Source: https://www.legalcrystal.com/case/96675/morgan-vs-united-states
Timestamp: 2019-04-26 08:15:45+00:00

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1. An order of the Secretary of Agriculture fixing the maximum rates to be charged by market agencies (commission men) at stockyards held void for failure to allow the "full hearing" before the Secretary required by the Packers and Stockyards Act. Morgan v. United States, 298 U. S. 468 . P. 304 U. S. 13 .
2. In administrative proceedings of a quasi -judicial character, the liberty and property of the citizen must be protected by the rudimentary requirements of fair play. These demand a fair and open hearing. P. 304 U. S. 14 .
3. In requiring a "full hearing," the Packers and Stockyards Act has regard to judicial standards -- not in any technical sense, but with respect to those fundamental requirements of fairness which are of the essence of due process in a proceeding of a judicial nature. Those requirements relate not only to the taking and consideration of evidence, but also to the concluding, as well as to the beginning and intermediate steps in the procedure. P. 304 U. S. 19 .
argument, was refused. Oral argument, before an Assistant Secretary, was general and sketchy and did not reveal in any appropriate manner the Government's claims. The Government submitted no brief and furnished no statement of its contentions. Numerous and elaborate findings were prepared by subordinates who had conducted the proceedings for the Government, and were submitted to the Secretary, who accepted them, with certain rate alterations. No opportunity was afforded the appellants to examine the findings until they were served with the order fixing rates which they claim to be confiscatory. A rehearing was refused by the Secretary. The Secretary did not read the testimony, but examined it somewhat to get its drift; he did not hear the oral argument, but read a transcript of it and the appellants' briefs, and conferred ex parte concerning the findings with the subordinates who prepared them.
(1) The right to a "full hearing" embraces not only the right to present evidence, but also a reasonable opportunity to know the claims of the opposing party and to meet them. The right to submit argument implies that opportunity; otherwise, the right may be but a barren one. Those who are brought into contest with the Government in a quasi -judicial proceeding aimed at the control of their activities are entitled to be fairly advised of what the Government proposes and to be heard upon its proposals before it issues its final command. P. 304 U. S. 18 .
(2) No such reasonable opportunity was accorded in this case. P. 304 U. S. 19 .
(3) In all substantial aspects, the proceeding was an adversary one -- a prosecution by the Government of the owners of the market agencies threatening the existence of the agencies and the owners' means of livelihood. P. 304 U. S. 20 .
(4) An earlier order containing findings of facts and fixing a schedule of rates, which was set aside because of changes in economic conditions, could not avail to remedy the defects in the conduct of the latter proceeding here in question. P. 304 U. S. 21 .
(5) The action of the Secretary in accepting and making as his own the findings which had been prepared by the active prosecutors for the Government, after an ex parte discussion with them and without according any reasonable opportunity to the respondents in the proceeding to know the claims thus presented and to contest them, was more than an irregularity in procedure; it was a vital defect. P. 304 U. S. 21 .
5. A petition for rehearing based upon the grounds of inconsistency of the decision on this appeal with rulings on the earlier appeal, 298 U. S. 298 U.S. 468, and upon the ground of surprise, is denied. P. 304 U. S. 23 .
6. Questions as to the disposition of moneys impounded in the District Court representing charges for market agency services paid in excess of the rates fixed by the void order are for that court to decide. P. 304 U. S. 26 .
Appeal from a decree of the District Court, constituted of three judges, which dismissed the bills in fifty suits, consolidated for hearing, challenging the validity of maximum rates fixed by the Secretary of Agriculture for market agencies at the Kansas City Stock Yards. A former appeal is reported in 298 U. S. 298 U.S. 468. The present report includes an opinion delivered May 31, 1938, denying a rehearing. Summaries of the arguments on the procedural questions are extracted from the main briefs used on the hearing.
This case presents the question of the validity of an order of the Secretary of Agriculture fixing maximum rates to be charged by market agencies at the Kansas City Stockyards. Packers and Stockyards Act 1921, 42 Stat. 159; 7 U.S.C. §§ 181-229. The District Court of three judges dismissed the bills of complaint in fifty suits (consolidated for hearing) challenging the validity of the rates, and the plaintiffs brings this direct appeal. 7 U.S.C. § 217; 28 U.S.C. § 47.
without having heard or read the evidence and without having heard or considered the arguments submitted, and that his sole information with respect to the proceeding was derived from consultation with employees in the Department of Agriculture. We held that it was error to strike these allegations, that the defendant should be required to answer them, and that the question whether plaintiffs had a proper hearing should be determined. 298 U. S. 298 U.S. 468.
After the remand, the bills were amended and interrogatories were directed to the Secretary which he answered. The court received the evidence which had been introduced at its previous hearing, together with additional testimony bearing upon the nature of the hearing accorded by the Secretary. This evidence embraced the testimony of the Secretary and of several of his assistants. The District Court rendered an opinion, with findings of fact and conclusions of law, holding that the hearing before the Secretary was adequate and, on the merits, that his order was lawful. On this appeal, plaintiffs again contend (1) that the Secretary's order was made without the hearing required by the statute, and (2) that the order was arbitrary, and unsupported by substantial evidence.
to the reasonableness of the charges of appellants for stockyards services at Kansas City. The taking of evidence before an examiner of the Department was begun on December 3, 1930, and continued until February 10, 1931. The Government and appellants were represented by counsel, and voluminous testimony and exhibits were introduced. In March, 1931, oral argument was had before the Acting Secretary of Agriculture and appellants submitted a brief. On May 18, 1932, the Secretary issued his findings and an order prescribing maximum rates. In view of changed economic conditions, the Secretary vacated that order and granted a rehearing. That was begun on October 6, 1932, and the taking of evidence was concluded on November 16, 1932. The evidence received at the first hearing was resubmitted, and this was supplemented by additional testimony and exhibits. On March 24, 1933, oral argument was had before Rexford G. Tugwell as Acting Secretary.
changes in the rates, when his order was made on June 14, 1933. These findings, 180 in number, were elaborate. They dealt with the practices and facilities at the Kansas City livestock market, the character of appellants' business and services, their rates and the volume of their transactions, their gross revenues, their methods in getting and maintaining business, their joint activities, the economic changes since the year 1929, the principles which governed the determination of reasonable commission rates, the classification of cost items, the reasonable unit costs plus a reasonable amount of profits to be covered into reasonable commission rates, the reasonable amounts to be included for salesmanship, yarding salaries and expenses, office salaries and expenses, business getting and maintaining expenses, administrative and general expenses, insurance, interest on capital, and profits, together with summary and the establishment of the rate structure. Upon the basis of the reasonable costs as thus determined, the Secretary found that appellants' schedules of rates were unreasonable and unjustly discriminatory, and fixed the maximum schedules of the just and reasonable rates thereafter to be charged.
"My answer to the question would be that that very definitely was my independent conclusion as based on the findings of the men in the Bureau of Animal Industry. I would say, I will try to put it as accurately as possible, that it represented my own independent reactions to the findings of the men in the Bureau of Animal Industry."
Save for certain rate alterations, he "accepted the findings."
and to be heard upon its proposals before it issues its final command.
No such reasonable opportunity was accorded appellants. The administrative proceeding was initiated by a notice of inquiry into the reasonableness of appellants' rates. No specific complaint was formulated, and, in a proceeding thus begun by the Secretary on his own initiative, none was required. Thus, in the absence of any definite complaint, and in a sweeping investigation, thousands of pages of testimony were taken by the examiner, and numerous complicated exhibits were introduced bearing upon all phases of the broad subject of the conduct of the market agencies. In the absence of any report by the examiner or any findings proposed by the Government, and thus without any concrete statement of the Government's claims, the parties approached the oral argument.
Nor did the oral argument reveal these claims in any appropriate manner. The discussion by counsel for the Government was "very general," as he said, in order not to take up "too much time." It dealt with generalities both as to principles and procedure. Counsel for appellants then discussed the evidence from his standpoint. The Government's counsel closed briefly, with a few additional and general observations. The oral argument was of the sort which might serve as a preface to a discussion of definite points in a brief, but the Government did not submit a brief. And the appellants had no further information of the Government's concrete claims until they were served with the Secretary's order.
or the trial judge permitted the plaintiff's attorney to formulate the findings upon the evidence, conferred ex parte with the plaintiff's attorney regarding them, and then adopted his proposals without affording an opportunity to his opponent to know their contents and present objections, there would be no hesitation in setting aside the report or decree as having been made without a fair hearing. The requirements of fairness are not exhausted in the taking or consideration of evidence, but extend to the concluding parts of the procedure as well as to the beginning and intermediate steps.
continue because, through existing competition, there are too many, that fact will not invalidate the order. While we are not now dealing with the merits, the breadth of the Secretary's discretion under our rulings applicable to such a proceeding, Tagg Bros. & Moorhead v. United States, 280 U. S. 420 ; Acker v. United States, 298 U. S. 426 , places in a strong light the necessity of maintaining the essentials of a full and fair hearing, with the right of the appellants to have a reasonable opportunity to know the claims advanced against them as shown by the findings proposed by the Bureau of Animal Industry.
Equally unavailing is the contention that the former Secretary of Agriculture had made an order in May, 1932, containing findings of fact and fixing a schedule of rates, of which appellants were apprised. Because of changes in economic conditions, the Secretary himself had set aside that order and directed a rehearing. This necessarily involved, as the Secretary found, a consideration "of changes both general and particular" which had "occurred since the year 1929" and brought up all the questions pertinent to the new situation to which the additional evidence upon the rehearing was directed. The former findings and order were no longer in effect, and it is with the conduct of the later proceeding that we are concerned.
the evidence and the contentions of both parties and make his findings upon the spot. Again, the evidence being in, the Secretary might receive the proposed findings of both parties, each being notified of the proposals of the other, hear argument thereon, and make his own findings. But what would not be essential to the adequacy of the hearing if the Secretary himself makes the findings is not a criterion for a case in which the Secretary accepts and makes as his own the findings which have been prepared by the active prosecutors for the Government, after an ex parte discussion with them and without according any reasonable opportunity to the respondents in the proceeding to know the claims thus presented and to contest them. That is more than an irregularity in practice; it is a vital defect.
The maintenance of proper standards on the part of administrative agencies in the performance of their quasi -judicial functions is of the highest importance, and in no way cripples or embarrasses the exercise of their appropriate authority. On the contrary, it is in their manifest interest. For, as we said at the outset, if these multiplying agencies deemed to be necessary in our complex society are to serve the purposes for which they are created and endowed with vast powers, they must accredit themselves by acting in accordance with the cherished judicial tradition embodying the basic concepts of fair play.
"Sec. 310. Whenever, after full hearing upon a complaint made as provided in section 309 or after full hearing under an order for investigation and hearing made by the Secretary on his own initiative, either in extension of any pending complaint or without any complaint whatever, the Secretary is of the opinion that any rate, charge, regulation, or practice of a stockyard owner or market agency, for or in connection with the furnishing of stockyard services, is or will be unjust, unreasonable, or discriminatory, the Secretary --"
"(a) May determine and prescribe what will be the just and reasonable rate or charge, or rates or charges, to be thereafter observed in such case, or the maximum or minimum, or maximum and minimum, to be charged, and what regulation or practice is or will be just, reasonable, and nondiscriminatory to be thereafter followed."
First. The first ground is that the Court has reversed itself; that the present decision is "directly contrary to the law of the case" as established by the Court's decision on the former appeal, Morgan v. United States, 298 U. S. 468 , and that "a procedural omission" previously held "to be of no significance" is now regarded as "fatally defective."
These assertions are unwarranted. Not only are the two decisions consistent, but the rule announced in our former opinion was applied, and was decisive of the present appeal. And the Government is in no position to claim surprise. The question whether there had been a fair hearing in the present case, in the light of the situation disclosed by the Secretary's testimony and the other evidence, was fully argued at the bar. Appellants presented both orally and in an elaborate brief, with copious references to the record, the contention which we sustained.
"But there must be a hearing in a substantial sense. And to give the substance of a hearing, which is for the purpose of making determinations upon evidence, the officer who makes the determinations must consider and appraise the evidence which justifies them. "
The case was then tried by the District Court upon that issue. From the Secretary's frank disclosure, it appeared that findings of fact necessary to sustain the order had not been made by him upon his own consideration of the evidence, but as stated below. Because such action fails to satisfy the requirement of a full hearing stated in our first opinion and quoted above, we reversed the judgment of the District Court which sustained the order.
Testimony of the Secretary and his associates disclosed what had actually occurred. It appeared that the oral argument before the Assistant Secretary had been general and sketchy; that, aside from the oral argument, which did not reveal the claims of the Government in any appropriate manner, the Government had submitted no brief, and no statement of its contentions had been furnished; that, in this situation, findings had been prepared in the Bureau of Animal Industry, Department of Agriculture, whose representatives had conducted the proceedings for the Government; that these findings, 180 in number, were elaborate, dealing with all phases of the practices and facilities at the Kansas City livestock market, the services and methods of the plaintiffs, and the costs and profits which should be allowed them as reasonable. These findings, prepared not by the Secretary, but by those who had prosecuted the case for the Government, were adopted by the Secretary with certain rate alterations. No opportunity was afforded to the plaintiffs for the examination of the findings thus prepared until they were served with the Secretary's order and their request for a rehearing was denied.
"Those who are brought into contest with the Government in a quasi -judicial proceeding aimed at the control of their activities are entitled to be fairly advised of what the Government proposes and to be heard upon its proposals before it issues its final command."
"No such reasonable opportunity was accorded appellants. . . ."
"The Government adverts to an observation in our former opinion that, while it was good practice -- which we approved -- to have the examiner receiving the evidence in such a case prepare a report as a basis for exceptions and argument, we could not say that that particular type of procedure was essential to the validity of the proceeding. That is true, for, as we said, what the statute requires 'relates to substance, and not form.' Conceivably, the Secretary, in a case the narrow limits of which made such a procedure practicable, might himself hear the evidence and the contentions of both parties and make his findings upon the spot. Again, the evidence being in, the Secretary might receive the proposed findings of both parties, each being notified of the proposals of the other, hear argument thereon, and make his own findings."
an ex parte discussion with them and without according any reasonable opportunity to the respondents in the proceeding to know the claims thus presented and to contest them. That is more than an irregularity in practice; it is a vital defect."
The distinction was again brought out in our recent decision in the case of Labor Board v. Mackay Radio & Telegraph Co., post, p. 304 U. S. 333 , where the mere absence of an examiner's report was found not to be controlling, as the record showed that, in that case, the contentions of the parties had been clearly defined, and that there had been in the substantial sense a full and adequate hearing.
Second. The second ground upon which a rehearing is sought is that there is impounded in the District Court a large sum representing charges paid in excess of the rates fixed by the Secretary. The Solicitor General raises questions both of substance and procedure as to the disposition of these moneys. These questions are appropriately for the District Court, and they are not properly before us upon the present record. We have ruled that the order of the Secretary is invalid because the required hearing was not given. We remand the case to the District Court for further proceedings in conformity with our opinion. What further proceedings the Secretary may see fit to take in the light of our decision, or what determinations may be made by the District Court in relation to any such proceedings, are not matters which we should attempt to forecast or hypothetically to decide.

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