Securities & Exchange Commission v. Cogan. Cogan v. Securities & Exchange Commission Jones v. Securities & Exchange Commission

201 F.2d 78 SECURITIES & EXCHANGE COMMISSION v. COGAN. COGAN v. SECURITIES & EXCHANGE COMMISSION et al. JONES v. SECURITIES & EXCHANGE COMMISSION et al. Nos. 12716-12813. United States Court of Appeals, Ninth Circuit. Dec. 15, 1951. On Rehearing Dec. 22, 1952. Roger S. Foster, Gen. Counsel, Myron S. Isaacs, Chief Counsel, Division of Public Utilities, W. Victor Rodin, Atty., Securities & Exchange Commission, Washington, D. C., for appellant Securities & Exchange Commission. William J. Cogan, New York City, M. Mitchell Bourquin, San Francisco, Cal., for appellants Cogan and Jones. Seibert & Riggs, Emil Morosini, Jr., William A. Todd, New York City, for appellee Standard Power & Light Corp. A. Louis Flynn, Helmer Hansen, Chicago, Ill., for appellee Standard Gas & Electric Co. Douglass Newman, New York City, for appellee Market St. R. Co. Before DENMAN, Chief Judge, and BONE and POPE, Circuit Judges. DENMAN, Chief Judge. 1 These appeals, consolidated for hearing, are from two orders of the district court rendered on July 11, 1950, and November 21, 1950, pursuant to Section 11(e) of the Public Utility Holding Company Act of 1935. 1 The order of July…

These appeals, consolidated for hearing, are from two orders of the district court rendered on July 11, 1950, and November 21, 1950, pursuant to Section 11(e) of the Public Utility Holding Company Act of 1935. 1 The order of July 11th approved the principal provisions of a Securities & Exchange Commission order for the reorganization of Market Street Railway Co., but disapproved the plan insofar as it failed to provide an allowance of fees for William J. Cogan as attorney for the Van Kirk Committee for prior preference stockholders of Market Street, and remanded the proceeding to the Commission. The Commission appeals here from the portions of the order of July 11, 1950, which disapproved disallowance of the attorney’s fee. The remainder of the order, which approved the reorganization plan in all other respects was appealed from by Cogan personally but not as attorney for any person affected by the plan — and hence is not considered by us.

Upon remand to the Commission, the plan was ordered divided into two steps. Step One ordered a reorganization in substance as in the reorganization plan approved by the district court’s order of July 11, 1950, other than as to the above fees.…

On Rehearing.

After application for a rehearing which followed our former opinion in this matter, we granted a rehearing limited to the question of the propriety of the Commission’s action in denying Cogan’s fee. Now, after hearing the arguments upon the rehearing, we are convinced that so much of our former opinion as directed a reversal of that portion of the district court’s order relating to Cogan’s fee was wrong, and that the orders of the district court should be affirmed in their entirety.

The facts are adequately stated in our former opinion and need not be repeated here. Briefly, the Commission disallowed the fee proposed for appellee Cogan because (1), in a discussion with the officers of Standard Gas, with whom Cogan was dealing in an attempt to reach a settlement of claims between Market Street and Standard Gas, Cogan .said “In case you don’t want me as counsel against you on any other matter, perhaps you could give me a retainer”, and (2), because during the negotiations for settlement, Cogan indicated that he was willing to agree to a payment of a stated sum to Standard Gas provided he was paid a counsel fee of $50,-000 and the committee which he represented was…

I concur in the opinion. I am also of the view that just as on demurrer the question whether the facts alleged in a complaint support a cause of action is one of law so is the question whether the facts proved support a finding. The Commission’s application for enforcement states a finding which I ignored in the opinion we are ‘modifying. Paragraph 16 states that the Commission found as justification for disallowing Cogan’s fee “that Cogan gave such attention to his personal interests and the fees which he hoped to secure, that his obligation of undivided loyalty to the stockholders whom he represented was not fulfilled.”

The facts are that Cogan procured for his stockholders an agreement from his opponents for a settlement of their claims which the Commission’s application in paragraph 25 states is “fair and equitable to the persons affected thereby.” The facts showing such fairness and equity are set forth in detail in Exhibit J attached to the Commission’s application.

The facts showing the success of Cogan in producing such “fair and equitable” and highly beneficial decision for his stockholder clients gives no substantial support to the Commission’s finding that “his…

(concurring).

I agree with Judge Pope’s conclusion that the measure of the attorney’s duty to his client is a question of law for ultimate determination by reviewing courts. However, I agree with Chief Judge Denman that the vital issue here is whether, as the Commission found, Cogan was in fact actually guilty of divided loyalty. On this, as on other issues of fact, our scope of review is limited to a determination whether (on the whole record) this finding is supported by substantial evidence. If there was a suggestion of “divided loyalty”, the Commission gave it a most peculiar complexion by finding that the end result in this case was a settlement that was “fair and equitable.” For the reasons pointed out in Chief Judge Denman’s concurring opinion, I do not believe that the finding of divided loyalty can be sustained.