298 U.S. 468 (1936), 686, Morgan v. United States

Docket Nº:No. 686
Citation:298 U.S. 468, 56 S.Ct. 906, 80 L.Ed. 1288
Party Name:Morgan v. United States
Case Date:May 25, 1936
Court:United States Supreme Court

Page 468

298 U.S. 468 (1936)

56 S.Ct. 906, 80 L.Ed. 1288



United States

No. 686

United States Supreme Court

May 25, 1936

Argued April 29, 30, 1936




1. Under § 310 of the Packers & Stockyards Act, a hearing is prerequisite to a valid order of the Secretary of Agriculture fixing rates for Market Agencies. P. 473.

2. Upon review under the Packers & Stockyards Act of an order of the Secretary of Agriculture fixing rates of such agencies, all questions touching the regularity and validity of the proceedings before the Secretary are open. P. 477.

3. The Secretary's recitals of his procedure in such cases are not conclusive on the question whether the statutory requirements were obeyed. Id.

4. If, upon the facts alleged before the court on review of the Secretary's order, the full hearing required by the Act was not given, the plaintiffs are entitled by the terms of the Act itself to prove the facts and have the order set aside. Id.

5. It is not essential to the validity of a rate order made by the Secretary of Agriculture under the Packers & Stockyards Act that each of several respondents be given a separate hearing, or that a preliminary report be made by the examiner who took the testimony and be submitted to the parties in order that they may take their exceptions and address their arguments to the points thus raised. P. 478.

6. The function of the Secretary of Agriculture in fixing rates under the Packers & Stockyards Act is not that of ordinary executive action, but is both legislative and judicial in quality; fundamental procedural requirements must be obeyed; a full hearing of both evidence and argument must be given; nothing can be treated as evidence which is not introduced as such; facts and circumstances which ought to be considered must not be excluded, and those that should not legally influence the conclusion must not be considered; findings based on the evidence must embrace the basic facts needed to sustain the order. P. 479.

7. An order of the Secretary of Agriculture fixing rates for Market Agencies under the Packers & Stockyards Act is invalid if the evidence and arguments were heard and considered by an assistant to the Secretary, but not by the Secretary himself . P. 481.

Page 469

8. If the duty of ascertaining and fixing just and reasonable rates for Market Agencies, imposed by the Packers & Stockyards Act on the Secretary of Agriculture, may lawfully be delegated by him in a particular case to an assistant -- a question not here presented or determined -- it would be for the assistant to make the order, as well as to conduct the hearing. Pp. 478, 481.

8 F.Supp. 766 reversed.

Appeals from decrees of the District Court of three judges dismissing fifty bills brought by Market Agencies, under the Packers & Stockyards Act, to enjoin the enforcement of an order of the Secretary of Agriculture fixing maximum rates to be charged by them for buying and selling livestock. The cases were consolidated in the court below for trial.

Page 471

HUGHES, J., lead opinion

MR. CHIEF JUSTICE HUGHES delivered the opinion of the Court.

These are fifty suits, consolidated for the purpose of trial, to restrain the enforcement of an order of the Secretary of Agriculture fixing the maximum rates to be charged by market agencies for buying and selling livestock at the Kansas City Stock Yards. Packers and Stockyards Act 1921, 42 Stat. 159, 7 U.S.C. §§ 181-229.

Page 472

The proceeding was instituted by an order of the Secretary of Agriculture in April, 1930, directing an inquiry into the reasonableness of existing rates. Testimony was taken, and an order prescribing rates followed in May, 1932. An application for rehearing, in view of changed economic conditions, was granted in July, 1932. After the taking of voluminous testimony, which was concluded in November, 1932, the order in question was made on June 14, 1933. Rehearing was refused on July 6, 1933.

Plaintiffs then brought these suits attacking the order, so far as it prescribed maximum charges for selling livestock, as illegal and arbitrary and as depriving plaintiffs of their property without due process of law in violation of the Fifth Amendment of the Constitution. The District Court of three judges entered decrees sustaining the order and dismissing the bills of complaint. 8 F.Supp. 766. Motions for rehearing were denied and, by stipulation, the separate decrees were set aside and a joint and final decree was entered to the same effect. Plaintiffs bring this direct [56 S.Ct. 908] appeal. 7 U.S.C. § 217; 28 U.S.C. § 47.

On the merits, plaintiffs assert that the ultimate basis for the reduction in commission rates is the Secretary's opinion that there are too many market agencies, too many salesmen, and too much competition in the business; that the Secretary has departed entirely from the evidence as to the actual cost of employing salesmen in selling cattle at these yards, and has made an allowance for salaries which is based on pure speculation and is wholly inadequate to meet the cost of the service; that he has substituted in place of his accountants' figures as to actual expenditures, with respect to the item entitled "Business Getting and Maintaining Expense," a hypothetical allowance greatly less than actual cost, and that the Secretary has thus made findings without evidence, and an order, essentially arbitrary, which prescribes

Page 473

unreasonable rates. The Government answers that, while the Secretary is not authorized expressly to prescribe or limit the number of firms that may engage in the market agency business, he is under a duty to take cognizance of evidence tending to show that, under present competitive conditions, certain costs actually incurred are unreasonable; that, in determining what are just and reasonable rates, he must give consideration to evidence of the excessiveness of costs, and, if such evidence shows that there are many market agencies not receiving a sufficient volume of business to entitle their costs to be regarded as reasonable, the Secretary must take cognizance of that fact; that it was in this view that the Secretary made certain findings as to the inadequacy of the present business at the stockyards to support economically all the firms now striving to make a profit; that his findings, supported by evidence, were directly pertinent to the determination of reasonable costs, and, so determining, the Secretary was authorized to fix the rates prescribed in his order.

Before reaching these questions, we meet at the threshold of the controversy plaintiffs' additional contention that they have not been accorded the hearing which the statute requires. They rightly assert that the granting of that hearing is a prerequisite to the making of a valid order. The statute provides (42 Stat. 159, 166, § 310; 7 U.S.C. § 211):

Sec. 310. Whenever after full hearing upon a complaint made as provided in § 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 --

Page 474

(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.

The allegations as to the failure to give a proper hearing are set forth in paragraph IV of the bill of complaint, quoted in full in the margin. * The allegations in substance are: that separate hearings were not accorded to [56 S.Ct. 909] the respective respondents (plaintiffs here). That, at the

Page 475

conclusion of the taking of the testimony before an examiner, a request was made that the examiner prepare a tentative report, which should be subject to oral argument and exceptions, so that a hearing might be had before the Secretary without undue inconvenience to him, but that the request was denied, and no tentative report was exhibited to plaintiffs and no oral argument upon the issues presented by the order of inquiry and the evidence was at any time had before the Secretary. That the Secretary, without warrant of law, delegated to Acting Secretaries the determination of issues

Page 476

with respect to the reasonableness of the rates involved. That, when the oral arguments were presented after the original hearing, and after the rehearing, the Secretary was neither sick, absent, nor otherwise disabled, but was at his office in the Department of Agriculture, and the appointment of any other person as Acting Secretary was illegal. That the Secretary, at the time he signed the order in question, had not personally heard or read any of the evidence presented at any hearing in connection with the proceeding, and had not heard or considered oral arguments relating thereto...

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