Opinion ID: 313092
Heading Depth: 2
Heading Rank: 1

Heading: Requirements of the Administrative Procedure Act

Text: 35 Petitioner argues that the administrative procedures followed by the Commission in setting the rates under review were so defective that they must be held invalid. The contention is that the Natural Gas and Administrative Procedure Acts require that the Commission engage in so-called formal rule-making as described in sections 556 and 557 of the APA. 29 Under these sections parties have the right to submit evidence and engage in some form of cross-examination; this is essentially rule-making using adjudicative procedures. 36 On the other hand, the FPC believes that it may proceed in an informal manner under section 553 of the APA. 30 These informal procedures require only that notice of the proposed rule be given in the Federal Register and that interested parties be permitted to comment on the rule. 37 The positions taken by the parties present the court with a mutually exclusive, either-or choice: if the Commission may use the informal procedures of section 553, then arguably the procedures used to set the rates under review were adequate; if the FPC may only make rates by using the formal procedures of sections 556 and 557, then the procedures used here were inadequate and the orders under attack must be set aside. 38 We decline to hold that the Commission is required by either statutory language or the Constitution to observe strictly the procedures outlined in sections 556 and 557 of the APA. 31 Although the Commission is not required to proceed with the rigor urged by petitioner, for other reasons we believe that the procedures employed here were inadequate and the rate orders under attack must be set aside. 39 The two extreme positions taken by the opponents in this case were founded upon a misconception of the separate and composite requirements of the Administrative Procedure Act, the Natural Gas Act, several opinions of this court and the Supreme Court's opinions in Morgan v. United States and United States v. Florida East Coast Railway Co. 32 Within the baroque structure created by these converging elements, there is admittedly some room for confusion. With a full realization that our efforts may not be altogether successful, we first turn to an elucidation of this complex and oftentimes puzzling area of the law.
40 Petitioner argues that the formal procedures outlined in sections 556 and 557 of Title 5 U.S.C. should have been followed in setting the disputed rates. These formal procedures by their terms, however, are only required when the substantive statute (in this case the Natural Gas Act) requires that rules be made on the record after opportunity for an agency hearing. 33 The Natural Gas Act does not provide on its face that rates will be made by an on the record proceeding. Taking the language of the APA and the Natural Gas Act together, but nothing else at this time, the strictures of sections 556 and 557 need not be followed here. 41 There is some danger in according too much weight to magic words such as on the record. However, the Supreme Court's recent opinion in United States v. Florida East Coast Railway Co. 34 emphasized the importance of this phrase and virtually established it as a touchstone test of when section 556 and section 557 proceedings are required. The Interstate Commerce Commission statute under which the rates were promulgated in Florida East Coast required that there be a hearing, but did not specify what sort of hearing should be held. 35 Most significantly, the ICC statute did not require that they be made on the record. 42 The fact that a hearing was required was accorded no particular significance by the Court. This was interpreted as merely a statement of Congressional intent to require a hearing of some sort-either formal or informal- but was of no help in determining which kind. In addition, the Court found nothing in the legislative history that indicated that Congress intended the ICC to use formal procedures in this context. 36 Finally, the Court disposed of the argument that the Constitution required more exhaustive proceedings than had been accorded. 37 43 Although the situation in Florida East Coast is distinguishable in several critical aspects from the instant case, 38 we believe it is controlling on the narrow point of whether the Commission must rigorously comply with the standards of sections 556 and 557 of the APA. The Natural Gas Act does not on its face require that rates be made on the record and we can find nothing in the Act's legislative history indicating that Congress felt that on the record rule-making, with all its procedural formalities, was required in this case.
44 We conclude that the FPC need not employ the precise procedures set forth in sections 556 and 557 of the APA. It does not follow, however, that the Commission may proceed with only the guidance of the less rigorous standards of section 553. 39 The Commission's position assumes that there are only two permissible forms of procedures cognizable under the APA, that the two are mutually exclusive, and that their existence precludes the use of any other procedures that lie between them. 40 This rigid interpretation of what is permitted and required under the APA is inaccurate, as it would not meet the multifarious situations arising before the numerous agencies charged with the administration of various and varied statutes. 45 Flexibility in fitting administrative procedures to particular functions is critically important in evaluating the APA and has been a dominant theme in a number of opinions by this court. No court, to our knowledge, has ever treated the explicit language of section 553 on the one hand and sections 556 and 557 on the other as expressing every type of procedure that might be called for in a particular situation. 46 The entire thrust of our opinion in City of Chicago v. FPC 41 was that artificial distinctions based upon the language of the APA should be avoided in determining what procedure should be followed. There we had before us a dispute regarding the type of procedures called for, in effect the reverse of the situation here: 47 Petitioner claims that the proceeding was intended by the Commission, and understood by the parties, to be an adjudicatory one but that the Commission impermissibly changed it to a rule-making proceeding at the last minute. . . . 48 In many cases, it is unnecessary, and even unwise, to classify a given proceeding as either adjudicatory or rule-making. The line between the two is frequently a thin one and resolution of a given problem will rarely turn wholly on whether the proceeding is placed in one category or the other. Moreover, obsession with attempts to place agency action in the proper category may often obscure the real issue which divides the parties and requires our resolution. 42 49 Our City of Chicago opinion also emphasized that strict adherence to the explicit dictates of the APA was not the primary test of the appropriateness of a particular type of procedure. Rather, the primary objective is the acquisition of information which will enable the Commission to carry out effectively the provisions of the Natural Gas Act. 43 To this end the Commission should realistically tailor the proceedings to fit the issues before it, the formation it needs to illuminate those issues and the manner of presentation . . . . 44 50 Support for this flexible interpretation of the APA may be observed in other areas of administrative law. In American Airlines v. CAB, 45 this court sitting en banc articulated this approach in approving procedures that were more rigorous than those of section 553 and less rigorous than those of sections 556 and 557: 51 This court has indicated its readiness to lay down procedural requirements deemed inherent in the very concept of fair hearing for certain classes of cases, even though no such requirements had been specified by Congress. Gonzalez v. Freeman, 118 U.S.App.D. C. 180, 334 F.2d 570 (1964); Pollack v. Simonson, 121 U.S.App.D.C. 362, 350 F.2d 740 (1965). 46 52 In considering the appropriateness of procedures we bear in mind this court's observation in American Airlines that [i]t is part of the genius of the administrative process that its flexibility permits adoption of approaches subject to expeditious adjustment in the light of experience. 47 53 We quite recently had occasion to apply these general principles in International Harvester Co. v. Ruckelshaus, 48 in which we considered what procedures were required in promulgating emissions control standards for automobiles. We did not resolve the issue by forcing the problem into the artificial cubbyholes of informal versus formal. Rather, we examined what Congress intended to be accomplished when it called for hearings on pollution controls. We emphasized the procedures in fair contemplation required of the agency, in order to permit the reviewing court to conduct the kind of judicial review contemplated by Congress. The court concluded that emissions standards involved a determination of general policy of the sort amenable to legislative type hearings. We held these general policy questions to be inextricably bound up with relatively specific factual issues of the sort that ordinarily require testing by cross-examination and other adjudicatory procedures. 54 The court rejected, however, the argument that there was a general right to cross-examine witnesses to the same extent that might be permissible if the action were before a court of law. We reasoned that such a broad right would make the proceedings unduly cumbersome and, far from advancing the public interest, might actually inhibit the attainment of the ultimate goal to which the statute was directed. 49 We concluded that permitting the submission of pre-screened written questions would achieve the dual goals of adequately illuminating factual disputes while not unduly burdening the process with adjudicative procedures inappropriate for the specific job required under the statute. We did indicate that a limited right of cross-examination was to be provided with respect to certain types of issues that required cross-examination for fair ventilation. 55 The approach employed in International Harvester and other cases is entirely consistent with the language of the APA. The statute has long been interpreted as permitting an agency to provide more than the bare minimum described in section 553. 50 By like token, the formal proceedings of sections 556 and 557 do not require that full adjudicative methods be employed in every situation that may fall within its ambit. Thus, subsection (d) of section 556 provides that in rule making . . . an agency may, when a party will not be prejudiced thereby, adopt procedures for the submission of all or part of the evidence in written form. 51 Even a superficial reading of the APA's legislative history shows that far from wanting to force agency procedures into narrowly defined categories, Congress was primarily concerned with fitting procedures to agency functions. 52 56 The APA may be viewed as providing the outer boundaries of administrative procedures. Congress has determined that the procedures outlined in section 553 will be the minimum protections upon which administrative action may be based, according to interested parties a simple notice and right to comment. At the opposite end of the spectrum lie the requirements of sections 556 and 557. Those may be viewed as representing the highest degree of administrative protection that Congress believed would be necessary to protect interested parties. There is no reason, however, to conclude that Congress in establishing these limits intended to preclude all the possible formulations that might lie in between the two extremes. To so hold would run directly counter to several opinions of this court that have approved or required procedures that contained elements of both section 553 and section 556 and 557 proceedings, but fully conform to neither. 53 57 To permit flexibility under the APA does not, however, mean that agencies are granted carte blanche to proceed in any way they may see fit. Flexibility is not synonymous with uncontrolled discretion. Furthermore, the FPC may have interpreted this court's prior comments on the subject as permitting whatever the agency thought proper so long as it did not fall beneath the minimum of section 553. This unfortunate reading may have been the basis for the Commission's belief that the superficial hearings, conferences, accorded in this case were adequate. 58 Such a reading of the Act and our opinions is simply incorrect. It is true that the nature of a particular regulatory scheme may permit or even require less than the formal procedures of sections 556 and 557. It is equally true, however, that an examination of the purposes and provisions of the substantive statute being administered may require that more than the comparatively feeble protections of section 553 of the APA may be called for. A final determination of what procedures are appropriate here must turn upon an analysis of the regulatory scheme envisioned by Congress in passing the Natural Gas Act and a determination of what is necessary to effectuate the policies of this regulatory statute. 59