Opinion ID: 255137
Heading Depth: 1
Heading Rank: 2

Heading: General Issues.

Text: 34
35 Petitioners advance three contentions as to why the instant order falls outside the authority conferred on the Board by 21 of the Shipping Act. They argue: (1) 21 does not cover 'contracts, agreements, and understandings'; (2) 21 is limited to obtaining information relevant to the Board's 'regulatory' power over carriers' rates under 17 and 18; and (3) 21 does not authorize the Board to compel the production of documents located outside the territorial confines of the United States. 36 Petitioners' first contention is properly answered in Kerr: namely, that, although 21 does not expressly speak of 'contracts, agreements or understandings,' it is clear that such papers are encompassed within the broad language of the section which requires carriers and other persons subject to the Act to file 'any account, record, rate, or charge, or any memorandum of any facts and transactions appertaining to the business of such carrier or other person subject to this chapter.' Mutual dealings between parties culminating in consensual arrangements are clearly 'transactions.' And the writings evidencing the arrangements arrived at are just as clearly 'memoranda.' Therefore, the instant order falls within the scope of 21. 37 Petitioners present an elaborate argument based upon the legislative history of 21. They contend that section is modeled upon 20 of the Interstate Commerce Act, 34 Stat. 594 (1906), 49 U.S.C.A. 20, and that a year before the enactment of the Shipping Act the Supreme Court in United States v. Louisville & N.R.R., 1915, 236 U.S. 318, 35 S.Ct. 363, 368, 59 L.Ed. 598, limited the similar language of 20 to cover only accounting and bookkeeping records. Assuming arguendo that petitioners' claims are correct, there is good reason why they should not be followed and why 21 should not be given a similarly restrictive meaning. In Louisville the Interstate Commerce Commission had attempted to inspect the railroad's correspondence under 20. Had the Supreme Court upheld the Commission's authorization to do so under 20, it would have been forced to resolve the question whether such inspection constituted an unreasonable search and seizure. Under the Court's then view of the Fourth Amendment's limitation on the compulsory production of corporate records and documents-- a view no longer followed, compare Federal Trade Comm. v. American Tobacco Co., 1924, 264 U.S. 298, 44 S.Ct. 336, 68 L.Ed. 696, with Oklahoma Press Pub. Co. v. Walling, 1946, 327 U.S. 186, 66 S.Ct. 494, 90 L.Ed. 614, and United States v. Morton Salt Co., 1950, 338 U.S. 632, 70 S.Ct. 357, 94 L.Ed. 401, the Court would probably have had to answer that question in the affirmative. Because the prevailing views on the constitutional question led to a restrictive reading of 20 of the Interstate Commerce Act in 1915 does not seem to us to justify a similarly restrictive reading of 21 of the Shipping Act today when those views are no longer followed. 38 In addition it should be noted that in Louisville the Supreme Court defined 'records' as used in 20 of the Interstate Commerce Act to include 'the written evidence of (a corporation's) contracts and business transactions.' 11 Section 21 of the Shipping Act also speaks of 'records,' and consequently the Louisville case may be read as supporting the Board's authority under that section. 39 Petitioners' second contention is that 21 is limited to enabling the Board to obtain information relevant to carrying out its supervisory power over carriers' rates under 17 and 18 and is therefore inapplicable where the Board is seeking information to determine whether the prohibitions of 14-16 are being complied with. We find no basis in the Shipping Act for this bifurcation of the Board's authority. Furthermore, petitioners' claim would appear to be laid at rest by the Supreme Court's description of 21 in Isbrandtsen-Moller Co. v. United States, 1937, 300 U.S. 139, 144-145, 57 S.Ct. 407, 410, 81 L.Ed. 562: 40 'The purpose of section 21 is not far to seek. Other sections forbid allowance of rebates, require the filing of agreements fixing or regulating rates, granting special rates, accommodations or privileges, which may be disapproved, canceled, or modified if the Board finds them unjustly discriminatory or violative of the act, prohibit undue or unreasonable preferences or the cutting of established rates and unjust discrimination between shippers or ports. To enable it to perform its functions the Board may well need such information as that which the section gives it power to demand.' 41 This quotation refers to the Board's responsibilities under 14-16 as well as 17 and 18. It is apparent that 21 is not to be restricted to what petitioners characterize as the 'regulatory' as opposed to the 'enforcement' sections of the Act. 42 Petitioners finally contend that, since 21 does not expressly authorize the Board to require the production of records or memoranda located outside the territorial confines of the United States, that power ought not to be implied. In support of this argument, they point to 27 of the Shipping Act, 46 U.S.C.A. 826, under which the Board 'for the purpose of investigating alleged violations' may subpoena witnesses or documents 'from any place in the United States at any designated place of hearing.' Petitioners contend this restriction should be read into 21. We think not. 43 It is questionable whether the Board is in fact powerless under 27 to subpoena documents outside the territorial confines of the United States. Cf. Securities and Exchange Comm. v. Minas De Artemisa, S.A., 9 Cir., 1945, 150 F.2d 215, in which a similar description of the Security and Exchange Commission's subpoena power under 22(b) of the Securities Act of 1933, 15 U.S.C.A. 77 v(b), was held not to preclude the Commission from compelling persons within the United States to produce documents of foreign corporations situated outside this country. 44 In any event, in light of the coverage and the purposes of the Shipping Act, we can see no reason to restrict 21 to cover only information within the United States. In enacting the Shipping Act, which deals with foreign as well as interstate commerce, Congress was clearly mindful of the fact that foreign flag as well as United States carriers were subject to regulation thereunder. See H.R.Rep. No. 659, 64th Cong., 1st Sess. (1916). If the Board's investigatory powers were limited to the territorial confines of the United States, regulation of foreign flag carriers would be hampered to a substantial degree. Consequently, we will not read into 21 a territorial limitation which appears to be contrary to the purposes of the Shipping Act. 45 We must reject petitioners' contentions regarding protests of foreign governments and extra-territorial enforcement of the Board's order. As the Second Circuit pointed out in Kerr, the protests of foreign governments are matters for consideration by the Executive and not the courts. And the question as to whether the order can be enforced by extra-territorial means is not presently before us. All that is here involved is whether the order was properly and validly issued. 46
47 Petitioners next contend that because the 21 order is industry-wide in application it is analogous to rule-making and the Board was required to give notice of the proposed issuance of the order to interested parties so they could submit their views and arguments. Clearly the order is not legislative in character. In any event, notice and hearing are not prerequisite to the issuance of such an order directed to a single carrier. Isbrandtsen-Moller Co. v. United States, supra. That the Board chose in this instance as a matter of convenience to issue one order directed to many carriers rather than to issue many orders each directed to a single carrier does not convert the instant order into the promulgation of a rule. 48
49 The Board's order does not state the purpose for which the information is demanded. For this reason, among others, petitioners contend that the order violates the Fourth Amendment. 12 50 Although earlier limitations on the investigatory powers of administrative agencies have been relaxed in recent years, 13 the Supreme Court has informed us that 'a governmental investigation into corporate matters may be of such a sweeping nature and so unrelated to the matter properly under inquiry as to exceed the investigatory power.    But it is sufficient if the inquiry is within the authority of the agency, the demand is not too indefinite and the information sought is reasonably relevant. 'The gist of the protection is in the requirement, expressed in terms, that the disclosure sought shall not be unreasonable.' Oklahoma Press Publishing Co. v. Walling, 327 U.S. 186, 208 (66 S.Ct. 494, 505, 90 L.Ed. 614, 166 A.L.R. 531).' United States v. Morton Salt Co., 1950, 338 U.S. 632, 652-653, 70 S.Ct. 357, 369, 94 L.Ed. 401. 51 What is 'reasonably relevant' depends on the purpose and nature of the investigation undertaken by the agency. 'Relevancy and adequacy or excess in the breadth of the subpoena are matters variable in relation to the nature, purposes and scope of the inquiry.' Oklahoma Press Pub. Co. v. Walling, 1946, 327 U.S. 186, 209, 66 S.Ct. 494, 506, 90 L.Ed. 614. And as Professor Davis has pointed out, 'the breadth of a subpena or of a search made in records may be excessive, but the test is relevance to the specific purpose, and the purpose is determined by the investigators.' 1 Davis, Administrative Law Treatise 3.06 (1958). Consequently, the Board's failure in the instant case to state its purpose in requiring the information demanded precluded a determination of relevancy. 52 Respondents, relying on Mortion Salt, contend that no detailed specification of purpose is necessary when an agency is investigating 'merely on suspicion that the law is being violated, or even    because it wants assurance that it is not.' 14 If this order is pursuant to such an investigation, a matter which the Board contends in its brief but which does not appear from the face of the order, it might be argued that a detailed specification at this stage of 'initial inquiry' may not be feasibly required. Whatever may be the validity of that argument, we think it cannot excuse the absence of any indication whatsoever, as in the instant order, of the investigation's purpose since no basis is thereby afforded for determining the relevancy of the information demanded. And just as the reasons underlying agency action must appear from the agency's order, so too we think that the statement of purpose must be apparent from the order itself and cannot be supplied by contentions in the briefs. 53 In any event, the language in Morton Salt upon which the Government relies was not directed to the matter of purpose and relevancy, but rather to the issue of whether the Federal Trade Commission had power to compel reports absent 'probable cause' to believe that the law was being violated. 54 The Government also points to Isbrandtsen-Moller Co. v. United States, supra; and Bowles v. Northwest Poultry & Dairy Products Co., 9 Cir., 1946, 153 F.2d 32, for the proposition that statements of purpose are unnecessary. In Isbrandtsen-Moller which, like the instant case, involved an investigatory order information as to the rates 55 'It appearing, That full and complete information as to the rates with the transportation of certain property from continental United States to points in foreign countries by carriers by water in foreign commerce subject to the Shipping Act, 1916, is necessary to the proper administration of the regulatory provisions of said act   . 15 ' 56 This order, stating the subject of the investigation to be rates and charges, provided a standard for determining the relevancy of the documents demanded. Similarly, the order involved in Northwest Poultry contained a sufficient statement of purpose and relevancy since the records there required were needed in order to determine whether the corporation had complied with a particular Regional Price Order under the Emergency Price Control Act. 57 Since the reasonableness of the order under review is dependent upon the relevancy of the information demanded, and that cannot be determined in the absence of a statement of purpose, the order is fatally defective. Because petitioners' contentions regarding the breadth and the vagueness of the order are in part dependent upon the question of relevancy, we find it unnecessary to presently deal with them. The order under review is vacated and the case remanded to the Board for proceedings not inconsistent with this opinion. 58