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tion 5 (c) of the act. The other features, namely, section 15 of the act, and the proposed new section 19, I am not sufficiently familiar with to be able to make any satisfactory contribution.
I am going to deal with what appear to me to be four features of the Federal Trade Commission practice under section 5 (c) that are justifiably the subject of criticism.
First, section 5 (c), as it is now written, provides for judicial review, of course, and with respect to the review of the facts it contains a provision that the findings of the Commission as to the facts, if supported by evidence, shall be conclusive. That language dates back to the adoption of the original act in 1914, at which' time the word “testimony” was used instead of the word "evidence."
That phraseology is, on the face of it, broad enough to limit the court's authority on judicial review to what the lawyer speaks of'as the scintilla rule; that is to say, any evidence would, on the face of the language, suffice to sustain a conclusion on the question of fact.
Now, the courts have construed the language so as to read in before the word “evidence” the word “substantial," so that I think we may now say that by virtue of the court decisions, mostly under the Labor Act, it is true, but by virtue of the court decisions, the findings of fact are conclusive, if supported by substantial evidence.
However, that term is vague enough in itself, and it has certain features that, in my judgment, need correction. Among other things, at the present time some of the courts have been thinning out the meaning of "substantial evidence” by adopting these tactics—at least, so it seems from their written opinions-adopting the practice of examining the record to find whether or not there is in the record any evidence in support of the conclusion of fact. If such evidence is found, regardless of the weight of the countervailing evidence, the decision is said to be sustained by substantial evidence.
There seems to be some justifiable criticism of that practice. Possibly the courts do not even intend it to be that way, but some clarifying language would certainly be of merit.
So the first of the features of section 5 (c) concerning which I would speak is the phraseology “supported by evidence.” Later I will try to describe what I think might well be done with it.
The second feature is this: Under current judicial opinions, the court review does not apparently extend to what the courts are calling in ference from the facts. Again and again, in recent years, we find the courts, including the Supreme Court of the United States, saying something like this
and this is quoted from Justice Douglas in the LinkBelt case:
Congress entrusted the Board, not the courts, with the power to draw inferences from the facts.
This is a quotation from Judge Allen, in the United States Truck case, in the sixth circuit:
While the findings of the Board are claimed to be unsupported by substantial evidence, and the long history of known hostility to unionization shown by the respondent is impressive, nevertheless the findings are in general supported' by inferences which the Board has a right to draw, and which this court has no right to review.
That is a Labor Board case, but the language of the Labor Act is quite like the language of the Trade Act, so that the cases in the two fields may be interchanged.
In other words, courts in recent years have been saying at least that the inference to be drawn from the facts are not for the court to review; they are conclusive.
Now, suppose by a process of inference, the use of circumstantial evidence, we reach what we speak of as the ultimate facts in a controversy, and if the process of inference is completely foreclosed by the terms of the present section 5 (c), a very important area of fact determination is foreclosed from court review.
So I should think the second defect in the phraseology of section 5 (c) is failure to make clear that the inference to be drawn in arriving at the ultimate facts from the evidentiary facts is just as much subject to court review as any other portion of the facts determination.
The CHAIRMAN. Doctor, would it be agreeable to you if we were to ask questions as you proceed ?
Dr. STASON. I wish you would, please.
The CHAIRMAN. Do you have in mind the particular facts the judge spoke of as being inference instead of direct facts which the court could consider, in the Truck Co. case? The facts that brought about that statement?
Dr. STASON. In the United States Truck Co. case to which I referred the statement was dictum. The court in that case set aside a cease and desist order of the National Labor Relations Board because the decision of the Board required the reinstatement of two employees who were found rather clearly to have been guilty of intoxication while on duty, and therefore, being under the influence of liquor, they were operating motortrucks contrary to the provisions of the Motor Vehicle Act.
She set aside the order in that case, and therefore her statement was dictum. I cannot at the moment recall from any specific case the precise illustration for which you ask, but I can easily suggest an hypothetical possibility for illustration purposes.
Take a case arising under the sections of the act having to do with deceptive practices. The facts are usually fairly easily ascertained. The question is whether the facts, as ascertained, have a tendency to deceive the public. The tendency to deceive is the ultimate fact. However, one reaches that conclusion from the evidentiary facts. The conclusion of fact that is reached by the inference process is really the heart of the whole matter and unless the court has authority to review the process of inference the court's powers are very restricted indeed.
Does that illustrate the point ?
The CHAIRMAN. Circumstantial evidence is largely establishing facts by inference, is it not?
Dr. STASON. That is correct.
The CHAIRMAN. Would you understand the court's decision to limit the consideration of circumstantial evidence in making this decision ?
Dr. STASON. No; circumstantial evidence may be considered by the Commission, but the inference drawn by the Commission from circumstantial evidence cannot be reviewed by the court, if one follows and believes the language that has been used in at least a half dozen of these recent cases.
The CHAIRMAN. Do you interpret those decisions as precluding the court from considering circumstantial evidence in a case ?
Dr. Srason. No, the court can consider circumstantial evidence in that type of situation as in any other type. I think, perhaps, we are not speaking to a common point. Circumstantial evidence is just as usable in a Federal Trade Commission proceeding as in any other type of judicial controversy or quasi-judicial controversy, and it can be used to support a cease and desist order, or it can be used to bring about the setting aside of an order. The objection that I am taking, however, is at a little different point. The courts say that an inference to be drawn from the factual evidence in arriving at a conclusion of fact is for the Commission and not for the court. In other words, the court is precluded by these statements from reviewing the process of fact determination between the evidentiary fact and the ultimate fact.
The CHAIRMAN. Yes; I understand that. The question I was getting at is whether the court, in effect, in reviewing a case on appeal is denied consideration by it of circumstantial evidence. I would regard circumstantial evidence to be just as much evidence as the direct fact.
Dr. STASON. So would I.
The CHAIRMAN. Is the court denied consideration of what we ordinarily call circumstantial evidence?
Dr. STASON. Yes, sir; it seems to me it is.
Dr. Stason. It seems to me the language of at least a half dozen well reasoned recent cases point that way.
The CHAIRMAN. Has that been the conclusive or determinative point in those cases?
Dr. Srason. It is difficult to tell, Mr. Chairman. The cease and desist orders, both in Labor Board cases and Commission cases, have been sustained. In sustaining the orders the courts' opinions have said the inferences are not for the court to pass upon. Whether the court's feeling that it cannot pass upon the inference has been the concluding factor is impossible to say without going back of the opinion. And that I have not done.
Mr. ROGERS. What kind of rule would you lay down as to drawing inferences ?
Dr. STASON. I beg your pardon?
Mr. ROGERS. What sort of rule would you lay down as to the drawing of inferences ?
Dr. Stason. I would say that the inference drawn by the Commission from the evidentiary facts should be subject to the same standard of judicial review as that which is applied to the evidentiary facts themselves. In other words, I can't distinguish, in my thinking, between the portion of the process of fact determination which involves the drawing of an inference from evidentiary facts from the determination of the evidentiary facts themselves. I would treat them all alike.
Mr. O'HARA. Dean, I notice you use the term "circumstantial evidence.” My experience with that term in my State is that it applies only to criminal cases. I have never heard of a civil case in
State where they used the words “circumstantial evidence.” Is that a common use of the term in this Federal Trade Commission practice ?
Dr. STASON. I think the term that is used is "drawing inferences" — that is the expression, “drawing inferences from the evidentiary facts.” I use the term “circumstantial evidence” because it is a convenient legal concept to express an idea. I know of no reason, however, why the term “circumstantial evidence” should not be used in civil proceedings at law as well as criminal proceedings.
Mr. O'HARA. That may be true, but I wonder if it isn't generally considered to be a term used in criminal practice.
Dr. Stason. No; I think the term "circumstantial evidence" is one of universal application instead of being limited to just criminal proceedings. In any event, that is the way I use it.
Further, just to conclude that discussion of the drawing of inferences, I have here in my notes a quotation from the so-called Medo case, in which Justice Stone said—this was a 1941 case, I believe. He used this kind of language, and, again, I don't think it can be called more than dictum:
It has now long been settled that the findings of the Board (Labor Board), as with those of other administrative agencies, are conclusive upon the reviewing courts when supported by evidence, that the weighing of conflicting evidence is for the Board, not for the courtsand this is the point:
that the inferences from the evidence are to be drawn by the Boardi and not by the courts, save only as questions of law are raised, and that upon such questions of law the experienced judgment of the Board is entitled to great weight.
Mr. REECE. As I understand, from your statement of that interpretation, the court need only read one side of a case, and if it finds any substantial evidence in it the administrative action taken is sustained without weighing the relative strength or preponderance of evidence.
Dr. STASON. I think as the term "substantial evidence” is being construed in some courts today, that is true. I don't think that is done in all the courts, and I think there is a great deal of vagueness and uncertainty as to just what should be done. The phrase used is “conclusive if supported by evidence." The courts have put in the word "substantial” so that as amended by judicial interpretation, it reads "shall be conclusive if supported by substantial evidence.”
Now, the question is, what is substantial evidence? I think there have been decisions rendered in the last 10 years in which the courts have examined the record on one side and found substantial evidence present and sustained a decision without too much, if any regard, for the weight of the countervailing evidence. However, I don't believe that is what substantial evidence means, or ought to mean, and I am glad to say I don't think it is by any means always interpreted that way. I think it is more or less a sporadic decision that goes off that way.
Mr. O'HARA. Dean, may I direct your attention to one view? Under the practice established, appeals from administrative decisions are only to circuit court of appeals, and from fact-finding bodies in the States there are so many cases where the appeal is to the appellate court, only, and where there is a question of whether there is any evidence to sustain the triers of the facts, I think some very unfortunate results have come from that procedure, if I may say so, because you find a reviewing court in a State, or the circuit court of appeals in a circuit, finding some small bit of evidence and saying, "Well, you might have found differently, but there is some evidence to sustain the triers of facts.” I think the damage is done in regard to the finding of some small bit of evidence which is greatly outweighed by other evidence, and the remedy is gone when you go to the circuit court of appeals or appellate court as the case may be.
They may make their decision on some small bit of evidence. I think in some of these cases that arise until we get a trial de novo, it is going to be difficult for Congress to afford relief on some of these complaints of administrative injustices. Do you agree with me or not?
Dr. Stason. No; I don't agree that a trial de novo is the solution. I would add a qualification to that, and, if I may, I would rather explain it a little later.
Mr. O'HARA. Very well.
Dr. Stason. The third defect in section 5 (c) to which I would refer has to do with the possibility of court review of the remedy that is ordered by the Commission. The Commission, of course, enters its cease-and-desist order. The court is given the power to reverse, affirm or modify, subject to the provision that the decision on questions of fact, if supported by evidence, shall be conclusive. The courts have been construing that power to modify in a rather restrictive way. In fact, the courts have said in recent years that the question of the remedy to be applied is discretionary or should be discretionary with the administrative agency, and being discretionary, should not be subject to judicial review. As a consequence, the power of the court is circumscribed, and if it decides that the fact decision is supported by substantial evidence, that there are no errors of law, it must sustain the cease-and-desist order, even though the remedy which is prescribed goes beyond what seems to be the reasonable needs of the case. I
quote from the A. P. W. Paper Co. case, a 1945 case: The present order goes beyond permissible limits in forbidding any use of the words “Red Cross.”. Accordingly, the order must be reversed and the case remanded to the Commission for the entry of an order which will not infringe the rights of the petitioner under the Red Cross Act above considered. We do not ourselves attempt to formulate a new order, because our recent decisions, have held that the measure of the necessary relief is peculiarly within the competence of the Commission.
Now, ever since the decision, 5 or 6 years ago, by Judge Hand, in the so-called Herzfeld case, it has become increasingly clear that the question of the remedy is one which the courts deem to have been left within the discretionary control and power of the Commission, that the court should not intervene at that point, even though it deems the remedy unduly harsh and severe.
Those are three of the features of section 5 (c) to which I refer as seeming to need statutory decision.
Now, there is the fourth, and the last proposition that I would like to make, and that is this: The Federal Trade Commission process, beginning with the issuance of the complaint and ending with the entry of a cease and desist order, is a very thorough process indeed, handled with great skill, and yet to an outsider like myself, it doesn't look like a properly developed quasi-judicial procedure. It is a very high-class investigatory procedure. It lacks many of the essential elements of fairness that should inhere in a quasi-judicial process.