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Law School Case Brief

SEC v. Chenery Corp. - 332 U.S. 194, 67 S. Ct. 1575 (1947)


A reviewing court, in dealing with a determination or judgment which an administrative agency alone is authorized to make, must judge the propriety of such action solely by the grounds invoked by the agency. If those grounds are inadequate or improper, the court is powerless to affirm the administrative action by substituting what it considers to be a more adequate or proper basis. To do so would propel the court into the domain which Congress has set aside exclusively for the administrative agency.


Respondents sought approval of an amendment to a reorganization plan to provide for issuance of new common stock of the reorganized company to be distributed to members of its management on the basis of the shares of the old preferred stock which they had acquired during the period of reorganization. Reviewing the transaction under the Public Utility Holding Company Act of 1935, petitioner Securities and Exchange Commission (Commission) denied the application, finding that the proposed transaction to convert preferred stock into common stock of a new corporation was inconsistent with the standards of §§ 7 and 11 of the Act. The appellate court reversed the Commission's determination. Respondents appealed.


Could the court disturb the Securities and Exchange Commission's determination in which it denied an application for approval of an amendment of the plan of reorganization?




The Supreme Court of the United States reversed the judgment because petitioner Commission's decision was the type of judgment that petitioner was best equipped to make and which justified the use of the administrative process. The Court found that its scope of review of an administrative order wherein a new principle was announced and applied was no different from that which pertained to ordinary administrative action. The Court found that its own duty was at an end when it became evident that the Commission's action was based upon substantial evidence and was consistent with the authority granted by to it Congress. Whether the Court agreed or disagreed with the result reached, it was an allowable judgment that the Court could not disturb.


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