U.S. Supreme Court United States v. Florida East Coast
Ry. Co., 410
U.S. 224 (1973) United States v. Florida East Coast
Railway Co. No. 70-279 Argued December 7,
1972 Decided January 22,
1973 410
U.S. 224 APPEAL FROM THE UNITED STATES
DISTRICT COURT FOR THE MIDDLE DISTRICT OF
FLORIDA Syllabus The District Court ruled that appellee railroads were prejudiced
by failure of the Interstate Commerce Commission (ICC) to hold oral
hearings as required by §§ 556 and 557 of the Administrative
Procedure Act (APA) before establishing industry-wide per
diem rates for freight-car use. The ICC did receive written
submissions from appellees, but refused to conduct the hearings
requested by appellees prior to completion of its rulemaking. Held: The language of § 1(14)(a) of the Interstate
Commerce Act that "[t]he Commission may, after hearing . . .
establish reasonable rules . . ." did not trigger §§ 556 and 557 of
the APA requiring a trial-type hearing and the presentation of oral
argument by the affected parties; and the ICC's proceeding was
governed only b § 553 of the APA requiring notice prior to
rulemaking. United States v. Allegheny-Ludlum Steel Corp., 406 U. S. 742 . Nor
does the "after hearing" language of § 1(14)(a) of the Interstate
Commerce Act by itself confer upon interested parties either the
right to present evidence orally and to cross-examine opposing
witnesses, or the right to present oral argument to the agency's
decisionmaker. Pp. 410 U. S.
234 -246. 322 F.
Supp. 725 , reversed and remanded.

															REHNQUIST, J., delivered the opinion of the Court, in which
BURGER, C.J., and BRENNAN, WHITE, MARSHALL, and BLACKMUN, JJ.,
joined. DOUGLAS, J., filed a dissenting opinion, in which STEWART,
J., joined, post, p. 410 U. S. 246 .
POWELL, J., took no part in the consideration or decision of the
case. Page 410 U. S. 225 MR. JUSTICE REHNQUIST delivered the opinion of the Court.

															Appellees, two railroad companies, brought this action in the
District Court for the Middle District of Florida to set aside the
incentive per diem rates established by appellant
Interstate Commerce Commission in a rulemaking proceeding. Incentive Per Diem Charges -- 1968, Ex parte No. 252
(Sub-No. 1), 337 I.C.C. 217 (1970). They challenged the order of
the Commission on both substantive and procedural grounds. The
District Court sustained appellees' position that the Commission
had failed to comply with the applicable provisions of the
Administrative Procedure Act, 5 U.S.C. § 551 et seq., and
therefore set aside the order without dealing with the railroads'
other contentions. The District Court held that the language of §
1(14)(a) [ Footnote 1 ] of the
Interstate Commerce Page 410 U. S. 226 Act, 24 Stat. 379, as amended, 49 U.S.C. § 1(14)(a), required
the Commission in a proceeding such as this to act in accordance
with the Administrative Procedure Act, 5 U.S. C § 556(d), and that
the Commission's determination to receive submissions from the
appellees only in written form was a violation of that section
because the appellees were "prejudiced" by that determination
within the meaning of that section.

															Following our decision last Term in United States v.
Allegheny-Ludlum Steel Corp., 406 U.
S. 742 (1972), we noted probable jurisdiction, 407 U.S.
908 (1972), and requested the parties to brief the question of
whether the Commission's proceeding was governed by 5 U.S.C. § 553,
[ Footnote 2 ] Page 410 U. S. 227 or by §§ 556 [ Footnote 3 ]
and 557, [ Footnote 4 ] of the
Administrative Procedure Act. We here decide that the Commission's
proceeding was governed only by § 553 of that Act, Page 410 U. S. 228 and that appellees received the "hearing" required by § 1
(14)(a) of the Interstate Commerce Act. We, therefore, reverse the
judgment of the District Court and Page 410 U. S. 229 remand the case to that court for further consideration of
appellees' other contentions that were raised there, but which we
do not decide. Page 410 U. S. 230 I . BACKGROUND OF CHRONIC FREIGHT CAR SHORTAGES

															This case arises from the factual background of a chronic
freight-car shortage on the Nation's railroads, which we described
in United States v. Allegheny-Ludlum Steel Corp., supra. Judge Simpson, writing for the District Court in this case, noted
that "[f]or a number of years portions of the nation have been
plagued with seasonal shortages of freight cars in which to ship
goods." 322 F.
Supp. 725 , 726 (MD Fla.1971). Judge Friendly, writing for a
three-judge District Court in the Eastern District of New York in
the related case of Long Island R. Co. v. United
States, 318 F.
Supp. 490 , 491 (EDNY 1970), described the Commission's order as
"the latest chapter in a long history of freight car shortages in
certain regions and seasons and of attempts to ease them."
Congressional concern for the problem was manifested in the
enactment in 1966 of an amendment to § 1(14)(a) of the Interstate
Commerce Act, enlarging the Commission's authority to prescribe per diem charges for the use by one railroad of freight
cars owned by another. Pub.L. 89-430, 80 Stat. 168. The Senate Page 410 U. S. 231 Committee on Commerce stated in its report accompanying this
legislation:

															"Car shortages, which once were confined to the Midwest during
harvest seasons, have become increasingly more frequent, more
severe, and nationwide in scope as the national freight car supply
has plummeted."

															S.Rep. No. 386, 89th Cong., 1st Sess., 1-2.

															The Commission, in 1966, commenced an investigation, Ex
parte No. 252, Incentive Per Diem Charges,

															"to determine whether information presently available warranted
the establishment of an incentive element increase, on an interim
basis, to apply pending further study and investigation."

															332 I.C.C. 11, 12 (1967). Statements of position were received
from the Commission staff and a number of railroads. Hearings were
conducted at which witnesses were examined. In October, 1967, the
Commission rendered a decision discontinuing the earlier
proceeding, but announcing a program of further investigation into
the general subject.

															In December, 1967, the Commission initiated the rulemaking
procedure giving rise to the order that appellees here challenge.
It directed Class I and Class II linehaul railroads to compile and
report detailed information with respect to freight car demand and
supply at numerous sample stations for selected days of the week
during 12 four-week periods, beginning January 29, 1968.

															Some of the affected railroads voiced questions about the
proposed study or requested modification in the study procedures
outlined by the Commission in its notice of proposed rulemaking. In
response to petitions setting forth these carriers' views, the
Commission staff held an informal conference in April, 1968, at
which the objections and proposed modifications were discussed. Page 410 U. S. 232 Twenty railroads, including appellee Seaboard, were represented
at this conference, at which the Commission's staff sought to
answer questions about reporting methods to accommodate individual
circumstances of particular railroads. The conference adjourned on
a note that undoubtedly left the impression that hearings would be
held at some future date. A detailed report of the conference was
sent to all parties to the proceeding before the Commission.

															The results of the information thus collected were analyzed and
presented to Congress by the Commission during a hearing before the
Subcommittee on Surface Transportation of the Senate Committee on
Commerce in May, 1969. Members of the Subcommittee expressed
dissatisfaction with the Commission's slow pace in exercising the
authority that had been conferred upon it by the 1966 Amendments to
the Interstate Commerce Act. Judge Simpson, in his opinion for the
District Court, said:

															"Members of the Senate Subcommittee on Surface Transportation
expressed considerable dissatisfaction with the Commission's
apparent inability to take effective steps toward eliminating the
national shortage of freight cars. Comments were general that the
Commission was conducting too many hearings and taking too little
action. Senators pressed for more action and less talk, but
Commission counsel expressed doubt respecting the Commission's
statutory power to act without additional hearings."

															322 F. Supp. at 727.

															Judge Friendly, describing the same event in Long Island R.
Co. v. United States, supra, said:

															"To say that the presentation was not received with enthusiasm
would be a considerable understatement. Senators voiced displeasure
at the Commission's Page 410 U. S. 233 long delay at taking action under the 1966 amendment, engaged in
some merriment over what was regarded as an unintelligible
discussion of methodology . . . and expressed doubt about the need
for a hearing. . . . But the Commission's general counsel insisted
that a hearing was needed . . . and the Chairman of the Commission
agreed. . . ."

															318 F. Supp. at 494.

															The Commission, now apparently imbued with a new sense of
mission, issued in December, 1969, an interim report announcing its
tentative decision to adopt incentive per diem charges on
standard boxcars based on the information compiled by the
railroads. The substantive decision reached by the Commission was
that so-called "incentive" per diem charges should be paid
by any railroad using on its lines a standard boxcar owned by
another railroad. Before the enactment of the 1966 amendment to the
Interstate Commerce Act, it was generally thought that the
Commission's authority to fix per diem payments for
freight car use was limited to setting an amount that reflected
fair return on investment for the owning railroad, without any
regard being had for the desirability of prompt return to the
owning line or for the encouragement of additional purchases of
freight cars by the railroads as a method of investing capital. The
Commission concluded, however, that, in view of the 1966 amendment,
it could impose additional "incentive" per diem charges to
spur prompt return of existing cars and to make acquisition of new
cars financially attractive to the railroads. It did so by means of
a proposed schedule that established such charges on an
across-the-board basis for all common carriers by railroads subject
to the Interstate Commerce Act. Embodied in the report was a
proposed rule adopting the Commission's tentative conclusions and a
notice Page 410 U. S. 234 to the railroads to file statements of position within 60 days,
couched in the following language:

															"That verified statements of facts, briefs, and statements of
position respecting the tentative conclusions reached in the said
interim report, the rules and regulations proposed in the appendix
to this order, and any other pertinent matter, are hereby invited
to be submitted pursuant to the filing schedule set forth below by
an interested person whether or not such person is already a party
to this proceeding."

															" * * * *" "That any party requesting oral hearing shall set forth with
specificity the need therefor and the evidence to be adduced."

															337 I.C.C. 183, 213.

															Both appellee railroads filed statements objecting to the
Commission's proposal and requesting an oral hearing, as did
numerous other railroads. In April, 1970, the Commission, without
having held further "hearings," issued a supplemental report making
some modifications in the tentative conclusions earlier reached,
but overruling in toto the requests of appellees.

															The District Court held that, in so doing, the Commission
violated § 556(d) of the Administrative Procedure Act, and it was
on this basis that it set aside the order of the Commission. II . APPLICABILITY OF ADMINISTRATIVE PROCEDURE ACT

															In United States v. Allegheny-Ludlum Steel Corp.,
supra, we held that the language of § 1(14)(a) of the
Interstate Commerce Act authorizing the Commission to act "after
hearing" was not the equivalent of a requirement that a rule be
made "on the record after opportunity for an agency hearing" as the
latter term is used in § 53(c) of the Administrative Procedure Act.
Since the 1966 amendment to § 1(14)(a), under which Page 410 U. S. 235 the Commission was here proceeding, does not, by its terms, add
to the hearing requirement contained in the earlier language, the
same result should obtain here unless that amendment contains
language that is tantamount to such a requirement. Appellees
contend that such language is found in the provisions of that Act
requiring that:

															"[T]he Commission shall give consideration to the national level
of ownership of such type of freight car and to other factors
affecting the adequacy of the national freight car supply, and
shall, on the basis of such consideration, determine whether
compensation should be computed. . . ."

															While this language is undoubtedly a mandate to the Commission
to consider the factors there set forth in reaching any conclusion
as to imposition of per diem incentive charges, it adds to
the hearing requirements of the section neither expressly nor by
implication. We know of no reason to think that an administrative
agency, in reaching a decision, cannot accord consideration to
factors such as those set forth in the 1966 amendment by means
other than a trial-type hearing or the presentation of oral
argument by the affected parties. Congress by that amendment
specified necessary components of the ultimate decision, but it did
not specify the method by which the Commission should acquire
information about those components. [ Footnote 5 ] Page 410 U. S. 236 Both of the district courts that reviewed this order of the
Commission concluded that its proceedings were governed by the
stricter requirement of §§ 556 and 557 of the Administrative
Procedure Act, rather than by the provisions of § 553 alone.
[ Footnote 6 ] The conclusion of
the District Court for the Middle District of Florida, which we
here review, was based on the assumption that the language in §
1(14)(a) of the Interstate Commerce Act requiring rulemaking under
that section to be done "after hearing" was the equivalent of a
statutory requirement that the rule "be made on the record after
opportunity for an agency hearing." Such an assumption Page 410 U. S. 237 is inconsistent with our decision in Allegheny-Ludlum,
supra. The District Court for the Eastern District of New York reached
the same conclusion by a somewhat different line of reasoning. That
court felt that, because § 1(14)(a) of the Interstate Commerce Act
had required a "hearing," and because that section was originally
enacted in 1917, Congress was probably thinking in terms of a
"hearing" such as that described in the opinion of this Court in
the roughly contemporaneous case of ICC v. Louisville &
Nashville R. Co., 227 U. S. 88 , 227 U. S. 93 (1913). The ingredients of the "hearing" were there said to be
that

															"[a]ll parties must be fully apprised of the evidence submitted
or to be considered, and must be given opportunity to cross-examine
witnesses, to inspect documents and to offer evidence in
explanation or rebuttal."

															Combining this view of congressional understanding of the term
"hearing" with comments by the Chairman of the Commission at the
time of the adoption of the 1966 legislation regarding the
necessity for "hearings," that court concluded that Congress had,
in effect, required that these proceedings be "on the record after
opportunity for an agency hearing" within the meaning of § 553(c)
of the Administrative Procedure Act.

															Insofar as this conclusion is grounded on the belief that the
language "after hearing" of § 1(14)(a), without more, would trigger
the applicability of §§ 556 and 557, it, too, is contrary to our
decision in Allegheny-Ludlum, supra. The District Court
observed that it was

															"rather hard to believe that the last sentence of § 553(c) was
directed only to the few legislative sports where the words 'on the
record' or their equivalent had found their way into the statute
book."

															318 F. Supp. at 496. This is, however, the language which
Congress used, and since there are statutes on the books that do
use these Page 410 U. S. 238 very words, see, e.g., the Fulbright Amendment to the
Walsh-Healey Act, 41 U.S.C. § 43a, and 21 U.S.C. § 371(e)(3), the
regulations provision of the Food and Drug Act, adherence to that
language cannot be said to render the provision nugatory or
ineffectual. We recognized in Allegheny-Ludlum that the
actual words "on the record" and "after . . . hearing" used in §
553 were not words of art, and that other statutory language having
the same meaning could trigger the provisions of §§ 556 and 557 in
rulemaking proceedings. But we adhere to our conclusion, expressed
in that case, that the phrase "after hearing" in § 1(14)(a) of the
Interstate Commerce Act does not have such an effect. III . "HEARING" REQUIREMENT OF § 1(14)(a) OF THE INTERSTATE COMMERCE ACT Inextricably intertwined with the hearing requirement of the
Administrative Procedure Act in this case is the meaning to be
given to the language "after hearing" in § 1(14)(a) of the
Interstate Commerce Act. Appellees, both here and in the court
below, contend that the Commission procedure here fell short of
that mandated by the "hearing" requirement of § 1(14)(a), even
though it may have satisfied § 553 of the Administrative Procedure
Act. The Administrative Procedure Act states that none of its
provisions "limit or repeal additional requirements imposed by
statute or otherwise recognized by law." 5 U.S.C. § 559. Thus, even
though the Commission was not required to comply with §§ 556 and
557 of that Act, it was required to accord the "hearing" specified
in § 1(14)(a) of the Interstate Commerce Act. Though the District
Court did not pass on this contention, it is so closely related to
the claim based on the Administrative Procedure Act that we proceed
to decide it now. Page 410 U. S. 239 If we were to agree with the reasoning of the District Court for
the Eastern District of New York with respect to the type of
hearing required by the Interstate Commerce Act, the Commission's
action might well violate those requirements, even though it was
consistent with the requirements of the Administrative Procedure
Act.

															The term "hearing" in its legal context undoubtedly has a host
of meanings. [ Footnote 7 ] Its
meaning undoubtedly will vary, depending on whether it is used in
the context of a rulemaking-type proceeding or in the context of a
proceeding devoted to the adjudication of particular disputed
facts. It is by no means apparent what the drafters of the Esch Car
Service Act of 1917, 40 Stat. 101, which became the first part of §
1(14)(a) of the Interstate Commerce Act, meant by the term. Such an
intent would surely be an ephemeral one if, indeed, Congress in
1917 had in mind anything more specific than the language it
actually used, for none of the parties refer to any legislative
history that would shed light on the intended meaning of the words
"after hearing." What is apparent, though, is that the term was
used in granting authority to the Commission to make rules and
regulations of a prospective nature.

															Appellees refer us to testimony of the Chairman of the
Commission to the effect that, if the added authority ultimately
contained in the 1966 amendment were enacted, the Commission would
proceed with "great caution" in imposing incentive per
diem rates, and to statements of both Commission personnel and
Members of Congress as to the necessity for a "hearing" before
Commission action. Certainly, the lapse of time of more than three
years between the enactment of the 1966 amendment and the
Commission's issuance of its tentative Page 410 U. S. 240 conclusions cannot be said to evidence any lack of caution on
the part of that body. Nor do generalized references to the
necessity for a hearing advance our inquiry, since the statute, by
its terms, requires a "hearing"; the more precise inquiry of
whether the hearing requirements necessarily include submission of
oral testimony, cross-examination, or oral arguments is not
resolved by such comments as these.

															Under these circumstances, confronted with a grant of
substantive authority made after the Administrative Procedure Act
was enacted, [ Footnote 8 ] we
think that reference to that Act, in which Congress devoted itself
exclusively to questions such as the nature and scope of hearings,
is a satisfactory basis for determining what is meant by the term
"hearing" used in another statute. Turning to that Act, we are
convinced that the term "hearing," as used therein, does not
necessarily embrace either the right to present evidence orally and
to cross-examine opposing witnesses, or the right to present oral
argument to the agency's decisionmaker.

															Section 553 excepts from its requirements rulemaking devoted to
"interpretative rules, general statements of policy, or rules of
agency organization, procedure, or practice," and rulemaking

															"when the agency for good cause finds . . . that notice and
public procedure thereon are impracticable, unnecessary, or
contrary to the public interest."

															This exception does not apply, however, "when notice or hearing
is required by statute"; in those cases. even though interpretative
rulemaking be involved, the requirements of § 553 apply. But since
these requirements Page 410 U. S. 241 themselves do not mandate any oral presentation, see
Allegheny-Ludlum, supra, it cannot be doubted that a statute
that requires a "hearing" prior to rulemaking may in some
circumstances be satisfied by procedures that meet only the
standards of § 553. The Court's opinion in FPC v. Texaco
Inc., 377 U. S. 33 (1964), supports such a broad definition of the term "hearing."

															Similarly, even where the statute requires that the rulemaking
procedure take place "on the record after opportunity for an agency
hearing," thus triggering the applicability of § 656, subsection
(d) provides that the agency may proceed by the submission of all
or part of the evidence in written form if a party will not be
"prejudiced thereby." Again, the Act makes it plain that a specific
statutory mandate that the proceedings take place on the record
after hearing may be satisfied in some circumstances by evidentiary
submission in written form only.

															We think this treatment of the term "hearing" in the
Administrative Procedure Act affords a sufficient basis for
concluding that the requirement of a "hearing" contained in §
1(14)(a), in a situation where the Commission was acting under the
1966 statutory rulemaking authority that Congress had conferred
upon it, did not by its own force require the Commission either to
hear oral testimony, to permit cross-examination of Commission
witnesses, or to hear oral argument. Here, the Commission
promulgated a tentative draft of an order, and accorded all
interested parties 60 days in which to file statements of position,
submissions of evidence, and other relevant observations. The
parties had fair notice of exactly what the Commission proposed to
do, and were given an opportunity to comment, to object, or to make
some other form of written submission. The final order of the
Commission indicates that it gave consideration to the statements
of the two appellees here. Page 410 U. S. 242 Given the "open-ended" nature of the proceedings, and the
Commission's announced willingness to consider proposals for
modification after operating experience had been acquired, we think
the hearing requirement of § 1(14)(a) of the Act was met.

															Appellee railroads cite a number of our previous decisions
dealing in some manner with the right to a hearing in an
administrative proceeding. Although appellees have asserted no
claim of constitutional deprivation in this proceeding, some of the
cases they rely upon expressly speak in constitutional terms, while
others are less than clear as to whether they depend upon the Due
Process Clause of the Fifth and Fourteenth Amendments to the
Constitution, or upon generalized principles of administrative law
formulated prior to the adoption of the Administrative Procedure
Act. Morgan v. United States, 304 U. S.
1 (1938), is cited in support of appellees' contention
that the Commission's proceedings were fatally deficient. That
opinion describes the proceedings there involved as
" quasi -judicial," id. at 304 U. S. 14 , and
thus presumably distinct from a rulemaking proceeding such as that
engaged in by the Commission here. But since the order of the
Secretary of Agriculture there challenged did involve a form of
ratemaking, the case bears enough resemblance to the facts of this
case to warrant further examination of appellees' contention. The
administrative procedure in Morgan was held to be
defective primarily because the persons who were to be affected by
the Secretary's order were found not to have been adequately
apprised of what the Secretary proposed to do prior to the time
that he actually did it. Illustrative of the Court's reasoning is
the following passage from the opinion:

															"The right to a hearing embraces not only the right to present
evidence, but also a reasonable opportunity to know the claims of
the opposing party Page 410 U. S. 243 and to meet them. The right to submit argument implies that
opportunity; otherwise the right may be but a barren one. Those who
are brought into contest with the Government in a quasi -judicial proceeding aimed at the control of their
activities are entitled to be fairly advised of what the Government
proposes and to be heard upon its proposals before it issues its
final command." Id. at 304 U. S. 18 -19.
[ Footnote 9 ]

															The proceedings before the Secretary of Agriculture had been
initiated by a notice of inquiry into the reasonableness of the
rates in question, and the individuals being regulated suffered
throughout the proceeding from its essential formlessness. The
Court concluded that this formlessness denied the individuals
subject to regulation the "full hearing" that the statute had
provided.

															Assuming, arguendo, that the statutory term "full
hearing" does not differ significantly from the hearing requirement
of § 1(14)(a), we do not believe that the proceedings of the
Interstate Commerce Commission before us suffer from the defect
found to be fatal in Morgan. Though the initial notice of
the proceeding by no means set out in detail what the Commission
proposed to do, its tentative conclusions and order of December
1969, could scarcely have been more explicit or detailed. All
interested parties were given 60 days following the issuance of
these tentative findings and order in which to make appropriate
objections. Appellees were "fairly advised" of exactly what the
Commission proposed to do sufficiently in advance of the entry of
the final order to give them adequate time to Page 410 U. S. 244 formulate and to present objections to the Commission's
proposal. Morgan, therefore, does not aid appellees. ICC v. Louisville & Nashville R. Co., 227 U. S.
88 (1913), involved what the Court there described as a
" quasi -judicial" proceeding of a quite different nature
from the one we review here. The provisions of the Interstate
Commerce Act, 24 Stat. 379, as amended, and of the Hepburn Act, 34
Stat. 584, in effect at the time that case was decided, left to the
railroad carriers the "primary right to make rates," 227 U.S. at 227 U. S. 92 ,
but granted to the Commission the authority to set them aside if,
after hearing, they were shown to be unreasonable. The proceeding
before the Commission in that case had been instituted by the New
Orleans Board of Trade complaint that certain class and commodity
rates charged by the Louisville & Nashville Railroad from New
Orleans to other points were unfair, unreasonable, and
discriminatory. 227 U.S. at 227 U. S. 90 .
The type of proceeding there, in which the Commission adjudicated a
complaint by a shipper that specified rates set by a carrier were
unreasonable, was sufficiently different from the nationwide
incentive payments ordered to be made by all railroads in this
proceeding so as to make the Louisville & Nashville opinion inapplicable in the case presently before us.

															The basic distinction between rulemaking and adjudication is
illustrated by this Court's treatment of two related cases under
the Due Process Clause of the Fourteenth Amendment. In Londoner
v. Denver, cited in oral argument by appellees, 210 U.
S. 373 (1908), the Court held that due process had not
been accorded a landowner who objected to the amount assessed
against his land as its share of the benefit resulting from the
paving of a street. Local procedure had accorded him the right to
file a written complaint and objection, but not to be heard orally.
This Court held that due process Page 410 U. S. 245 of law required that he "have the right to support his
allegations by argument however brief, and, if need be, by proof,
however informal." Id. at 210 U. S. 386 .
But in the later case of Bi-Metallic Investment Co. v. State
Board of Equalization, 239 U. S. 441 (1915), the Court held that no hearing at all was constitutionally
required prior to a decision by state tax officers in Colorado to
increase the valuation of all taxable property in Denver by a
substantial percentage. The Court distinguished Londoner by stating that there, a small number of persons "were
exceptionally affected, in each case upon individual grounds." Id. at 239 U. S. 446 .

															Later decisions have continued to observe the distinction
adverted to in Bi-Metallic Investment Co., supra. In Ohio Bell Telephone Co. v. Public Utilities Comm'n, 301 U. S. 292 , 301 U. S.
304 -305 (1937), the Court noted the fact that the
administrative proceeding there involved was designed to require
the utility to refund previously collected rate charges. The Court
held that, in such a proceeding, the agency could not, consistently
with due process, act on the basis of undisclosed evidence that was
never made a part of the record before the agency. The case is thus
more akin to Louisville & Nashville R. Co., supra, than it is to this case. FCC v. WJR, 337 U.
S. 265 (1949), established that there was no
across-the-board constitutional right to oral argument in every
administrative proceeding, regardless of its nature. While the line
dividing them may not always be a bright one, these decisions
represent a recognized distinction in administrative law between
proceedings for the purpose of promulgating policy-type rules or
standards, on the one hand, and proceedings designed to adjudicate
disputed facts in particular cases, on the other.

															Here, the incentive payments proposed by the Commission in its
tentative order, and later adopted in its Page 410 U. S. 246 final order, were applicable across the board to all of the
common carriers by railroad subject to the Interstate Commerce Act.
No effort was made to single out any particular railroad for
special consideration based on its own peculiar circumstances.
Indeed, one of the objections of appellee Florida East Coast was
that it and other terminating carriers should have been treated
differently from the generality of the railroads. But the fact that
the order may, in its effects, have been thought more
disadvantageous by some railroads than by others does not change
its generalized nature. Though the Commission obviously relied on
factual inferences as a basis for its order, the source of these
factual inferences was apparent to anyone who read the order of
December, 1969. The factual inferences were used in the formulation
of a basically legislative-type judgment, for prospective
application only, rather than in adjudicating a particular set of
disputed facts.

															The Commission's procedure satisfied both the provisions of §
1(14)(a) of the Interstate Commerce Act and of the Administrative
Procedure Act, and were not inconsistent with prior decisions of
this Court. We, therefore, reverse the judgment of the District
Court, and remand the case so that it may consider those
contentions of the parties that are not disposed of by this
opinion. It is so ordered. MR. JUSTICE POWELL took no part in the consideration or decision
of this case.

															[ Footnote 1 ]

															Section 1(14)(a) provides:

															"The Commission may, after hearing, on a complaint or upon its
own initiative without complaint, establish reasonable rules,
regulations, and practices with respect to car service by common
carriers by railroad subject to this chapter, including the
compensation to be paid and other terms of any contract, agreement,
or arrangement for the use of any locomotive, var, or other vehicle
not owned by the carrier using it (and whether or not owned by
another carrier), and the penalties or other sanctions for
nonobservance of such rules, regulations, or practices. In fixing
such compensation to be paid for the use of any type of freight
car, the Commission shall give consideration to the national level
of ownership of such type of freight car and to other factors
affecting the adequacy of the national freight car supply, and
shall, on the basis of such consideration, determine whether
compensation should be computed solely on the basis of elements of
ownership expense involved in owning and maintaining such type of
freight car, including a fair return on value, or whether such
compensation should be increased by such incentive element or
elements of compensation as in the Commission's judgment will
provide just and reasonable compensation to freight car owners,
contribute to sound car service practices (including efficient
utilization and distribution of cars), and encourage the
acquisition and maintenance of a car supply adequate to meet the
needs of commerce and the national defense. The Commission shall
not make any incentive element applicable to any type of freight
car the supply of which the Commission finds to be adequate, and
may exempt from the compensation to be paid by any group of
carriers such incentive element or elements if the Commission finds
it to be in the national interest."

															[ Footnote 2 ]

															"§ 553. Rule making."

															"(a) This section applies, according to the provisions thereof,
except to the extent that there is involved -- "

															"(1) a military or foreign affairs function of the United
States, or"

															"(2) a matter relating to agency management or personnel or to
public property, loans, grants, benefits, or contracts."

															"(b) 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."

															"Except when notice or hearing is required by statute, this
subsection does not apply --"

															"(a) to interpretative rules, general statements of policy, or
rules of agency organization, procedure, or practice; or"

															"(b) when the agency for good cause finds (and incorporates the
finding and a brief statement of reasons therefor in the rules
issued) that notice and public procedure thereon are impracticable,
unnecessary, or contrary to the public interest."

															"(c) After notice required by this section, the agency shall
give interested persons an opportunity to participate in the rule
making through submission of written data, views, or arguments with
or without opportunity for oral presentation. After consideration
of the relevant matter presented, the agency shall incorporate in
the rules adopted a concise general statement of their basis and
purpose. When rules are required by statute to be made on the
record after opportunity for an agency hearing, sections 556 and
557 of this title apply instead of this subsection."

															"(d) The required publication or service of a substantive rule
shall be made not less than 30 days before its effective date,
except --"

															"(1) a substantive rule which grants or recognizes an exemption
or relieves a restriction;"

															"(2) interpretative rules and statements of policy; or"

															"(3) as otherwise provided by the agency for good cause found
and published with the rule."

															"(e) Each agency shall give an interested person the right to
petition for the issuance, amendment, or repeal of a rule."

															[ Footnote 3 ]

															"§ 556. Hearings; presiding employees; powers and duties; burden
of proof; evidence; record as basis of decision."

															"(a) This section applies, according to the provisions thereof,
to hearings required by section 553 or 554 of this title to be
conducted in accordance with this section."

															"(b) There shall preside at the taking of evidence --"

															"(1) the agency;"

															"(2) one or more members of the body which comprises the agency;
or"

															"(3) one or more hearing examiners appointed under section 3105
of this title."

															"This subchapter does not supersede the conduct of specified
classes of proceedings, in whole or in part, by or before boards or
other employees specially provided for by or designated under
statute. The functions of presiding employees and of employees
participating in decisions in accordance with section 557 of this
title shall be conducted in an impartial manner. A presiding or
participating employee may at any time disqualify himself. On the
filing in good faith of a timely and sufficient affidavit of
personal bias or other disqualification of a presiding or
participating employee, the agency shall determine the matter as a
part of the record and decision in the case."

															"(c) Subject to published rules of the agency and within its
powers, employees presiding at hearings may -- "

															"(1) administer oaths and affirmations;"

															"(2) issue subpoenas authorized by law;"

															"(3) rule on offers of proof and receive relevant evidence;"

															"(4) take depositions or have depositions taken when the ends of
justice would be served;"

															"(5) regulate the course of the hearing;"

															"(6) hold conferences for the settlement or simplification of
the issue by consent of the parties;"

															"(7) dispose of procedural requests or similar matters;"

															"(8) make or recommend decisions in accordance with section 557
of this title; and"

															"(9) take other action authorized by agency rule consistent with
this subchapter."

															"(d) Except as otherwise provided by statute, the proponent of a
rule or order has the burden of proof. Any oral or documentary
evidence may be received, but the agency as a matter of policy
shall provide for the exclusion of irrelevant, immaterial, or
unduly repetitious evidence. A sanction may not be imposed or rule
or order issued except on consideration of the whole record or
those parts thereof cited by a party and supported by and in
accordance with the reliable, probative, and substantial evidence.
A party is entitled to present his case or defense by oral or
documentary evidence, to submit rebuttal evidence, and to conduct
such cross-examination as may be required for a full and true
disclosure of the facts. In rule making or determining claims for
money or benefits or applications for initial licenses 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."

															"(e) The transcript of testimony and exhibits, together with all
papers and requests filed in the proceeding, constitutes the
exclusive record for decision in accordance with section 557 of
this title and, on payment of lawfully prescribed costs, shall be
made available to the parties. When an agency decision rests on
official notice of a material fact not appearing in the evidence in
the record, a party is entitled, on timely request, to an
opportunity to show the contrary."

															[ Footnote 4 ]

															"§ 557. Initial decisions; conclusiveness; review by agency;
submissions by parties; contents of decisions; record."

															"(a) This section applies, according to the provisions thereof,
when a hearing is required to be conducted in accordance with
section 556 of this title."

															"(b) When the agency did not preside at the reception of the
evidence, the presiding employee or, in cases not subject to
section 554(d) of this title, an employee qualified to preside at
hearings pursuant to section 556 of this title, shall initially
decide the case unless the agency requires, either in specific
cases or by general rule, the entire record to be certified to it
for decision. When the presiding employee makes an initial
decision, that decision then becomes the decision of the agency
without further proceedings unless there is an appeal to, or review
on motion of, the agency within time provided by rule. On appeal
from or review of the initial decision, the agency has all the
powers which it would have in making the initial decision except as
it may limit the issues on notice or by rule. When the agency makes
the decision without having presided at the reception of the
evidence, the presiding employee or an employee qualified to
preside at hearings pursuant to section 556 of this title shall
first recommend a decision, except that in rule making or
determining applications for initial licenses --"

															"(1) instead thereof the agency may issue a tentative decision
or one of its responsible employees may recommend a decision;
or"

															"(2) this procedure may be omitted in a case in which the agency
finds on the record that due and timely execution of its functions
imperatively and unavoidably so requires."

															"(c) Before a recommended, initial, or tentative decision, or a
decision on agency review of the decision of subordinate employees,
the parties are entitled to a reasonable opportunity to submit for
the consideration of the employees participating in the decisions
-- "

															"(1) proposed findings and conclusions; or"

															"(2) exceptions to the decisions or recommended decisions of
subordinate employees or to tentative agency decisions; and"

															"(3) supporting reasons for the exceptions or proposed findings
or conclusions."

															"The record shall show the ruling on each finding, conclusion,
or exception presented. All decisions, including initial,
recommended, and tentative decisions, are a part of the record and
shall include a statement of --"

															"(A) findings and conclusions, and the reasons or basis
therefor, on all the material issues of fact, law, or discretion
presented on the record; and"

															"(b) the appropriate rule, order, sanction, relief, or denial
thereof."

															[ Footnote 5 ]

															The Court of Appeals for the Ninth Circuit reached a result
similar to that which we reach, in Pacific Coast European
Conference v. United States, 350 F.2d 197 (1965). Construing
the authority of the Federal Maritime Commission under § 14b of the
Shipping Act, 1916, as amended, 46 U.S.C. § 813a, that court
observed that

															"[t]he authority of the Commission to permit such contracts was
limited by requiring that the contracts in eight specified respects
meet the congressional judgment as to what they should
include."

															350 F.2d at 201. Notwithstanding these explicit directions that
particular factors be considered by the Commission in reaching its
decision, the court held that the statute's requirements of "notice
and hearing" were not sufficient to bring into play the provisions
of §§ 556 and 557 of the Administrative Procedure Act.

															[ Footnote 6 ]

															Both district court opinions were handed down before our
decision in United States v. Allegheny-Ludlum Steel Corp., 406 U. S. 742 (1972), and it appears from the record before us that the
Government in those courts did not really contest the proposition
that the Commission's proceedings were governed by the stricter
standards of §§ 556 and 557.

															The dissenting opinion of MR. JUSTICE DOUGLAS relies in part on
indications by the Commission that it proposed to apply the more
stringent standards of §§ 556 and 557 of the Administrative
Procedure Act to these proceedings. This Act is not legislation
that the Interstate Commerce Commission, or any other single
agency, has primary responsibility for administering. An agency
interpretation involving, at least in part, the provisions of that
Act does not carry the weight, in ascertaining the intent of
Congress, that an interpretation by an agency "charged with the
responsibility" of administering a particular statute does. See
United States v. American Trucking Assns., 310 U.
S. 534 (1940); Norwegian Nitrogen Products Co. v.
United States, 288 U. S. 294 (1933). Moreover, since any agency is free under the Act to accord
litigants appearing before it more procedural rights than the Act
requires, the fact that an agency may choose to proceed under §§
556 and 557 does not carry the necessary implication that the
agency felt it was required to do so.

															[ Footnote 7 ] See 1 K. Davis, Administrative Law Treatise, § 6.05
(1958).

															[ Footnote 8 ]

															The Interstate Commerce Act was amended in May, 1966; the 1946
Administrative Procedure Act was repealed by Act of Sept. 6, 1966,
80 Stat. 378, which revised, codified, and enacted Title 5 of the
United States Code, but the section detailing the procedures to be
used in rulemaking is substantially similar to the original
provision in the 1946 Administrative Procedure Act. See §
4(b), 60 Stat. 238.

															[ Footnote 9 ]

															This same language was cited with approval by the Court in Willner v. Committee on Character, 373 U. S.
96 , 373 U. S. 105 (1963), in which it was held that an applicant for admission to the
bar could not be denied such admission on the basis of ex
parte statements of others whom he had not been afforded an
opportunity to cross-examine.

															MR. JUSTICE DOUGLAS, with whom MR. JUSTICE STEWART concurs,
dissenting.

															The present decision makes a sharp break with traditional
concepts of procedural due process. The Commission order under
attack is tantamount to a rate order. Charges are fixed that
nonowning railroads must pay Page 410 U. S. 247 owning railroads for boxcars of the latter that are on the
tracks of the former. These charges are effective only during the
months of September through February, the period of greatest boxcar
use. For example, the charge for a boxcar that costs from $15,000
to $17,000 and that is five years of age or younger amounts to
$5.19 a day. Boxcars costing between $39,000 and $41,000 and that
are five years of age or younger cost the nonowning railroad $12.98
a day. The fees or rates charged decrease as the ages of the
boxcars lengthen. 49 CFR § 1036.2. This is the imposition on
carriers by administrative fiat of a new financial liability. I do
not believe it is within our traditional concepts of due process to
allow an administrative agency to saddle anyone with a new rate,
charge, or fee without a full hearing that includes the right to
present oral testimony, cross-examine witnesses, and present oral
argument. That is required by the Administrative Procedure Act, 5
U.S.C. § 556(d); § 556(a) states that § 556 applies to hearings
required by § 553. Section 553(c) provides that § 556 applies
"[w]hen rules are required by statute to be made on the record
after opportunity for an agency hearing." A hearing under §
1(14)(a) of the Interstate Commerce Act fixing rates, charges, or
fees is certainly adjudicatory, not legislative in the customary
sense.

															The question is whether the Interstate Commerce Commission
procedures used in this rate case "for the submission of . . .
evidence in written form" avoided prejudice to the appellees so as
to comport with the requirements of the Administrative Procedure
Act. [ Footnote 2/1 ] The Government
appeals from the District Court's order Page 410 U. S. 248 remanding this case to the Commission for further proceedings on
the incentive per diem rates to be paid by the appellee
railroads for the standard boxcars they use.

															In 1966, Congress amended § 1(14)(a) of the Interstate Commerce
Act to require that the Commission investigate the use of methods
of incentive compensation to alleviate any shortage of freight cars
"and encourage the acquisition and maintenance of a car supply
adequate to meet the needs of commerce and the national defense."
49 U.S.C. § 1(14)(a). While the Commission was given the discretion
to exempt carriers from incentive payments "in the national
interest," it was denied the power to "make any incentive element
applicable to any type of freight car the supply of which the
Commission finds to be adequate. . . ." Ibid. The Commission's initial investigation under this authority (31
Fed.Reg. 9240) was terminated without action because it "produced
no reliable information respecting the quantum of interim incentive
charge necessary to meet the statutory standards." 332 I.C.C. 11,
16. A subsequent study of boxcar supply and demand conditions (32
Fed.Reg. 20987) yielded data that were compiled in an interim
report containing tentative charges and that were submitted to the
railroads for comment. 337 I.C.C. 183. Although the Commission was
admittedly uncertain whether its proposed charges would accomplish
the statutory objective, id. at 191, and even though "the
opportunity to present evidence and arguments" was contemplated, id. at 183, congressional impatience militated against
further delay in implementing § 1(14)(a). [ Footnote 2/2 ] Consequently, the Commission rejected the
requests of the appellees and other railroads for further hearings
and promulgated an incentive Page 410 U. S. 249 per diem rate schedule for standard boxcars. 337 I.C.C.
217.

															Appellees then brought this action in the District Court
alleging that they were "prejudiced" within the meaning of the
Administrative Procedure Act by the Commission's failure to afford
them a proper hearing. 322 F.
Supp. 725 (MD Fla.1971). Seaboard argued that it had been
damaged by what it alleged to be the Commission's sudden change in
emphasis from specialty to unequipped boxcars, and that it would
lose some $1.8 million as the result of the Commission's allegedly
hasty and experimental action. Florida East Coast raised
significant challenges to the statistical validity of the
Commission's data, [ Footnote 2/3 ]
and also contended that its status as a terminating railroad left
it with a surfeit of standard boxcars which should exempt it from
the requirement to pay incentive charges.

															Appellees, in other words, argue that the inadequacy of the
supply of standard boxcars was not sufficiently established by the
Commission's procedures. Seaboard contends that specialty freight
cars have supplanted standard boxcars and Florida East Coast
challenges the accuracy of the Commission's findings.

															In its interim report, the Commission indicated that there would
be an opportunity to present evidence and arguments. See 337 I.C.C. 183, 187. The appellees could reasonably have expected
that the later hearings would give them the opportunity to
substantiate and elaborate the criticisms they set forth in
their Page 410 U. S. 250 initial objections to the interim report. That alone would not
necessarily support the claim of "prejudice." But I believe that
"prejudice" was shown when it was claimed that the very basis on
which the Commission rested its finding was vulnerable because it
lacked statistical validity or other reasoned basis. At least in
that narrow group of cases, prejudice for lack of a proper hearing
has been shown.

															Both Long Island R. Co. v. United
States, 318 F.
Supp. 490 (EDNY 1970), and the present case involve challenges
to the Commission's procedures establishing incentive per
diem rates. In Long Island, however, the railroad pointed to
no specific challenges to the Commission's findings ( id. at 499), and the trial was conducted on stipulated issues involving
the right to an oral hearing. Id. at 491 n. 2. Since Long
Island presented no information which might have caused the
Commission to reach a different result, [ Footnote 2/4 ] there was no showing of prejudice, and a fortiori no right to an oral hearing. In the Page 410 U. S. 251 present case, by contrast, there are specific factual disputes,
and the issue is the narrow one of whether written submission of
evidence without oral argument was prejudicial.

															The more exacting hearing provisions of the Administrative
Procedure Act, 5 U.S.C. §§ 556-557, are only applicable, of course,
if the "rules are required by statute to be made on the record
after opportunity for an agency hearing." Id. §
553(c). United States v. Allegheny-Ludlum Steel Corp., 406 U. S. 742 , was
concerned strictly with a rulemaking proceeding of the Commission
for the promulgation of "car service rules" that in general
required freight cars, after being unloaded, to be returned "in the
direction of the lines of the road owning the cars." Id. at 406 U. S. 743 .
We sustained the Commission's power with respect to these two rules
on the narrow ground that they were wholly legislative. We held
that § 1(14)(a) of the Interstate Commerce Act, requiring, by its
terms, a "hearing," "does not require that such rules be made
on the record'" within the meaning of § 553(c). Id. at 406 U. S. 757 .
We recognized, however, that the precise words "on the record" are
not talismanic, but that the crucial question is whether the
proceedings under review are "an exercise of legislative
rulemaking" or "adjudicatory hearings." Ibid. The
"hearing" requirement of § 1(14)(a) cannot be given a fixed and
immutable meaning to be applied in each and every case without
regard to the nature of the proceedings. The rules in question here established "incentive" per
diem charges to spur the prompt return of existing cars and to
make the acquisition of new cars financially attractive to the
railroads. [ Footnote 2/5 ] Unlike
those we considered in Page 410 U. S. 252 Allegheny-Ludlum, these rules involve the creation of a
new financial liability. Although quasi -legislative, they
are also adjudicatory in the sense that they determine the measure
of the financial responsibility of one road for its use of the
rolling stock of another road. The Commission's power to promulgate
these rules pursuant to § 1(14)(a) is conditioned on the
preliminary finding that the supply of freight cars to which the
rules apply is inadequate. Moreover, in fixing incentive
compensation once this threshold finding has been made, the
Commission

															"shall give consideration to the national level of ownership of
such type of freight car and to other factors affecting the
adequacy of the national freight car supply. . . . [ Footnote 2/6 ] Page 410 U. S. 253 "

															The majority finds ICC v. Louisville & Nashville R.
Co., 227 U. S. 88 ,
"sufficiently different" as to make the opinion in that case
inapplicable to the case now before us. I would read the case
differently, finding a clear mandate that, where, as here,
ratemaking must be Page 410 U. S. 254 based on evidential facts, § 1(14)(a) requires that full hearing
which due process normally entails. There we considered Commission
procedures for setting aside as unreasonable, after a hearing,
carrier-made rates. The Government maintained that the Commission,
invested with legislative ratemaking power, but required by the
Commerce Act to obtain necessary information, could act on such
information as the Congress might. The Government urged that we
presume that the Commission's findings were supported by such
information, "even though not formally proved at the hearing." Id. at 227 U. S. 93 . We
rejected the contention, holding that the right to a hearing
included

															"an opportunity to test, explain, or refute. . . . All parties
must be fully apprised of the evidence submitted or to be
considered, and must be given opportunity to cross-examine
witnesses, to inspect documents and to offer evidence in
explanation or rebuttal." Ibid. I would agree with the District Court in Long
Island R. Co., supra, at 497, that Congress was fully
cognizant of our decision in Louisville & Nashville R.
Co. when it first adopted the hearing requirement of § 1
(14)(a) in 1917. And when Congress debated the 1966 amendment that
empowered the Commission to adopt incentive per diem rates, it had not lost sight of the importance of hearings.
Questioned about the effect that incentive compensation might have
on terminating lines, Mr. Staggers, Chairman of the House Committee
on Interstate and Foreign Commerce and floor manager of the bill,
responded:

															"I might say to the gentleman that this will not be put into
practice until there have been full hearings before the
Commission and all sides have had an opportunity to argue and
present their facts on the question."

															112 Cong.Rec. 10443 (emphasis added). Nor should we overlook the
Commission's own interpretation of the hearing requirement in §
1(14)(a) as it applies to this case. The Commission's order
initiating Page 410 U. S. 255 the rulemaking proceeding notified the parties that it was
acting

															"under authority of Part I of the Interstate Commerce Act (49
U.S.C. § 1, et seq. ); more particularly, section 1(14)(a)
and the Administrative Procedure Act (5 U.S.C. §§ 53, 556, and
557)."

															Clearly, the Commission believed that it was required to hold a
hearing on the record. [ Footnote
2/7 ] This interpretation, not of the Administrative Procedure
Act, but of § 1(14)(a) of the Commission's own Act, is "entitled to
great weight." United States v. American Trucking Assns., 310 U. S. 534 , 310 U. S. 549 ; Norwegian Nitrogen Products Co. v. United States, 288 U. S. 294 , 288 U. S.
315 .

															The majority, at one point, distinguishes Morgan v. United
States, 304 U. S. 1 ( Morgan II ), on the ground that the proceedings there
involved were " quasi -judicial," "and thus presumably
distinct from a rulemaking proceeding such as that engaged in by
the Commission here." It is this easy categorization and
pigeonholing that leads the majority to find Allegheny-Ludlum of
controlling significance in this case. Morgan II dealt
with the "full hearing" requirement of § 310 of the Packers and
Stockyards Act, 42 Stat. 166, as it related to ratemaking for the
purchase and sale of livestock. [ Footnote 2/8 ] It is true that the Court characterized
the proceedings as " quasi- Page 410 U. S. 256 judicial." But, the first time the case was before the Court, Morgan v. United States, 298 U. S. 468 , Mr.
Chief Justice Hughes noted that the "distinctive character" of the
proceeding was legislative: "It is proceeding looking to
legislative action in the fixing of rates of market agencies." Id. at 298 U. S. 479 .
Nevertheless, the Secretary of Agriculture was required to
establish rates in accordance with the standards and under the
limitations prescribed by Congress. The Court concluded:

															"A proceeding of this sort requiring the taking and weighing of
evidence, determinations of fact based upon the consideration of
the evidence, and the making of an order supported by such
findings, has a quality resembling that of a judicial proceeding.
Hence, it is frequently described as a proceeding of quasi-judicial character. The requirement of a 'full
hearing' has obvious reference to the tradition of judicial
proceedings. . . ." Id. at 298 U. S.
480 .

															Section 1(14)(a) of the Interstate Commerce Act bestows upon the
Commission broad discretionary power to determine incentive rates.
These rates may have devastating effects on a particular line.
According to the brief of one of the appellees, the amount of
incentive compensation paid by debtor lines amounts to millions of
dollars each six-month period. Nevertheless, the courts must defer
to the Commission as long as its findings are supported by
substantial evidence and it has not abused its discretion.

															"All the more insistent is the need, when power has been
bestowed so freely, that the 'inexorable safeguard' . . . of a fair
and open hearing be maintained in its integrity." Ohio Bell Telephone Co. v. Public Utilities Comm'n, 301 U. S. 292 , 301 U. S.
304 .

															Accordingly, I would hold that appellees were not afforded the
hearing guaranteed by § 1(14)(a) of the Interstate Commerce Act and
5 U.S.C. §§ 553, 556, and 557, and would affirm the decision of the
District Court.

															[ Footnote 2/1 ]

															5 U.S.C. § 556(d) provides that a "sanction may not be imposed"
without a full hearing, including cross-examination. But 556(d)
makes an exception, which I submit is not relevant here. It
provides:

															"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."

															(Emphasis added.)

															[ Footnote 2/2 ]

															See Hearing before the Subcommittee on Surface Transportation of
the Senate Committee on Commerce, 91st Cong., 1st Sess. (1969).

															[ Footnote 2/3 ]

															Florida East Coast argues, for example, that the Commission's
finding of a boxcar shortage may be attributable to a variety of
sampling or definitional errors, asserting that it is unrealistic
to define boxcar deficiencies in such a manner as "to show as a deficiency' the failure to supply a car on the day requested by
the shipper no matter when the request was received." The
Government's contention that a 24-hour standard was not used seems
unresponsive to this argument. See 337 I.C.C. 217,
221. [ Footnote 2/4 ]

															In the Long Island case, the court, speaking through
Judge Friendly, said:

															"Whether there was to be an oral hearing or not, the Long
Island's first job was to examine the basic data and find this out.
Nothing stood in its way. . . . If, on examining the data, the Long
Island had pointed to specifies on which it needed to cross-examine
or present live rebuttal testimony and the Commission had declined
to grant an oral hearing, we would have a different case. Instead,
the Long Island's request for an oral hearing was silent as to any
respect in which the Commission's disclosure of greater detail or
cross-examination of the Commission's staff was needed to enable it
to mount a more effective argument against the Commission's
proposal. The last sentence of § 556(d) would be deprived of all
meaning if this were held sufficient to put the agency on notice
that 'prejudice' would result from the denial of an oral hearing.
Even taking into account the further representations that have been
made to us, we fail to see that prejudice has been
established." 318 F.
Supp. 490 , 499.

															[ Footnote 2/5 ]

															Title 49 CFR § 1036.1 provides:

															" Application. -- Each common carrier by railroad
subject to the Interstate Commerce Act shall pay to the owning
railroads, including the owning railroads of Canada, the additional
per diem charges set forth in § 1036.2 on all boxcars shown below,
. . . while in the possession of nonowning railroads and subject to
per diem rules. These charges are in addition to all other per diem
charges currently in effect or prescribed. Mexican-owned cars are
exempt from the operation of these rules. The rules of this part
shall apply regardless of whether the foregoing boxcars are in
intrastate, interstate, or foreign commerce."

															As I have noted, § 1036.2 contains a schedule of per diem rates
or fees for the use of another's boxcars which have been shunted
onto its tracks, the rates or fees being definite or precise and
controlled by two variables: the cost of the boxcars and the ages
of the boxcars. These rates or fees, according to the record,
amount to millions of dollars a year.

															[ Footnote 2/6 ]

															The Commission discusses the critical factual issues to be
resolved in fixing incentive compensation rates under § 1(14)(a) in Incentive Per Diem Charges, 332 I.C.C. 11, 14-15:

															"Before an incentive element, either interim or long-term, can
be added to the per diem charge for the use of any particular type
of freight car, we are required to give consideration to the
national level of ownership of that type of car and to other
factors affecting the adequacy of the national freight car supply.
We have observed that the adequacy of the national freight car
fleet depends upon the interplay of a number of factors, none of
which can be said to be of superior importance. Further, since the
effect of an incentive charge must be produced over a future
period, consideration must be given to possible changes in these
factors. In recent years many innovations and improvements have
taken place in car design and operation. In the transportation of
many commodities the standard boxcar has been replaced by cars
capable of transporting greater loads with substantially less
damage. In the transportation of grains, railroads are converting
more and more to the use of large covered hopper cars. Shippers of
lumber and plywood have found modern cars designed to facilitate
transportation of their products increasingly desirable. At the
same time, many of these cars are adaptable to the transportation
of other commodities when not needed in the particular trade for
which they were designed. In large part, the special service
boxcars, covered hoppers and flatcars of various types handle
traffic which formerly moved in general service boxcars. The same
is true to some extent with respect to refrigerator cars. Their
larger size and, with respect to the flatcars in trailer-on-flatcar
(TOFC) service, their more rapid turnaround, enables them to
provide service which would require many more of the general
service boxcars which they replaced."

															"Valid conclusions as to the types of cars, the construction of
which for future use is to be encouraged by application of either
an interim or long-range incentive charge, and which must be found
to be in inadequate supply pursuant to the statutory requirement,
necessarily require consideration of the extent to which the
transportation service they perform is or can also be provided by
cars of other types. Such consideration requires a thorough
analysis of the services currently desired by the shipping public
and those reasonably to be anticipated in the future. An overall,
nationwide review of traffic and service demands and trends must
precede any valid determination of the existing or prospective
national requirements for freight cars of particular types. It is
quite obvious that application of an incentive charge which served
to encourage the acquisition of cars not adaptable to efficient
provision of needed service over their normal lifetime would not be
in the national interest. Shipper need, demand and acceptance with
respect to future equipment is a significant factor."

															[ Footnote 2/7 ]

															In its final report, the Commission apparently still believed
that its proceedings had to comply with the provisions of § 556 of
the Administrative Procedure Act. The report stated that the
parties had been granted a hearing in accordance with those
provisions. 337 I.C.C. at 219.

															[ Footnote 2/8 ] Morgan II considered in some depth the parameters of a
"full hearing." The majority takes the position that the case is
inapposite because the hearings provided in this case do not
"suffer from the defect found to be fatal in Morgan " -- i.e., the parties were "fairly advised" of the scope and
substance of the Commission proceedings. In Morgan II, however, there was no question that a "full hearing" included the
right to present oral testimony and argument. 304 U. S.
1 , 304 U. S.
18 -20.