Prepared by the United States Department of Justice Tom C. Clark, Attorney General, 1947.

[81]

VII    SECTION 8--DECISIONS

The provisions of section 8, together with those of section 5 (c), govern the procedure subsequent to hearing. Section 8 applies to cases of rule making and adjudication which are required by sections 4 and 5 to be conducted in accordance with sections 7 and 8. It became effective on December 11, 1946, and is applicable to proceedings commenced on and after that date. See section 12.

Section 8 (a) provides for intermediate and final decisions, prescribes who shall make them, and defines the decisional relationship between the agency heads and presiding officers.⁽¹⁾ The subsection reads as follows:

Action by subordinates. In cases in which the agency has not presided at the reception of the evidence, the officer who presided (or, in cases not subject to subsection (c) of section 5, any other officer or officers qualified to preside at hearings pursuant to section 7) shall initially decide the case or the agency shall require (in specific cases or by general rule) the entire record to be certified to it for initial decision. Whenever such officers make the initial decision and in the absence of either an appeal to the agency or review upon motion of the agency within time provided by rule, such decision shall without further proceedings then become the decision of the agency. On appeal from or review of the initial decisions of such officers the agency shall, except as it may limit the issues upon notice or by rule, have all the powers which it would have in making the initial decision. Whenever the agency makes the initial decision without having presided at the reception of the evidence, such officers shall first recommend a decision except that in rule making or determining applications for initial licenses (1) in lieu thereof the agency may issue a tentative decision or any of its responsible officers may recommend a decision or (2) any such procedure may be omitted in any case in which the agency finds upon the record that due and timely execution of its functions imperatively and unavoidably so requires.

At the outset, it should be noted that section 8 (a) has no application to cases in which the agency itself has presided at the reception of the evidence. The procedures required by this subsection are intended "to bridge the gap between the officials who hear and those who decide cases." H.R. Rep. p. 38 (Sen. Doc. p. 272). If the agency itself, e.g., the Interstate Commerce Commission, hears the evidence, it may decide the case without the use of any intermediate decision. In such cases, however, the agency may, if it desires, preface its final decision with a tentative decision to which the parties may file exceptions.

[82] In cases of adjudication subject to section 5 (c) and in which the agency itself has not presided at the reception of evidence, the presiding officer⁽²⁾ must "initially decide the case or the agency shall require (in specific cases or by general rule) the entire record to be certified to it for initial decision." It is further provided that "Whenever the agency makes the initial decision without having presided at the reception of the evidence [the presiding officer] shall first recommend a decision." That is, in cases of adjudication subject to section 5 (c), the presiding officer must make either (a) an "initial" decision which will become the agency's final decision in the absence of an appeal to or review by the agency, or (b) a "recommended" decision which will be followed by an "initial" decision by the agency.

Under the terms of the subsection, the presiding officer's decision will constitute an initial decision unless the agency provides otherwise either by general rule published in the Federal Register or by order in the particular case. Accordingly, each agency should determine whether it desires the decisions of its presiding officers to be "initial" decisions or recommended decisions.

In cases not subject to section 5 (c), the agency may provide for the making of initial decisions by "any other officer or officers qualified to preside at hearings pursuant to section 7." That is, in rule making, in "determining applications for initial licenses," and in "proceedings involving the validity or application of rates, facilities, or practices of public utilities or carriers," an "initial" decision may be made, for example, by a hearing examiner other than the one who heard the evidence. Further, the fourth sentence of section 8 (a) provides that in rule making and in determining applications for initial licenses the agency may issue a tentative decision or any of its responsible officers may recommend a decision in lieu of a recommended decision by the hearing examiner who conducted the hearing. This last clause permits, in rule making and determining applications for initial licenses, "the continuation of the widespread agency practice of serving upon the parties, as a substitute for either an examiner's report or a tentative agency report, a report prepared by the staff of specialists and technicians normally engaged in that portion of [83] the agency's operations to which the proceeding in question relates." Sen. Rep. p. 43⁽³⁾ (Sen. Doc. p. 229).

Finally, in rule making or determining applications for initial licenses the agency may itself decide the case without any prior initial, recommended or tentative decision, even though it has not presided at the reception of the evidence, "in any case in which the agency finds upon the record that due and timely execution of its functions imperatively and unavoidably so requires."

Appeals and review. Where the agency permits a hearing officer to make an "initial" decision, "in the absence of either an appeal to the agency or review upon motion of the agency within time provided by rule, such decision shall without further proceedings then become the decision of the agency." Parties may appeal from the hearing officer's initial decision to the agency, which must thereupon itself consider and decide the case. Also, the agency may review the hearing officer's initial decision even though the parties fail to appeal. Each agency should publish a rule prescribing the time within which parties may appeal or the agency may call up the case for review.⁽⁴⁾ Where the hearing examiner (or other officer where permitted by the subsection makes a recommended decision, the agency must always make an "initial" or final decision.

In making its decision, whether following an initial or recommended decision, the agency is in no way bound by the decision of its subordinate officer; it retains complete freedom of decision--as though it had heard the evidence itself. This follows from the fact that a recommended decision is advisory in nature. See National Labor Relations Board v. Elkland Leather Co., 114 F. 2d 221, 225 (C.C.A. 3, 1940), certiorari denied, 311 U.S. 705. Similarly, the third sentence of section 8 (a) provides that "On appeal from or review of the initial decisions of such [hearing] officers the agency shall, except as it may limit the issues upon notice or by rule, have all the powers which it would have in making the initial decision." This is not to say that hearing [84] examiners' initial or recommended decisions are without effect. "They become a part of the record [as required by subsection 8 (b)] and are 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." Sen. Rep. p. 24, H.R. Rep. p. 38 (Sen. Doc. pp. 210, 272). In such cases, it is apparently assumed that agencies will attach considerable weight to the findings of the examiner who saw and heard the witnesses. However, in cases where the credibility of witnesses is not a material factor, or cases where the recommended or initial decision is made by an officer other than the one who heard the evidence, the function of such decision will be, rather, the sharpening of the issues for subsequent proceedings.

Section 8 (a) empowers agencies to "limit the issues upon notice or by rule" on appeal from or review of the initial decisions of hearing officers. That is, an agency may limit the issues which it will consider in such cases by notice in a particular case or by a general rule published in the Federal Register. It may restrict its review to questions of law and policy or, where it is alleged that erroneous findings of fact have been made by the hearing officer, to determining whether cited portions of the record disclose that the findings are clearly wrong. Final Report,

p. 51. See also Sen. Rep. p. 43 (Sen. Doc. p. 229).

Where the hearing officer makes a recommended decision, the agency must itself consider and determine all issues properly presented. However, it may provide that it will consider only such objections to its subordinates' decisions (recommended or initial) as are presented to it as exceptions to such decisions. See Marshall Field & Co. v. National Labor Relations Board, 318 U.S. 253, 255 (1943); National Labor Relations Board v. Cheney California Lumber Co., 327 U.S. 385, 387-88 (1946). It may also require that exceptions be precise and supported by specific citations, to the record.⁽⁵⁾ The agency in reviewing either initial or recommended decisions may adopt in whole or in part the findings, conclusions, and basis therefor stated by the presiding [85] officer. On the other hand, it may make entirely new findings either upon the record or upon new evidence which it takes. Also, it may remand the case to the hearing officer for any appropriate further proceedings. Sen. Rep. p. 43, H.R. Rep. pp. 38-39 (Sen. Doc. pp. 229, 272-273).

Submittals. The first sentence of section 8 (b) provides that "Prior to each recommended, initial, or tentative decision, or decision upon agency review of the decision of subordinate officers the parties shall be afforded a reasonable opportunity to submit for the consideration of the officers participating in such decisions (1) proposed findings and conclusions, or (2) exceptions to the decisions or recommended decisions of subordinate officers or to tentative agency decisions, and (3) supporting reasons for such exceptions or proposed findings or conclusions." [Italics supplied]. The procedure thus prescribed for the focusing of issues and arguments is a codification of the present general practice. Senate Comparative Print, June 1945, p. 16 (Sen. Doc. p. 33). "Ordinarily proposed findings and conclusions are submitted only to the officers making the initial [or recommended] decision, and the parties present exceptions thereafter if they contest the result. However, such exceptions may in form or effect include proposed findings or conclusions for the reviewing authority to consider as part of the exceptions." Sen. Rep. pp. 24, 43 (Sen. Doc. pp. 210, 229).

Agencies may require that proposed findings and conclusions and exceptions be supported by precise citation of the record or legal authorities as the case may be. Reasonable time limits for the submission of such materials may be imposed. The opportunity to submit supporting reasons means that briefs on the law and facts which are filed by parties in support of their proposed findings and conclusions and exceptions must be received and considered. Sen. Rep. p. 24, H.R. Rep. p. 39 (Sen. Doc. pp. 210, 273). Section 8 (b) does not purport to prescribe opportunities for oral argument. Accordingly, subject to the provisions of particular statutes, each agency must itself determine in what cases oral argument before hearing officers or the agency is necessary or appropriate.⁽⁶⁾

[86] Decisions. Section 8 (b) further provides: "The record shall show the ruling upon each such finding, conclusion, or exception presented. All decisions (including initial, recommended, or tentative decisions) shall become a part of the record and include a statement of (1) findings and conclusions, as well as the reasons or basis therefor, upon all the material issues of fact, law, or discretion presented on the record; and (2) the appropriate rule, order, sanction, relief, or denial thereof."

Since all decisions, whether made by the agency or by a subordinate officer, become a part of the record, the requirement of the first quoted sentence will be satisfied if such decisions in some way indicate the ruling of the agency or such officer upon each requested finding or conclusion or exception presented to the agency or to such officer. The purpose of this requirement is "to preclude later controversy as to what the agency had done." H.R. Rep. p. 54, fn. 19 (Sen. Doc. p. 288).

The form and content of decisions, as prescribed in the last sentence of section 8 (b), are discussed in the Committee reports as follows:

The requirement that the agency must state the basis for its findings and conclusions means that such findings and conclusions must be sufficiently related to the record as to advise the parties of their record basis. Most agencies will do so by opinions which reason and relate the issues of fact, law, and discretion. Statements of reasons, however, may be long or short as the nature of the case and the novelty or complexity of the issues may require.

Findings and conclusions must include all the relevant issues presented by the record in the light of the law involved. They may be few or many. A particular conclusion of law may render certain issues and findings immaterial, or vice versa. Where oral testimony is conflicting or subject to doubt of its credibility, the credibility of witnesses would be a necessary finding if the facts are material. It should also be noted that the relevant issues extend to matters of administrative discretion as well as of law and fact. This is important because agencies often determine whether they have power to act rather than whether their discretion should be exercised or how it should be exercised. Furthermore, without a disclosure of the basis for the exercise of, or failure to exercise, discretion, the parties are unable to determine what other or additional facts they might offer by way of rehearing or reconsideration of decisions. Sen. Rep. pp. 24-25, H.R. Rep. p. 39. (Sen. Doc. pp. 210-211, 273).

An agency which issues opinions in narrative and expository form may continue to do so without making separate findings of fact and conclusions of law. However, such opinions must indicate the agency's findings and conclusions on material issues of fact, law or discretion with such specificity "as to advise the parties and any reviewing court of their record and legal basis."⁽⁷⁾ The [87] requirement that such decisions indicate the reasons for the exercise of discretionary power is a codification of existing good practice. See Phelps Dodge Corp. v. National Labor Relations Board, 313 U.S. 177, 194-197 (1941).

Nothing in the Act is intended to preclude agency heads from utilizing the services of agency employees as assistants for analysis and drafting. Morgan v. United States, 298 U.S. 468, 481 (1936). Of course, in adjudicatory cases subject to section 5 (c), such assistants could not have performed investigative or prosecuting functions in the cases (or in factually related cases) in which they are so employed. Also, the agency heads are free to employ the hearing officer who heard a particular case as the draftsman of their final decision and otherwise to assist in its formulation. Compare generally section 4 (a) of the National Labor Relations Act, as amended.

Appeals to superior agency. Nothing in section 8 is intended to cut off any rights which parties may have for appeal to or review by a superior agency. Sen. Rep. p. 23 (Sen. Doc. p. 209). The requirements of subsection 8 (b) as to the form and content of decisions do not apply to decisions of a superior agency upon such appeal from or review of the agency's decision.

 1. Any of the requirements of section 8 may be waived by the parties. Sen. Rep. p. 23 (Sen. Doc. p. 209).

 2. As here used, presiding officer means the member of the agency, the examiner appointed pursuant to section 11, or the special statutory board or hearing officer who conducted the hearing. See section 7 (a). Where the presiding officer becomes unavailable as by illness or leaving the agency, the agency may direct another hearing officer to make an initial or recommended decision, or it may issue a tentative decision, or it may order a rehearing.

 3. It is to be noted that in "proceedings involving the validity or application of rates, facilities, or practices of public utilities or carriers" (if they do not constitute either rule making or the determination of an application for an initial license), an intermediate (i.e., "initial" or "recommended") decision must be made by the hearing examiner who conducted the hearing or by some other officer or officers qualified to preside at hearings pursuant to section 7 (a).

 4. It is important to note that section 10 (c) permits an agency to require parties to appeal from hearing officers' initial decisions to the agency as a prerequisite to obtaining judicial review. Such a requirement must be set forth in a published rule which must further provide that the hearing officer's initial decision shall be inoperative pending the agency's review of the case. Sen. Rep. p. 27, H.R. Rep. pp. 43, 55, fn. 21 (Sen. Doc. p. 213, 277, 289).

 5. See Final Report, p. 52: "The Committee strongly urges that the agencies abandon the notion that no matter how unspecified or unconvincing the grounds set out for appeal, there is yet a duty to reexamine the record minutely and reach fresh conclusions without reference to the hearing commissioner's decision. Agencies should insist upon meaningful content and exactness in the appeal from the hearing commissioner's decision and in the subsequent oral argument before the agency. Too often, at present, exceptions are blanket in character, without reference to pages in the record and without in any way narrowing the issues. They simply seek to impose upon the agency the burden of complete reexamination. Review of the hearing commissioner's decision should in general and in the absence of clear error be limited to grounds specified in the appeal."

 6. See Morgan v. United States, 298 U.S. 468, 481 (1936): "Argument may be oral or written."

 7. Agencies should keep in mind that pursuant to section 3 (b) they may cite as precedents only such previous orders and opinions as have been published or made available for public inspection.

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