U.S. Supreme Court Universal Camera Corp. v. Labor Board, 340
U.S. 474 (1951) Universal Camera Corp. v. National
Labor Relations Board No. 40 Argued November 6-7,
1950 Decided February 26,
1951 340
U.S. 474 CERTIORARI TO THE UNITED STATES
COURT OF APPEALS FOR THE SECOND
CIRCUIT Syllabus The National Labor Relations Board ordered petitioner to
reinstate with back pay an employee found to have been discharged
because he gave certain testimony in another proceeding under the
National Labor Relations Act. The evidence as to the reason for his
discharge was conflicting, and the Board overruled its examiner's
findings of fact and his recommendation that the proceedings be
dismissed. In decreeing enforcement, the Court of Appeals held that
the Board's findings of fact were "supported by substantial
evidence on the record considered as a whole" within the meaning of
§ 10(e) of the National Labor Relations Act, as amended in 1947.
This holding was based partly on the view (1) that the 1947
amendments had not broadened the scope of judicial review, and (2)
that the Board's rejection of its examiner's findings of fact was
without relevance in determining whether the Board's findings were
supported by substantial evidence. Held: 1. In the light of the legislative history, the standard of
proof required under § 10(e) of the National Labor Relations Act,
as amended by the Labor Management Relations Act, 1947, to support
a decision of the Labor Board on judicial review is the same as
that to be exacted by courts reviewing every administrative action
subject to the Administrative Procedure Act. Pp. 340 U. S.
477 -487.

															2. In amending § 10(e) of the National Labor Relations Act so as
to require that, on judicial review, the Board's findings of fact
must be supported by substantial evidence "on the record considered
as a whole," Congress made it clear that a reviewing court is not
barred from setting aside a Board decision when it cannot
conscientiously find that the evidence supporting that decision is
substantial, when viewed in the light that the record in its
entirety furnishes, including the body of evidence opposed to the
Board's view. Pp. 340 U. S.
487 -488.

															3. When read in the light of their legislative history, the
Administrative Procedure Act and the Labor Management Relations
Act, Page 340 U. S. 475 1947, require the courts to assume more responsibility for the
reasonableness and fairness of Labor Board decisions than some
courts have shown in the past. Pp. 340 U. S.
488 -490.

															4. Whether, on the record as a whole, there is substantial
evidence to support agency findings is a question which Congress
has placed in the keeping of the courts of appeals. This Court will
intervene only in what ought to be the rare instance when the
standard appears to have been misapprehended or grossly misapplied.
P. 340 U. S.
491 .

															5. The Court of Appeals erred in holding that it was barred from
taking into account the report of the examiner on questions of fact
insofar as that report was rejected by the Board. Pp. 340 U. S.
491 -497.

															(a) A trial examiner's findings are not as unassailable as a
master's, and may be reversed by the Board when when not clearly
erroneous. P. 340 U. S.
492 .

															(b) A reviewing court need not give a trial examiner's findings
more weight than, in reason and in the light of judicial
experience, they deserve, but they should be accorded the relevance
that they reasonably command in answering the comprehensive
question whether the evidence supporting the Board's order is
substantial. Pp. 340 U. S.
496 -497.

															6. The cause is remanded to the Court of Appeals, which is left
free to grant or deny enforcement as it thinks the principles
expressed in the opinion, of this Court dictate. P. 340 U. S.
497 .

															179 F.2d 749, vacated and remanded.

															The Court of Appeals decreed enforcement of an order of the
National Labor Relations Board requiring petitioner to reinstate an
employee with back pay and to cease and desist from discriminating
against any employee who files charges or gives testimony under the
National Labor Relations Act. 179 F.2d 749. This Court granted
certiorari. 339 U.S. 962. Judgment vacated and cause
remanded, p. 340 U. S.
497 . Page 340 U. S. 476 MR. JUSTICE FRANKFURTER delivered the opinion of the Court.

															The essential issue raised by this case and its companion, Labor Board v. Pittsburgh Steamship Co., post, 340 U. S. 498 , is
the effect of the Administrative Procedure Act and the legislation
colloquially known as the Taft-Hartley Act on the duty of Courts of
Appeals when called upon to review orders of the National Labor
Relations Board.

															The Court of Appeals for the Second Circuit granted enforcement
of an order directing, in the main, that petitioner reinstate with
back pay an employee found to have been discharged because he gave
testimony under the Wagner Act, and cease and desist from
discriminating against any employee who files charges or gives
testimony under that Act. The court below, Judge Swan dissenting,
decreed full enforcement of the order. 179 F.2d 749. Because the
views of that court regarding the effect of the new legislation on
the relation between the Board and the courts of appeals in the
enforcement of the Board's orders conflicted with those of the
Court of Appeals for the Sixth Circuit, [ Footnote 1 ] we brought both cases here. 339 U.S. 951.
The clash of opinion obviously required settlement by this
Court. Page 340 U. S. 477 I .

															Want of certainty in judicial review of Labor Board decisions
partly reflects the intractability of any formula to furnish
definiteness of content for all the impalpable factors involved in
judicial review. But, in part, doubts as to the nature of the
reviewing power and uncertainties in its application derive from
history, and, to that extent, an elucidation of this history may
clear them away.

															The Wagner Act provided: "The findings of the Board as to the
facts, if supported by evidence, shall be conclusive." Act of July
5, 1935, § 10(e), 49 Stat. 449, 454, 29 U.S.C. § 160(e). This Court
read "evidence" to mean "substantial evidence," Washington, V.
& M. Coach Co. v. Labor Board, 301 U.
S. 142 , and we said that

															"[s]ubstantial evidence is more than a mere scintilla. It means
such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion." Consolidated Edison Co. v. Labor Board, 305 U.
S. 197 , 305 U. S. 229 .
Accordingly, it

															"must do more than create a suspicion of the existence of the
fact to be established. . . . [I]t must be enough to justify, if
the trial were to a jury, a refusal to direct a verdict when the
conclusion sought to be drawn from it is one of fact for the
jury." Labor Board v. Columbian Enameling & Stamping Co., 306 U. S. 292 , 306 U. S.
300 .

															The very smoothness of the "substantial evidence" formula as the
standard for reviewing the evidentiary validity of the Board's
findings established its currency. But the inevitably variant
applications of the standard to conflicting evidence soon brought
contrariety of views, and, in due course, bred criticism. Even
though the whole record may have been canvassed in order to
determine whether the evidentiary foundation of a determination by
the Board was "substantial," the phrasing of this Court's process
of review readily lent itself to the notion Page 340 U. S. 478 that it was enough that the evidence supporting the Board's
result was "substantial" when considered by itself. It is fair to
say that, by imperceptible steps, regard for the factfinding
function of the Board led to the assumption that the requirements
of the Wagner Act were met when the reviewing court could find in
the record evidence which, when viewed in isolation, substantiated
the Board's findings. Compare Labor Board v. Waterman Steamship
Corp., 309 U. S. 206 ; Labor Board v. Bradford Dyeing Ass'n, 310 U.
S. 318 ; and see Labor Board v. Nevada Consolidated
Copper Corp., 316 U. S. 105 .
This is not to say that every member of this Court was consciously
guided by this view, or that the Court ever explicitly avowed this
practice as doctrine. What matters is that the belief justifiably
arose that the Court had so construed the obligation to review.
[ Footnote 2 ]

															Criticism of so contracted a reviewing power reinforced
dissatisfaction felt in various quarters with the Board's
administration of the Wagner Act in the years preceding the war.
The scheme of the Act was attacked as an inherently unfair fusion
of the functions of prosecutor and judge. [ Footnote 3 ] Accusations of partisan bias were not
wanting. [ Footnote 4 ] The
"irresponsible admission and weighing of hearsay, opinion, and
emotional speculation in place of factual evidence" was said to be
a "serious menace." [ Footnote
5 ] No doubt Page 340 U. S. 479 some, perhaps even much, of the criticism was baseless ,and some
surely was reckless. [ Footnote
6 ] What is here relevant, however, is the climate of opinion
thereby generated, and its effect on Congress. Protests against
"shocking injustices" [ Footnote
7 ] and intimations of judicial "abdication" [ Footnote 8 ] with which some courts granted
enforcement of the Board's order stimulated pressures for
legislative relief from alleged administrative excesses.

															The strength of these pressures was reflected in the passage in
1940 of the Walter-Logan Bill. It was vetoed by President
Roosevelt, partly because it imposed unduly rigid limitations on
the administrative process and partly because of the investigation
into the actual operation of the administrative process then being
conducted by an experienced committee appointed by the Attorney
General. [ Footnote 9 ] It is
worth noting that, despite its aim to tighten control over
administrative determinations of fact, the Walter-Logan Bill
contented itself with the conventional formula that an agency's
decision could be set aside if "the findings of fact are not
supported by substantial evidence." [ Footnote 10 ] Page 340 U. S. 480 The final report of the Attorney General's Committee was
submitted in January, 1941. The majority concluded that

															"[d]issatisfaction with the existing standards as to the scope
of judicial review derives largely from dissatisfaction with the
factfinding procedures now employed by the administrative bodies.
[ Footnote 11 ]"

															Departure from the "substantial evidence" test, it thought,
would either create unnecessary uncertainty or transfer to courts
the responsibility for ascertaining and assaying matters the
significance of which lies outside judicial competence.
Accordingly, it recommended against Legislation embodying a general
scheme of judicial review. [ Footnote 12 ] Page 340 U. S. 481 Three members of the Committee registered a dissent. Their view
was that the "present system or lack of system of judicial review"
led to inconsistency and uncertainty. They reported that, under a
"prevalent" interpretation of the "substantial evidence" rule,

															"if what is called 'substantial evidence' is found anywhere in
the record to support conclusions of fact, the courts are said to
be obliged to sustain the decision without reference to how heavily
the countervailing evidence may preponderate -- unless, indeed, the
stage of arbitrary decision is reached. Under this interpretation,
the courts need to read only one side of the case, and, if they
find any evidence there, the administrative action is to be
sustained, and the record to the contrary is to be ignored.
[ Footnote 13 ]"

															Their view led them to recommend that Congress enact principles
of review applicable to all agencies not excepted by unique
characteristics. One of these principles was expressed by the
formula that judicial review could extend to "findings, inferences,
or conclusions of fact unsupported, upon the whole record, by
substantial evidence." [ Footnote
14 ] So far as the Page 340 U. S. 482 history of this movement for enlarged review reveals, the phrase
"upon the whole record" makes its first appearance in this
recommendation of the minority of the Attorney General's Committee.
This evidence of the close relationship between the phrase and the
criticism out of which it arose is important, for the substance of
this formula for judicial review found its way into the statute
books when Congress with unquestioning -- we might even say
uncritical -- unanimity enacted the Administrative Procedure Act.
[ Footnote 15 ] Page 340 U. S. 483 Once is tempted to say "uncritical" because the legislative
history of that Act hardly speaks with that clarity of purpose
which Congress supposedly furnishes courts in order to enable them
to enforce its true will. On the one hand, the sponsors of the
legislation indicated that they were reaffirming the prevailing
"substantial evidence" test. [ Footnote 16 ] But, with equal clarity, they expressed
disapproval of the manner in which the courts were applying Page 340 U. S. 484 their own standard. The committee reports of both houses refer
to the practice of agencies to rely upon "suspicion, surmise,
implications, or plainly incredible evidence," and indicate that
courts are to exact higher standards "in the exercise of their
independent judgment," and on consideration of "the whole record."
[ Footnote 17 ]

															Similar dissatisfaction with too restricted application of the
"substantial evidence" test is reflected in the legislative history
of the Taft-Hartley Act. [ Footnote 18 ] The bill as reported to the House provided
that the

															"findings of the Board as to the facts shall be conclusive
unless it is made to appear to the satisfaction of the court either
(1) that the findings of fact are against the manifest weight of
the Page 340 U. S. 485 evidence, or (2) that the findings of fact are not supported by
substantial evidence. [ Footnote
19 ]"

															The bill left the House with this provision. Early committee
prints in the Senate provided for review by "weight of the
evidence" or "clearly erroneous" standards. [ Footnote 20 ] But, as the Senate Committee Report
relates,

															"it was finally decided to conform the statute to the
corresponding section of the Administrative Procedure Act, where
the substantial evidence test prevails. In order to clarify any
ambiguity in that statute, however, the committee inserted the
words 'questions of fact, if supported by substantial evidence on the record considered as a whole. . . .' [ Footnote 21 ]"

															This phraseology was adopted by the Senate. The House conferees
agreed. They reported to the House:

															"It is believed that the provisions of the conference
agreement Page 340 U. S. 486 relating to the courts' reviewing power will be adequate to
preclude such decisions as those in NLRB v. Nevada Consol.
Copper Corp., 316 U. S. 105 , and in the Wilson, Columbia Products, Union Pacific Stages, Hearst,
Republic Aviation, and Le Tourneau, etc. cases, supra, without unduly burdening the courts. [ Footnote 22 ]"

															The Senate version became the law. Page 340 U. S. 487 It is fair to say that, in all this, Congress expressed a mood.
And it expressed its mood not merely by oratory, but by
legislation. As legislation, that mood must be respected, even
though it can only serve as a standard for judgment, and not as a
body of rigid rules assuring sameness of applications. Enforcement
of such broad standards implies subtlety of mind and solidity of
judgment. But it is not for us to question that Congress may assume
such qualities in the federal judiciary.

															From the legislative story we have summarized, two concrete
conclusions do emerge. One is the identity of aim of the
Administrative Procedure Act and the Taft-Hartley Act regarding the
proof with which the Labor Board must support a decision. The other
is that, now, Congress has left no room for doubt as to the kind of
scrutiny which a court of appeals must give the record before the
Board to satisfy itself that the Board's order rests on adequate
proof.

															It would be mischievous word-playing to find that the scope of
review under the Taft-Hartley Act is any different from that under
the Administrative Procedure Act. The Senate Committee which
reported the review clause of the Taft-Hartley Act expressly
indicated that the two standards were to conform in this regard,
and the wording of the two Acts is, for purposes of judicial
administration, identical. And so we hold that the standard of
proof specifically required of the Labor Board by the Taft-Hartley
Act is the same as that to be exacted by courts reviewing every
administrative action subject to the Administrative Procedure
Act.

															Whether or not it was ever permissible for courts to determine
the substantiality of evidence supporting a Labor Board decision
merely on the basis of evidence which, in and of itself, justified
it, without taking into account contradictory evidence or evidence
from which conflicting inferences could be drawn, the new
legislation Page 340 U. S. 488 definitively precludes such a theory of review and bars its
practice. The substantiality of evidence must take into account
whatever in the record fairly detracts from its weight. This is
clearly the significance of the requirement in both statutes that
courts consider the whole record. Committee reports and the
adoption in the Administrative Procedure Act of the minority views
of the Attorney General's Committee demonstrate that to enjoin such
a duty on the reviewing court was one of the important purposes of
the movement which eventuated in that enactment.

															To be sure, the requirement for canvassing "the whole record" in
order to ascertain substantiality does not furnish a calculus of
value by which a reviewing court can assess the evidence. Nor was
it intended to negative the function of the Labor Board as one of
those agencies presumably equipped or informed by experience to
deal with a specialized field of knowledge, whose findings within
that field carry the authority of an expertness which courts do not
possess, and therefore must respect. Nor does it mean that, even as
to matters not requiring expertise, a court may displace the
Board's choice between two fairly conflicting views even though the
court would justifiably have made a different choice had the matter
been before it de novo. Congress has merely made it clear
that a reviewing court is not barred from setting aside a Board
decision when it cannot conscientiously find that the evidence
supporting that decision is substantial when viewed in the light
that the record in its entirety furnishes, including the body of
evidence opposed to the Board's view.

															There remains, then, the question whether enactment of these two
statutes has altered the scope of review other than to require that
substantiality be determined in the light of all that the record
relevantly presents. A formula for judicial review of
administrative action may afford grounds for certitude, but cannot
assure certainty of application. Page 340 U. S. 489 Some scope for judicial discretion in applying the formula can
be avoided only by falsifying the actual process of judging, or by
using the formula as an instrument of futile casuistry. It cannot
be too often repeated that judges are not automata. The ultimate
reliance for the fair operation of any standard is a judiciary of
high competence and character, and the constant play of an informed
professional critique upon its work.

															Since the precise way in which courts interfere with agency
findings cannot be imprisoned within any form of words, new
formulas attempting to rephrase the old are not likely to be more
helpful than the old. There are no talismanic words that can avoid
the process of judgment. The difficulty is that we cannot escape,
in relation to this problem, the use of undefined defining
terms.

															Whatever changes were made by the Administrative Procedure and
Taft-Hartley Acts are clearly within this area where precise
definition is impossible. Retention of the familiar "substantial
evidence" terminology indicates that no drastic reversal of
attitude was intended.

															But a standard leaving an unavoidable margin for individual
judgment does not leave the judicial judgment at large, even though
the phrasing of the standard does not wholly fence it in. The
legislative history of these Acts demonstrates a purpose to impose
on courts a responsibility which has not always been recognized. Of
course, it is a statute, and not a committee report, which we are
interpreting. But the fair interpretation of a statute if often
"the art of proliferating a purpose," Brooklyn National Corp.
v. Commissioner, 157 F.2d 450, 451, revealed more by the
demonstrable forces that produced it than by its precise phrasing.
The adoption in these statutes of the judicially constructed
"substantial evidence" test was a response to pressures for
stricter and more uniform practice, not a reflection of approval of
all existing practices. Page 340 U. S. 490 To find the change so elusive that it cannot be precisely
defined does not mean it may be ignored. We should fail in our duty
to effectuate the will of Congress if we denied recognition to
expressed Congressional disapproval of the finality accorded to
Labor Board findings by some decisions of this and lower courts, or
even of the atmosphere which may have favored those decisions.

															We conclude, therefore, that the Administrative Procedure Act
and the Taft-Hartley Act direct that courts must now assume more
responsibility for the reasonableness and fairness of Labor Board
decisions than some courts have shown in the past. Reviewing courts
must be influenced by a feeling that they are not to abdicate the
conventional judicial function. Congress has imposed on them
responsibility for assuring that the Board keeps within reasonable
grounds. That responsibility is not less real because it is limited
to enforcing the requirement that evidence appear substantial when
viewed, on the record as a whole, by courts invested with the
authority and enjoying the prestige of the Courts of Appeals. The
Board's findings are entitled to respect, but they must nonetheless
be set aside when the record before a Court of Appeals clearly
precludes the Board's decision from being justified by a fair
estimate of the worth of the testimony of witnesses or its informed
judgment on matters within its special competence or both.

															From this, it follows that enactment of these statutes does not
require every Court of Appeals to alter its practice. Some --
perhaps a majority -- have always applied the attitude reflected in
this legislation. To explore whether a particular court should or
should not alter its practice would only divert attention from the
application of the standard now prescribed to a futile inquiry into
the nature of the test formerly used by a particular court.

															Our power to review the correctness of application of the
present standard ought seldom to be called into action. Page 340 U. S. 491 Whether, on the record as a whole, there is substantial evidence
to support agency findings is a question which Congress has placed
in the keeping of the Courts of Appeals. This Court will intervene
only in what ought to be the rare instance when the standard
appears to have been misapprehended or grossly misapplied. II Our disagreement with the view of the court below that the scope
of review of Labor Board decisions is unaltered by recent
legislation does not, of itself, as we have noted, require reversal
of its decision. The court may have applied a standard of review
which satisfies the present Congressional requirement.

															The decision of the Court of Appeals is assailed on two grounds.
It is said (1) that the court erred in holding that it was barred
from taking into account the report of the examiner on questions of
fact insofar as that report was rejected by the Board, and (2) that
the Board's order was not supported by substantial evidence on the
record, considered as a whole, even apart from the validity of the
court's refusal to consider the rejected portions of the examiner's
report.

															The latter contention is easily met. It is true that two of the
earlier decisions of the court below were among those disapproved
by Congress. [ Footnote 23 ]
But this disapproval, we have seen, may well have been caused by
unintended intimations of judicial phrasing. And, in any event, it
is clear from the court's opinion in this case that it, in fact,
did consider the "record as a whole," and did not deem itself
merely the judicial echo of the Board's conclusion. The testimony
of the company's witnesses was inconsistent, and there was clear
evidence that the complaining Page 340 U. S. 492 employee had been discharged by an officer who was at one time
influenced against him because of his appearance at the Board
hearing. On such a record, we could not say that it would be error
to grant enforcement.

															The first contention, however, raises serious questions, to
which we now turn. III The Court of Appeals deemed itself bound by the Board's
rejection of the examiner's findings because the court considered
these findings not "as unassailable as a master's." [ Footnote 24 ] 179 F.2d at 752. They are not.
Section 10(c) of the Labor Management Relations Act provides
that.

															"If upon the preponderance of the testimony taken, the Board
shall be of the opinion that any person named in the complaint has
engaged in or is engaging in any such unfair labor practice, then
the Board shall state its findings of fact. . . ."

															61 Stat. 147, 29 U.S.C.(Supp. III) § 160(c). The responsibility
for decision thus placed on the Board is wholly inconsistent with
the notion that it has power to reverse an examiner's findings only
when they are "clearly erroneous." Such a limitation would make so
drastic a departure from prior administrative practice that
explicitness would be required.

															The Court of Appeals concluded from this premise

															"that, although the Board would be wrong in totally disregarding
his findings, it is practically impossible for a Page 340 U. S. 493 court, upon review of those findings which the Board itself
substitutes, to consider the Board's reversal as a factor in the
court's own decision. This we say because we cannot find any middle
ground between doing that and treating such a reversal as error,
whenever it would be such, if done by a judge to a master in
equity."

															179 F.2d at 753. Much as we respect the logical acumen of the
Chief Judge of the Court of Appeals, we do not find ourselves
pinioned between the horns of his dilemma.

															We are aware that to give the examiner's findings less finality
than a master's, and yet entitle them to consideration in striking
the account, is to introduce another and an unruly factor into the
judgmatical process of review. But we ought not to fashion an
exclusionary rule merely to reduce the number of imponderables to
be considered by reviewing courts.

															The Taft-Hartley Act provides that

															"The findings of the Board with respect to questions of fact if
supported by substantial evidence on the record considered as a
whole shall be conclusive."

															61 Stat. 148, 29 U.S.C.(Supp. III) § 160(e). Surely an
examiner's report is as much a part of the record as the complaint
or the testimony. According to the Administrative Procedure Act,
"All decisions (including initial, recommended, or tentative
decisions) shall become a part of the record. . . ." § 8(b), 60
Stat. 242, 5 U.S.C. § 1007(b). We found that this Act's provision
for judicial review has the same meaning as that in the
Taft-Hartley Act. The similarity of the two statutes in language
and purpose also requires that the definition of "record" found in
the Administrative Procedure Act be construed to be applicable as
well to the term "record" as used in the Taft-Hartley Act.

															It is therefore difficult to escape the conclusion that the
plain language of the statutes directs a reviewing court to
determine the substantiality of evidence on the record including
the examiner's report. The conclusion Page 340 U. S. 494 is confirmed by the indications in the legislative history that
enhancement of the status and function of the trial examiner was
one of the important purposes of the movement for administrative
reform.

															This aim was set forth by the Attorney General's Committee on
Administrative Procedure:

															"In general, the relationship upon appeal between the hearing
commissioner and the agency ought, to a considerable extent, to be
that of trial court to appellate court. Conclusions,
interpretations, law, and policy should, of course, be open to full
review. On the other hand, on matters which the hearing
commissioner, having heard the evidence and seen the witnesses, is
best qualified to decide, the agency should be reluctant to disturb
his findings unless error is clearly shown. [ Footnote 25 ]"

															Apparently it was the Committee's opinion that these
recommendations should not be obligatory. For the bill which
accompanied the Final Report required only that hearing officers
make an initial decision which would become final in the absence of
further agency action, and that agencies which differed on the
facts from their examiners give reasons and record citations
supporting their conclusion. [ Footnote 26 ] This proposal was further moderated by the
Administrative Procedure Act. It permits agencies to use examiners
to record testimony, but not to evaluate it, and contains the
rather obscure provision that an agency which reviews an examiner's
report has "all the powers which it would have in making the
initial decision." [ Footnote
27 ] Page 340 U. S. 495 But this refusal to make mandatory the recommendations of the
Attorney General's Committee should not be construed as a
repudiation of them. Nothing in the statutes suggests that the
Labor Board should not be influenced by the examiner's opportunity
to observe the witnesses he hears and sees and the Board does not.
Nothing suggests that reviewing courts should not give to the
examiner's report such probative force as it intrinsically
commands. To the contrary, § 11 of the Administrative Procedure Act
contains detailed provisions designed to maintain high standards of
independence and competence in examiners. Section 10(c) of the
Labor Management Relations Act requires that examiners "shall issue
. . . a proposed report, together with a recommended order." Both
statutes thus evince a purpose to increase the importance of the
role of examiners in the administrative process. High standards of
public administration counsel that we attribute to the Labor
Board's examiners both due regard for the responsibility which
Congress imposes on them and the competence to discharge it.
[ Footnote 28 ] Page 340 U. S. 496 The committee reports also make it clear that the sponsors of
the legislation thought the statutes gave significance to the
findings of examiners. Thus, the Senate Committee responsible for
the Administrative Procedure Act explained in its report that
examiners' decisions

															"would be of consequence, for example, to the extent that
material facts in any case depend on the determination of
credibility of witnesses as shown by their demeanor or conduct at
the hearing. [ Footnote
29 ]"

															The House Report reflects the same attitude, [ Footnote 30 ] and the Senate Committee
Report on the Taft-Hartley Act likewise indicates regard for the
responsibility devolving on the examiner. [ Footnote 31 ]

															We do not require that the examiner's findings be given more
weight than, in reason and in the light of judicial experience,
they deserve. The "substantial evidence" standard is not modified
in any way when the Board and its examiner disagree. We intend only
to recognize that evidence supporting a conclusion may be less
substantial when an impartial, experienced examiner who has
observed the witnesses and lived with the case has drawn
conclusions different from the Board's than when he has reached the
same conclusion. The findings of the examiner are to be considered
along with the consistency and inherent probability of testimony.
The significance of his report, of course, depends largely on the
importance of credibility in the particular case. To give it this
significance does not seem to us materially more difficult Page 340 U. S. 497 than to heed the other factors which in sum determine whether
evidence is "substantial."

															The direction in which the law moves is often a guide for
decision of particular cases, and here it serves to confirm our
conclusion. However halting its progress, the trend in litigation
is toward a rational inquiry into truth, in which the tribunal
considers everything "logically probative of some matter requiring
to be proved." Thayer, A Preliminary Treatise on Evidence, 530; Funk v. United States, 290 U. S. 371 .
This Court has refused to accept assumptions of fact which are
demonstrably false, United States v. Provident Trust Co., 291 U. S. 272 ,
even when agreed to by the parties, Swift & Co. v. Hocking
Valley R. Co., 243 U. S. 281 .
Machinery for discovery of evidence has been strengthened; the
boundaries of judicial notice have been slowly but perceptibly
enlarged. It would reverse this process for courts to deny
examiners' findings the probative force they would have in the
conduct of affairs outside a courtroom.

															We therefore remand the cause to the Court of Appeals. On
reconsideration of the record, it should accord the findings of the
trial examiner the relevance that they reasonably command in
answering the comprehensive question whether the evidence
supporting the Board's order is substantial. But the court need not
limit its reexamination of the case to the effect of that report on
its decision. We leave it free to grant or deny enforcement as it
thinks the principles expressed in this opinion dictate. Judgment vacated that cause remanded. MR. JUSTICE BLACK and MR. JUSTICE DOUGLAS concur with parts I
and II of this opinion, but, as to part III, agree with the opinion
of the court below, 179 F.2d 749, 753.

															[ Footnote 1 ] Labor Board v. Pittsburgh Steamship Co., 180 F.2d 731; aff'd, post, p. 340 U. S. 498 . The
Courts of Appeals of five circuits have agreed with the Court of
Appeals for the Second Circuit that no material change was made in
the reviewing power. Eastern Coal Corp. v. Labor Board, 176 F.2d 131, 134-136; Labor Board v. La Salle Steele Co., 178 F.2d 829, 833-834; Labor Board v. Minnesota Mining &
Mfg. Co., 179 F.2d 323, 325-326; Labor Board v.
Continental Oil Co., 179 F.2d 552, 555; Labor Board v.
Booker, 180 F.2d 727, 729; but see Labor Board v. Caroline
Mills, Inc., 167 F.2d 212, 213.

															[ Footnote 2 ] See the testimony of Dean Stason before the
Subcommittee of the Senate Committee on the Judiciary in 1941.
Hearings on S. 674, 77th Cong., 1st Sess. 1355-1360.

															[ Footnote 3 ] See, for example, the remarks of Laird Bell, then
Chairman of the Committee on Administrative Law of the Chicago Bar
Association, writing in 1940 in the American Bar Association
Journal. 26 A.B.A.J. 552.

															[ Footnote 4 ] See Gall, The Current Labor Problem: The View of
Industry, 27 Iowa L.Rev. 381, 382.

															[ Footnote 5 ]

															This charge was made by the majority of the Special Committee of
the House appointed in 1939 to investigate the National Labor
Relations Board. H.R.Rep. No. 1902, 76th Cong., 3d Sess. 76.

															[ Footnote 6 ]

															Professor Gellhorn and Mr. Linfield reached the conclusion in
1939, after an extended investigation, that "the denunciations find
no support in fact." Gellhorn and Linfield, Politics and Labor
Relations, 39 Col.L.Rev. 339, 394. See also Millis and
Brown, From the Wagner Act to Taft-Hartley, 66-75.

															[ Footnote 7 ] Wilson & Co. v. Labor Board, 126 F.2d 114, 117.

															[ Footnote 8 ]

															In Labor Board v. Standard Oil Co., 138 F.2d 885, 887,
Judge Learned Hand said,

															"We understand the law to be that the decision of the Board upon
that issue is, for all practical purposes, not open to us at all;
certainly not after we have once decided that there was
'substantial' evidence that the 'disestablished' union was
immediately preceded by a period during which there was a
'dominated' union. . . ."

															"[W]e recognize how momentous may be such an abdication of any
power of review. . . ."

															[ Footnote 9 ]

															86 Cong.Rec. 13942-13943, reprinted as H.R.Doc. No. 986, 76th
Cong., 3d Sess.

															[ Footnote 10 ]

															S. 915, H.R. 6324, 76th Cong., 1st Sess., § 5(a).

															[ Footnote 11 ]

															Final Report, 92.

															[ Footnote 12 ]

															Referring to proposals to enlarge the scope of review to permit
inquiry whether the findings are supported by the weight of the
evidence, the majority said:

															"Assuming that such a change may be desirable with respect to
special administrative determinations, there is serious objection
to its adoption for general application."

															"In the first place, there is the question of how much change,
if any, the amendment would produce. The respect that courts have
for the judgments of specialized tribunals which have carefully
considered the problems, and the evidence, cannot be legislated
away. The line between 'substantial evidence' and 'weight of
evidence' is not easily drawn -- particularly when the court is
confined to a written record, has a limited amount of time, and has
no opportunity further to question witnesses on testimony which
seems hazy or leaves some lingering doubts unanswered. 'Substantial
evidence' may well be equivalent to the 'weight of evidence' when a
tribunal in which one has confidence and which had greater
opportunities for accurate determination has already so
decided."

															"In the second place, the wisdom of a general change to review
of the 'weight of evidence' is questionable. If the change would
require the courts to determine independently which way the
evidence preponderates, administrative tribunals would be turned
into little more than media for transmission of the evidence to the
courts. It would destroy the values of adjudication of fact by
experts or specialists in the field involved. It would divide the
responsibility for administrative adjudications."

															Final Report 91-92.

															[ Footnote 13 ] Id., 210-211.

															[ Footnote 14 ]

															The minority enumerated four "existing deficiencies" in judicial
review. These were (1) "the haphazard, uncertain, and variable
results of the present system or lack of system of judicial
review," (2) the interpretation permitting substantiality to be
determined without taking into account conflicting evidence, (3)
the failure of existing formulas "to take account of differences
between the various types of fact determinations," and (4) the
practice of determining standards of review by "case-to-case
procedure of the courts." They recommended that,

															"Until Congress finds it practicable to examine into the
situation of particular agencies, it should provide more definitely
by general legislation for both the availability and scope of
judicial review in order to reduce uncertainty and variability. As
the Committee recognizes in its report, there are several principal
subjects of judicial review -- including constitutional questions,
statutory interpretation, procedure, and the support of findings of
fact by adequate evidence. The last of these should obviously, we
think, mean support of all findings of fact, including inferences
and conclusions of fact, upon the whole record. Such a legislative
provision should, however, be qualified by a direction to the
courts to respect the experience, technical competence, specialized
knowledge, and discretionary authority of each agency. We have
framed such a provision in the appendix to this statement." Id., 210-212.

															The text of the recommended provision is as follows:

															"(e) Scope of review. -- As to the findings,
conclusions, and decisions in any case, the reviewing court,
regardless of the form of the review proceeding, shall consider and
decide, so far as necessary to its decision and where raised by the
parties, all relevant questions of: (1) constitutional right,
power, privilege, or immunity; (2) the statutory authority or
jurisdiction of the agency; (3) the lawfulness and adequacy of
procedure; (4) findings, inferences, or conclusions of fact
unsupported, upon the whole record, by substantial evidence; and
(5) administrative action otherwise arbitrary or capricious. Provided, however, That, upon such review, due weight
shall be accorded the experience, technical competence, specialized
knowledge, and legislative policy of the agency involved, as well
as the discretionary authority conferred upon it." Id., 246-247.

															[ Footnote 15 ]

															60 Stat. 237, 5 U.S.C. § 1001 et seq. The form finally adopted
reads as follows:

															"Sec. 10. Except so far as (1) statutes preclude judicial review
or (2) agency action is by law committed to agency discretion. . .
."

															" * * * *" "(e) SCOPE OF REVIEW. -- So far as necessary to decision, and
where presented, the reviewing court shall decide all relevant
questions of law, interpret constitutional and statutory
provisions, and determine the meaning or applicability of the terms
of any agency action. It shall (A) compel agency action unlawfully
withheld or unreasonably delayed; and (B) hold unlawful and set
aside agency action, findings, and conclusions found to be (1)
arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with law; (2) contrary to constitutional right, power,
privilege, or immunity; (3) in excess of statutory jurisdiction,
authority, or limitations, or short of statutory right; (4) without
observance of procedure required by law; (5) unsupported by
substantial evidence in any case subject to the requirements of
sections 7 and 8 or otherwise reviewed on the record of an agency
hearing provided by statute; or (6) unwarranted by the facts to the
extent that the facts are subject to trial de novo by the
reviewing court. In making the foregoing determinations, the court
shall review the whole record, or such portions thereof as
may be cited by any party, and due account shall be taken of the
rule of prejudicial error."

															60 Stat. 243-244, 5 U.S.C. § 1009(e). (Italics ours.)

															In the form in which the bill was originally presented to
Congress, clause (B)(5) read,

															"unsupported by competent, material, and substantial evidence
upon the whole agency record as reviewed by the court in any case
subject to the requirements of sections 7 and 8."

															H.R. 1203, 79th Cong., 1st Sess., quoted in S.Doc. No. 248, 79th
Cong., 2d Sess. 155, 160. References to competency and materiality
of evidence were deleted, and the final sentence added, by the
Senate Committee. S.Rep.No. 752, 79th Cong., 1st Sess. 28;
S.Doc.No. 248, supra, 39-40, 214. No reason was given for
the deletion.

															[ Footnote 16 ]

															A statement of the Attorney General appended to the Senate
Report explained that the bill "is intended to embody the law as
declared, for example, in Consolidated Edison Co. v. Labor
Board, 305 U. S. 197 ."
Section 10(e) of Appendix B to S.Rep. No. 752, supra, reprinted in S.Doc. No. 248, supra, 230. Mr. McFarland,
then Chairman of the American Bar Association Committee on
Administrative Law, testified before the House Judiciary Committee
to the same effect. Id., 85-86.

															[ Footnote 17 ]

															The following quotation from the report of the Senate Judiciary
Committee indicates the position of the sponsors.

															"The 'substantial evidence' rule set forth in section 10(e) is
exceedingly important. As a matter of language, substantial
evidence would seem to be an adequate expression of law. The
difficulty comes about in the practice of agencies to rely upon
(and of courts to tacitly approve) something less -- to rely upon
suspicion, surmise, implications, or plainly incredible evidence.
It will be the duty of the courts to determine, in the final
analysis and in the exercise of their independent judgment,
whether, on the whole record, the evidence in a given instance is
sufficiently substantial to support a finding, conclusion, or other
agency action as a matter of law. In the first instance, however,
it will be the function of the agency to determine the sufficiency
of the evidence upon which it acts -- and the proper performance of
its public duties will require it to undertake this inquiry in a
careful and dispassionate manner. Should these objectives of the
bill, as worded, fail, supplemental legislation will be
required."

															S.Rep. No. 752, supra, 30-31. The House Committee
Report is to substantially the same effect. H.R.Rep. No. 1980, 79th
Cong., 2d Sess. 45. The reports are reprinted in S.Doc. No. 248, supra, 216-217, 279. See also the response of Senator McCarran in debate, to
the effect that the bill changed the "rule" that courts were
"powerless to interfere" when there "was no probative evidence." Id., 322. And see the comment of Congressman
Springer, a member of the House Judiciary Committee, id., 376.

															[ Footnote 18 ]

															61 Stat. 136, 29 U.S.C. (Supp. III) § 141 et seq. [ Footnote 19 ]

															H.R. 3020, 80th Cong., 1st Sess., § 10(e), reprinted in 1
Legislative History of the Labor Management Relations Act 1947, p.
71.

															[ Footnote 20 ]

															The history of the evolution of the Senate provision was given
by Senator Morse. 93 Cong.Rec. 5108, reprinted in 2 Legislative
History 1504-1505. The prints were not approved by the
Committee.

															[ Footnote 21 ]

															S.Rep. No. 105, 80th Cong., 1st Sess. 26-27, reprinted in 1
Legislative History 432-433. The Committee did not explain what the
ambiguity might be, and it is to be noted that the phrase it
italicized is indistinguishable in content from the requirement of
§ 10(e) of the Administrative Procedure Act that "the court shall
review the whole record or such portions thereof as may be cited by
any party. . . ."

															Senator Taft gave this explanation to the Senate of the meaning
of the section:

															"In the first place, the evidence must be substantial; in the
second place, it must still look substantial when viewed in the
light of the entire record. That does not go so far as saying that
a decision can be reversed on the weight of the evidence. It does
not go quite so far as the power given to a circuit court of
appeals to review a district court decision, but it goes a great
deal further than the present law, and gives the court greater
opportunity to reverse an obviously unjust decision on the part of
the National Labor Relations Board."

															93 Cong.Rec. 3839, reprinted in 2 Legislative History 1014.

															[ Footnote 22 ]

															H.R.Rep. No. 510, 80th Cong., 1st Sess. 56, reprinted in 1
Legislative History 560. In Labor Board v. Nevada Consolidated
Copper Corp., 316 U. S. 105 , 316 U. S. 107 , we
reversed a judgment refusing to enforce a Board order because,
"upon an examination of the record, we cannot say that the findings
of fact of the Board are without support in the evidence." The
sufficiency of evidence to support findings of fact is not involved
in the three other decisions of this Court to which reference was
made. Labor Board v. Hearst Publications, Inc., 322 U. S. 111 ; Republic Aviation Corp. v. Labor Board and Labor Board
v. Le Tourneau Co., 324 U. S. 793 . The
language used by the Court offers a probable explanation for
including two of the decisions of Courts of Appeals. In Wilson
& Co. v. Labor Board, 126 F.2d 114, 117, the Court of
Appeals for the Seventh Circuit sustained a finding that the
employer dominated a company union after stating that it had

															"recognized (or tried to) that findings must be sustained, even
when they are contrary to the great weight of the evidence, and we
have ignored, or at least endeavored to ignore, the shocking
injustices which such findings, opposed to the overwhelming weight
of the evidence, produce." Labor Board v. Columbia Products Corp., 141 F.2d 687,
688 is a per curiam decision of the Court of Appeals for the Second
Circuit sustaining a finding of discriminatory discharge. The court
said of the Board's decision on a question of fact, "Though it may
strain our credulity, if it does not quite break it down, we must
accept it. . . ." The reason for disapproval of Labor Board v.
Union Pacific Stages, 99 F.2d 153, is not apparent. The Court of
Appeals for the Ninth Circuit there enforced the portion of the
Board's order directing the company to disavow a policy of
discrimination against union members on the ground that there
appeared "to be evidence, although disputed," that some company
officials had discouraged employees from joining. 99 F.2d at 179.
The bulk of the lengthy opinion, however, is devoted to a
discussion of the facts to support the court's conclusion that the
Board's findings of discriminatory discharges should not be
sustained.

															[ Footnote 23 ] Labor Board v. Standard Oil Co., 138 F.2d 885; Labor Board v. Columbia Products Corp., 141 F.2d 687. See notes 8 and | 8 and S. 474fn22|>22, supra. [ Footnote 24 ]

															Rule 53(e)(2), Fed.Rules Civ.Proc., gives finality to the
findings of a master unless they are clearly erroneous.

															The court's ruling excluding from consideration disagreement
between the Board and the examiner was in apparent conflict with
the views of three other circuits. Labor Board v. Ohio Calcium
Co., 133 F.2d 721, 724; A. E. Staley Mfg. Co. v. Labor
Board, 117 F.2d 868, 878; Wilson & Co. v. Labor
Board, 123 F.2d 411, 418; cf. International Ass'n of
Machinists v. Labor Board, 71 App.D.C. 175, 180, 110 F.2d 29,
34( C.A.D.C.Cir.).

															[ Footnote 25 ]

															Final Report, 51.

															[ Footnote 26 ]

															§§ 308(1) and 309(2) of the proposed bill, quoted in Final
Report, 200, 201.

															[ Footnote 27 ]

															§ 8(a), 60 Stat. 242, 5 U.S.C. § 1007(a). The quoted provision
did not appear in the bill in the form in which it was introduced
into the Senate. S. 7, 79th Cong., 1st Sess., § 7. It was added by
the Senate Judiciary Committee. The Committee published its reasons
for modifying the earlier draft, but gave no explanation for this
particular change. See S.Doc. No. 248, supra, 32-33. It is likely that the sentence was intended to embody a
clause in the draft prepared by the Attorney General's Committee
which provided that, on review of a case decided initially by an
examiner, an agency should have jurisdiction to remand or to

															"affirm, reverse, modify, or set aside in whole or in part the
decision of the hearing commissioner, or itself to make any finding
which in its judgment is proper upon the record."

															§ 309(2), Final Report 201. The substance of this recommendation
was included in bills introduced into the House. H.R. 184, 79th
Cong., 1st Sess., § 309(2), and H.R. 339, 79th Cong., 1st Sess., §
7(c), both quoted in S.Doc. No. 248, supra, 138, 143.

															[ Footnote 28 ]

															Salaries of trial examiners range from $7,600 to $10,750 per
year. See Appendix to the Budget of the United States
Government for the fiscal year ending June 30, 1952, p. 47.

															[ Footnote 29 ]

															S.Rep. No. 752, supra, 24, reproduced in S.Doc. No.
248, supra, 210.

															[ Footnote 30 ]

															H.R.Rep. No. 1980, 79th Cong., 2d Sess. 38-39, reprinted in
S.Doc. No. 248, supra, 272-273. The House Report added
that, "In a broad sense, the agencies' reviewing powers are to be
compared with that of courts under section 10(e) of the bill." The
language of the statute offers no support for this statement.

															[ Footnote 31 ]

															S.Rep. No. 105, 80th Cong., 1st Sess. 9, quoted in 1 Legislative
History of the Labor Management Relations Act 1947, p. 415.


U.S. Supreme Court SEC v. Chenery Corp., 318 U.S.
80 (1943) Securities and Exchange Commission
v. Chenery Corporation No. 254 Argued December 17, 18,
1942 Decided February 1,
1943 318 U.S.
80 CERTIORARI TO THE UNITED STATES
COURT OF APPEALS FOR THE DISTRICT OF
COLUMBIA Syllabus By an order of the Securities and Exchange Commission under the
Public Utility Holding Company Act of 1935, approval was given,
over objections, to a plan for the reorganization of a registered
holding company, whereby preferred stock which had been acquired by
officers and directors of the company while plans for its
reorganization were before the Commission would not be converted
into stock of the reorganized company, as would all other preferred
stock, but would be surrendered at cost plus interest. The
Commission explicitly based its order on its view of principles of
equity judicially established. However, the Commission did not
find, but, on the contrary, disavowed, that the specific
transactions showed misuse by the officers and directors of their
position as reorganization managers, or that, as such managers,
they took advantage of the corporation, other stockholders, or the
investing public. Held: 1. On review under § 24(a) of the Act, the validity of the order
of the Commission must be judged on the grounds upon which the
record discloses that its action was based. P. 318 U. S.
87 .

															2. Tested by principles of equity judicially established, the
order of the Commission can not be sustained. P. 318 U. S.
88 .

															3. It is immaterial that the Commission might have made findings
which would justify its order as an appropriate safeguard of
interests which the Act was designed to protect. Such findings are
essential to the validity of the order, and here there is none. P. 318 U. S.
94 . Page 318 U. S. 81 4. Such an administrative order can not be upheld if not
sustainable by the grounds upon which it was based by the
Commission. P. 318 U. S.
95 .

															75 U.S.App.D.C. 374, 128 F.2d 303, remanded.

															Certiorari, 317 U.S. 609, to review a judgment setting aside an
order of the Securities and Exchange Commission under the Public
Utility Holding Company Act of 1935.

															MR. JUSTICE FRANKFURTER delivered the opinion of the Court.

															The respondents, who were officers, directors, and controlling
stockholders of the Federal Water Service Corporation (hereafter
called Federal), a holding company registered under the Public
Utility Holding Company Act of 1935, c. 687, 49 Stat. 803, 15
U.S.C. § 79 et seq., brought this proceeding under § 24(a)
of the Act to review an order made by the Securities and Exchange
Commission on September 24, 1941, approving a plan of
reorganization for the company. Under the Commission's order,
preferred stock acquired by the respondents during the period in
which successive reorganization plans proposed by the management of
the company were before the Commission was not permitted to
participate in the reorganization on an equal footing with all
other preferred stock. The Court of Appeals for the District of
Columbia, with one judge dissenting, set the Commission's order
aside, 75 U.S.App.D.C. 374, 128 F.2d 303, and, because the question
presented looms large in the administration of the Act, we brought
the case here. 317 U.S. 609 Page 318 U. S. 82 The relevant facts are as follows. In 1937, Federal was a
typical public utility holding company. Incorporated in Delaware,
its assets consisted of securities of subsidiary water, gas,
electric, and other companies in thirteen states and one foreign
country. The respondents controlled Federal through their control
of its parent, Utility Operators Company, which owned all of the
outstanding shares of Federal's Class B common stock, representing
the controlling voting power in the company. On November 8, 1937,
when Federal registered as a holding company under the Public
Utility Holding Company Act of 1935, its management filed a plan
for reorganization under §§ 7 and 11 of the Act, the relevant
portions of which are copied in the margin. [ Footnote 1 ] This plan, as well as two other plans
later Page 318 U. S. 83 submitted by Federal, provided for participation by Class B
stockholders in the equity of the proposed reorganized company.
This feature of the plans was unacceptable to the Commission, and
all were ultimately withdrawn. Page 318 U. S. 84 On March 30, 1940, a fourth plan was filed by Federal. This
plan, proposing a merger of Federal, Utility Operators Company, and
Federal Water and Gas Corporation, a wholly owned inactive
subsidiary of Federal, contained no provision for participation by
the Class B stock. Instead, that class of stock was to be
surrendered for cancellation, and the preferred and Class A common
stock of Federal were to be converted into common stock of the new
corporation. As the Commission pointed out in its analysis of the
proposed plan,

															"except for the 5.3% of new common allocated to the present
holders of Class A stock, substantially all of the equity of the
reorganized company will be given to the present preferred
stockholders."

															During the period from November 8, 1937, to June 30, 1940, while
the successive reorganization plans were before the Commission, the
respondents purchased a total of 12,407 shares of Federal's
preferred stock. (The total number of outstanding shares of
Federal's preferred stock was 159,269.) These purchases were made
on the over-the-counter market through brokers at prices lower than
the book value of the common stock of the new corporation into
which the preferred stock would have been converted under the
proposed plan. If this feature of the plan had been approved by the
Commission, the respondents, through their holdings of Federal's
preferred stock, would Page 318 U. S. 85 have acquired more than 10 percent of the common stock of the
new corporation. The respondents frankly admitted that their
purpose in buying the preferred stock was to protect their
interests in the company.

															In ascertaining whether the terms of issuance of the new common
stock were "fair and equitable" or "detrimental to . . . the
interest of investors" within § 7 of the Act, the Commission found
that it could not approve the proposed plan so long as the
preferred stock acquired by the respondents would be permitted to
share on a parity with other preferred stock. The Commission did
not find fraud or lack of disclosure, but it concluded that the
respondents, as Federal's managers, were fiduciaries, and hence
under a "duty of fair dealing" not to trade in the securities of
the corporation while plans for its reorganization were before the
Commission. It recommended that a formula be devised under which
the respondents' preferred stock would participate only to the
extent of the purchase prices paid plus accumulated dividends since
the dates of such purchases. Accordingly, the plan was thereafter
amended to provide that the preferred stock acquired by the
respondents, unlike the preferred stock held by others, would not
be converted into stock of the reorganized company, but could only
be surrendered at cost plus 4 percent interest. The Commission,
over the respondents' objections, approved the plan as thus
amended, and it is this order which is now under review.

															We completely agree with the Commission that officers and
directors who manage a holding company in process of reorganization
under the Public Utility Holding Company Act of 1935 occupy
positions of trust. We reject a lax view of fiduciary obligations,
and insist upon their scrupulous observance. See Wormley v.
Wormley , 8 Wheat. 421, 21 U. S. 441 ; Southern Pacific Co. v. Bogert, 250 U.
S. 483 , 250 U. S.
487 -488; and see Stone, The Public Influence of
the Bar, 48 Harv.L.Rev. 1, 8-9. But to say that a man is a
fiduciary Page 318 U. S. 86 only begins analysis; it gives direction to further inquiry. To
whom is he a fiduciary? What obligations does he owe as a
fiduciary? In what respect has he failed to discharge these
obligations? And what are the consequences of his deviation from
duty?

															The Commission did not find that the respondents, as managers of
Federal, acted covertly or traded on inside knowledge, or that
their position as reorganization managers enabled them to purchase
the preferred stock at prices lower than they would otherwise have
had to pay, or that their acquisition of the stock in any way
prejudiced the interests of the corporation or its stockholders. To
be sure, the new stock into which the respondents' preferred stock
would be converted under the plan of reorganization would have a
book value -- which may or may not represent market value --
considerably greater than the prices paid for the preferred stock.
But that would equally be true of purchases of preferred stock made
by other investors. The respondents, the Commission tells us,
acquired their stock as the outside world did, and upon no better
terms. The Commission dealt with this as a specific case, and not
as the application of a general rule formulating rules of conduct
for reorganization managers. Consequently, it is a vital
consideration that the Commission conceded that the respondents did
not acquire their stock through any favoring circumstances. In its
own words, "honesty, full disclosure, and purchase at a fair price"
characterized the transactions. The Commission did not suggest
that, as a result of their purchases of preferred stock, the
respondents would be unjustly enriched. On the contrary, the
question before the Commission was whether the respondents, simply
because they were reorganization managers, should be denied the
benefits to be received by the 6,000 other preferred stockholders.
Some technical rule of law must have moved the Commission to single
out the respondents and deny their preferred Page 318 U. S. 87 stock the right to participate equally in the reorganization. To
ascertain the precise basis of its determination, we must look to
the Commission's opinion.

															The Commission stated that,

															"in the process of formulation of a 'voluntary' reorganization
plan, the management of a corporation occupies a fiduciary position
toward all of the security holders to be affected, and that it is
subjected to the same standards as other fiduciaries with respect
to dealing with the property which is the subject matter of the
trust."

															Applying by analogy the restrictions imposed on trustees in
trafficking in property held by them in trust for others, Michoud v.
Girod , 4 How. 503, 45 U. S. 557 ,
the Commission ruled that, even though the management does not hold
the stock of the corporation in trust for the stockholders,
nevertheless the "duty of fair dealing" which the management owes
to the stockholders is violated if those in control of the
corporation purchase its stock, even at a fair price, openly and
without fraud. The Commission concluded that "honesty, full
disclosure, and purchase at a fair price do not take the case
outside the rule."

															In reaching this result, the Commission stated that it was
merely applying "the broad equitable principles enunciated in the
cases heretofore cited," namely, Pepper v. Litton, 308 U. S. 295 ; Michoud v.
Girod , 4 How. 503, 45 U. S. 557 ; Magruder v. Drury, 235 U. S. 106 , 235 U. S.
119 -120; and Meinhard v. Salmon, 249 N.Y. 458,
164 N.E. 545. Its opinion plainly shows that the Commission
purported to be acting only as it assumed a court of equity would
have acted in a similar case. Since the decision of the Commission
was explicitly based upon the applicability of principles of equity
announced by courts, its validity must likewise be judged on that
basis. The grounds upon which an administrative order must be
judged are those upon which the record discloses that its action
was based. Page 318 U. S. 88 In confining our review to a judgment upon the validity of the
grounds upon which the Commission itself based its action, we do
not disturb the settled rule that, in reviewing the decision of a
lower court, it must be affirmed if the result is correct "although
the lower court relied upon a wrong ground or gave a wrong reason." Helvering v. Gowran, 302 U. S. 238 , 302 U. S. 245 .
The reason for this rule is obvious. It would be wasteful to send a
case back to a lower court to reinstate a decision which it had
already made, but which the appellate court concluded should
properly be based on another ground within the power of the
appellate court to formulate. But it is also familiar appellate
procedure that, where the correctness of the lower court's decision
depends upon a determination of fact which only a jury could make,
but which has not been made, the appellate court cannot take the
place of the jury. Like considerations govern review of
administrative orders. If an order is valid only as a determination
of policy or judgment which the agency alone is authorized to make
and which it has not made, a judicial judgment cannot be made to do
service for an administrative judgment. For purposes of affirming,
no less than reversing, its orders, an appellate court cannot
intrude upon the domain which Congress has exclusively entrusted to
an administrative agency.

															If, therefore, the rule applied by the Commission is to be
judged solely on the basis of its adherence to principles of equity
derived from judicial decisions, its order plainly cannot stand. As
the Commission concedes here, the courts do not impose upon
officers and directors of a corporation any fiduciary duty to its
stockholders which precludes them, merely because they are officers
and directors, from buying and selling the corporation's stock.
[ Footnote 2 ] Page 318 U. S. 89 The cases upon which the Commission relied do not establish
principles of law and equity which, in themselves, are sufficient
to sustain its order. The only question in Pepper v.
Litton, 308 U. S. 295 , was
whether claims obtained by the controlling stockholders of a
bankrupt corporation were to be treated equally with the claims of
other creditors where the evidence revealed "a scheme to defraud
creditors reminiscent of some of the evils with which 13 Eliz, c. 5
was designed to cope," 308 U.S. at 308 U. S. 296 .
Another case relied upon, Woods v. City Bank Co., 312 U. S. 262 ,
held only that a bankruptcy court, in the exercise of its plenary
power to review fees and expenses in connection with a
reorganization proceeding under Chapter X of the Chandler Act, 52
Stat. 840, could deny compensation to protective committees
representing conflicting interests. Michoud v.
Girod , 4 How. 503, and Magruder v. Drury, 235 U. S. 106 ,
dealt with the specific obligations of express trustees, and not
with those of persons in control of a corporate enterprise toward
its stockholders.

															Determination of what is "fair and equitable" calls for the
application of ethical standards to particular sets of facts. But
these standards are not static. In evolving standards of fairness
and equity, the Commission is not bound by settled judicial
precedents. Congress certainly did not mean to preclude the
formulation by the Commission of standards expressing a more
sensitive regard for what is right and what is wrong than those
prevalent at the time the Public Utility Holding Company Act of
1935 became law. But the Commission did not, in this case, proffer
new standards reflecting the experience gained by it in
effectuating the legislative policy. On the contrary, it explicitly
disavowed any purpose of going beyond those which the courts had
theretofore recognized. Since the Commission professed to decide
the case before it according to settled judicial doctrines, its
action must be judged by the standards which the Commission itself
invoked. Page 318 U. S. 90 And, judged by those standards, i.e., those which would
be enforced by a court of equity, we must conclude that the
Commission was in error in deeming its action controlled by
established judicial principles.

															But the Commission urges here that the order should nevertheless
be sustained because

															"the effect of trading by management is not measured by the
fairness of individual transactions between buyer and seller, but
by its relation to the timing and dynamics of the reorganization
which the management itself initiates and so largely controls."

															Its argument lays stress upon the

															"strategic position enjoyed by the management in this type of
reorganization proceeding, and the vesting in it of statutory
powers available to no other representative of security
holders."

															It contends that these considerations warrant the stern rule
applied in this case, since the Commission "has dealt extensively
with corporate reorganizations, both under the Act, and other
statutes entrusted to it," and "has, in addition, exhaustively
studied protective and reorganization committees," and that the
situation was therefore "peculiarly within the Commission's special
administrative competence."

															In determining whether to approve the plan of reorganization
proposed by Federal's management, the Commission could inquire,
under § 7(d)(6) and (e) of the Act, whether the proposal was
"detrimental to the public interest or the interest of investors or
consumers," and, under § 11(e), whether it was "fair and
equitable." That these provisions were meant to confer upon the
Commission broad powers for the protection of the public plainly
appears from the reports of the Congressional committees in charge
of the legislation. The provisions of § 7 were

															"designed to give adequate protection to investors and consumers
. . . , and are in accord with the underlying purpose of the
legislation to give to investors and consumers full protection
against the deleterious practices Page 318 U. S. 91 which have characterized certain holding company finance in the
past."

															Sen.Rep.No.621, 74th Cong., 1st Sess., p. 28. Similarly, the
authority given the Commission by § 11 was intended to be
responsive to the demands of the particular situations with which
the Commission would be faced:

															"Under these subsections [11(d)(e), and (f)], Commission
approval of reorganization plans and supervision of the conditions
under which such plans are prepared will make it impossible for a
group of favored insiders to continue their domination over
inarticulate and helpless minorities, or even, as is often the
case, majorities. . . ." Id., p. 33.

															In view of this legislative history, reflecting the range of
public interests committed to the care of the Commission, § 17(a)
and (b), which requires officers and directors of any holding
company registered under the Act to file statements of their
security holdings in the company and provides that profits made
from dealing in such securities within any period of less than six
months shall inure to the benefit of the company, cannot be
regarded as a limitation upon the power of the Commission to deal
with other situations in which officers and directors have failed
to measure up to the standards of conduct imposed upon them by the
Act. The Act vests in the officers and directors of a holding
company registered under the Act broad powers as representatives of
all the stockholders. Besides the Commission, only the management
can initiate a proceeding before the Commission to simplify the
corporate structure and to effect a fair and equitable distribution
of voting power among security holders. Only the management can
amend a plan under §§ 7 and 11(e), and this it may do at any time;
only the management can withdraw the plan, and this, too, it may do
at will; and even after the Commission has approved a plan, it
cannot be carried out without the consent of the management. Page 318 U. S. 92 Notwithstanding § 17(a) and (b), therefore, the Commission could
take appropriate action for the correction of reorganization abuses
found to be "detrimental to the public interest or the interest of
investors or consumers." It was entitled to take into account those
more subtle factors in the marketing of utility company securities
that gave rise to the very grave evils which the Public Utility
Holding Act of 1935 was designed to correct. See the
concurring opinion of Judge Learned Hand in Morgan, Stanley
& Co. v. Securities Exchange Commission, 126 F.2d 325,
332.

															But the difficulty remains that the considerations urged here in
support of the Commission's order were not those upon which its
action was based. The Commission did not rely upon "its special
administrative competence"; it formulated no judgment upon the
requirements of the "public interest or the interest of investors
or consumers" in the situation before it. Through its preoccupation
with the special problems of utility reorganizations, the
Commission accumulates an experience and insight denied to others.
Had the Commission, acting upon its experience and peculiar
competence, promulgated a general rule of which its order here was
a particular application, the problem for our consideration would
be very different. Whether and to what extent directors or officers
should be prohibited from buying or selling stock of the
corporation during its reorganization presents problems of policy
for the judgment of Congress or of the body to which it has
delegated power to deal with the matter. Abuse of corporate
position, influence, and access to information may raise questions
so subtle that the law can deal with them effectively only by
prohibitions not concerned with the fairness of a particular
transaction. But before transactions otherwise legal can be
outlawed or denied their usual business consequences, they must
fall under the ban of some standards of conduct prescribed by an
agency of Page 318 U. S. 93 government authorized to prescribe such standards -- either the
courts or Congress or an agency to which Congress has delegated its
authority. Congress itself did not proscribe the respondents'
purchases of preferred stock in Federal. Established judicial
doctrines do not condemn these transactions. Nor has the
Commission, acting under the rulemaking powers delegated to it by §
11(e), promulgated new general standards of conduct. It purported
merely to be applying an existing judge-made rule of equity. The
Commission's determination can stand, therefore, only if it found
that the specific transactions under scrutiny showed misuse by the
respondents of their position as reorganization managers, in that,
as such managers, they took advantage of the corporation or the
other stockholders or the investing public. The record is utterly
barren of any such showing. Indeed, such a claim against the
respondents was explicitly disavowed by the Commission.

															In view of the conditions imposed by the Commission in approving
the plan, it is clear that the respondents were charged with
violation of a positive command of law, rather than with any moral
wrong. If there had been a wrong, it would be against the
stockholders from whom they purchased the preferred stock at less
than the book value of the new stock -- which, as we have already
said, may or may not be its real value. But the Commission did not
regard such stockholders as beneficiaries of the respondents'
"trust," and hence entitled to restitution. The Commission did not
undo the purchases deemed by it to have been made by the
respondents in violation of their fiduciary obligations. Instead,
the Commission confirmed the purchases, and ordered that the stock
be surrendered to the corporation.

															Judged, therefore, as a determination based upon judge-made
rules of equity, the Commission's order cannot be upheld. Its
action must be measured by what the Commission Page 318 U. S. 94 did, not by what it might have done. It is not for us to
determine independently what is "detrimental to the public interest
or the interest of investors or consumers" or "fair and equitable"
within the meaning of §§ 7 and 11 of the Public Utility Holding
Company Act of 1935. The Commission's action cannot be upheld
merely because findings might have been made and considerations
disclosed which would justify its order as an appropriate safeguard
for the interests protected by the Act. There must be such a
responsible finding. Compare United States v. Chicago, M., St.
P. & P. R. Co., 294 U. S. 499 , 294 U. S.
510 -511. There is no such finding here.

															Congress has seen fit to subject to judicial review such orders
of the Securities and Exchange Commission as the one before us.
That the scope of such review is narrowly circumscribed is beside
the point. For the courts cannot exercise their duty of review
unless they are advised of the considerations underlying the action
under review. If the action rests upon an administrative
determination -- an exercise of judgment in an area which Congress
has entrusted to the agency -- of course it must not be set aside,
because the reviewing court might have made a different
determination were it empowered to do so. But if the action is
based upon a determination of law as to which the reviewing
authority of the courts does come into play, an order may not stand
if the agency has misconceived the law. In either event, the
orderly functioning of the process of review requires that the
grounds upon which the administrative agency acted by clearly
disclosed and adequately sustained. "The administrative process
will best be vindicated by clarity in its exercise." Phelps
Dodge Corp. v. Labor Board, 313 U. S. 177 , 313 U. S. 197 .
What was said in that case is equally applicable here:

															"We do not intend to enter the province the belongs to the
Board, nor do we do so. All we ask of the Board is to give clear
indication that it has exercised the discretion with Page 318 U. S. 95 which Congress has empowered it. This is to affirm most
emphatically the authority of the Board." Ibid. Compare United States v. Carolina Carriers
Corp., 315 U. S. 475 , 315 U. S.
488 -490. In finding that the Commission's order cannot
be sustained, we are not imposing any trammels on its powers. We
are not enforcing formal requirements. We are not suggesting that
the Commission must justify its exercise of administrative
discretion in any particular manner or with artistic refinement. We
are not sticking in the bark of words. We merely hold that an
administrative order cannot be upheld unless the grounds upon which
the agency acted in exercising its powers were those upon which its
action can be sustained.

															The cause should therefore be remanded to the Court to Appeals
with directions to remand to the Commission for such further
proceedings, not inconsistent with this opinion, as may be
appropriate. So ordered. Mr. Justice DOUGLAS took no part in the consideration and
decision of this case.

															[ Footnote 1 ]

															"Sec. 7. (a) A registered holding company or subsidiary company
thereof may file a declaration with the Commission regarding any of
the acts enumerated in subsection (a) of section 6, in such form as
the Commission may be rules and regulations prescribe as necessary
or appropriate in the public interest or for the protection of
investors or consumers. Such declaration shall include --"

															"(1) such of the information and documents which are required to
be filed in order to register a security under section 7 of the
Securities Act of 1933, as amended, as the Commission may by rules
and regulations or order prescribe as necessary or appropriate in
the public interest or for the protection of investors or
consumers; and"

															"(2) such additional information, in such form and detail, and
such documents regarding the declarant or any associate company
thereof, the particular security and compliance with such State
laws as may apply to the act in question as the Commission may by
rules and regulations or order prescribe as necessary or
appropriate in the public interest or for the protection of
investors or consumers. . . ."

															" * * * *" "(d) If the requirements of subsections (c) and (g) are
satisfied, the Commission shall permit a declaration regarding the
issue or sale of a security to become effective unless the
Commission finds that --"

															" * * * *" "(6) the terms and conditions of the issue or sale of the
security are detrimental to the public interest or the interest of
investors or consumers."

															"(e) If the requirements of subsection (g) are satisfied, the
Commission shall permit a declaration to become effective regarding
the exercise of a privilege or right to alter the priorities,
preferences, voting power, or other rights of the holders of an
outstanding security unless the Commission finds that such exercise
of such privilege or right will result in an unfair or inequitable
distribution of voting power among holders of the securities of the
declarant or is otherwise detrimental to the public interest or the
interest of investors or consumers."

															"(f) Any order permitting a declaration to become effective may
contain such terms and conditions as the Commission finds necessary
to assure compliance with the conditions specified in this section.
. . ."

															"Sec. 11. (a) It shall be the duty of the Commission to examine
the corporate structure of every registered holding company and
subsidiary company thereof, the relationships among the companies
in the holding company system of every such company and the
character of the interests thereof and the properties owned or
controlled thereby to determine the extent to which the corporate
structure of such holding company system and the companies therein
may be simplified, unnecessary complexities therein eliminated,
voting power fairly and equitably distributed among the holders of
securities thereof, and the properties and business thereof
confined to those necessary or appropriate to the operations of an
integrated public utility system. . . ."

															" * * * *" "(e) In accordance with such rules and regulations or order as
the Commission may deem necessary or appropriate in the public
interest or for the protection of investors or consumers, any
registered holding company or any subsidiary company of a
registered holding company may, at any time after January 1, 1936,
submit a plan to the Commission for the divestment of control,
securities, or other assets, or for other action by such company or
any subsidiary company thereof for the purpose of enabling such
company or any subsidiary company thereof to comply with the
provisions of subsection (b). If, after notice and opportunity for
hearing, the Commission shall find such plan, as submitted or as
modified, necessary to effectuate the provisions of subsection (b)
and fair and equitable to the persons affected by such plan, the
Commission shall make an order approving such plan; and the
Commission, at the request of the company, may apply to a court, in
accordance with the provisions of subsection (f) of section 18 to
enforce and carry out the terms and provisions of such plan. If,
upon any such application, the court, after notice and opportunity
for hearing, shall approve such plan as fair and equitable and as
appropriate to effectuate the provisions of section 11, the court,
as a court of equity may, to such extent as it deems necessary for
the purpose of carrying out the terms and provisions of such plan,
take exclusive jurisdiction and possession of the company or
companies and the assets thereof, wherever located; and the court
shall have jurisdiction to appoint a trustee, and the court may
constitute and appoint the Commission as sole trustee, to hold or
administer, under the direction of the court and in accordance with
the plan theretofore approved by the court and the Commission, the
assets so possessed. . . ."

															[ Footnote 2 ] See 1 Dodd and Baker, Cases on Business Associations
(1940) 498-500, 583-86, 621-22; 1 Morawetz on Private Corporations
(2d ed. 1886) §§ 516-21, pp. 482-89.

															MR. JUSTICE BLACK, with whom MR. JUSTICE REED and MR. JUSTICE
MURPHY concur, dissenting.

															For reasons set out in the Court's opinion and the dissenting
opinion below, I agree that these respondents, officers and
directors of the Corporations seeking reorganization, acted in a
fiduciary capacity in formulating and managing plans they submitted
to the Commission, and that, as fiduciaries, they should be held to
a scrupulous observance of their trust. I further agree that
Congress conferred on the Commission "broad powers for the
protection of the public," investors and consumers, and that the
Commission, not the Court, was invested by Congress with authority
to determine whether a proposed reorganization or merger would be
"fair and equitable," or whether Page 318 U. S. 96 it would be "detrimental to the public interest or the interest
of investors or consumers."

															The conclusions of the Court with which I disagree are those in
which it holds that, while the Securities and Exchange Commission
has abundant power to meet the situation presented by the
activities of these respondents, it has not done so. This
conclusion is apparently based on the premise that the Commission
has relied upon the common law, rather than on "new standards
reflecting the experience gained by it in effectuating legislative
policy," and that the common law does not support its conclusion;
that the Commission could have promulgated "a general rule of which
its order here was a particular application," but, instead, made
merely an ad hoc judgment; and that the Commission made no
finding that these practices would prejudice anyone.

															The Commission's actual finding was that

															"The plan of reorganization herein considered, like the previous
plans filed with us over the past several years, was formulated by
the management of Federal, and discussions concerning the
reorganization of this corporation have taken place between the
management and the staff of the Commission over the past several
years;"

															that C. T. Chenery purchased 8,618 shares of preferred stock
during this period; that other officers and directors of the
concerns involved acquired 3,789 shares during the same period;
that, for this stock these respondent fiduciaries paid $328,346.89
and then submitted their latest reorganization plan, under which
this purchased stock would have a book value in the reorganization
company of $1,162,431.90. In the light of these and other facts,
the Commission concluded that the new plan would be

															"unfair, inequitable, and detrimental so long as the preferred
stock purchased by the management at low prices is to be permitted
to share on a parity with other preferred stock."

															The Commission declined to give "effectiveness" to the proposed
plan and entered Page 318 U. S. 97 "adverse findings" against it under §§ 7(d)(1) and 7(d)(2) of
the controlling Act, resting its refusal to approve on this
statement:

															"We find that the provisions for participation by the preferred
stock hold by the management result in the terms of issuance of the
new securities being detrimental to the interests of investors, and
the plan being unfair and inequitable."

															The grounds upon which the Commission made its findings seem
clear enough to me. Accepting, as the Court does, the fiduciary
relationship of these respondents in managing the Commission
proceedings, it follows that their peculiar information as to the
stock values under their proposed plan afforded them opportunities
for stock purchase profits which other stockholders did not have.
While such fiduciaries, they bought preferred stock and then
offered a reorganization plan which would give this stock a book
value of four times the price they had paid for it. What the
Commission has done is to say that no such reward shall be reaped
by these fiduciaries. At the same time, they are permitted to
recover the full purchase price with interest. To permit their
reorganization plan to put them in the same position as the old
stockholders gives to these fiduciaries an unconscionable profit
for trading with inside information.

															I can see nothing improper in the Commission's findings and
determinations. On the contrary, the rule they evolved appears to
me to be a salutary one, adequately supported by cogent reasons and
thoroughly consistent with the high standards of conduct which
should be required of fiduciaries. That the Commission saw fit to
draw support for its own administrative conclusion from decisions
of courts should not detract from the validity of its findings.
Entrusted, as the Commission is, with the responsibility of lifting
the standard of transactions in the marketplace in order that the
managers of financial ventures may not impose upon the general
investing public, Page 318 U. S. 98 it seems wholly appropriate that the Commission should have
recognized the influence of admonitory language like the following
it approvingly quoted from Meinhard v. Salmon, 249 N.Y.
458, 164 N.E. 545, 546:

															"A trustee is held to something stricter than the morals of the
marketplace. Not honesty alone, but the punctilio of an honor the
most sensitive, is then the standard of behavior. As to this, there
has developed a tradition that is unbending and inveterate. . . .
Only thus has the level of conduct for fiduciaries been kept at a
level higher than that trodden by the crowd."

															The decisions cited by the Commission seem to me to show the
soundness of the conclusion it reached. As judges, we are entitled
to a sense of gratification that the common law has been able to
make so substantial a contribution to the development of the
administrative law of this field. See e.g. Pepper v.
Litton, 308 U. S. 295 ; Michoud v.
Girod , 4 How. 503; Magruder v. Drury, 235 U. S. 106 . Of
course, the Commission is not limited to common law principles in
protecting investors and the public, but, even if it were so
limited, the Magruder case would, in my opinion, provide
complete support for the position taken by the Commission:

															"The intention is to provide against any possible selfish
interest exercising an influence which can interfere with the
faithful discharge of the duty which is owing in a fiduciary
capacity. . . . It makes no difference that the estate was not a
loser in the transaction, or that the commission was no more than
the services were reasonably worth."

															pp. 235 U. S.
119 -120. The distinction now seen by the Court between
these cases and the instant problem comes to little more than that
the fact situations are similar, but not identical.

															While I consider that the cases on which the Commission relied
give full support to the conclusion it reached, I do not suppose,
as the Court does, that the Commission's rule is not fully based on
Commission experience. The Page 318 U. S. 99 Commission did not "explicitly disavow" any reliance on what its
members had learned in their years of experience, and, of course,
they, as trade experts, made their findings that respondent's
practice was "detrimental to the interests of investors" in the
light of their knowledge. That they did not unduly parade fact data
across the pages of their reports is a commendable saving of
effort, since they meant merely to announce for their own
jurisdiction an obvious rule of honest dealing closely related to
common law standards. Of course, the Commission can now change the
form of its decision to comply with the Court order. The Court can
require the Commission to use more words; but it seems difficult to
imagine how more words or different words could further illuminate
its purpose or its determination. A judicial requirement of
circumstantially detailed findings as the price of court approval
can bog the administrative power in a quagmire of minutiae.
Hypercritical exactions as to findings can provide a handy but an
almost invisible glideway enabling courts to pass "from the narrow
confines of law into the more spacious domain of policy." Phelps-Dodge Corporation v. Labor Board, 313 U.
S. 177 , 313 U. S. 194 .
Here for instance, the Court apparently holds that the Commission
has full power to do exactly what it did; but the Court sends the
matter back to the Commission to revise the language of its
opinion, in order, I suppose, that the Court may reappraise the
reasons which moved the Commission to determine that the conduct of
these fiduciaries was detrimental to the public and investors. The
Act under which the Commission proceeded does not purport to vest
us with authority to make such a reappraisal.

															That the Commission has chosen to proceed case by case, rather
than by a general pronouncement, does not appear to me to merit
criticism. The intimation is that the Commission can act only
through general formulae rigidly adhered to. In the first place,
the rule of the single case is obviously a general advertisement to
the trade, Page 318 U. S. 100 and, in the second place, the briefs before us indicate that
this is but one of a number of cases in which the Commission is
moving to an identical result on a broad front. But, aside from
these considerations, the Act gives the Commission wide powers to
evolve policy standards, and this may well be done case by case, as
under the Federal Trade Commission Act. Federal Trade
Commission v. R. F. Keppel & Bros., 291 U.
S. 304 , 291 U. S.
310 -312.

															The whole point of the Commission finding has been lost if it is
criticized for a failure to show injury to particular shareholders.
The Commission holding is that it should not

															"undertake to decide case by case whether the management's
trading has, in fact, operated to the detriment of the persons whom
it represents,"

															because the "tendency to evil" from this practice is so great
that the Commission desires to attach to it a conclusive
presumption of impropriety.

															The rule the Commission adopted here is appropriate. Protection
of investors from insiders was one of the chief reasons which led
to adoption of the law which the Commission was selected to
administer. * That purpose can
be greatly retarded by over-meticulous exactions -- exactions which
require a detailed narration of underlying reasons which prompt the
Commission to require high standards of honesty and fairness. I
favor approving the rule they applied.

															*

															"Among the most vicious practices unearthed at the hearings
before the subcommittee was the flagrant betrayal of their
fiduciary duties by directors and officers of corporations who used
their positions of trust and the confidential information which
came to them in such positions to aid them in their market
activities. Closely allied to this type of abuse was the
unscrupulous employment of inside information by large stockholders
who, while not directors and officers, exercised sufficient control
over the destinies of their companies to enable them to acquire and
profit by information not available to others."

															Report of the Senate Committee on Banking and Currency on Stock
Exchange Practices, Report No. 1455, 73d Cong., 2d Sess.