Schwabacher v. United States, 334 U.S. 182 (1948)
U.S. Supreme CourtSchwabacher v. United States, 334 U.S. 182 (1948)
Schwabacher v. United States
Argued January 7, 1948
Decided May 3, 1948
334 U.S. 182
1. The Interstate Commerce Commission, under § 5 of the Interstate Commerce Act as amended, approved and authorized a voluntary merger of two railroad companies into one corporation. The Commission found that the public interest would be served by the merger and unification of their properties and operations, and that the plan as a whole, and as applied to each group of shareholders, was just and reasonable; but it disclaimed jurisdiction to pass upon the claims of dissenting stockholders who owned a small percentage of one class of stock of one of the companies and who had intervened and claimed that the terms of the merger deprived them of charter rights under the law of the incorporation of their company. The Commission considered that the amount involved in the claims of the dissenting stockholders, however settled, was not sufficient to affect the solvency of the new company or jeopardize its operations.
Held: the Commission was not free to renounce or delegate its power to settle finally the amount of capital liabilities of the new company and the proportion or amount thereof which each class of stockholders should receive on account of its contributions to the new entity. Pp. 334 U. S. 184-202.
2. The jurisdiction of the Commission under both § 5 and § 20a is made plenary and exclusive and independent of all other state or federal authority. P. 334 U. S. 197.
3. The Commission may not leave claims growing out of the capital structure of one of the constituent companies to be added to the obligations of the new company, contingent upon the decision of some other tribunal or agreement of the parties themselves, but must pass upon and approve all capital liabilities which the merged company will assume and discharge as a result of the merger. Pp. 334 U. S. 197-198.
4. The Commission must look for standards in passing on a voluntary merger only to the Interstate Commerce Act. P. 334 U. S. 198.
5. The rights of shareholders of railroads merging voluntarily under the Interstate Commerce Act are governed by federal, not state,
law, and, apart from meeting the test of the public interest, the merger terms, as to stockholders, must be found to be just and reasonable. Pp. 334 U. S. 198-199.
6. In appraising a stockholder's position in a merger as to justice and reasonableness, it is not the promise that a corporate charter made to him, but the current worth of that promise, that governs; it is not what he once put into a constituent company, but what value he is contributing to the merger, that is to be made good. P. 334 U. S. 199.
7. It would be inconsistent to allow state law to apply a liquidation basis to what federal law designates as a basis for continued public service. P. 334 U. S. 200.
8. When stockholders are given what it is just and reasonable they should have, the Interstate Commerce Act does not permit state law to impose greater obligations on the financial structure of the merging railroads, with consequent increased calls upon their assets or earning capacity. P. 334 U. S. 201.
9. No rights alleged to have been granted to dissenting stockholders by state law provision concerning liquidation survive the merger agreement approved by the requisite number of stockholders and approved by the Commission as just and reasonable. Any such rights are, as a matter of federal law, accorded recognition in the obligation of the Commission not to approve any plan which is not just and reasonable. P. 334 U. S. 201.
72 F. Supp. 560, reversed.
A suit to set aside an order of the Interstate Commerce Commission approving and authorizing a voluntary merger of two railroads was dismissed by a District Court of three judges. 72 F. Supp. 560. A direct appeal was taken to this Court. Reversed and remanded, p. 334 U. S. 202.