Administrative Law and Procedure

The first issue that is encountered in the study of administrative law concerns the way in which Congress can effectively delegate its legislative power to an ADMINISTRATIVE AGENCY. Article I, Section I, of the U.S. Constitution provides that all legislative power is vested in Congress. Despite early resistance, the U.S. Supreme Court gradually accepted the delegation of legislative authority so long as Congress sets clear standards for the administration of the duties in order to limit the scope of agency discretion. With this basic principle as their guide, courts have invalidated laws that grant too much legislative power to an administrative agency. President FRANKLIN D. ROOSEVELT learned just how far the Court would go in allowing the delegation of authority, in two cases that stemmed from his administrative-agency actions to support his NEW DEAL program.

The NATIONAL INDUSTRIAL RECOVERY ACT (15 U.S.C.A. § 701 et seq., 40 U.S.C.A. § 401 et seq. [1933]) authorized the president to prohibit interstate shipments of oil that had been produced in violation of state board rules that attempted to regulate crude-oil production to match consumer demand. The Panama Refining Company sued to prevent federal officials from enforcing the prohibition, known as the "hot oil" law (Panama Refining Co. v. Ryan, 293 U.S. 388, 55 S. Ct. 241, 79 L. Ed. 446 [1935]). The U.S. Supreme Court found the law to be unconstitutional. Congress could have passed a law prohibiting interstate shipments of hot oil, but it did not do so; instead, it gave that power to the president. This has been called a case of delegation run amok because the law had no clear standards defining when and how the president should use the authority that the statute delegated to him.

Four months later, the Court invalidated a criminal prosecution for violation of the Live Poultry Code, an unfair-competition law that President Franklin D. Roosevelt had signed in 1934 pursuant to another section of the National Industrial Recovery Act. This was the case of SCHECHTER POULTRY CORP. V. UNITED STATES, 295 U.S. 495, 55 S. Ct. 837, 79 L. Ed. 1570 (1935). The problem in this case was not that the delegation of authority was ill-defined, but that it seemed limitless. The president was given the authority to "formulate codes of fair competition" for any industry if these codes would "tend to effectuate the policy" of the law. Comprehensive codes were created, establishing an elaborate regulation of prices, minimum wages, and maximum hours for different kinds of businesses. But there were no procedural safeguards from arbitrariness or abuses by enforcement agencies. Someone who was charged with a violation was not given the right to notice of the charges, the right to be heard at an agency hearing, or the right to challenge the agency's determination in a lawsuit. The Court struck this law down, stating that the unfair procedures helped strong industrial groups to use these codes to improve their commercial advantage over small producers.

As a result of Panama Refining and Schechter Poultry, when Congress delegates authority to agencies, it also sets out important provisions detailing procedures that protect against ARBITRARY administrative actions.