In Re Witherbee Court Corporation , 88 F.2d 251 ( 1937 )

L. HAND, Circuit Judge

(dissenting).

I recognize of course that a reorganization committee must be protected, and that it may for that purpose reserve a lien for its expenses and its compensation upon- the depósited securities. Perhaps it should be free even to vote on them against the will of their owners, so far as that may be necessary to protect the lien; that power this committee does not need, for the bonds have ample value to secure it whether this reorganization goes through; or not. But except such a lien I can see no other legitimate interest that it can have; it seems to me an oppressive condition to require a depositor to abandon to the committee all power of choice, unless he pays his proportion of the expenses and withdraws. I do not understand that my brothers disagree so far; what they say is that if the dissenters were not content to be bound by the committee’s judgment, they should have at least declared that they wished to withdraw; that they should not be allowed to continue to enjoy the advantages of the committee’s activities, and yet oppose its decision as to the plan. So far as such an enforced conformity might be necessary for any legitimate purpose of the enterprise, this too might be reasonable; but I cannot see that it was necessary here. Such a committee is formed to protect the interests of the “whole class by putting those in charge who will follow the proceeding, advise themselves of the value and prospects of the property, protect it, prepare plans for its reorganization, advertise them, get the court’s consent if enough depositors accept, and set up the new company. None of these purposes require the depositors’ surrender of their right to vote, and the statute clearly means that in general they shall choose personally. Reorganization merely as such is not an added purpose of such associations ; no plan may turn out to be available which is better than liquidation; or a better plan may be found than that proposed. The committee will still be useful in either case, and it is needlessly oppressive to deny to a depositor its services, unless he will consent to abdicate. I would ban all such powers; they are of the kind which the statute discountenances. I know of course the opportunities opened for blackmail, but we must not forget that the statute is coercive in any case, and we ought to be jealous to see that the conditions upon its sanctions are fulfilled.

Therefore I can see no inconsistency in a depositor’s remaining a depositor and voting as he likes. But even if this be not true, these depositors were not advised of any power to withdraw from the group except upon paying their share of the expenses; in the notice sent out on March 27, 1936 (Exhibit D), withdrawal was expressly made conditional upon such a payment. They got no intimation of any other means of withdrawal by which they could preserve their franchise; it was too much to expect them to divine that they might withdraw in the face of this position taken by the committee. Thus whatever may be said as to the general question, this order at any rate can be affirmed only on the theory that the committee had the power to vote in the name of all depositors who would not pay their aliquot share of the expenses. That in my judgment ought certainly to be unlawful. For both these reasons I think that the plan was never approved.