## Facts

- Livestock market agencies (commission men) operated at the Kansas City Stockyards and charged commissions for buying and selling livestock.
- The Secretary of Agriculture, acting under the Packers and Stockyards Act of 1921, initiated a broad inquiry into the reasonableness of commission rates and conducted an extensive evidentiary proceeding.
- An examiner took thousands of pages of testimony and received numerous complex exhibits.
- The agencies requested a tentative report from the examiner to enable focused exceptions and argument; the request was denied.
- Oral argument occurred before an Assistant Secretary and was characterized as general.
- Department subordinates who presented the government’s case prepared extensive proposed findings and recommendations and submitted them to the Secretary.
- The Secretary adopted the subordinates’ findings with some modifications and issued an order setting maximum commission rates.
- The agencies were not given an opportunity to review or contest the proposed findings or the government’s specific contentions before the final order issued.
- Multiple suits to enjoin enforcement were consolidated; a three-judge district court upheld the order.
- After an earlier remand concerning whether a proper hearing occurred, the district court again sustained the order based on additional evidence about the Secretary’s process.

## Issues

1. Whether the Secretary’s rate order was issued after the “full hearing” required by the Packers and Stockyards Act and fundamental fairness in a quasi-judicial administrative proceeding.
2. Whether the rate order was arbitrary or unsupported by substantial evidence.

## Decision

- The Supreme Court reversed the three-judge district court and set aside the Secretary’s rate order.
- The Court held the order void for failure to provide the “full hearing” required by the statute.
- Because the procedural defect was dispositive, the Court did not decide whether the order was arbitrary, unsupported by substantial evidence, or confiscatory.
- The case was remanded for further proceedings consistent with the requirement of a full hearing.

## Legal Principles

- In quasi-judicial administrative proceedings, statutory hearing requirements incorporate fundamental requirements of fairness associated with due process.
- A “full hearing” includes not only the opportunity to present evidence, but also a reasonable opportunity to know the government’s claims and to meet them through exceptions and argument before the final decision.
- The deciding official may use subordinates to gather evidence and assist, but the decision-making process must reflect genuine consideration of the record by the official who issues the order.
- A procedure that permits government advocates within the agency to prepare proposed findings submitted privately to the decision maker, while denying the regulated parties a chance to examine and contest those findings before the final order, fails the requirement of a fair and open hearing.

## Conclusion

The Court invalidated the Secretary of Agriculture’s stockyard rate order because the affected market agencies were not afforded a full and fair opportunity to learn and contest the government’s proposed findings and theory before the Secretary issued the final order, rendering the proceeding inconsistent with the statutory “full hearing” requirement.


Morgan v. United States, 304 U.S. 1 (1938)