The Ohio "Blue Sky Law," Supplement to Page & Adams'
Ann.Gen.Code of Ohio, 1916, vol. 2, §§ 6373-1 to 6373-24, examined
as to its constitutionality and upheld.
In the exercise of the power to prevent fraud and imposition,
Hutchinson Ice Cream Co. v. Iowa, ante, 242 U. S. 153, a
state may forbid dealing in stocks and other securities within its
borders without a license, and subject the business to executive
supervision.
The liability of a business to regulation is not necessarily
dependent upon its liability to be abolished under the police
power.
Under the so-called "Blue Sky Law" of Ohio, dealers within its
provisions (including companies floating their own issues) are not
licensed to sell stocks and other securities unless an executive
officer designated is satisfied of the good business repute of the
applicants and their agents, and licenses, when issued, may be
revoked by him upon ascertaining that the licensees are of bad
business repute, have violated any provision of the act, or have
engaged, or are about to engage, under favor of their licenses, in
illegitimate business or fraudulent
Page 242 U. S. 540
transactions; his findings, however, are made subject to
judicial review.
Held that the powers thus conferred are
not arbitrary, but consistent with due process under the Fourteenth
Amendment.
Gundling v. Chicago, 177 U.
S. 183.
The fact that the statute designates a particular court to
review the executive findings does not affect its validity.
It is to be presumed that the executive officer will act
properly in the public interest, and not wantonly or
arbitrarily.
Whether there is a constitutional liberty to buy securities on
one's own judgment of value without governmental interposition to
protect from bad bargains will not be determined at the suit of
parties whose rights are involved only from the standpoint of
sellers, but
Quaere whether the state power does not extend to such
guardianship over buyers.
The equal protection clause of the Fourteenth Amendment leaves
the states at liberty to regulate those activities which they deem
conspicuous sources of existing evils without embracing others
which, but for this distinction, would fall in the same class.
A state law designed to prevent fraud in the selling of
securities, which affects securities coming from other states only
in requiring that persons dealing in them within the state shall be
first licensed, shall file information concerning them and be
subject in such dealing to executive supervision, is not invalid as
a direct burden on interstate commerce.
Quaere as to when and under what circumstances
securities transported into a state may be held to have lost their
interstate character?
230 F. 233 reversed.
These cases were heard together in the district court and there
disposed of in one opinion. They were argued and submitted together
here. The bills of complaint attacked from different angles the
so-called Blue Sky Law of the State of Ohio, which provides:
"Sec. 6373-1. Except as otherwise provided in this act, no
dealer shall, within this state, dispose or offer to dispose of any
stock, stock certificates, bonds, debentures, collateral trust
certificates, or other similar instruments (all hereinafter termed
'securities') evidencing title to or interest in property, issued
or executed by any private or
quasi public corporation,
copartnership, or association
Page 242 U. S. 541
(except corporations not for profit) or by any taxing
subdivision of any other state, territory, province, or foreign
government, without first being licensed so to do as hereinafter
provided."
"Sec. 6373-2. . . . The term 'dealer,' as used in this act shall
be deemed to include any person or company, except national banks,
disposing or offering to dispose, of any such security, through
agents or otherwise, and any company engaged in the marketing or
flotation of its own securities either directly or through agents
or underwriters or any stock promotion scheme whatsoever,
except:"
"(a) An owner, not the issuer of the security, who disposes of
his own property, for his own account; when such disposal is not
made in the course of repeated and successive transactions of a
similar character by such owner, or a natural person, other than
the underwriter of the security, who is a
bona fide owner
of the security and disposes of his own property for his own
account . . ."
"As used in this act, the term 'company' shall include any
corporation, copartnership, or association, incorporated or
unincorporated, and whenever and wherever organized; . . ."
The Geiger-Jones Company is an Ohio corporation, licensed to do
the business of buying and selling investment securities, and of
buying and selling the stocks and bonds of industrial corporations.
It has a regularly established clientage, it alleges, of about
11,000 persons residing in the State of Ohio and other states, and
has sold and there are now outstanding in the hands of persons to
whom it has sold, securities of about twenty to twenty-five million
dollars par value, and has stockholders in Ohio and other states.
That the securities above referred to consist of securities of over
twenty corporations of Ohio and other states and foreign countries.
That it is still selling such
Page 242 U. S. 542
securities and is and has been engaged in intrastate,
interstate, and foreign commerce.
The appellee, Don C. Coultrap, in No. 439, repeats the
allegations made by Geiger-Jones Company, with enumeration of some
of the companies in whose stocks and securities that corporation is
engaged in dealing, and alleges that he is the owner and holder of
its stocks and of the stocks of other companies, and is engaged in
buying and selling and offering to sell such stocks in the State of
Ohio and in the State of Pennsylvania, and in the course of such
transactions travels back and forth between those states and
conducts a correspondence from Pennsylvania to Ohio, and receives
certificates evidencing the ownership of stock from the State of
Ohio, and sends them from Pennsylvania to Ohio.
William R. Rose, one of the appellees in No. 440, alleges
himself to be a citizen of Ohio and engaged in that state in the
business of buying and selling investment securities, and
particularly the stocks and bonds of industrial corporations, and
that he has built up and maintained a large and profitable business
and an enviable reputation.
The RiChard Auto Manufacturing Company, the other appellee, is a
corporation of West Virginia, but has its principal place of
business in Cleveland, Ohio, and has a contract to manufacture and
is ready to manufacture automobiles under certain patents obtained
by Francois RiChard as soon as and not until the stock of the
company can be put upon the market and a sufficient amount realized
therefrom for such purposes.
That on September 25, 1914, and prior thereto, Rose was actively
engaged in buying and selling stocks and bonds of industrial
corporations and investment securities in general, and particularly
the stock of the RiChard Auto Manufacturing Company, of which
company he was the secretary, and for which business he had unusual
aptitude and was able to prosecute more successfully "than any
Page 242 U. S. 543
other man whose services were available to said
corporation."
That, on September 25th, he was arrested upon an affidavit filed
by one H.R. Young, a subordinate and deputy of the state
Superintendent of Banks and Banking for the State of Ohio, under
whose immediate direction and control he was then acting. Rose,
upon being taken before a magistrate, waived examination and was
"bound over to the grand jury" of Cuyahoga County, which jury
subsequently returned an indictment against him for violation of
the law.
The grievance alleged in Nos. 438 and 439 is that, under the
laws of the state, the Attorney General is threatening to give an
opinion to Hall, the superintendent of Banks and Banking, that the
law is valid and that it is the duty of Hall to cancel appellees'
license, and that this will result in irreparable injury to
appellees and to their security holders from the publicity they
will obtain. And it is apprehended that Hall will act on such
advice, believing that he is bound by the opinion of the Attorney
General.
The statute is attached to the bills, and is asserted to be
unconstitutional, invalid, and void, and the particulars are
enumerated to be that it will deprive appellees of their property
without due process of law, deny them the equal protection of the
laws, impose burdens on interstate commerce, confer executive
powers, delegate such powers and legislative powers, in violation
of the Constitution of Ohio. Appellees consider themselves
remediless except in equity, and pray injunctions interlocutory and
permanent.
The complaint of Rose and the Auto Company is that Hall,
Superintendent of Banks and Banking, is actively engaged in the
prosecution of the proceedings against Rose, and has, together with
the prosecuting attorney, interfered with, interrupted, and
completely prevented Rose from carrying on his business in the
State of Ohio, and especially in attempting upon his part to
dispose of and
Page 242 U. S. 544
sell the stock of the Auto Company, and that the Prosecuting
Attorney and the Sheriff of Cuyahoga County, unless restrained,
will assist and actively cooperate with Hall, to the great and
irreparable injury of both Rose and the Auto Company.
The charge is amplified by details which it is unnecessary to
give, and the law is charged to be unconstitutional in the same
particulars as those enumerated by the Geiger-Jones Company.
Injunctions temporary and perpetual are prayed.
The district court in the
Geiger-Jones case considered
that it was without power to enjoin the Attorney General, but
decided that it could and should, under the charges of the bill,
restrain Hall from further action under the law, the restraint to
continue until the hearing and determination of the applications of
the respective complainants for interlocutory injunctions.
The applications subsequently came to be heard before three
judges, and Hall and all of his employees and subordinates were
enjoined from attempting to enforce the provisions of the law.
There was an exception in No. 440, as follows:
". . . except such proceedings as may be deemed proper in any
criminal action pending against said complainants or either of them
when the complaint in this cause was filed."
The injunctions in all the cases were to continue until final
decision of further order of the court. The court declared the law
to be obnoxious to all of the charges made by the respective
complainants against it. 230 F. 233.
Page 242 U. S. 548
MR. JUSTICE McKENNA, after stating the case as above, delivered
the opinion of the Court.
It will be observed that these cases bring here for judgment an
asserted conflict between national power and state power, and
bring, besides, power of the state as limited or forbidden by the
national Constitution.
The assertion of such conflict and limitation is an
ever-recurring one, and yet it is approached as if it were a new
thing under the sun. The primary postulate of the state is that the
law under review is an exercise of the police power of the state,
and that power, we have said, is the least limitable of the
exercises of government.
Sligh v. Kirkwood, 237 U. S.
52. We get no accurate idea of its limitations by
opposing to it the declarations of the Fourteenth Amendment that no
person shall be deprived of his life, liberty, or property without
due process of law, or denied the equal protection of the laws.
Noble State Bank v. Haskell, 219 U.
S. 104,
219 U. S. 110.
A stricter inquiry is necessary, and we must consider what it is of
life, liberty, and property that the Constitution protects.
What life is and what may or may not affect it, we have quite
accurate tests, and what liberty is in its outside sense, and, in
like sense, what property is. We know that it is of the essence of
liberty -- indeed, we may say, of life -- that there shall be
freedom of conduct, and yet there may
Page 242 U. S. 549
be limitations upon such freedom. We know that, in the concept
of property, there are the rights of its acquisition, disposition,
and enjoyment -- in a word, dominion over it. Yet all of these
rights may be regulated. Such are the declarations of the cases,
become platitudes by frequent repetition and many instances of
application.
The question, then, is, is the statute of Ohio within the
principles declared? The statute is a restraint upon the
disposition of certain property, and requires dealers in securities
evidencing title to or interest in such property to obtain a
license -- a requirement simple enough in itself, and yet of itself
asserted to be an illegal control of a private business, made
especially so by the conditions which are imposed. These
conditions, summarized, are as follows:
To obtain the license, there must be filed with the
Superintendent of Banks and Banking (termed in the act
"commissioner") application for such license, together with
information in such form as the commissioner shall determine,
setting forth:
"(a) The names and addresses of the directors and officers if
such applicant be a corporation or association, and of all partners
if it be a partnership, and of the person if the applicant be an
individual, together with names and addresses of all agents of such
applicant assisting in the disposal of such securities;"
"(b) Location of the applicant's principal office and of his
principal office in the state, if any;"
"(c) The general plan and character of the business of said
applicant, together with references which the 'commissioner' shall
confirm by such investigation as he may deem necessary,
establishing the good repute in business of such applicant,
directors, officers, partners, and agents."
"If the applicant be a corporation organized under the laws of
any other state, territory, or government, or have its principal
place of business therein, it shall also file a copy of its
articles of incorporation, certified by the proper
Page 242 U. S. 550
officer of such state, territory, or government, and of its
regulations and bylaws, and if it be an unincorporated association,
a certified copy of its articles of association or deed of
settlement."
The applicant is also required to file a written instrument
irrevocably consenting to be sued in a particular county, and, if
personal service there cannot be had, consenting to service upon
the sheriff of the county.
It is also provided that all of the applications shall be
published in a daily newspaper, and if the commissioner be
satisfied that the applicant is of good repute, he shall, upon
payment of certain fees, register the applicant as a licensed
dealer in securities. Pending disposition of the application,
temporary permission to transact business may be given. Yearly
renewals of the licenses are provided for.
The commissioner may revoke a license upon ascertaining that the
licensee: (a) is of bad repute, (b) has violated any provision of
the act, or (c) has engaged, or is about to engage, under favor of
such license, in illegitimate business or fraudulent
transactions.
It will be observed, therefore, that the law is a regulation of
business, constrains conduct only to that end, the purpose being to
protect the public against the imposition of unsubstantial schemes
and the securities based upon them. Whatever prohibition there is
is a means to the same purpose, made necessary, it may be supposed,
by the persistence of evil and its insidious forms and the
experience of the inadequacy of penalties or other repressive
measures. The name that is given to the law indicates the evil at
which it is aimed -- that is, to use the language of a cited case,
"speculative schemes which have no more basis than so many feet of
blue sky;'" or, as stated by counsel in another case, "to stop
the sale of stock in fly-by-night concerns, visionary oil wells,
distant gold mines, and other like fraudulent exploitations." Even
if the descriptions be regarded as rhetorical, the existence of
evil is
Page 242 U. S.
551
indicated, and a belief of its detriment, and we shall not
pause to do more than state that the prevention of deception is
within the competency of government, and that the appreciation of
the consequences of it is not open for our review. The Trading
Stamp Cases, 240 U. S. 342,
240 U. S. 391.
Therefore, the purpose being legal, the question only remains
whether the manner in which it is accomplished is illegal. This is
contended, and the provisions which render the law void are found,
it is stated, in: (1) power conferred upon the commissioner to
grant or refuse licenses, (2) the authority given the commissioner
to place forbidden restrictions and burdens on the conduct of the
business of one who has obtained a license.
The basis of these contentions is that the law confers arbitrary
power upon the commissioner. In considering the contentions, we
must keep in mind that the law is addressed to a complex situation.
Its purpose is, as we have seen, to give a basis for judgment of
the securities offered the purchasing public, assure credit where
it is deserved and confidence to investment and trading, prevent
deception and save credulity and ignorance from imposition, as far
as this can be done by the approved reputation of the seller of the
securities and authoritative information.
It may, however, be said that character establishes itself, and
neither needs nor can be compelled to accept the stamp of
government, and it is asserted that the "normal investment business
of the country" and its "individual transactions" are not subject
to "executive control" -- the broad contention being made that, as
such business cannot be prohibited, it cannot be regulated. This,
indeed, is the basic principle of the opposition to the statute. It
is expressed in many ways, and the various provisions of the
statute -- those that are explicit in direction to the commissioner
and those that commit discretion to him -- are said to so burden
and complicate "normal business as to
Page 242 U. S. 552
make it difficult, if not impossible, to carry it on in a normal
way, if at all."
As broadly made, we cannot assent to these propositions. The
reason and extent of the law we have indicated and the control to
which individual transactions are subjected, and we think both are
within the competency of the state. It is to be remembered that the
value of securities consists in what they represent, and to
determine such value is a complex problem even to the most skillful
and informed.
We have very lately decided a case upon the principle of the
power of the state to prevent frauds and impositions.
Hutchinson Ice Cream Co. v. Iowa, 242 U.
S. 153. The principle applies as well to securities as
to material products, the provisions of the law necessarily varying
with the objects. As to material products, the purpose may be
accomplished by a requirement of inherent purity. The intangibility
of securities, they being representatives or purporting to be
representatives of something else, of property, it may be, in
distant states and countries, schemes of plausible pretensions,
requires a difference of provision, and the integrity of the
securities can only be assured by the probity of the dealers in
them and the information which may be given of them. This assurance
the state has deemed necessary for its welfare to require, and the
requirement is not unreasonable or inappropriate. It extends to the
general market something of the safeguards that are given to
trading upon the exchanges and stock boards of the country --
safeguards that experience has adopted as advantageous.
Inconvenience may be caused and supervision and surveillance, but
this must yield to the public welfare, and against counsel's alarm
of consequences we set the judgment of the state.
We turn back, therefore, to consider the more specific
objections to the law. The basis of them is, as we have seen, the
power conferred upon the commissioner, which is
Page 242 U. S. 553
asserted to be arbitrary. The objection is somewhat difficult to
handle. It centers in the provision that requires the commissioner,
as a condition of a license, "to be satisfied of the good repute in
business of such applicant and named agents," and in the power
given him to revoke the license or refuse to renew it upon
ascertaining that the licensee
"is of bad business repute, has violated any provision of the
act, or has engaged or is about to engage, under favor of such
license, in illegitimate business or fraudulent transactions."
It is especially objected that, as to these requirements, no
standard is given to guide or determine the decision of the
commissioner. Therefore it is contended that the discretion thus
vested in the commissioner leaves "room for the play and action of
purely personal and arbitrary power."
We are a little surprised that it should be implied that there
is anything recondite in a business reputation or its existence as
a fact which should require much investigation. If in special cases
there may be controversy, those cases the statute takes care of; an
adverse judgment by the commissioner is reviewable by the courts. §
6373-8. So also as to the other judgments.
Besides, it is certainly apparent that, if the conditions are
within the power of the state to impose, they can only be
ascertained by an executive officer. Reputation and character are
quite tangible attributes, but there can be no legislative
definition of them that can automatically attach to or identify
individuals possessing them, and necessarily the aid of some
executive agency must be invoked. The contention of appellees would
take from government one of its most essential instrumentalities,
of which the various national and state commissions are instances.
But the contention may be answered by authority. In
Gundling v.
Chicago, 177 U. S. 183, an
ordinance of the City of Chicago was passed on which required a
license of dealers in cigarettes, and, as a condition
Page 242 U. S. 554
of the license, that the applicant, if a single individual, all
of the members of the firm, if a copartnership, and any person or
persons in charge of the business, if a corporation, should be of
good character and reputation, and the duty was delegated to the
mayor of the city to determine the existence of the conditions. The
ordinance was sustained. To this case may be added
Red "C" Oil
Manufacturing Co. v. North Carolina, 222 U.
S. 380,
222 U. S. 394,
and cases cited;
Mutual Film Corporation v. Industrial
Commission of Ohio, 236 U. S. 230;
Brazee v. Michigan, 241 U. S. 340,
241 U. S. 341.
See also Reetz v. Michigan, 188 U.
S. 505;
Lieberman v. Van De Carr, 199 U.
S. 552.
The discretion of the commissioner is qualified by his duty, and
besides, as we have seen, the statute gives judicial review of his
action. Pending such review, we must accord to the commissioner a
proper sense of duty and the presumption that the functions
entrusted to him will be executed in the public interest, not
wantonly or arbitrarily to deny a license to or take one away from
a reputable dealer (
Plymouth Coal Co. v. Pennsylvania,
232 U. S. 531,
232 U. S.
545), and, as we have said, in cases where there can be
a dispute of fact, the statute provides for judicial review, and we
see no legal objection to the designation of a particular court for
such review.
We are not disposed to give serious attention to the contention
that, while the statute in form prohibits sales,
"it at the same time necessarily prevents purchases, and thereby
shields contemplated purchasers from loss of property by the
exercise of their own defective judgment,"
and puts them as well as the sellers under guardianship. If we
may suppose that such purchasers would assert a liberty to form a
"defective judgment," and resent means of information as a
limitation of their freedom, we must wait until they themselves
appear to do so. Besides, there are examples in legislation of
unsolicited protection, and there is much in the business we are
considering
Page 242 U. S. 555
which urges to an imitation of the examples. It is not wise to
put out of view the tendencies of the business, and that it tempts
to and facilitates speculative judgments if the purpose be trading,
improvident judgments if the purpose be investment. Whatever
detriment may come from such judgments the law may be powerless to
prevent, but against counterfeits of value, the law can give
protection, and such is the purpose of the statute under review. It
must be judged of upon that consideration, not upon the assertion
of an absolute liberty of conduct which does not exist.
Discriminations are asserted against the statute which extend,
it is contended, to denying appellees the equal protection of the
laws. Counsel enumerates them as follows:
"Prominent among such discriminations are between the cases
where more or less than fifty percent of an issue of bonds is
included in the sale to one person; between securities which have
and which have not been authorized by the Public Service Commission
of this state; between the securities issued by a bank, trust
company, a building and loan association organized under the laws
of this state and those which are not; between an
owner
who sells his securities in a single transaction and one who
disposes of them in successive transactions; between a bank or
trust company who sells at a commission of not more than two
percent and one which sells at a higher commission; against
securities when any part of the proceeds to be derived from the
sale are to be applied in payment for patents, services, goodwill,
or for property not located in this state; in providing for such
delays in the issuance of a license and in the subsequent conduct
of business thereunder as to substantially hinder, and in many
cases naturally arising, to utterly prevent, sales; in
discriminating between securities which have and which have not
been published in regular market reports; between
Page 242 U. S. 556
sales where, in a single transaction, the sale is for $5,000 or
more; in discriminations against securities issued by taxing
subdivisions of other states; between securities upon which there
has and has not been a default as to principal or interest; against
securities which have not from time to time for six months been
published in the regular market reports or the news columns of a
daily newspaper of general circulation in the state; where the
securities are or are not of manufacturing or transportation
companies in the hands of
bona fide purchasers prior to
March 1st, 1914, where such companies were on that date, and shall
be at the time of the proposed sale, going concerns; between cases
where the information contemplated is or is not contained in a
standard manual of information approved by the commissioner; where
the disposal is or is not made for a commission of less than one
percent of the par value thereof by a licensee who is a member of a
regularly organized and recognized stock exchange and who has an
established and lawfully conducted business in this state,
regularly open for public patronage as such; between cases in which
the vendor proposes to sell securities for which he has and those
for which he has not paid ninety percent of the price at which they
are to be sold by him; where the securities are or are not those of
a common carrier or of a company organized under the laws of this
state and engaged principally in the business of manufacturing,
transportation, etc., and the whole or a part of the property upon
which such securities are predicated are located within this
state."
We cannot give separate attention to the asserted
discriminations. It is enough to say that they are within the power
of classification which a state has. A state
"may direct its law against what it deems the evil as it
actually exists without covering the whole field of possible
abuses, and it may do so nonetheless that the forbidden act
does
Page 242 U. S. 557
not differ in kind from those that are allowed. . . . If a class
is deemed to present a conspicuous example of what the legislature
seeks to prevent, the Fourteenth Amendment allows it to be dealt
with although otherwise and merely logically not distinguishable
from others not embraced in the law."
Central Lumber Co. v. South Dakota, 226 U.
S. 157,
226 U. S. 160.
The cases were cited from which those propositions were deduced. To
the same effect is
Armour & Co. v. North Dakota,
240 U. S. 510,
240 U. S.
517.
The next contention of appellees is that the law under review is
a burden on interstate commerce, and therefore contravenes the
commerce clause of the Constitution of the United States. There is
no doubt of the supremacy of the national power over interstate
commerce. Its inaction, it is true, may imply prohibition of state
legislation, but it may imply permission of such legislation. In
other words, the burden of the legislation, if it be a burden, may
be indirect and valid in the absence of the assertion of the
national power. So much is a truism; there can only be controversy
about its application. The language of the statute is: "Except as
otherwise provided in this act, no dealer shall, within this state,
dispose" of certain securities
"issued or executed by any private or
quasi-public
corporation, copartnership, or association (except corporations not
for profit) . . . without first being licensed so to do as
hereinafter provided."
The provisions of the law, it will be observed, apply to
dispositions of securities within the state, and while information
of those issued in other states and foreign countries is required
to be filed (§ 6373-9), they are only affected by the requirement
of a license of one who deals in them
within the state.
Upon their transportation into the state there is no impediment --
no regulation of them or interference with them after they get
there. There is the exaction only that he who disposes of them
there shall
Page 242 U. S. 558
be licensed to do so, and this only that they may not appear in
false character and impose an appearance of a value which they may
possess -- and this certainly is only an indirect burden upon them
as objects of interstate commerce, if they may be regarded as such.
It is a police regulation strictly, not affecting them until there
is an attempt to make disposition of them within the state. To give
them more immunity than this is to give them more immunity than
more tangible articles are given, they having no exemption from
regulations the purpose of which is to prevent fraud or deception.
Such regulations affect interstate commerce in them only
incidentally.
Hatch v. Reardon, 204 U.
S. 152;
Ware & Leland v. Mobile County,
209 U. S. 405;
Engel v. O'Malley, 219 U. S. 128;
Brodnax v. Missouri, 219 U. S. 285;
Banker Brothers Co. v. Pennsylvania, 222 U.
S. 210;
Savage v. Jones, 225 U.
S. 501;
Standard Stock Food Co. v. Wright,
225 U. S. 540;
Trading Stamp Cases, supra. With these cases
International Textbook Co. v. Pigg, 217 U. S.
91;
Buck Stove & Range Co. v. Vickers,
226 U. S. 205, and
the
Lottery Case, 188 U. S. 321, are
not in discordance.
We might indeed ask, when do the designated securities cease
migration in interstate commerce and settle to the jurisdiction of
the state? Material things, choses in possession, pass out of
interstate commerce when they emerge from the original package. Do
choses in action have a longer immunity? It is to be remembered
that, though they may differ in manner of transfer, they are in the
same form in the hands of the purchaser as they are in the hands of
the seller, and in the hands of both as they are brought into the
state. We ask again, do they never pass out of interstate commerce?
Have they always the freedom of the state? Is there no point of
time at which the state can expose the evil that they may mask? Is
anything more necessary for the supremacy of the national power
than that they be kept free when in actual transportation,
Page 242 U. S. 559
subjected to the jurisdiction of the state only when they are
attempted to be sold to the individual purchaser? The questions are
pertinent, the answer to them one way or the other, of consequence;
but we may pass them, for, regarding the securities as still in
interstate commerce after their transportation to the state is
ended and they have reached the hands of dealers in them, their
interstate character is only incidentally affected by the
statute.
Decree reversed and the cause remanded for further
proceedings in conformity with this opinion.
MR. JUSTICE McREYNOLDS dissents.
* These cases, together with
Caldwell et al. v. Sioux Falls
Stock Yards Co. et al., post, 242 U. S. 559,
involving the "Blue Sky Law" of South Dakota, and
Merrick et
al. v. Halsey & Co. et al., post, 242 U. S. 568,
involving the "Blue Sky Law" of Michigan, have been styled for
convenience "The Blue Sky Cases."
