Court Opinion

ID: 6915829
Source: CourtListenerOpinion
Date Created: 2022-07-23 22:40:59.746072+00
Date Added: 2024-06-11T16:06:39.346098
License: Public Domain

BAZELON, Circuit Judge
(dissenting).
It is in the public interest that the people of Florida receive natural gas service as expeditiously as possible. But hasty contrivance may make for a project of such doubtful feasibility as to delay rather than expedite the desired service. Moreover, a speedy conclusion, however desirable, is not to be achieved at the expense of procedural fairness. I would reverse the grant of these certificates because the Commission’s procedure was unfair. The legality or feasibility of the certificated project are questions I need not reach as I view the case. Whatever doubts the record discloses as to those questions serve, however, to emphasize the significance of the procedural deficiencies.

Omission of Intermediate Decision Procedure

On December 6, 1956, after almost five months of hearings before a hearing examiner, in the course of which a record of some 20,000 pages was made, the Commissioner found “that unless final action is taken by the Commission prior to December 81, 1956, the gas purchase contracts of Coastal will be subject to cancellation, and unless the intermediate decision procedure is omitted, it appears that a decision by the Commission cannot be rendered before December 21, 1956.” Accordingly, it ordered omission of intermediate decision procedure and undertook to “render final decision in the proceedings.”
Section 8 of the Administrative Procedure Act, 5 U.S.C.A. § 1007, reflected in the Commission’s Rules of Practice and Procedure, 18 C.F.R. §§ 1.30, 1.31, establishes the procedure by which administrative agencies are to decide pro*650ceedings before them. In general, it is contemplated that the officer who hears a case will render an initial decision, or, if the Commission itself renders the initial decision, the officer shall first submit a recommended decision. Prior to any initial or recommended decision, the parties shall file proposed findings and conclusions. Before final decision, the parties shall have the right to file exceptions to the initial decision. All rulings upon proposed findings or conclusions and upon exceptions are to be shown in the record.
This procedure gives reasonable assurance that the final decision of the agency will reflect the evidence produced before the hearing examiner and that issues fairly raised will have been considered and decided. It also produces an administrative record which is amenable to judicial review. The task we face in measuring the agency’s final decision against 20,000 pages of evidence would have been immeasurably simplified had-the issues been progressively sharpened at the various stages of the intermediate decision procedure. ' There can be no question that this procedure is generally desirable. There may, however, be occasional emergencies requiring a calculated risk of error in order to achieve a ■ speedy decision. For such emergencies it is provided that the agency may omit the entire intermediate decision procedure in an application for an initial license1 and may itself render a final decision on the record taken by the hearing examiner, if “the agency finds upon the record that due and timely execution of its functions imperatively and unavoidably so requires.” (Emphasis supplied.)
In the instant case, the Commission made this finding in the very words of the statute. The finding, as has been noted, was explained in terms of the possible cancellation of gas purchase contracts upon which the project depended, “unless final action is taken by the Commission prior to December 31, 1956.” The Commission recognized that its action might make it seem that it was permitting applicants to control the procedure by fixing contract dates, but it asserted that :it was really doing no such thing, rather “giving primary consideration to the public interest.”
It is obvious, as the Commission recognized, that it is unjustifiable to forego the security of the intermediate decision procedure simply because applicants fix arbitrary contract dates, for that would presage an early end to the whole scheme of administrative procedure so painstakingly established by Congress. What the Commission found in this case, to justify omitting the initial decision procedure, over and above the applicants’ shotgun contract dates, does not appear. And it is not for us, of course, to supply deficiencies in the Commission’s findings.
If it were our function to examine the record for the purpose of determining what justification existed for omitting the intermediate decision procedure, my reading of the record would tend to undermine rather than support the Commission’s findings that omission was “imperatively and unavoidably” required. The record shows that, though the gas supply contracts gave the suppliers an option to cancel if the project were not certificated by a certain date, the date in question had originally been July 1956 in some of the contracts and had been extended. There is nothing in the record to show that the option date would not have been extended again. Nor was any evidence presented that the options to cancel would have been exercised if there were not a certificate by December 31, 1956. The possibility of cancellation, so far as appears from the record, never became more than a mere possibility. The Commission, indeed, found only that the contracts would “be subject to cancellation,” not that they would be cancelled.
The.lack of basis for the Commission’s action is shown by subsequent events. The Commission found that the contracts *651would be subject to cancellation “unless final action is taken by the Commission prior to December 31, 1956.” 1a But, despite precipitate procedure, there was in fact no final action by the Commission prior to December 31, 1956. The Commission’s Opinion No. 301 of December 28, 1956, found the proposal in “substantial” respects not to meet the public convenience and necessity2 and it offered a certificate only with conditions. It disclosed that “although the conditions * * * are substantial, the alternative is to deny the applications.” The applicants found this conditional grant unacceptable. They applied, instead, on January 24, 1957, for elimination of some of the conditions. Not till February 21, 1G57, did the Commission resolve the question of elimination of the controversial conditions. And not till March 22, 1957, did the applicants accept their certificates of public convenience and necessity. Not a single one of the gas suppliers, so far as the record shows, exercised its option to cancel its contract during this delay of almost three months beyond the shotgun date.
There was thus no justification for taking the calculated risk of error inherent in omission of the intermediate decision procedure. Moreover, by its subsequent actions, as I shall now show, the Commission so greatly enhanced the possibility of error as to invalidate the proceedings.

The Decision

The hearings closed on November 28, 1956. The record of some 20,000 pages presumably reached the Commission on or after December 6, 1956, when it ordered omission of intermediate decision procedure.3 Twenty-two days later the Commission issued its thirty-one page majority opinion and the five page dissent of two of its members. In that twenty-two day period, without the benefit of an initial or recommended decision prepared by the examiner who heard the evidence, or exceptions thereto filed by the parties, the five members of the Commission would have had to study the entire record, consider and decide the case, and prepare their opinions. Assuming that the Commissioners had no other functions to perform; assuming further that they commenced reading the record on November 28, 1956, as soon as the hearings closed and even before they had decided to omit the intermediate decision procedure; assuming further that hearing oral argument, reading the briefs filed by the parties, conferring, and writing the opinions took no time at all; and assuming finally that they worked every day, including Sundays and Christmas day; merely to have read the record, each of the five Commissioners would have had to read between 600 and 700 pages each day.4 We need *652not, and I do not, undertake to decide how fast an administrative agency may work. It is our concern, however, to decide' whether there has been a fair and substantial hearing. “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.” Morgan v. United States, 1936, 298 U.S. 468, 481-482, 56 S.Ct. 906, 912, 80 L.Ed. 1288. Only by closing our eyes to reality can we hold that the Commission did “consider and appraise the evidence” here.
Respondent argues but feebly against the arithmetical impossibility of a fair and substantial hearing.5 Its position seems to be, however, that lack of a fair and substantial hearing is not prejudicial so long as the decision happens to be supported by the evidence. We cannot assume that extremely complex issues are correctly resolved by mere accident. And we should not assume that the Commission allowed its staff, which was fully familiar with the record through participation in the hearings, to play an undisclosed role in the decisional process. What respondent’s argument comes to is that the lack of a substantial hearing can be remedied mmc pro tunc by having the reviewing court “consider and appraise the evidence,” and in effect, re-promulgate the determinations which were invalid when made. That is not our function.6

Post-Decision Proceedings

In its Opinion No. 301, issued on December 28, 1956, the Commission found the applicants’ proposals deficient in respects which made them inconsonant with public convenience and necessity. It held that the applications as they stood would have to be denied. Instead *653of denying them, however, it offered the applicants an opportunity to file new tariffs, new service agreements and a new financing plan along lines suggested in the opinion and it proceeded to issue certificates of public convenience and necessity conditioned upon the filing of such revised proposals. Thereafter, the applicants applied for rehearing seeking elimination of some of the Commission’s conditions and undertaking to comply with others. Petitioner sought to oppose this application, but its opposition was rejected by the Commission’s secretary. Petitioner then appealed to the Commission from this rejection. On February 21, 1957, the Commission issued an order modifying the conditions it had imposed in its Opinion No. 301 and denying petitioner’s appeal from the Secretary’s refusal to accept its opposition.
The Commission held that a party’s right to a hearing expires with the Commission’s order granting a certificate, even a conditional one, and that subsequent proceedings in connection with the propriety of or compliance with the conditions may be ex parte. It said in its order of February 21, 1957:
“No party can question the Commission’s power under Section 7(e) to ‘attach to the issuance of the certificate and to the exercise of the rights granted thereunder such reasonable terms and conditions as the public convenience and necessity may require,’ as the Act in terms provides. Clearly, under the statute, the only hearing required to support the imposition of a condition which is reasonable and required by public convenience and necessity is the specific and only hearing for which the pertinent section makes provision — the hearing on the certificate application. That hearing was had, and was full and adequate. The record was extensive and on the basis of it the Commission could either accept the project as proposed or at its discretion impose the reasonable conditions the public convenience and necessity required to bring the tariff and financing proposals into conformity with the Act’s standards. We chose the latter course.”
I note, but pass over, the Commission’s seeming failure to reckon with the provision of § 7(e) of the Natural Gas Act, 15 U.S.C.A. § 717f(e), that, if it does not find that the proposal is required by the public convenience and necessity, “such application shall be denied.” Nor do I think we need decide whether the power given the Commission by that section “to attach to the issuance of the certificate * * * such reasonable terms and conditions as the public convenience and necessity requires,” authorizes the Commission to convert an invalid proposal into a valid one. What concerns me is an apparent subversion of the legislative scheme that contested applications for certificates of public convenience and necessity be examined under the flood-lights of an adversary hearing.
Congress intended, both by the Natural Gas Act and by the Administrative Procedure Act, that, when there are parties in interest asserting that the certificate applied for will not serve the public convenience and necessity, the parties should be given a fair and substantial hearing and the issues should be decided on the basis of evidence taken at such hearing. If that evidence supports a grant, the certificate should be issued. If it does not, the certificate should be denied. To the extent that the Commission has power to grant a certificate on condition that the proposal be amended, the certificate may be granted only if the evidence in the record supports it. The Commission may not, after finding from the evidence that a proposed project will not serve the public convenience and necessity, approve, ex parte and without additional hearing, a new proposal not covered by the evidence taken at the hearing. The Commission argued, in rejecting petitioner’s opposition to the revised project, (1) that the only hearing required by law is “the hearing on the certificate application”; and (2) that it *654has the power to grant a certificate upon any condition which is reasonable and required by public convenience and necessity. From this it reasoned that, when a proposal is found on the evidence not to serve public convenience and necessity, it need neither reject it nor hold further adversary proceedings to determine whether a revised proposal would serve public convenience and necessity; but that it may simply banish the opponents from the proceedings and thereafter negotiate in camera with the proponents for a desirable proposal. This is fallacious reasoning which makes a farce of administrative procedure.
Counsel for the Commission now defend the Commission’s banishment of petitioner on a different ground. They argue that further proceedings were unnecessary, not on the technical ground that there had already been “the hearing,” but because the revisions of the project were covered in and are amply supported by the evidence. But we must judge the Commission’s action in the light of the reason it gave in taking it, not that of its counsel in defending it. Securities and Exchange Commission v. Chenery Corp., 1943, 318 U.S. 80, 87, 63 S.Ct. 454, 87 L.Ed. 626. If the evidence is indeed sufficient to support the revised project, we are entitled to have the Commission so find. Should we, absent such a finding, undertake to determine the sufficiency of the evidence, we should1, soon find ourselves in deep water. For example, in its Opinion No. 301, the-Commission found, with respect to rates-proposed to be charged the power companies for transportation of gas, that,, “although the evidence is not sufficient to enable a determination of precisely what the proper rate should be, it sufficiently supports the conclusion that Houston Gas’ presently proposed rates-are not designed to require each class of service to bear its proper share of' costs.” Thereafter, in compliance with conditions imposed by the Commission, Houston Gas proposed to increase the-transportation rate by two cents per thousand cubic feet. If we are to read' the Commission’s findings to mean that, the evidence does not permit any determination of what the proper rate-should be, it follows that there is- nothing to support the sufficiency of the increased’ rate. If the Commission meant only that the “precisely” proper rate could not be determined from the evidence, but that an approximately proper rate could be determined, perhaps the two cent increase brought the rate within the approximation. But, so to find, we should have to determine initially, from all the-accounting exhibits and other evidence, what the approximately proper rate should be. That prospect does not persuade me to depart from the rule of the Chenery case.

. Cf. Chotin Towing Corp. v. F. P. C., 102 U.S.App.D.C.-, 250 F.2d 394.

. That the contracts were conditioned on “final action” by the Commission by December 31, 3956, rather than merely the issuance of a conditional certificate of public convenience and necessity was found by the Commission; — not, as footnote 17 of the majority opinion states, “suggested” by me. It may be possible to construe the contracts to mean that any certificate, even a conditional one, would terminate the options to cancel. But the Commission did not so construe them. I do suggest that the court is not warranted in substituting its construction of the contracts for the construction adopted and acted upon by the Commission.

. The dissenting Commissioners said: “The conditions found necessary in the opinion and order of the majority confirm the fact that the project as proposed is economically impossible of completion.”

. The record had been certified to the Commission on November 16, 1956, in connection with the motion for omission of the intermediate decision procedure. In certifying it, however, the hearing examiner pointed out that it was only partial, since a dozen witnesses remained to be cross-examined and one or more interveners or groups of interveners were still expected to present their affirma.tive cases.

. The respondent argues in its brief that most of the record deals with matters so “noncontroversial” that “there would be little practical need for their being read.” If that fact is true, the use of *652the intermediate decision procedure would have disclosed it. But the Commission, confronted with a raw record of evidence received by a hearing examiner as relevant and material, must assume that all of it is significant enough to be read. How the Commission was supposed to know which parts of the record there was “little practical need” to read the respondent does not suggest.

. See note 4, supra.

. We need not delve deeply into the record to conclude that the determination that the public convenience and necessity requires the project is not as clearly supported by the evidence as respondent suggests. It is enough to refer to the opinion of the two dissenting Commissioners, which begins as foEows:
“The evidence and testimony of record, all fuHy tested on cross-examination and rebuttal, aE fully briefed and argued, discloses the inherent weaknesses in this application. The conditions found necessary in the opinion and order of the majority confirm the fact that the project as proposed is economically impossible of completion. Even in the form which it would take if the conditions were met it would contain so many compromises with principle and rest on so much speculation for its success that the Act does not permit a finding that the public convenience and necessity requires its construction and operation.
“Let one thing be clear at the outset. This statement is addressed to these particular projects, the one proposed and the one which would be created if conditions were met, and to those projects only. By no means do I oppose bringing natural gas into peninsular Florida nor do I disagree that the economy of the State would benefit from its introduction — if it could be done on an economically sound basis. But the economy most emphatically would not benefit if the project to bring it there were not economically sound. And those in issue here are not. Accordingly I am reluctantly, but inevitably, forced to dissent.
“The project as proposed is plainly impossible unless the Commission surrenders all significant control over matters of regulatory concern to contractual agreement between the applicant and the customer for 60% of its service. This, necessarily, the Commission has refused to do. I do not believe it should make the gesture of offering the unacceptable alternative. I feel the certificate is unacceptable because under its terms the principal customers, the power companies, cannot be expected to go along unless the Commission makes concessions in rate making principles which I do not feel are justified at this time on this record. And if they do not go along, the project is not feasible.”