CORPORATIONS: Failure of Revenge

When Robert R. Young was battling his way to control of the New York Central, one of his aides was Randolph Phillips, onetime New York newspaper financial writer. After Young won in 1954, he and Phillips fell out (TIME, Dec. 26, 1955) because, according to Young, Phillips failed to get the top Central job he expected. Phillips set about getting revenge. Though a battery of high-priced Central lawyers had never laid a legal glove on Young, Phillips soon had Young hanging on the ropes.

As a starter, Phillips blocked Young and other stockholders in his Alleghany Corp. from exchanging $40 million in 5½% preferred stock, on which dividends were in arrears, for new 6% convertible stock on which Young and the shareholders could start drawing dividends. Then Phillips won a lower court decision holding that Alleghany Corp. should be regulated by the Securities and Exchange Commission, not the Interstate Commerce Commission. ICC had allowed Young to use the Alleghany Corp. in his fight for the Central in ways that the stricter SEC rules would have forbidden.

Last week in the U.S. Supreme Court, Phillips lost out in his revenge. In a 5-to-3 decision, the court overruled the lower court, decided that Alleghany was properly placed under the jurisdiction of

ICC. The ruling still left it up to the lower courts to decide if ICC had observed all of its own regulations for the protection of minority stockholders when it approved the stock swap. But Bob Young could finally breathe easy. If he had lost in the Supreme Court, the retroactive ruling might have cost him control of the Central.