Chenery Corporation v. SEC

154 F.2d 6 (1946)


Ps, officers, and directors of Federal, held a one-third interest in Utility Operators Company, and that company, in turn, had virtual control of Federal through the ownership of Federal Class B common stock, representing forty-three percent of voting power. During the period the various plans of reorganization were before D, Ps purchased Federal's preferred stock to the total amount of 12,467 shares. All of the purchases were made individually. D made formal findings and refused to approve the plan because it provided participation of the preferred shares purchased by Ps during the period reorganization plans were before the Commission, even though the purchases were made honestly, after full disclosure and at a fair price at public sale. D reasoned that Ps, officers and directors of the corporation, occupied a fiduciary relationship to the corporation and its shareholders, and consequently were subject to the limitations imposed upon fiduciaries in dealing with trust property. Ps relented and agreed that the stock so purchased would not be converted into common stock of the new corporation, but would be surrendered to the corporation at cost plus 4% interest. Ps objected and sued. The case went to the Supreme Court, which decided that there was no rule in place and therefore, D could not enforce its decision. The case was remanded and once again is being appealed because D reaffirmed its order but this time based on administrative experience. Ps again appealed