Opposition Brief — Cone v. United States

Thy ~~

aaa

>

=m

an anchopaeestaSRAEONNA

NE ee

_ eee iene

lhe. seat

‘ ‘ Ce eT. Aakash

5 Nigga sient NBII ie CASO ta

ee re

ib

INDEX

‘“ - ‘ . PAGE

inions Below | nee Heenan

P. og fey. |

Jurisdiction .

Question Presented

Statement of the Case

Argument

1

1

2

Statutes Involved 2 |

| 2

5

6

I. There is No Conflict of Decision

‘IL There is No i) Important Question of Federal

Law o 18

IlI., The Decision Below is Clearly Correct .............. 10

Conclusion Serpecsell set 13

: ‘CITATIONS

‘Cases:

Alabama Electric Cooperative, Inc. v. Securities

and, Exchange Commission, 353 F. 2d 905 (D.C.

Cir. 1965) ..... 1,5

. Alabama’*Power Company v. Ickes, 302 U. S. 464, 12

American Airlines, Inc. v. North American Air-

lines, Inc,, 351 U. 8S. 79 6

Atlantic Refining Co. v. Public Service Commis-

sion, 360 U. S. 378 6

FPC v. Transcontinental Gas Corp., 365U.S.1. 6

McLean Trucking Co. v. United te 321 U. S.

67 ) yt, ee :

PAGE

National Broadcasting Co. v. United States, 319

U. S. 190 6

Seaboard Air Line R. Co. v. United States, 382

U. S. 154 6

Securities and Exchange Commission v. New Eng-

land Electric System, 346 F. 2d 399 (1st Cir. -

1965), cert. granted, 382 U. S. 953 8

Tennessee Electric Power Co. v. TVA, 306 U. S.

118 12

United Gas Co. v. Callery Properties, 382 U. S.

223 6

. United States v. Detroit & Cleveland Navigation

Co., 326 U. S. 236 6

Statutes: | |

Administrative Procedure Act, Section 10(e), 5

U.S.C. §1009(e) , ; 2

Ngfural Gas Act, Section 7(e), 15 U.S.C. §7178(e) 6

Public Utility Holding Company - Act, 15 US.C.

§79 et seq.

Section 1, 15 U.S.C. §79a

Section 6, 15 U.S.C. §79f

Section 10, 15 U.S.C. §79j

Section 11(b)(1), 15 U.S:C. $79k(b)(1) 0...

™ Section 24(a), 15 U.S.C. §79x(a)

NY onwp pw wo

IN THE

Supreme Court of the United States

OCTOBER TERM, 1965

No. 1027

Oe :

AaBaMa Execrric Cooperative, Inc.,

Petitioner,

v.

-SECURITIFS AND Excuance Commission, ALABAMA Power

Company and Tue Sournern Company,

Respondents.

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT

EE ie

BRIEF FOR RESPONDENTS ALABAMA POWER .

COMPANY AND THE SOUTHERN COMPANY

IN OPPOSITION

Opinions Below |

The opinion and‘order of the SEC are not yet reported.

They are set forth at pages J.A. 113-124 of the Joint.

Appendix which has been filed in this Court. “The opinion

of the Court of Appeals is reported at 353 F. 2d 905. It

is also set forth in Appendix A to the Petition herein.

Jurisdiction

The jurisdictional requisites are adequately set forth in

the Petition. | ;

Question Presented

In a proceeding under the Public Utility Holding Com-

pany Act of 1935 to obtain an order of the Securities and

Exchange Commission with respect to the issuance and

sale of securities by an electric utility and the acquisition

of such securities by its pagent, a registered public utility

holding company, is the SEC required, at the request of

another electric corporation of the same State, to examine

the use of the proceeds from such sale, already authorized

after hearing by the State Commission having jurisdic-

tion, with a view tg preventing the application of any

portion thereof penditures which such other electric

corporation objected to before the State Commission, and

still objects to, as duplicating some of its facilities in the

same State?

Statutes Involved | ae

The statutory provisions relied on by petitioner are

Sections 1, 6 and 10 of the Public Utility Holding Company

Act and Section 10(e) of the Administrative Procedure

Act. They are set forth in Appendix B to the Petition.

Statement of the Case

On January 21, 1965 The Southern Company (herein

“Southern”), a registered public utility holding company,

and certain of its public utility subsidiary companies,

including Alabama Power Company (herein “Alabama

Power”), filed with the Securities and Exchange Com-

mission (herein “SEC”) a joint application-declaration

seeking authorization, among other things, for the issue

by Alabama Power and the purchase by Southern of

140,000 shares of common stock for $14,000,000, the pro- =

o

3

ceeds to be used by Alabama Power in its 1965-1966

Construction Program. Exemption from the registration

provisions of Section 6(a) of the Public Utility Holding

Company Act was claimed pursuant to the third sentence

of Section 6(b) thereof on the ground that the proceeds

were to be used solely for the purpose of financing the

.-—business of Alabama Power and that the issue and sale

had been expressly authorized by the Alabama Public

Servic e Commission (herein “State Commission”) (J.A.

1-16).*.. ,

Alabama Electric Cooperative, Inc. (herein “Coopera-

tive”), petitioner herein, sought leave to intervene in. the

proceeding before the SEC. It alleged that Alabama

Power intended to use a portion of the proceeds of the

sale of stock to construct lines and facilities that would

duplicate those owned by it. The Cooperative requested

the SEC to include provisions in its order authorizing the

application-declaration which would prevent such a use of

the proceeds, and to devise procedures whereby Alabama

Power would be required to notify the SEC in advance

of each future expenditure, allowing the Cooperative the

opportunity to object thereto and be heard thereon (J.A.

34-44).

The same contentions had previously been made by the

Cooperative in a proceeding initiated by Alabama Power

- before the State Commission seeking its approval of the

proposed financing. The Cooperative had been permitted

to intervene as an adversary party in that proceeding and

had participated in evidentiary hearings before the State

Commission (J.A. 107-112). Taken in a light most favor-.

able to the Cooperative, the testimony revealed that out of

total proceeds from the proposed financing amounting to

+

approximately $119 million, less than $2 million was pro-

posed to be spent over a two-year period to provide

electric service to the cities of Troy and Luverne? Ala-

bama, municipal systems which had chosen to be served

by Alabama Power although theretofore served by the

Cooperative* (J.A. 69, 77). The Cooperative requested

that the State Commission withhold its authorization of

the proposed financing or, in the alternative, that it enter

an order directing that no portion of the proceeds thereof

or any other funds belonging to Alabama Power be used

to ‘duplicate its lines or facilities (J.A. 111).

‘The State Commission rejected the Cooperative’s con-

tention, finding that the proposed financing “Is for lawful

objects within the corporate purposes of petitioner [Ala-

bama Power] * * * Is compatible with the public interest

{[and] Is necessary, appropriate for and consistent with

the proper performance by the petitioner of its service to

the public * * * and will not impair its ability to. perform

that service * * *” (J.A. 26-7). The Cooperative has also

appealed to the Alabama Courts from the foregoing order

of the State Commission. |

On June 1, 1965 the SEC denied the Cooperative’s peti-

tion for intervention and for a hearing in the present

proceeding and authorized the issue and sale of stock as

proposed by Southern and Alabama Power. The SEC

based its order on an express finding that the matters

complained: of were within the exclusive jurisdiction of the

_* Alabama Power’s contracts for the supplying of electric energy

to these two cities had previously been unsuccessfully challenged by

the Cooperative in — proceedings before the State Commis-

sion. The approval of these contracts by the State Commission has

been upheld by the Circuit Court for Montgomery County and is

currently being challenged by the Cooperative in the Alabama

Supreme Court. :

)

/

5

State Commission and that the relief requested by the

Cooperative: was beyond the SEC’s authority under the

Holding Company Act (J.A. 113-124).

The Cooperative sought review of the SEC’s order in

the United States Court of Appeals for the District of

Columbia Circui Alabama Power and Southern were

permitted to iftervene in that proceeding in support of

the position taken by the,SEC. On November 24, 1965

- that Court affirmed the order of the SEC, finding that the

Cooperative had misconceived the purpose of the Holding

Company Act and holding that the SEC “* * * acted

properly and. with commendable restraint in refusing to |

exercise the enlarged jurisdiction which the Cooperative |

urged upon 6 Saas

Argument

A careful reading of the Petition herein fails to disclose

any substantial ground for the issuance of a writ of certi-

orari in this proceeding. There is no conflict between the

decision being appealed from and a decision of this or any

other court. Nor is the issue raised an important question

of federal law which has not been, but should be, settled

by this Court within the meaning of Rule 19. Moreover, .

a review of the provisions and purpose of the Holding

Company Act indicates that the construction of it con-

curred in below by both the SEC and the Court of Appeals

is clearly correct.

* Alabama Electric Cooperative, Inc. v. Securities and =e

Commission, 353 F.2d 905, 907 (D. C. Cir. 1965).

1.

e There is no conflict of decision.

Petitioner asserts no conflict of decision between the

opinion of the Court of Appeals herein and any opinion

of this Court or any court. Indeed, petitioner admits that

the issue has not been raised before in the entire thirty-

year history of the Holding Company Act. Petitioner does

contend, however, that the holdings of both the SEC and.

the Court of Appeals below fail to adhere to the “plain

intent” of a number of decisions of this Court in which

such terms as “public interest” and “public venience

and necessity” have been broadly construed-i context

of, various regulatory statutes (Petition, pp. 9-10).

None of these cases, however, involve nstruction of

the Holding Company Act. Indeed, af of /them involve

statutes which expressly confer upon some regulatory

agency certificating or licensing authority of a ki

Holding Company Act clearly does not confer upon the

SEC. Thus, Atlantic Refining Co. Public Service

Commission, 360 U. S. 378, FPC v. Transcontinental Gas

Corp., 365 U. S. 1 and United Gas Co. v. Callery Proper-

ties, 382 U. S. 223, all involve Section 7(e) of the Natural

Gas Act, 15 U.S.C. $717 f(e); McLean Trucking .Co. v.

United States, 321 U. S. 67, Seaboard Air Line R. Co. v.

United States, 382 U. S. 154 and United States v. Detroit

& Cleveland Navigation :Co., 326 U. S. 236, all arise

under the Interstate Commerce Act and National Broad-

casting Co. v. United States, 319 U. S. 190 and American

Airlines, Inc. v. North American Airlines, Inc., 351 U. S.

79 involve the Communications Act and the Civil Aero-

nauties Act, respectively.

-—

7

_

Under all of these statutes the appropriate regulatory

body has been given the duty te determine which of two

or more competing services can best and most efficiently

serve the public interest in the relevant area of ‘trans-

portation, broadcasting, et cetera. It is in this context

that such agencies have been told to investigate fully. all

factors bearing on the public interest in reaching their -

determinations. 2 Ey Al

The Holding Company Act, however, does not confer

upon the SE€ the task of deciding which of two or more

competing electric utility companies should serve a par-

ticular customer in a particular area. It creates no certifi-

’ eating or licensing authority in such matters at all. So

the fact that the Natural Gas Act requires the FPC to

consider the “end use” of gas in determining whether or.

not the public interest will be served by a proposed pipe-

line can hardly mean that the SEC-must consider the

“end use” of each dollar spent by the subsidiary of a

regulated holding company merely because the term “pub-

lic interest” appears in both statutes.

Although the question presented by the petition herein

has not been raised heretofore, the identical issue involv-

ing substantially the same parties is currently awaiting

argument before the Court of Appeals of the Fifth Cir-

cuit.* It is submitted that the present application for

*The proceeding currently before the Fifth Circuit involves a

second application to the SEC by Alabama Power for authority. to

issue and sell certain shares of preferred stock and bonds. The

issue and sale of these securities was authorized by the State Com-

mission at the same time and-in the perl gpa. as the com-

mon stock involved in the instant ing. The .Cooperative

again sought to intervene before the SEC on the same grounds

and for the same reasons as in the instant proceeding; intervention

was denied by the SEC on the basis of its opinion in the t

case. iding Conmmans 2 the choice of venue afforded by §24(a) of

the Holding y Act, 15 U.S.C. §79x(a), the Cooperative has

sought review of this second order in the of for the

Fifth Circuit. Oral argument in that Circuit has been scheduled for

March 28, 1966.

ae

certiorari would be‘ more appropriately a and

if the Fifth Circuit reaches a result in conflict-with that

reached by the Court below. 53

- Petitioner anxiously seeks to borrow signification for its

application from the fact that the Court has yecently

granted certiorari in No. 636, Securities and Exchange

’ Commission v. Neu .England Electric System, 346 F. 2d

399 (1st Cir. 1965), cert. granted, 382 U. S. 963. Peti-.

tioner suggests that since the Court will be engaged in

that case in an extensive review of the legislative history

of the Holding Company Act, review of the present pro-

ceeding also might be timely and appropriate (Petition,

pp. 12, 15). It should however be sufficient to observe that

the question presented in the New England case involves

the construction of Section 11(b)(1) of thé Holding Com-

pany Act, which defines the circumstances under which >

non-iategrated holding company systems will be permitted

to exist. An examination of this problem can scarcely be

probative of the entirely different issued raised under al-

together different sections of the Holding Company Act by ~

_ the present petition, and petitioner’s contention amounts

merely to the assertion that since the Court has already

scheduled one case involving the Holding Company Act it

might be appropriate to accept another. We do not under-.

stand that the Court’s grant of certiorari is to be-invoked

so lightly.

Il.

There is no important question of federal law.

As petitioner concedes at page 12 of its Petition, it is

not every misreading of legislative history which this

Court feels impelled to correct. Of course, we do not con-

cede that there has been any — at all in this.

i¢

o

9

case. But even passing this, petitioner suggests ff rea-

sons why the narrow question raised by it is of sufficient

importance to warrant review.

Nor can we supply any. Since the issue has not been

raised before in the entire thirty years that the Holding

Company Act has been in force, it is evident that similar

" eases involving other litigants are not now pending in

other courts awaiting the outcome of the present review.

Nor is this a case where the construction placed on a

statute by the Court below renders it unclear or difficult

to administer, or where the Court below has reached a

result at variance with that of the appropriate adminis-

‘ trative agency.

Indeed, nothing more’ ial demonstrates the narrow

and largely academic nature of the issue presented: than

a consideration of some of its practical consequences.

Even should this Court. grant certiorari and, ‘after

argument, reverse the court below on the merits, upon

remand the SEC would presumably be instructed only to

exercise its discretionary power to determine whether: or

not to permit intervention by petitioner. In the event

that such intervention’ was denied, such a denial would

presumably not be reviewable sess upon a Clear show-

‘ ing of abuse.

Even should -the SEC anes intervention, however,

and after a hearing grant the relief requested by peti-

r, it should be emphasized that .such relief would

| F eae be partial and incomplete. Petitioner does

not even suggest that the SEC has the power to prevent .

Alabama Power from using its funds to provide services

competitive with those of petitioner, but only that it can

prevent Alabama Power from using a portion of the pro-

ceeds of the current financing to do so. It seems clear

10

without more thai the jurisdiction of this Court should

not be invoked in order to implement any such frag-

mentary - nee

°

Ill.

The Decision below is clearly correct.

/

In addition to the fact that the decisions below are not

in conflict with those of any other court and the fact

that the issue involved is narrow and largely academic, ©

it is submitted that both the SEC and the Court of

Appeals were clearly correct in refusing to accept the

strained reading of the statute urged by petitioner.

Briefly stated, petitioner’s argument is that the interpre-

tation of terms such as “public interest” and “interest of

investors or consumers” in the Holding Company Act

_ should be equated with. the construction given similar

‘terms in such licensing or certification statutes as the

Natural Gas Act or the Interstate Commerce Act. Both

the SEC and the Court of Appeals found this equation

to be the root fallacy of petitioner’s argument. As the

° SEC ‘noted in its findings, “words like ‘public interest’

and the interest of ‘investors or consumers’, though of

wide generality, take their meaning and definition from

the substantive on and purposes of the Act”

(J.A. 116).

Yet both the provisions ‘id the purposes of the Act,

as revealed by its legislative history, amply demonstrate

that it was not the intention of Congress to involve the

SEC in such endless problems of local utility regulation as

which supplier can best serve a specific customer or

whether such customer should be given a choice of com-

peting services. Indeed, the whole thrust of the Holding

11

Company Act was to free local regulatory agencies from

the burden of the large interstate holding companies over

-which they had no control and which thwarted effective

local regulation. In so doing, Congress did not establish

the SEC as the. guarantor of the effectiveness of such

local regulation. Nor. did Congress provide for appeal

to the SEC by a utility disappointed, as petitioner is here,

by the refusal of the local regulatory agency to insulate

it from competition by another utility.

The soundness of these conclusions is demonstrated not

only by the careful examination by the SEC and the

Court of Appeals of the Act and its legislative antecedents

but also by the basic impracticality of petitioner’s argu-

ments. Thus, petitioner makes much of its contention that

the goal of effective electric utility regulation throughout

the country will remain unrealized until the SEC under-

takes to fulfill what petitioner considers its mandate

under the Holding Company Act (Petition, pp. 12-

13). Petitioner does not suggest, however, how the SEC

could possibly fulfill such a role when the Act admittedly

gives it jurisdiction only over those relatively few operat-

ing utilities which happen to be subsidiaries of registered

holding companies. Indeed, as petitioner well knows, the

regulatory role it is urging upon the SEC could never be

applied to it with the same force as to its competitor

Alabama Power. To suggest that such haphazard and

unequal regulation could be effective at all is clearly

specious. : ey 7

Putting aside even the obvious impracticality of attempt-

ing to regulate competition by regulating only a few of

the competitars, petitioner nowhere suggests how the SEC

is to equip itself for its monumental new role. If the SEC

is really to oversee the effectiveness of local utility regu-

lation in fifty states it will clearly have to acquire a vast

)

12

expertise not hitherto required of it. In addition -i€ will

obviously have to find somewhere adequate statutory

standards and criteria other than “public interest” or “the

interest of investors or consumers” in order to m “ai

the effectiveness of local regulation. Petitioner d

even advert to these problems, much less suggest how.

might be resolved.

The conclusion is irresistible that petitioner’s only con-

cern is that it be insulated insofar as possible from the

effects of local competition in the business of supplying

electric service, and that having lost its struggle to obtain

such insulation before the local regulatory commission

jurisdiction over such matters, it is now

federal statute to have a second day

rhaps sufficient to note that this Court

has consistently refused to infer a congressional mandate

to exclade local competition where none is clearly ex-

pressed. Alabama Power Company v. Ickes, 302 U. S. 464;

Tennessee Electric Power Co. v. TVA, 306 U. S. 118..

5

13

CONCLUSION LL

For the foregoing reasons the petition for a writ of

certiorari should be denied.

Respectfully submitted,

Jonn Bineuam,

Martin, Batcu, BincHam,

HawtHorne & W:

600 North 18th Stre ,

f Birmingham, Alabama 35203,

Attorneys for Alabama Power

Company and The Southern Company.

Of Counsel:

Ezexiret G. Stopparp

Winer, Cutter & Prcrghinc,

900 17th Street NcW.,

Washington, D. C. 20006.

Hayben N. Smira,

B. Brooxs Tomas,

Winturop, Stimson, Putnam

& Roserts,

40 Wall Street, —

New York, N. Y. 10005.

March 18, 1966.