Morgan et al. v. United States et al.

Supreme Court of United States
304 U.S. 1 (1938)

ELI5:

Rule of Law:

In a quasi-judicial administrative proceeding, the statutory requirement of a 'full hearing' demands that the regulated party be given a reasonable opportunity to know and challenge the specific claims and proposed findings of the government before a final order is issued. An agency cannot rely on ex parte findings prepared by its prosecutors without affording the opposing party a chance to examine and contest them.

Facts:

The Secretary of Agriculture initiated an inquiry into the reasonableness of rates charged by market agencies at the Kansas City Stock Yards.
A Department of Agriculture examiner held extensive hearings, gathering over 10,000 pages of testimony and 1,000 pages of exhibits.
The market agencies submitted written briefs, but the government did not, and its oral argument was described as 'general and sketchy.'
The agencies' request for the examiner to prepare a tentative report that they could review and object to was denied.
Instead, findings were prepared internally by the Bureau of Animal Industry, the same entity that had prosecuted the case for the government.
The Secretary of Agriculture, who had not heard the evidence or oral arguments, conferred privately with Bureau officials about their proposed findings.
The Secretary then adopted the Bureau's findings with minor changes and issued a final rate-making order.
The market agencies were not shown the proposed findings or given an opportunity to object to them before the final order was issued.

Procedural Posture:

The Secretary of Agriculture issued an order setting maximum rates for stockyard market agencies.
Fifty market agencies (plaintiffs) sued the United States in a three-judge U.S. District Court, challenging the order.
In a prior proceeding (Morgan I), the U.S. Supreme Court reversed the District Court's decision to strike allegations about the hearing's fairness and remanded the case.
On remand, the District Court took further evidence, including the Secretary's testimony, concluded the hearing was adequate, and dismissed the plaintiffs' complaints.
The market agencies (appellants) then brought this direct appeal to the U.S. Supreme Court against the United States (appellee).

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Issue:

Does an administrative rate-making order satisfy the statutory requirement of a 'full hearing' when the regulated parties were not informed of the government's specific claims or proposed findings and were not given an opportunity to challenge them before the order was finalized?

Opinions:

Majority - Chief Justice Hughes

No. A 'full hearing' as required by statute embodies fundamental requirements of fairness that are essential to due process in a judicial-type proceeding. The right to a hearing includes not only the right to present evidence but also a reasonable opportunity to know the claims of the opposing party and to meet them. In this case, the market agencies were never adequately advised of the government's specific contentions, as the government submitted no brief and its oral argument was vague. The Secretary's adoption of findings prepared ex parte by the government's prosecutors, without affording the agencies an opportunity to know their contents and present objections, was a 'vital defect.' This procedure violates the essence of a fair hearing because it is akin to a judge allowing one party's attorney to secretly formulate the findings and then adopting them without giving the opponent a chance to respond.

Analysis:

This decision is a cornerstone of administrative procedural due process, establishing that fairness in quasi-judicial proceedings extends beyond the evidence-gathering stage to the final decision-making process. It curtails the ability of an agency to act simultaneously as prosecutor and adjudicator in a closed-loop system. The ruling established a crucial precedent that parties subject to administrative adjudication must be given notice of the specific claims and findings being considered against them and a meaningful opportunity to rebut them before a final decision is rendered. This principle ensures that administrative actions are based on an open, adversarial process rather than secret, one-sided internal deliberations.

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