Business: Baltimore Battle

Exceedingly small potatoes in the utility industry is American States Public Service Co., a weak little holding company controlling a few waterworks and power companies scattered from Michigan to California. Organized in 1928, it filed for a bankruptcy reorganization six years later, is still in the hands of the Federal Court in Baltimore. There two plans submitted for its reorganization were being pondered obscurely until last week.

Then a number of important personages having not the slightest financial stake in the company’s future suddenly converged on Judge William Caldwell Coleman’s courtroom. Seemingly blocked in their reorganization proposals by the Public Utility Act of 1935, the bankruptcy trustees petitioned Judge Coleman for guidance, suggesting that the Act was unconstitutional. Thus the American States reorganization shaped up as the first constitutional test of the Administration’s dearest and harshest legislation.

Down from Manhattan and Philadelphia hurried crack power executives to observe the proceedings. Up from Washington hopped President Roosevelt’s two trouble-shooting young legalites, Thomas Corcoran and Benjamin Victor Cohen, co-authors of the original bill. SEC was represented by Chief Counsel John J. Burns. Also on hand was white-crowned Lawyer John William Davis, whose imposing presence generated much of the interest in an otherwise dull case.

The onetime Democratic presidential candidate intervened as the representative of a dentist named Ferd Lautenbach, who had the misfortune to be “the only one around Baltimore” still holding American States bonds. Until he was hastily summoned from his dental office to meet Lawyer Davis in court, Dentist Lautenbach had never seen his eminent attorney. “I submit,” said Mr. Davis, when challenged by the New Dealers, “that I do not have to have social relations with my client to defend his interests.”

At the instigation of the company, Dentist Lautenbach had signed the papers necessary to permit Mr. Davis to participate in the trustees’ action. He served without fee. But since he is also counsel to the Edison Electric Institute, Lawyer Davis jumped at an opportunity to take the Public Utility Act to court—particularly an opportunity in which the constitutional defense will be in the hands, not of the Government, but of lawyers for an investment trust which would prefer to see American States liquidated rather than reorganized.

To the young New Deal lawyers, present last week only as “friends of the court,” this legal background appeared distinctly “suspicious.” SECounsel Burns questioned the court’s jurisdiction, accused the interested lawyers of “collusion” and “professional impropriety.” Those are serious charges in any court and, coming from a man about half his age, they made Mr. Davis boil. Rising with dignity he thundered:

“They [Messrs. Burns, Cohen & Corcoran] have chosen to come in here as friends of the court with what they are pleased to call suggestions, and I may add, measuring my words, that the so-called suggestions made by the chief counsel of the SEC would have been offensive to the dignity of a police court in his State of Massachusetts.”

Growing madder by the minute, Lawyer Davis shouted: “I say it is an unworthy, an undignified and a contemptible presentation.

“And when I realize it comes from the official representatives of the Government of the United States, I say that if that represents their conception of official duty and their temper toward citizens, then on bended knee I pray, ‘God save the SEC and the people of these United States.’ ” Lawyer Davis requested that the charges of the Administration’s three representatives be placed in permanent court records as a horrible example to the bar.

Next day Lawyer Davis ripped into the Utility Act as the “most unexcused and unexcusable grasp of power” he had ever seen, “even in these fertile days.” Much of his attack was against the broad interpretation of the Federal Government’s postal and interstate commerce powers. When chunky, snub-nosed Tom Corcoran suggested that that implied the unconstitutionally of the Securities & Exchange Act, Mr. Davis declared: “Modesty reigned when that Act was drawn and passed and there was a bow at least to constitutional power. I find in this [Utility] Act not so much of a gesture.” Earlier in the week SEC’s new Chairman James McCauley (“Chink”) Landis had invited representatives from all the major holding companies to Washington for what turned into almost a love feast.

After the Baltimore battle, Mr. Landis chilled perceptibly, demanded in his first radio speech as SEC’s chairman a court test that is “real and not a sham.”