Before CLARK, Chief Judge, LUMBARD, Circuit Judge and LEIBELL, District Judge.
LUMBARD, Circuit Judge. -
The basic issue in this case is whether Cities Service Company and its subsidiaries can be denied exemption from registration under the Public Utility Holding Company Act, 15 U.S.C.A. § 79, because of a publicly-held minority interest in one of Cities Service's subsidiaries, Arkansas Fuel Oil Corporation ("Fuel Oil"), even though Cities Service and all its subsidiaries have disposed of all their utility holdings. The denial was based, in part, on a prior proceeding involving Fuel Oil in which jurisdiction was specifically retained over that company as a "registered holding company," because of the publicly-held minority interest. We hold that the order of the Securities and Exchange Commission is correct in law, and supported by substantial evidence.
In 1941 Cities Service registered under the Act as a holding company within the meaning of § 2(a) (7) of the Act, 15 U.S.C.A. § 79b(a) (7) - a company which directly or indirectly owns or controls 10% or more of the voting securities of a public utility company. At the time it controlled more than 125 companies, both utility and non-utility. One of its subsidiaries was Arkansas Natural Gas Corporation ("Arknat"), the predecessor of Fuel Oil, which was itself a registered holding company with two subsidiaries - one a gas utility company, and the other a non-utility. In 1944 the Securities and Exchange Commission ordered Cities Service to limit its operations to those of a single integrated gas utility system under § 11(b) (1) of the Act, 15 U.S.C.A. § 79k(b) (1), and at Cities' request, it allowed Cities the alternative of disposing of all its utility interests and to remain purely an oil company retaining the rest of its system intact. 17 S.E.C. 5 (1944). Cities chose the latter course. This required Cities' subsidiary, Arknat, to dispose of its interest in its gas utility subsidiary.
In 1951 Arknat filed, and the Commission approved, a reorganization plan which was designed to eliminate its utility interest, thereby terminating Arknat's holding company status, and to clear up voting and other inequities, pursuant to § 11(b) (2) of the Act*fn1 As a result, Arknat gave up its interest in its utility subsidiary and merged with its oil subsidiary, the Arkansas Fuel Oil Corporation (Fuel Oil). This left a publicly-held minority interest in Fuel Oil*fn2 and the Commission noted that this raised problems, the solution of which would however be postponed. In its discussion of whether the plan was "necessary" to effectuate the provisions of § 11(b) (2) of the Act, the Commission stated:
"We recognize that the continued existence of a minority interest in Fuel Oil presents a problem which may require corrective action. However, in view of the fact that Fuel Oil will remain under our jurisdiction as long as Cities is a registered holding company (a status which will continue until terminated by us), we believe that consideration of this problem may be deferred until a later date.
In the interim, provision should be made to give the public minority stockholders adequate representation on the initial board of directors of Fuel Oil, and accordingly prior to consummation of the plan Arknat should submit to us the names of the proposed directors for such action as we may deem proper.
In view of the foregoing, we find, that subject to the reservations noted, the plan, provides an appropriate means for achieving the results required by Section 11(b)." Holding Company Act Release No. 11511 (1952).
In its order of October 1, 1952, approving the plan the Commission expressly stated:
"Jurisdiction * * * is further specifically reserved with respect to * * * c.The resolution of the problems presented by the continued existence of a minority public interest in Fuel Oil after consummation of the plan; * * *"
In 1953 Fuel Oil applied to the Commission under § 5(d) of the Act for an order declaring that Fuel Oil was no longer a holding company. The Commission granted the order on October 7, 1953, but subject to the original reservation of jurisdiction for purposes of dealing with the minority interest problem. The order stated:
"In requesting the entry of an order, pursuant to Section 5(d) of the Act, declaring that it has ceased to be a holding company Ark-Fuel has agreed and consented that any such order shall be without prejudice to the jurisdiction reserved by the Commission's order dated October 1, 1952 * * * to the extent that the matters specified herein have not theretofore been disposed of .
The Commission finds that Ark-Fuel has ceased to be a holding company, that it is necessary for the protection of investors that the Commission retain jurisdiction over Ark-Fuel to the same extent as though it were still in all respects a registered holding company in respect of the matters over which jurisdiction was reserved in the Commission's Order dated October 1, 1952 * * * to the extent that the matters specified therein have not heretofore been disposed of, and that except for such retained jurisdiction, the registration of Ark-Fuel as a holding company should cease to be in effect."
By 1955 Cities had disposed of all its utility holdings with one exception not relevant here. On January 29, 1955 Cities applied for exemption for itself and each of its subsidiaries from the ...