Opinion ID: 328133
Heading Depth: 2
Heading Rank: 6

Heading: The Type of Hearing to which Patagonia is Entitled

Text: 51 Finally, the Board contends that if section 1841(d)(3) requires it to make a determination whether Patagonia had the power to exercise a controlling influence over Pima on June 30, 1968, the section does not require the Board to afford Patagonia a trial-type hearing. Consequently, the Board argues, its careful study of the facts, affidavits, and memoranda that Patagonia submitted in support of its application for a controlling influence determination, together with the Board Secretary's July 6, 1973, letter informing Patagonia of the Board's decision that Patagonia did not have the power to exercise a controlling influence over Pima, fulfilled all procedural requirements for the determination. Patagonia contends, on the other hand, that it is entitled to a full, evidentiary hearing, with an opportunity to present oral evidence and cross-examine any witnesses against it. 52 Patagonia's application for a section 1841(d)(3) controlling influence determination confronts the Board with a question of adjudicative, not legislative, fact. In the context of administrative law, legislative facts are those that affect an industry as a whole. An agency may resolve legislative questions through rule-making, relying on generalized data concerning an industry, the agency's special expertise, and policy considerations. The rules thereby evolved may be applied to particularized situations without formal hearings. Adjudicative facts are those that immediately affect only specific litigants. Questions of adjudicative fact must be resolved on the basis of the evidentiary submissions of the parties. They are the types of questions that in a trial would normally be submitted to a jury, or to a judge as the finder of facts. 1 K. Davis, Administrative Law Treatise § 7.02 (1958). Compare BankAmerica Corp. v. Board of Governors of the Federal Reserve System, 491 F.2d 985 (9th Cir. 1974) (presenting a question of legislative fact) with American Bancorporation, Inc. v. Board of Governors of the Federal Reserve System, 509 F.2d 29, 35-39 (8th Cir. 1974) (listing several questions of adjudicative fact). See O'Brien, Federal Reserve: Administrative Procedure and the Right to Be Heard under the Bank Holding Company Act, 91 Banking L.J. 856 (1974). 53 As to Patagonia, the Board must determine whether a particular business relationship existed between two business entities on a certain date. Disputed questions of adjudicative fact normally are not decided without affording to the party that may be adversely affected an evidentiary hearing in which that party has the opportunity to confront witnesses and to hear and contest the evidence against him. American Bancorporation, Inc. v. Board of Governors, supra at 37 (quoting 1 K. Davis, supra ); see Commercial National Bank of Little Rock v. Board of Governors of the Federal Reserve System, 451 F.2d 86, 90-91 (8th Cir. 1971); O'Brien, supra. 13 54 The Board argues, nevertheless, that Patagonia's application failed to create a factual dispute that would require an adversary hearing. We disagree. The basic factual issue is whether Patagonia had the power to exercise the asserted controlling influence over Pima. Without attempting to identify all of the underlying questions, we note only that significant factual disputes exist. For example, Patagonia asserts that the three directors that it had placed on Pima's Board were able, through their influence, to control the Board's decisions. Patagonia submitted evidence, in the form of affidavits, to that effect. As is pointed out in the Board Secretary's July 6, 1973, letter, the Board, relying on the asserted prestige and influence of certain of Pima's non-Patagonia directors and on the relatively short period of time during which the Patagonia directors had served, disagreed. Patagonia also contends that as of June 30, 1968, its plan to purchase the remainder of Pima's stock was well known and apparently unopposed. The Board contends, inter alia, that Pima's other shareholders had formed a voting trust to resist Patagonia's plan and were negotiating with other prospective purchasers. 55 We also reject the Board's argument that Patagonia waived its right to a formal hearing by failing to demand such a hearing during the course of the Board's review of the propriety of Patagonia's 20.005 percent ownership of Pima on June 30, 1968. Relying on the Board's October 19, 1972, notice in the Federal Register, Patagonia justifiably considered the Board's determination as to its 20.005 percent ownership of Pima to be separate from its application for a controlling influence determination. As to the latter, Patagonia clearly requested an evidentiary hearing. 56 We cannot hold, as Patagonia has requested, that the documentary evidence it submitted to the Board established, as a matter of law, that the asserted power to exercise a controlling influence of Pima existed. But Patagonia's documentation did raise genuine factual disputes that must be resolved in a trial-type adversary hearing before the Board. 14 57 Since the Board, on remand, must make a de novo determination, we need not reach the merits of Patagonia's final contention, i. e., that in the Board's prior review of Patagonia's application, the Board erroneously defined the statutory term, controlling influence. On remand, the Board will also direct its consideration to this contention. 58 The challenged Order, requiring Patagonia to divest itself of that portion of Pima's stock that Patagonia acquired after June 30, 1968, is vacated, 15 and the cause is remanded to the Board for further proceedings not inconsistent with this Opinion. 59 So ordered.