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

MORGAN V. UNITED STATES

Whether the Secretary of Agriculture provided a proper and “full hearing” as required by the statute before issuing the order?
Whether the Secretary’s order was arbitrary and unsupported by substantial evidence?

The Fundamental Fairness Doctrine: The Court found that fundamental fairness was violated when the Secretary adopted findings affecting market agencies’ businesses and livelihoods without giving them a meaningful opportunity to participate in the decision-making process, despite the proceedings having a significant impact on their property rights.
The Full Hearing Rule: While the Secretary physically held hearings and collected evidence, the Court invalidated his order because he failed to provide a “full hearing” when he relied on findings prepared by prosecutors from the Bureau of Animal Industry without giving the market agencies any chance to know or contest these findings before making them final.
The Quasi-Judicial Procedural Requirements: The Court held that since the proceeding effectively put the market agencies’ existence at risk, it was quasi-judicial in nature and thus required basic judicial fairness – which was violated when the Secretary had ex parte discussions with prosecutors and adopted their findings without allowing the affected parties to examine or challenge them.

The Secretary initiated an inquiry into the reasonableness of the rates charged by the market agencies and evidence collection involved extensive testimony and exhibits from both sides.
Oral arguments took place in March 1931, where appellants presented their case.
On May 18, 1932, the Secretary issued an order fixing maximum rates but later vacated it due to changing economic conditions and called for a rehearing.
The rehearing occurred, with additional evidence presented, but appellants were not given a chance to review the findings before the final order.
The Secretary issued a new order based on findings prepared by his department without giving appellants an opportunity to contest these findings.
The plaintiffs (appellants) filed fifty suits challenging the validity of these rates under the Packers and Stockyards Act of 1921, arguing they did not receive a fair hearing as required by law and that the Secretary’s order was arbitrary and unsupported by substantial evidence.

The Court emphasized that administrative agencies must provide a “full hearing” as required by the Packers and Stockyards Act, which includes a fair opportunity for affected parties to know and contest claims against them.
The Secretary’s process was deemed fundamentally flawed because appellants were not given adequate notice of the Government’s claims or an opportunity to respond before the final order was issued.
The order significantly impacted the appellants’ livelihoods, as it determined the rates they could charge for their services, potentially leading to financial deficits.
The Court’s decision reinforced the need for administrative fairness and transparency, invalidating the Secretary’s order due to procedural defects in the hearing process.