ized under Article I, and not Article III, of the Federal Constitution, to form a large court of some forty members, divided into trial and appellate divisions. Due to the mentioned confusion in terminology and for other reasons the committee has concluded to drop the phrase "Administrative Court" along with any further attempts at this time to consolidate the legislative courts.

REASONS FOR ABANDONMENT OF THE PROPOSED CONSOLIDATION OF THE
LEGISLATIVE COURTS

The basic principles underlying the studies and work of this committee since its organization in 1933-as shown by its printed reports to the Association— have been the result of the conviction of all of the men who have served on the committee that a combination of legislative, executive, and judicial power should not be exercised by the same group of Federal officers and employees. The committee has stated in prior reports that it was neither practicable nor desirable to deny that part of the Executive branch of the Federal government engaged in the administration of the laws all power to make laws, to the extent of filling in the details of statutes within reasonable and canalized limits. It can not be established with the certainty of a solution of a mathematical formula what should be the canalized limits in any particular case or what constitutes a reasonable delegation of legislative power-but whatever they may be, the statutes should state the general rule to be applied in the administration of the law, with complete freedom within the general rules to make regulations filling in the details of the statutes. The reasons for this conclusion have been stated in the 1936 report of this committee and need not be repeated here.

Also, the committee has insisted from the outset that there should be an independent review in the courts of administrative decisions, and that is the position of the present members of the committee, including the chairman, who is the only member who has been with the committee since its organization. Reasonable men will differ as to the method of such review, and the extent thereof, whether on both the law and the facts, or mandatorily as to the law and discretionarily as to the facts, or on the law only. Also they will differ as to whether the independent review should take place in a trial de novo on the law and the facts and, if so, whether special legislative tribunals should be established for that purpose, or whether existing tribunals should be used to the extent constitutionally possible, and whether the record should be made in the courts or before the administrative officers.

There developed hostility on the part of members of the Association-particularly those engaged principally in tax, customs, or patent law litigation—and in the legal forces of the Government itself 3 to the creation of a large administrative or legislative court, with headquarters at the seat of government but ambulatory in the discretion of such court to hear and determine these controversies de novo. The reasons for the opposition of these several groups varied, but at least they could, and did, agree that there should not be approved any recommendation for the consolidation of the existing legislative tribunals, particularly the Court of Claims, Customs Court, Court of Customs and Patent Appeals, with the Board of Tax Appeals to form the nucleus of a large court with the jurisdiction of all of the consolidated tribunals and with considerable additional jurisdiction over controversies for which there is now no existing method of judicial review.

The Boston meeting of the Association reaffirmed the position of the Association that the committee was correct in its repeated recommendation for an independent review of administrative decisions, but remanded to the committee all questions as to the organization, jurisdiction, etc., of the tribunal or tribunals to bring this about.4 It was at this point that the present committee took up the study at its first meeting and it was then concluded that there should be abandoned any attempt to bring about the consolidation of the existing legislative tribunals into a large legislative court under whatever name might be available for the new court. Further, it was concluded to study the matter from the standpoint of utilizing the existing administrative personnel in an attempt to improve the

3 Report, 1936, of the Committee on Administrative Law, Federal Bar Association, which was published by Mr. Cooper, a member of the said Committee, in "Federal Administrative Law," 23 A. B. A. Journal, 186, 190. See also discussion on the floor of the Assembly at the Boston meeting in 1936, reported in 61 A. B. A. Rep. 218, 227, 231, 235.

4 The resolution adopted in lieu of the one recommended by this committee is reported in 61 A. B. A. Rep. 233, approving "in principle the establishment of a Federal Administrative Court" and that "the subject of the composition, scope, and jurisdiction of a Federal Administrative Court be re-referred to the Committee on Administrative Law for further study and consideration, to report to the next annual convention."

administrative processes of hearing and determining the cases and to utilize the existing judicial machinery as far as possible in securing the independent reviews. In substance, the committee finally concluded that the necessary legislative or regulation-making power could, and should, be exercised by administrative officers not engaged in the judicial work of deciding concrete cases in which the regulation might be involved, with provision for judicial review of the regulations so as to insure their conformity with the Constitution of the United States and the Statutes under which issued. Also, that an appeal should be provided within the several administrative agencies-equipped by all of the safeguards surrounding the trial of a case in the courts so that such agencies might be able to determine the facts, and have the benefit of briefs and oral argument in cases justifying that action, with right of appeal on the record so made to the several United States Circuit Courts of Appeals.

The draft of bill so provides and while the principal sections of that draft have been explained in the copies sent to the members of the House of Delegates, the explanations will be restated herein for the benefit of the permanent record of the Association and for accessibility to other members of the Association, as well as to teachers and students of the subject.

THE MANDATORY IMPLEMENTATION OF THE STATUTES BY REGULATIONS ISSUED AFTER NOTICE AND HEARING OF INTERESTED PARTIES

The purposes of this requirement, contained in section 1 of the draft are: (1) To require the issuance of rules and regulations defining both the adjective and substantive details of Federal statutes; (2) To authorize and require public notice and hearing if requested, prior to such issuance of the rules and regulations; (3) To provide a method by which the subordinate officers and employees of the Government may be controlled in their administration of the statutes; (4) To provide a method whereby business men and others may be adivsed in advance of administrative action determining particular cases as to the administrative interpretation of the statutes; and (5) To protect the citizen acting in good faith in accordance with rules and regulations for a reasonable period after the rule or regulation is rescinded, amended, or held invalid.

The basic statute in this matter is section 161, Revised Statutes, which originated in the act of July 27, 1789, 1 Stat., 28. This section provides that:

"The head of each Department is authorized to prescribe regulations, not inconsistent with law, for the government of his Department, the conduct of its officers and clerks, the distribution and performance of its business, and the custody, use, and preservation of the records, papers, and property appertaining to it." 5

Many statutes relating to particular subject matters likewise contain authority to issue rules and regulations. Possibly the best of these provisions is contained in the recent Securities and Exchange Act of May 27, 1933, 48 Stat., 85, as amended by the act of June 6, 1934, 48 Stat., 908, as follows:

"The Commission shall have authority from time to time to make, amend. and rescind such rules and regulations as may be necessary to carry out the provisions of this title, including rules and regulations governing registration statements and prospectuses for various classes of securities and issuers, and defining accounting and trade terms used in this title. No provisions of this title imposing any liability shall apply to any act done or omitted in good faith in conformity with any rule or regulation of the Commission, notwithstanding that such rule or regulation may, after such act or omission, be amended or rescinded or be determined by judicial or other authority to be invalid for any reason." "

There are many decisions of the courts holding that rules and regulations issued pursuant to, and in conformity with law have the force and effect of law. United States vs. Eaton, 244 U. S. 677, Caha rs. United States, 152 U. S. 219; Haas vs. Henkel, 216 U. S. 462; United States vs. McDaniel, 7 Peters 1; Boake rs. Comingore, 177 U. S. 459; Merrill rs. Jones, 106 U. S. 466; Er Parte Reed, 100 U. S. 13; Sherlock vs. United States, 43 Ct. Cls. 161; Er Parte Curtis, 106 U. S. 371; Campbell rs. United States, 107 U. S. 407; United States vs. Foster, 233 U. S. 515; United States 8. George, 288 Ü. S. 14.

6 Prof. James Hart, now teaching at the University of Virginia, is reported to have prepared the first draft of this section of the Securities and Exchange Commission Law, and he has stated with respect thereto in "The Exercise of Rule Making Power and the Preparation of Proposed Legislative Measures by Administrative Departments, published by the President's Committee on Administrative Management" p. 18, that:

"It is evident that this simple technique is in entire accord with the American system of government, and that at the same time it furnishes the needed middle term between legislation and adjudication. It enables the business man to secure advance information of what his liabilities under the statute are, and, more important. it guarantees that this advance information can safely be relied upon."

Generally speaking, the practice in this country has not been to issue rules and regulations after notice and hearing of interested parties. However, the various committees of the Congress usually accord the right of hearings to interested parties and in most if not all cases where regulations are to be issued, such hearings would be helpful to the government officers. The absence of such a requirement as to rules and regulations is a serious defect in the existing procedure. As stated by Prof. Hart in "The Exercise of Rule-Making Power and the Preparation of Proposed Legislative Measures by Administrative Departments": "The most dangerous way to treat pressure politics is to adopt an ostrich attitude towards it. The thing to do is rather to give frank recognition of its existence; to expose it to the open light of day; to use it as a valuable source of information; and to shape it to beneficial ends.

"Thus the administrator should give full opportunity for those who would be affected by any proposed regulation to blow off steam. He would seek, without ballyhoo, to effect a meeting of the minds of conflicting groups. In his contacts

he should try 'to mix suasion with command,' in order to minimize the everpresent problem of compliance. He should make a deliberate effort to elicit the point of view of the less powerful groups, notably the unorganized consumers, and to give due weight to their interests, as a matter of far-sighted policy as well as of justice."

As this committee stated in its 1936 report to the Association, the Supreme Court of the United States held in the Panama Refining Company (293 U. S. 388, 415) and Schechter (295 U. S. 495) cases, that one of the three requisites for the exercise of delegated legislative power-or the issuance of rules and regulations having general application was a requirement of a finding by the administrative agency in the exercise of the authority delegated. The English practice is for notice and hearing.

The First Parliamentary Counsel corresponding somewhat to the Legislative Counsel to the Senate or to the House of Representatives stated to the Committee on Ministerial Powers (appointed by the Lord Chancellor to investigate the charges made by Lord Chief Justice Hewart in his book, "The New Despotism") that:

"In my opinion one of the most important safeguards against the improper use of delegated powers (though this applies much more as respects Regulations of a personal or local character) is the fact that no Minister in his senses with the fear of Parliament before his eyes would ever think of making Regulations without (where practicable) giving the persons who will be affected thereby (or their representatives) an opportunity of saying what they think about the proposal." 7 The Procurator-General and Treasury-Solicitor of England stated before the same committee that:

"It is I think, important that due notice should be given to any intention on the part of a Department to make new rules and regulations. This is in fact secured very fully at the present time, because organizations of trade, professional, and other interests, has proceeded so fast of late years that it can rarely, if ever, happen that there is not somebody whom a Department can consult before rules, regulations or orders are made affecting the interests of the persons whom that body represents, and these organized bodies are in practice always consulted and an expression of their views obtained."

The said Committee on Ministers' Powers recommended that the Rules and Publications Act of 1893 be extended to include all rules and regulations and that: "The system of the Department consulting particular interests specially affected by a proposed exercise of law-making power should be extended so as to ensure that such consultation takes place whenever practicable."

We think that there should be a legal requirement for notice and an opportunity for hearing before rules and regulations are issued, more particularly since we propose to expand the terms of section 161, Revised Statutes, so as to require that the rules and regulations shall deal with both the adjective and substantive law sides of any statute the department or other agency may be required to

7 Prof. Hart, p. 4, "The Exercise of Rule-Making Power," etc., above cited, says: "Rule making has an inherent check in that, since every rule applies to numbers of people, its defects will be criticised on a wide front, and pressure will be brought to bear for its improvement."

9

administer. At present, except for the Bureau of Internal Revenue, Bureau of Customs, and the Securities and Exchange Commission (the latter having a special statute to that effect, as above, quo ed), the Department of Agriculture and the Interstate Commerce Commission, the varibus agencies of the Government generally limit their rules and regulations to the adjective side of the law. Such a limitation is unsatisfactory for a number of reasons:

First, business men and their legal advisers as well as labor organizations and their advisers or any other individual or group affected by a particular statute can-not find out in advance of the trial and error method-suit by or against the

8 The Court, in upholding such an implementing regulation said, in Morrissey vs. Commissioner, 296 U. S. 344, 356, that: "The question is not one of the power of Congress to impose this tax upon petitioners but is simply one of statutory construction-whether Congress has imposed it. See Burk-Waggoner Oil Assn. vs. Hopkins, 269 U. S. 110, 114. The difficulty with the regulations as an exposition was that they themselves required explication; that they left many questions open with respect both to their application to particular enterprises and to their validity as applied. The so-called 'control test' had led to much litigation, and the change in the regulation after the decision in Hecht vs. Malley caused increased uncertainty. That situation is put in a strong light by the action of Congress, in order to afford relief to taxpayers, in enacting § 704 of the Revenue Act of 1928 as a 'retroactive' provision applicable, as stated, to trust returns which had been filed for a taxable year prior to 1925 under previous regulations and rulings, and also by giving an option to a trustee, in specified circumstances, in relation to the Revenue Act of 1926 and prior Acts. While it is impossible in the nature of things to translate the statutory concept of 'association' into a particularity of detail that would fix the status of every sort of enterprise or organization which ingenuity may create, the recurring dispute emphasize the need of a further examination of the congressional intent."

The court sustained the tax based on the new regulation.

The Court said in Pacific States Co. vs. White, 296 U. S. 176, 185, that:

"Every exertion of the police power, either by the legislature or by an administrative body, is an exercise of delegated power. Where it is by a statute, the legislature nas acted under power delegated to it through the Constitution. Where the regulation is by an order of an administrative body, that body acts under a delegation from the legislature. The question of law may, of course, always be raised whether the legislature had power to delegate the authority exercised. Compare Panama Refining Co. vs. Ryan, 293 U. S. 388 and A. L. A. Schechter Poultry Corp. vs. United States, 295 U. S. 495. But where the regulation is within the scope of authority legally delegated, the presumption of the existence of facts justifying its specific exercise attaches alike to statutes, to municipal ordinances, and to orders of administrative bodies. Compare Aetna Insurance Co. vs. Hyde, 275 U. S. 440, 447. Here there is added reason for applying the presumption of validity; for the regulation now challenged was adopted after notice and public hearing as the statute required. It is contended that the order is void because the administrative body made no special findings of fact. But the statute did not require special findings; doubtless because the regulation authorized was general legislation, not an administrative order in the nature of a judgment directed against an individual concern. Compare Wichita Railroad & Light Co. vs. Public Utilities Comm., 260 U. S. 48, 58-59; Mahler vs. Eby, 264 U. S. 32, 44; Southern Ry. Co. vs. Virginia, 290 U. S. 190, 193, 194."

9The rule was summarized, as to the Commissioner of Internal Revenue, in Koshland vs. Helvering, 298 U. S. 441, 446, as follows:

"And it is said that while no provision of the statute authorizes a specific regulation respecting this matter, the general power conferred by law to make appropriate regulations comprehends the subject. Where the act uses ambiguous terms, or is of doubtful construction, a clarifying regulation or one indicating the method of its application to specific cases not only is permissible but is to be given great weight by the courts. And the same principle governs where the statute merely expresses a general rule and invests the Secretary of the Treasury with authority to promulgate regulations appropriate to its enforcement. But where, as in this case, the provisions of the act are unambiguous, and its directions specific, there is no power to amend it by regulation."

Also, in Manhattan Company vs. Commissioner, 297 U. S. 129, 134, with respect to the attempt to apply a regulation retrospectively, that:

"The power of an administrative officer or board to administer a federal statute and to prescribe rules and regulations to that end is not the power to make law-for no such power can be delegated by Congressbut the power to adopt regulations to carry into effect the will of Congress as expressed by the statute. A regulation which does not do this, but operates to create a rule out of harmony with the statute, is a mere nullity. Lynch vs. Tilden Produce Co. 265 U. S. 315, 320–322; Miller vs. United States, 294 U. S. 435, 439–440, and cases cited And not only must a regulation, in order to be valid, be consistent with the statute, but it must be reasonable. International Ry. Co. vs. Davidson, 257 U. S. 506, 514. The original regulation as applied to a situation like that under review is both inconsistent with the statute and unreasonable.

"The contention that the new regulation is retroactive is without merit. Since the original regulation could not be applied, the amended regulation in effect became the primary and controlling rule in respect of the situation presented. It pointed the way, for the first time, for correctly applying the antecedent statute to a situation which arose under the statute. See Titsworth vs. Commissioner, 73 F. (2d) 385, 386. The statute defines the rights of the taxpayer and fixes a standard by which such rights are to be measured. The regulation constitutes only a step in the administrative process. It does not, and could not, alter the statute. It is no more retroactive in its operation than is a judicial determination construing and applying a statute to a case in hand.'

This procedure has been recognized as a proper method to be followed in the administration of the law. It was expressly so held in Morrissey vs. Commissioner, 296 U. S. 344, 354, as follows:

"As the statute merely provided that the term 'corporation' should include 'associations,' without further definition, the Treasury Department was authorized to supply rules for the enforcement of the Act within the permissible bounds of administrative construction. Nor can this authority be deemed to be so restricted that the regulations, once issued, could not later be clarified or enlarged so as to meet administrative exigencies or conform to judicial decision. Compare Murphy Oil Co. vs. Burnet, 287 U. S. 299, 303-307. We find no ground for the contention that by the enactment of the Revenue Act of 1924 the Department was limited to its previous regulations as to associations. We think that the Department did not

exceed its powers in rewriting its regulation, in the light of the decision in Hecht vs. Malley, so as to provide with respect to the income taxes, in general, to be paid by associations, that the extent or lack of control by the beneficiaries of a trust should not in itself determine whether there was an association within the meaning of the statute. That the revised regulation had congressional approval is persuasively evidenced by the fact that the regulation, as amended in 1925, was continued without substantial alteration until 1933, and meanwhile Congress re-enacted without change the general provision as to associations in the Revenue Acts of 1926, 1928, and 1932. See Brewster vs. Gage, 280 U. S. 327, 337; McCaughn vs. Hershey Chocolate Co., 283 U. S. 488, 492; Murphy Oil Co. vs. Burnet, supra; Helvering rs. Bliss, 293 U. S. 144. 151."

United States or its officers-where such an action will lie, what the statute actually means or what the administrative officers of the Government think it means. There is no existing procedure by which an advisory opinion may be obtained from the courts and jurisdiction could not be conferred on the constitutional courts to render such opinions. Such jurisdiction could be conferred on the legislative courts, but it would be dangerous from the standpoint of such courts because organized minorities displeased with an advisory opinion might bring about the abolishment of the court, as was done with respect to the earlier Commerce Court.

Second, the courts are not expert administrators and are not familiar with the administrative processes. Generally speaking the judges of the courts lack the necessary first-hand information to enable them to implement the statutes by advisory opinions even if it were not otherwise undesirable to give them such jurisdiction.

Third, law-making, whether by statute or rules and regulations, is essentially a political function, and to require the courts to legislate from case to case in filling in the details of statutes is to bring them into conflict with the other two political branches of our Government-the Legislative and the Executive. If, as proposed, the political branches of the Government be required to fill in the details of the statutes, both adjectively and substantively, the courts will not be required to do so and they may then perform their intended function of judging whether the statute is constitutional, whether the rules and regulations are in accord with the Constitution and statute under which issued, and whether the facts bring the case within or without the statute and regulations.

By such procedure we accomplish a double purpose: First, we enable the citizen to find out what the administrative officers may think the law means without having to go to court, either as a defendant or plaintiff; and, second, we have the details of the statutes filled in by the administrative officers, who are familiar with the administrative problems and processes, rather than by the courts, and we protect the courts from the warring social and economic forces-diverting their hostility to the political branches of the Government which are responsible for legislating in accordance with the terms of the Constitution.

Further, the proposed section intends to secure uniformity of administration,10 to protect the citizen or other person acting in accordance with a rule or regulation for thirty calendar days after the rule or regulation is rescinded or held invalid and notice to that effect has been published in the Federal Register. As the law now stands, a rule or regulation affords no protection unless it is in accord with the law. Whether it is in accord with the law must be found out after a suit in the courts with the person affected being either a defendant or, where suit may be maintained on the merits against the Government, a plaintiff. This is a long, expensive and unsatisfactory process. This newer thought in respect to legislation is incorporated in the above-quoted terms of the Securities and Exchange Act," but it does not go far enough in extending immunity for a reasonable period after publication of notice of the invalidity of the rule or regulation so as to enable the person affected to secure notice and readjust his business or professional practices accordingly.

This plan has had a period of more than two years of trial as to the District of Columbia compensation statute. Shortly after it was enacted, the statute was implemented under the able direction of the then Corporation Counsel. During its two or more years of operation there has been no litigation thereunder, while a very similar statute in one of the States has resulted in several hundred law

10 Prof. Hart above cited, p. 14, truly says that "discretion as to uniform rules is less dangerous than discretion as to individual cases, and discretion as to individual cases is less dangerous if guided by pre-existing rules than if untrammeled."

Prof. Milton Handler, a valued former member of the committee, has recently written as follows ("Unfair Competition," 21 Iowa L. Rev. 175):

"The definition of unfair competition by administrative legislation is incomparably superior to definition by administrative decision. The method of judicial exclusion and inclusion does not permit of a sustained, consistent, comprehensive and speedy attack upon the trade practice problem. The case by case determination takes years to cover even a narrow field; it leaves wide lacunae; false starts are difficult to correct and the erroneous decision is just as prolific as a sound ruling in begetting a progeny of subordinate rules. In a controversy between two litigants or between a Commission and a private party, the law making function is distracted by factors which are important to the contestants but irrelevant to the formulation of future policy. The fusion of law and economics, the detailed investigations and hearings, and the precise formulation of rules, all of which are so essential to a proper regulation of competition, are not feasible when law making is but a by-product of the adjustment of controversies. The combination of the two functions may have been justified when knowledge of the workings of competition was sparse and objectives ill-defined. It tan no longer be justified today. It would be little short of criminal to rely upon so inefficient a method of law making when more scientific and expeditious devices are available.

11 Prof. Hart, above cited, p. 18, says that such a "proposal does not oust the courts from jurisdiction finally to interpret the statute. It merely relieves a man from liability for having, prior to the decision, followed in good faith a mistaken interpretation of the administrator (in the regulation)."