IN THE MATTER OF

NEW ENGLAND PUBLIC SERVICE COMPANY

File No. 59-15. Promulgated March 11, 1947.

(Public Utility Holding Company Act of 1935-Section 11 (e))

SIMPLIFICATION OF HOLDING COMPANY SYSTEM

Practice and Procedure

Motion To Modify or Vacate Order Approving Section 11 (e) Plan

Where stockholder and potential bidder for holding company's interests in industrial subsidiaries, who had not appeared in proceedings for approval and for enforcement of Section 11 (e) plan providing for sale of subsidiaries to specified persons, filed motions seeking modification or vacation of Commission's order approving plan, held motions denied, without prejudice to later renewal of motion by stockholders.

MEMORANDUM OPINION AND ORDER

We have before us for consideration and disposition separate motions filed by Harry C. Blatchley and Allen L. Goldfine, which in effect request modification or vacation of our findings, opinion and order of October 11, 1945, issued pursuant to Section 11 (e) of the Public Utility Holding Company Act of 1935, which approved, subject to the approval of the United States District Court for the District of Maine, a plan of reorganization for New England Public Service Company ("NEPSCO") involving a sale by NEPSCO of its interests in certain industrial subsidiaries to Coffin & Burr, Incorporated and The First Boston Corporation ("Burr-Boston") for the sum of $16,500,000 in cash. Blatchley owns 30 shares of the prior lien preferred stock of NEPSCO. Goldfine owns no stock, and his standing, if any, is predicated on his desire to bid for NEPSCO's interest in the properties sold.

The Blatchley motion alleges that the sale of the non-utility assets of NEPSCO was not fair and equitable to the persons affected by such plan within the meaning of Section 11 (e) of the Public Utility Holding Company Act of 1935; that the consideration was inadequate; that the management of NEPSCO failed to perform its responsibilities to security holders, including the charges that various key officials of NEPSCO had a certain pecuniary interest in selling the assets to Burr-Boston and to no other group; and that in various

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respects, full disclosure was not made to the Commission. The prayer of the Blatchley motion is that the Commission "make and enter findings of fact and conclusions of law in accordance with the foregoing and take such action as it may deem appropriate to amend or rescind its order, findings of fact and conclusions of law heretofore made, to cause the appointment of a Trustee to assist and collect for the benefit of NEPSCO security holders in the causes of action referred to above, or otherwise to permit prosecution for the benefit of NEPSCO security holders of the causes of action which arise from the transactions in connection with NEPSCO's plan."

The Goldfine motion makes substantial similar allegations, but its prayer for relief is solely that the plan be set aside and the properties again be made subject to bidding.

In order to examine these motions in their present setting, it is necessary to recite in some detail certain events which occurred subsequent to the issuance of our findings, opinion and order on October 11, 1945. Shortly thereafter, and at the request of NEPSCO, we applied to the United States District Court for the District of Maine to enforce and carry out the plan. After appropriate notice, the application came on for a hearing before the District Court on October 25, 1945. At that time the representative of the Commission, as well as representatives of various groups of security holders requested the Court to approve the plan and order it carried out. Goldfine appeared by counsel and offered to bid $17,500,000. Goldfine had not appeared in the administrative proceedings before the Commission and the Court ruled that he was without standing to object to the sale. Blatchley had not appeared in the administrative proceedings and did not appear before the District Court. On the same day the Court entered an order approving the plan and ordering it carried out.

Subsequently, Blatchley and Goldfine filed petitions to review the Commission's order of October 11, 1945 and appeals from the District Court's order of October 25, 1945 in the United States Circuit Court of Appeals for the First Circuit. While these petitions for review and appeals were still pending, and on June 13, 1946, Blatchley filed in the District Court (1) a petition in the nature of a bill of review, and (2) a petition for leave to file the same and making charges similar to those contained in his motion now under consideration.

The bill of review and petition for leave to file the same came on for a hearing before the District Court on July 10, 1946. On this date we filed a cross-motion in which Blatchley orally joined, asking that the District Court:

"(1) remit to the Commission for preliminary consideration at a hearing before it the petition by Harry C. Blatchley in the nature of a bill of review and the petition for leave to file the same;

(2) that the Commission be authorized, insofar as authority of this Court is necessary therefor, to inquire into the new matters therein alleged and as to whether there are any other new matters making it fair and equitable that there be a modification of the order of the Commission dated October 11, 1945 and the order of this Court dated October 25, 1945;

(3) that the Commission be authorized to modify or supplement its findings as to the facts in respect of the plan which accompanied the Commission's order of October 11, 1945 by reason of such additional evidence as may be adduced at said hearing before the Commission; and

(4) that the Commission be authorized to file with this Court its modified or new findings and its recommendation, if any, for the modification or setting aside of its original order and the original order of this Court."

At the conclusion of the hearing on July 10, 1946, the District Court denied the Commission's cross-motion, which has been joined in by Blatchley. This ruling was later embodied in a formal order entered August 8, 1946. The District Court indicated, however, that it would have no objection to the Commission making such investigation as it deemed appropriate,1 but stated that it would treat any report filed by the Commission as advisory only. The Court indicated that it would hear evidence on the petition in the nature of a bill of review and set the matter down for hearing on a day certain. Subsequently, the District Court, in view of the action thereafter taken by Blatchley, in the Circuit Court of Appeals for the First Circuit, continued the matter generally. The petition in the nature of a bill of review and the petition for leave to file the same are still pending in the District Court, no interested party having requested that they be called up for hearing.

On August 8, 1946 Blatchley filed a notice of appeal from the District Court's order of July 10, 1946 denying the motion to remit the petition in the nature of a bill of review to the Commission, to the Circuit Court of Appeals for the First Circuit, and on September 11, 1946 filed in the same Court a petition for leave to file a petition for a writ of mandamus directed to the District Judge to require him to remit the bill of review to the Commission for the taking of testimony and the making of such recommendations and modifications of the Commission's findings of October 11, 1945, as might seem appropriate.

The petition for a writ of mandamus and Blatchley's appeal from the District Court's order of July 10, 1946, together with the peti

1 The Commission ordered, on July 23, 1946, a public investigation and public hearings were held in connection therewith. Previously, the Commission had conducted a private investigation, and the evidence taken in this prior private investigation was made part of the record of the public investigation.

tions to review the Commission's order of October 11, 1945, and the appeals from the District Court's order of October 25, 1945, theretofore filed by Blatchley and Goldfine, were heard together in the Circuit Court of Appeals. In that Court the Commission, as well as other respondents, urged that the Court could not properly entertain either the petitions for direct review of the Commission order approving the plan or the appeal from the District Court's approval order dated October 25, 1945. The Commission also urged the remitting of the bill of review to the Commission for the taking of testimony. It took no position as to certain other procedural problems present in the case. By opinions filed on October 29, 1946, the Circuit Court of Appeals denied the petition for leave to file a petition for a writ of mandamus, and dismissed the two petitions for review and the three appeals.2

In the mandamus matter, the Circuit Court of Appeals denied the application for leave to file upon the ground that it was not "the mandatory duty of the district court to remit the bill of review to the Commission for hearing thereon at this time."

Blatchley filed a petition for rehearing, which we in part supported. The petition for rehearing was denied on December 18, 1946.

While we have at all times taken a position at variance with the conclusion of the Circuit Court of Appeals on the propriety of remitting the bill of review to the Commission for the taking of testimony and for a possible modification of our findings, opinion and order of October 11, 1945, we consider it inappropriate, in view of the present status of the case and of the opinion of the Circuit Court of Appeals, to entertain the Blatchley motion on its merits. Accordingly, it will be dismissed without prejudice to its renewal at a later date if circumstances should so warrant. In the case of the Goldfine motion, we have at all times taken the position, and now find, that as a potential bidder only, and owning no stock, Goldfine is without standing to object to the sale of the NEPSCO assets. His motion is denied. Our determination, of course, involves no finding on the truth or falsity of the allegations and charges contained in the motions.

And to that effect It Is So ORDERED.

By the Commission (Commissioners McConnaughey, McEntire, and Hanrahan), Chairman Caffrey being absent and not participating.

The two petitions for review were dismissed on the authority of Okin v. Securities and Exchange Commission, 145 F. (2d) 206 (C. C. A. 2, 1944) and Lownsbury v. Securities and Exchange Commission, 151 F. (2d) 217 (C. C. A. 3, 1945). The appeals of Blatchley and Goldfine from the District Court's order of October 25, 1945 were dismissed upon the ground, as stated by the Circuit Court of Appeals, that neither Blatchley nor Goldfine had a standing to appeal from the order enforcing the plan. Blatchley's appeal from the District Court's order of July 10, 1946 was dismissed upon the ground that the order appealed from was interlocutory in character and not appealable.

IN THE MATTER OF

NORRIS & HIRSHBERG, INC.

Promulgated March 11, 1947.

(Securities Exchange Act of 1934-Section 15)

PRACTICE AND PROCEDURE

Certification of Record on Petition for Review

In certifying corrected transcript of record pursuant to remand of reviewing court, held index to transcript, prepared by record officer of the Commission after Commission's decision and after the filing of a petition for review, erroneously listing certain exhibits as having been received "for identification only" but in fact received in evidence, was not a part of the record upon which Commission's order was based.

Summaries and explanations attached to certain exhibits after they were offered in evidence with a view to assisting the trial examiner's disposition of the matter, held, properly included in transcript of the proceedings as argumentative material, the Commission being fully apprised of the nature of the material and having ruled that such data did not constitute evidence.

In certifying transcript of record to reviewing court, held, the mechanical task of compilation and copying may be delegated to Commission employees, but certification is the act of the Commission and should be evidenced, like other Commission actions, by the signature of Commission's Secretary, as well as by affixing by Secretary of Commission's seal.

Pursuant to direction of the reviewing court, held certificate should be made in the statutory language that transcript is of the record "upon which" rather than "included" orders complained of were entered.

OPINION OF THE COMMISSION

On January 22, 1946, the Commission revoked the registration of Norris & Hirshberg, Inc., an over-the-counter broker-dealer. The order was based on findings that Norris & Hirshberg had violated the fraud provisions of Section 15 (c) of the Securities Exchange Act of 1934 and Section 17 (a) of the Securities Act of 1933.1 On April 29, 1946, Norris & Hirshberg, Inc. filed in the Court of Appeals for the District of Columbia a petition for review of the Commission's order. The court approved a stipulation between Norris & Hirshberg

1 Securities Exchange Act Release No. 3776 (Doc. No. 37, Tr. p. 688 et seq.). The effectiveness of the order of the Commission was stayed by further orders of January 22, 1946, January 28, 1946, February 7, 1946, pending the filing of a petition for rehearing. On Apr 17, 1946, the Commission issued its opinion and order denying petition for rehearing, Securities Exchange Act Release No. 3810 (Doc. No. 46, Tr. p. 787).

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