National Tour Brokers Ass'n v. U.S., 77-1501

Decision Date07 July 1975
Docket NumberNo. 77-1501,77-1501
PartiesNATIONAL TOUR BROKERS ASSOCIATION, Petitioner, v. UNITED STATES of America and the Interstate Commerce Commission, Respondents, American Society of Travel Agents, Inc., High Adventure Tours, Inc., Campus Travel, Inc., et al., American Bus Association, Intervenors. . Argued 27 Oct. 1978. Decided 11 Dec. 1978. David I. Granger, Washington, D.C., with whom Harold D. Murry, Jr., Washington, D.C., was on the brief, for petitioner. Alan J. Thiemann, Atty., I.C.C., Washington, D.C., with whom Mark L. Evans, Gen. Counsel, Henri F. Rush, Associate Gen. Counsel, I.C.C. and Robert L. Thompson, Atty., Dept. of Justice, Washington, D.C., were on the brief, for respondents. Drew L. Carraway, John W. McFadden, Jr., Washington, D.C., John S. Fessenden, Arlington, Va., and Charles A. Webb, Washington, D.C., were on the brief, for intervenor, American Bus Association. Robert E. Goldstein, New York City, was on the brief, for intervenor, Campus Travel, Inc., et al. Also James H. Glavin, III, Waterford, N.Y., entered an appearance for intervenor, High Adventure Tours, Inc. Also Paul S. Quinn, Washington, D.C., entered an appearance for intervenor, American Society of Travel Agents, Inc. Also Robert B. Nicholson and Robert S. Burk, Attys., Dept. of Justice, Washington, D.C., entered appearances for respondent, United States of America. Before LUMBARD, * Senior Circuit Judge for the Second Circuit, and TAMM and WILKEY, Circuit Judges. Opinion for the Court filed by WILKEY, Circuit Judge. WILKEY, Circuit Judge: Petitioner seeks review of an order of the Interstate Commerce Commission (Commission or ICC) which prescribes new rules, and adopts new procedures, for the licensing of tour brokers. 1 Since we find that the Commission failed to comply with the procedural requirements of the Administrative Procedure Act, we vacate the order and rules prescribed thereunder, and remand to the Commission. I. BACKGROUND On 22 September 1975 the Interstate Commerce Commission had published in the Feder
CourtU.S. Court of Appeals — District of Columbia Circuit

David I. Granger, Washington, D.C., with whom Harold D. Murry, Jr., Washington, D.C., was on the brief, for petitioner.

Alan J. Thiemann, Atty., I.C.C., Washington, D.C., with whom Mark L. Evans, Gen. Counsel, Henri F. Rush, Associate Gen. Counsel, I.C.C. and Robert L. Thompson, Atty., Dept. of Justice, Washington, D.C., were on the brief, for respondents.

Drew L. Carraway, John W. McFadden, Jr., Washington, D.C., John S. Fessenden, Arlington, Va., and Charles A. Webb, Washington, D.C., were on the brief, for intervenor, American Bus Association.

Robert E. Goldstein, New York City, was on the brief, for intervenor, Campus Travel, Inc., et al.

Also James H. Glavin, III, Waterford, N.Y., entered an appearance for intervenor, High Adventure Tours, Inc.

Also Paul S. Quinn, Washington, D.C., entered an appearance for intervenor, American Society of Travel Agents, Inc.

Also Robert B. Nicholson and Robert S. Burk, Attys., Dept. of Justice, Washington, D.C., entered appearances for respondent, United States of America.

Before LUMBARD, * Senior Circuit Judge for the Second Circuit, and TAMM and WILKEY, Circuit Judges.

Opinion for the Court filed by WILKEY, Circuit Judge.

WILKEY, Circuit Judge:

Petitioner seeks review of an order of the Interstate Commerce Commission (Commission or ICC) which prescribes new rules, and adopts new procedures, for the licensing of tour brokers. 1 Since we find that the Commission failed to comply with the procedural requirements of the Administrative Procedure Act, we vacate the order and rules prescribed thereunder, and remand to the Commission.

I. BACKGROUND

On 22 September 1975 the Interstate Commerce Commission had published in the Federal Register a Notice and Order 2 which provided, in pertinent part, as follows:

ENTRY CONTROL OF BROKERS

Notice of Proceeding

Purpose: The Interstate Commerce Commission has always endeavored to review the current extent of its jurisdiction over the surface transportation industry And to propose to the Congress appropriate legislation which would alter that jurisdiction, pursuant to the provisions of the Interstate Commerce Act. The purpose of this document is to institute a proceeding to investigate the need for continued regulation of brokers of property and passengers, operating in interstate or foreign commerce, And to consider what, if any, legislative amendments of Section 211 of the Act ought to be recommended to the Congress.

It is ordered, That based on the reasons set forth in the attached notice, a proceeding be, and it is hereby, instituted (1) for the purposes of investigating the present licensing requirements for brokers of property and passengers, operating in interstate or foreign commerce, And (2) for the possible formulation of legislation which would amend Section 211 of the Interstate Commerce Act for subsequent recommendation to the Congress.

I. On July 7, 1975, the Interstate Commerce Commission announced the results of an internal staff study of the Agency's operations. The unprecedented "Blue Ribbon Staff Study Panel" made four reports to the Commission, including over 60 recommendations for internal, procedural, and substantive reform. Among these was the recommendation that Section 211 of the Interstate Commerce Act be amended so as to eliminate entry control requirements for broker licenses.

(I)n light of the study panel's recommendation and our continuing interest in scrutinizing the scope of this Commission's regulatory jurisdiction, we deem it in the public interest to institute this proceeding to consider (1) the need for and effectiveness of Section 211 of the Interstate Commerce Act in its present form, And (2) any possible legislative amendments to that section which should be proposed to the Congress.

This Commission, however, would appreciate the views, comments, and suggestions of any interested parties relating to the above inquiries And to any possible, pertinent, and constructive legislation we may propose to the Congress in this area.

A period of comment followed, during which written statements were received. The Commission then closed the record but, upon request from National Tour Brokers Association (NTBA), reopened the proceeding to hear oral argument on 9 August 1976. 3

In April of the following year, rather than proposing legislative changes to Congress, the Commission issued final rules involving both substantive and procedural changes with regard to the licensing of tour brokers. 4

On 8 July 1977 NTBA filed a "Petition to Reconsider and Vacate Report and Order and for Further Relief" (Petition for Reconsideration). This petition alleged six specifications of error, the first of which was:

(A) That the purported Notice initiating the proceeding, later characterized by the Commission as a notice of proposed rulemaking, failed to comply with the Administrative Procedure Act and the requirements of constitutional due process; . . . 5 By order served 26 August 1977, the Commission denied the Petition for Reconsideration, disagreeing with each specification of error. 6

NTBA is now before this court seeking review of the Commission's action. 7

II. ANALYSIS

We hold that in this case the ICC failed to comply with the notice requirements of the Administrative Procedure Act. Section 4(a) of the Act (5 U.S.C. § 553(b)) provides:

General notice of proposed rule making shall be published in the Federal Register, unless persons subject thereto are named and either personally served or otherwise have actual notice thereof in accordance with law. The notice shall include

(1) a statement of the time, place, and nature of public rule making proceedings;

(2) reference to the legal authority under which the rule is proposed; and

(3) either the terms or substance of the proposed rule or a description of the subjects and issues involved.

A. Constructive Notice

The first clause of § 553(b) provides for constructive notice: "General notice of proposed rule making shall be published in the Federal Register." We are unable to find that the Commission satisfied this requirement. 8 It is true that the Commission published a general notice in the Federal Register, but it was not a notice of proposed rulemaking. A fair reading of that item clearly indicates that it was one looking toward the formulation of possible legislative amendments which might be proposed to Congress, not administrative rulemaking. It seems that the Commission changed its mind halfway through this proceeding 9 and is now attempting to correct its procedural deficiencies by characterizing the proceeding Ex post facto as informal rulemaking. If this court were to countenance such procedure in this case, it is difficult to see where the line would ultimately be drawn. The constructive notice requirement of § 553(b) would be gutted of virtually all its meaning. Agencies could in the future publish vague, ambiguous notices in the Federal Register, adverting obliquely to certain issues or proceedings, and then, months or years later, promulgate final rules and claim that constructive notice had been given. This cannot be the objective of the APA notice requirement. 10

The purpose of this requirement is clear to put interested parties on notice that Administrative rulemaking in certain areas is about to take place. We hold that the Commission failed to meet this requirement in this case.

This alleged "notice" also did not provide, as required by § 553(b)(2), a "reference to the legal authority under which the rule is proposed." Such a reference would have included something along the lines of what the Commission Did include when it promulgated its final rules, a year and a half later. Therein it stated, "The rule is issued under the authority of 49 U.S.C. 302, 303, 304, 305, 311, and 320, and 5 U.S.C. 553 and 559." 11 In the original notice which was published on 22 September 1975, 12 the only statutory section mentioned is § 211 of the Interstate Commerce Act. 13 Reference to this section alone is insufficient, and, in any event, this section was not referred to as "the legal authority under which the rule is proposed." It was referred to solely as a statute then in existence which might need to be altered or amended.

We also find that the Commission did not comply with § 553(b)(3), which requires that "(t)he notice . . . include . . . either the terms or substance of the proposed rule or a description of the subjects and issues involved." Certainly the Commission did not include "the terms or substance of the proposed rule." However, the Commission argues that certain references in the notice were an adequate "description of the subjects and issues involved." 14 Our response is that, while this May 15 have been an adequate description of the subjects and issues involved for purposes of suggestions for legislative changes, it was not adequate for purposes of subsequently promulgated administrative rules. "Description(s) of subjects and issues" are of very little use to interested parties unless such parties are accurately apprised of the Purpose of the proceeding in which those subjects and issues are being aired. The attitude one takes towards issues may vary considerably depending on the context in which those issues are placed. The legislative change sought in this case was basically an expansion of the authority of the ICC, 16 while the administrative rules later issued addressed much more specific subjects such as territorial restrictions and bond amounts. 17

We cannot accept the effort of the ICC retroactively...

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