganized company to be distributed to members of its management on the basis of the shares of the old preferred stock which they had acquired during the period of reorganization. Reviewing the transaction under the Public Utility Holding Company Act of 1935, 49 Stat. 803, petitioner Securities and Exchange Commission denied the application, finding that the proposed transaction was inconsistent with the standards of §§ 7 and 11 of the Act. The appellate court reversed petitioner's determination. The court reversed because petitioner's judgment was the type of judgment which it was best equipped to make and which justified the use of the administrative process. The court found that its scope of review of an administrative order wherein a new principle was announced and applied was no different from that which pertained to ordinary administrative action. The court found that its duty was at an end when it became evident that the agency's action was based upon substantial evidence and was consistent with the authority granted by Congress.

CONCLUSION: The judgment of the lower court was reversed because petitioner's decision was the type of judgment which petitioner was best equipped to make and which justified the use of the administrative process. Whether the court agreed or disagreed with the result reached, it was an allowable judgment, which the court could not disturb.

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