Chenery Corp. v.
Securities and Exchange Commission case brief
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154 F.2d 6, 80 U.S. App.
D.C. 365 (D.C. Cir. 1946)
CASE SYNOPSIS:
Petitioners, the buyers and seller of securities, appealed an order
by respondent Securities Exchange Commission under the Public Utility
Holding Company Act, 15 U.S.C.S. § 79 et seq., which reaffirmed an
earlier order directing the sellers' shareholders to surrender shares
of preferred stock purchased while a plan for corporate
reorganization was under consideration by the Commission to the
seller at cost plus interest.
FACTS: The seller submitted a plan for reorganization to the Commission under §§ 7, 11 of the Public Utilities Holding Company Act, 15 U.S.C.S. §§ 79g, 79k. During the approval process, the buyers purchased shares of preferred stock, which would be converted to voting stock under the plan. The Commission rejected the plan because of the buyers' actions, though it declined to establish a general rule prohibiting such transactions. On appeal, the court reversed. The Supreme Court granted certiorari and remanded the case to the Commission for further proceedings consistent with its opinion. The Commission reaffirmed its previous decision and the petitioners sought review. On appeal, the court reversed. The court held that the Commission could not prohibit an otherwise legal business transaction in the absence of a legal prohibition, which the Commission had refused to issue. The court held that because the buyers' actions were fair and did not harm other stockholders or the public, and that the Commission could not prohibit their transaction without issuing a general regulation prohibiting all such transactions.
CONCLUSION: In petitioners' action for judicial review of the Commission's order regarding the seller's corporate reorganization, the court reversed the decision of the Commission.
FACTS: The seller submitted a plan for reorganization to the Commission under §§ 7, 11 of the Public Utilities Holding Company Act, 15 U.S.C.S. §§ 79g, 79k. During the approval process, the buyers purchased shares of preferred stock, which would be converted to voting stock under the plan. The Commission rejected the plan because of the buyers' actions, though it declined to establish a general rule prohibiting such transactions. On appeal, the court reversed. The Supreme Court granted certiorari and remanded the case to the Commission for further proceedings consistent with its opinion. The Commission reaffirmed its previous decision and the petitioners sought review. On appeal, the court reversed. The court held that the Commission could not prohibit an otherwise legal business transaction in the absence of a legal prohibition, which the Commission had refused to issue. The court held that because the buyers' actions were fair and did not harm other stockholders or the public, and that the Commission could not prohibit their transaction without issuing a general regulation prohibiting all such transactions.
CONCLUSION: In petitioners' action for judicial review of the Commission's order regarding the seller's corporate reorganization, the court reversed the decision of the Commission.
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