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Description
The first two terms of Franklin Roosevelt's presidency (1933-1941) were periods of great administrative innovation. Responding to the Great Depression, Congress created scores of new administrative agencies charged with overseeing economic policy and implementing novel social welfare programs. The story of the constitutional difficulties that some of these policy innovations encountered is a staple of both New Deal historiography and the constitutional history of twentieth-century America. There has been very little writing, however, about how courts and the New Deal-era administrative state interacted after these constitutional battles ended. Having overcome constitutional hurdles, these administrative agencies still had to interact with the judiciary in their day-to-day operations. This Article examines this interaction. In particular, it shows how Roosevelt's appointees to the federal bench changed administrative law so as to dramatically diminish the role of the judiciary in the administrative process. The New Dealers espoused what I will call a "prescriptive" vision of policymaking in which expert administrators implemented the policy desires that emerged from the democratic process. There was little room for courts in this vision of policymaking. This era of judicial passivity was short lived, but it firmly defined the role of expertise in the administrative state and created the model of judicial deference that would be both emulated and reacted against as administrative law developed during the rest of the twentieth century.
TABLE OF CONTENTS INTRODUCTION I. ADMINISTRATIVE LAW BEFORE THE NEW DEAL: A BRIEF OVERVIEW II. NEW DEAL ADMINISTRATIVE THEORY AND ITS DISSENTERS A. Expertise and the New Deal B. Expertise and the Courts C. The Conservative Response D. Courts, Democracy, and Expertise III. NEW DEAL ADMINISTRATIVE LAW A. Judicial Review of Agency Action B. The Fate of Crowell v. Benson IV. REMOVING A REFRACTIVE LENS: SOME CONCLUSIONS ABOUT NEW DEAL ADMINISTRATIVE LAW
INTRODUCTION
In 1904, the Ohio Valley Water Company ("Ohio Water") paid $3,900 for nine acres of property at the tip of Neville Island, a small sliver of land in the middle of the Ohio River about four miles northwest of Pittsburgh. (1) Two of the nine acres were dry land, and Ohio Water built a pumping station there. The remaining seven acres were wetlands made up mostly of a sandbar where the company sank its wells. Having thus improved the land, Ohio Water informed the Pennsylvania Public Service Commission ("PSC") that the land was now worth no less than $100,000. According to the company, drawing Ohio River water up through the sandbar purified the water, rendering it particularly potable. Ohio Water, therefore, possessed a unique and valuable piece of land.
Ohio Water had to report the value of its land to the PSC because the Commission needed this information to determine what rates Ohio Water would be allowed to charge its customers. Rate-making was a tricky business. Since the late 1890s, the Supreme Court of the United States had required rate-making agencies to set rates at a level that would allow public utilities to receive a reasonable return on their investment. (2) Rates that did not allow such a return were confiscatory and, as such, violated the Due Process Clause of the Fourteenth Amendment. Thus, to determine whether a particular rate was constitutional, a court had to determine whether it would allow a company to receive "a just and reasonable return upon the fair valuation of its property." (3) Accordingly, the more a company's property was worth, the more it could charge its customers.
Unfortunately for Ohio Water, the Pennsylvania PSC did not think the Neville Island property was worth $100,000. Indeed, the Commissioners did not think it was worth even half that much. According to the PSC, the reason such tasty water flowed from Ohio Water's wells was not because of some special property of the sandbar. The water was of high quality because the company was not pumping Ohio River water at all. Its wells had gone down through the sandbar into a slowly flowing aquifer that ran under the Ohio River, known to geologists as the Wisconsin Glacial Flow (and to the residents of Pittsburgh as "The Fourth River"). (4) Since the flow could be accessed along the Ohio River at least to the Ohio border and throughout Neville Island, there was nothing particularly unique or valuable about the sandbar. Lower value meant lower rates. (5)
Facing such financial hardship, Ohio Water appealed the PSC's valuation to the Pennsylvania Superior Court, which reversed the Commission. (6) After reviewing the evidence submitted to the PSC, the Superior Court ordered the agency to fix the company's rates based on the higher valuation of the Neville Island property. (7) The PSC, in turn, appealed the Superior Court's decision to the Pennsylvania Supreme Court.
At issue in this appeal was not the substance of the debate over the value of Ohio Water's wells. Instead, the litigants debated one of the most basic issues confronting those who study the administrative state: what is the proper relationship between courts and agencies? (8) Indeed, it is the dispute over this issue that makes this case, which ended up in the United States Supreme Court in 1920 under the moniker Ohio Valley Water Co. v. Ben Avon Borough, (9) such a good place to start an inquiry into the shifting relationship between the judiciary and the administrative state during the New Deal.
Progressives and their New Deal--era descendents demanded that courts stay out of the administrative process. Judges, they argued, did not possess the expertise necessary to understand the issues that agencies had to address, issues like the hydrological features of the Ohio River Valley. When courts thrust themselves into the administrative process--as the Pennsylvania Superior Court did in this instance--they would, at best, make a hash of the situation by applying legal doctrines rooted in otherworldly abstractions while ignoring the practical necessities of the particular public policy at issue. At worst, Progressives and New Dealers argued, courts would simply impose outcomes on agencies favoring the vested interests that the administrative state was designed to tame. In an increasingly complex, industrialized society, agencies had to be allowed to exercise their expertise without judicial interference.
This was certainly the PSC's position, and the Pennsylvania Supreme Court readily signed on. According to the court, determining the value of property for the purpose of setting rates was a complex and technical process "which calls for the exercise of a sound and reasonable judgment upon a proper consideration of all relevant facts." (10) Because rate-making was "not a matter of formulas," "[m]uch must be left to the sound discretion of the appraising body, the tribunal appointed by law and informed by experience, for the discharge of these delicate and complex duties." (11) An understanding of the comparative expertise between a court and an agency was the key to allocating power between the two:
It was assumed perhaps by the Legislature that the members of the Public Service Commissions would acquire special knowledge of the matters in-trusted [sic] to them by experience and study, and that ... they would prove efficient instrumentalities for dealing with the complex problems presented by the activities of these great corporations. It was not intended that the courts should interfere with the commissions or review their determinations further than is necessary to keep them within the law and protect the constitutional rights of the corporations over which they were given control. (12)
Accordingly, courts were to be deferential when they reviewed agency actions. Was the agency's action "reasonable" or "based on very substantial evidence"? (13) Was its behavior "not arbitrary or capricious"? (14) Courts were not to substitute their judgment for that of the agency. Because that had clearly happened in this instance--the PSC's valuation of the Neville Island property was "beyond question ... warranted," (15)--the Pennsylvania Supreme Court overturned the Superior Court's decision and reinstated the PSC's valuation. (16)
The PSC's victory, however, was short-lived. The company appealed the Pennsylvania court's decision to the United States Supreme Court, which tersely overturned the state court's opinion. Since an improper valuation of a regulated company's property could result in a constitutional violation, "the State must provide a fair opportunity for submitting that issue to a judicial tribunal for determination upon its own independent judgment as to both law and facts." (17) The Pennsylvania Superior Court had behaved properly, independently reviewing the facts that had been submitted to the Public Service Commission. The Pennsylvania Supreme Court, on the other hand, had ignored its duty by deferentially reviewing the agency's action for mere reasonableness. The expertise of the agency did not warrant any deference. (18)
For progressive proponents of the administrative state, the Supreme Court's ruling in Ben Avon was a nightmare come to life. (19) Was the Court really suggesting that courts not defer to agencies even on technical, factual issues that could not possibly be within the expertise of the judiciary? How could a court possibly justify second-guessing the state geologist of Pennsylvania and several "[o]ther practical men, speaking from experience" as to the ultimate source of the water that the Ohio Valley Water Company pumped out of its wells on the sandbar of Neville Island? (20) Why have an administrative state at all if courts were going to do all the work over again, but badly? Or was that the point? Had courts become the agents of interests who sought to undermine the efficiency and expertise of agencies in the name of protecting their property rights and elite status?
Decided in 1920, Ben Avon was not a case generated by a New Deal-era administrative innovation. However, the objections to Ben Avon took on a new urgency with the advent of the Great Depression and the election of Franklin Roosevelt. Roosevelt's landslide in 1932 brought with it a commitment to administrative government on an unprecedented scale. Ben Avon and its progeny represented an allocation of power between courts and the administrative state completely inconsistent with the Roosevelt administration's strategy for combating the economic crisis.
The 1930s thus became a crucible for the reconceptualization and reconstruction of this relationship between agencies and the judiciary. Forces seeking to expand administrative autonomy clashed with those seeking to ensure that agencies remained firmly under the control of courts. While this clash was certainly political--generally speaking, it pitted supporters of the New Deal against its opponents--it was also an intellectual conflict about the role of expertise in modern government. A crisis of the Great Depression's magnitude gave policymakers with a commitment to expertise-based administration a powerful weapon to dislodge the judiciary from its role protecting property and economic liberty from administrative agencies. Consequently, by the end of the 1930s there had been a dramatic change in the relationship between courts and the administrative state. Courts were placed in a position frankly subservient to the administrators whose task it was to rationalize and reform the failing economy through the application of scientific expertise.
This Article recounts the details of this narrative for two distinct historiographical reasons. The first is to address a hole in the existing historical literature of the New Deal. In the past ten years, there has been a marvelous effervescence of legal-historical scholarship about the New Deal. (21) The bulk of this scholarship, however, has focused on constitutional law. This, in and of itself, is not surprising. Constitutional law holds pride of place in the popular and academic imagination. Additionally, one of the major legacies of the New Deal was the redefinition of liberalism in a manner that shifted its focus from economic liberties to other rights including freedom of expression, and the equal protection of ethnic, religious, and racial minorities. It is an obvious impulse, therefore, to try to discern the law's role in this process, which requires a thorough study of New Deal-era constitutional law. Historians, however, have long acknowledged that the rise of the federal administrative state during the New Deal was another crucial and arguably preeminent component of the modern legal and political order. (22) Why then has there been so little work done on the invention and transformation of administrative law during the New Deal? (23)
This obvious lacuna is made even more perplexing by the increasing subtlety with which the administrative state itself is being examined. Scholarship produced under the rubric of "American political development" or "historical institutionalism" has broadened the way in which the administrative state has been portrayed. (24) In particular, scholars have demonstrated that the emergence of the administrative state was not simply the process of political actors implementing the desires of their constituents for more state control over the economic and social order. The nature of the emerging administrative state was shaped by the way these political impulses were refracted by existing institutional structures, both constitutional and bureaucratic in nature. (25) Scholars have examined how federalism, for example, determined the way that policymakers implemented the political desire for social welfare programs, (26) and how agencies generated certain political pressures while insulating themselves from others. (27)
Unfortunately, the one institution that these state-building scholars have neglected is the judiciary. (28) This fact motivates my second historiographical purpose: There is a need to build a bridge between this institution-focused political history (which ignores courts) and the new legal history of the New Deal (which ignores administrative law). This Article is a modest attempt to do so.
My thesis is simple. New Deal policymakers subscribed to what I will call a prescriptive vision of how public policy should be made. Expert administrators and a strong executive were best equipped to address a given societal problem and efficiently implement a solution. The democratic process identified social problems at the most general level. It was then the job of experts to discern the best way to solve a particular problem and implement the appropriate policy. Inexpert, inflexible, rule-bound courts were to recognize their proper role by allowing agencies to act with minimal judicial interference. By 1940, the federal judiciary had accepted this prescriptive model of policymaking and its reduced role in it.
My argument proceeds as follows: First, in Part I of this Article, I will draw a simplified, thumbnail sketch of the relationship between courts and agencies in the years before the New Deal. I will then, in Part II, discuss in some detail the debate that took place during the 1930s about the proper role of the courts in a polity that increasingly recognized the importance of administrative agencies for addressing the economic and social dislocations caused by the Great Depression. In Part III of this Article, I will demonstrate how administrative law changed during the 1930s to reflect the beliefs of those in this debate who asserted that courts should play as small a role as possible in the new, bureaucratic state. Finally, in Part IV, I will return to my two historiographical points. The extreme judicial deference to administrative agencies that marked the late 1930s and early 1940s was short-lived. But the story of its emergence is an excellent example of the importance of understanding the intersection between changes in administrative law and the development of the administrative state. The intellectual and political currents that shaped administrative law in the 1930s and 1940s defined the role that courts would play in the administrative process. As such, they helped to channel the development of bureaucracies and define the scope of their powers during the immense burst of state building that was the New Deal.
I. ADMINISTRATIVE LAW BEFORE THE NEW DEAL: A BRIEF OVERVIEW
Discovering the exact nature of the relationship between courts and agencies in the years prior to the New Deal is a daunting task. There existed no single statute that defined this relationship at either the federal or state level. Instead, there was a hodge-podge of different statutes and common law doctrines that could be used to challenge administrative actions. (29) Contemporary scholars including Ernst Freund, the pater familias of the discipline we now call administrative law, recorded the use of a host of common law doctrines to challenge agency actions: damage actions in tort or contract; writs of mandamus, certiorari, quo warranto, prohibition, and habeas corpus; as well as injunctions and declaratory judgments. (30) Additionally, the statutes that established administrative agencies frequently provided for some form judicial review of final administrative action. (31) Finally, as the Ben Avon case illustrates, the Constitution itself sometimes required judicial oversight of agencies.
As if this vast variety of methods of obtaining judicial review of administrative action were not confusing enough, different procedural mechanisms dictated differing degrees of judicial oversight. In New York, for example, certiorari review required courts to overturn agency actions if "findings of fact [we]re not supported by competent proof or [we]re against the weight of the evidence," while mandamus was required only if courts found agency action to be "palpably illegal." (32) In Massachusetts, writs of prohibition could only be issued against an agency that had acted in "clear excess of jurisdiction," while quo warranto actions generated de novo hearings before a court. (33) Statutes requiring judicial review frequently stated that administrative action had to be supported by "substantial evidence," though this standard meant different things in different contexts. (34)
Additionally, courts changed the intensity of their review of agency action depending on what exactly the agency was doing. Review of factual determinations might be less rigorous than review of legal determinations. Review of the application of facts to legal standards might fall somewhere in between. (35) On the other hand, as Ben Avon illustrated, certain facts might be reviewed de novo. Courts also drew a distinction between reviewing quasi-judicial acts and quasi-legislative acts. (36)
Despite these mind-numbing combinations (and the considerable sympathy they evoke for the practitioners who had to deal with them), it is possible to generalize about the way courts treated agency decisions. In subject matter areas that were clearly within traditional notions of the police power, courts gave agencies considerable discretion. By the 1920s, courts consistently deferred to agency actions with respect to public health, (37) customs and postal regulations, (38) the administration of veterans pensions, (39) and various licensing regimes. (40) The same was true of the actions of taxing agencies, (41) the Patent and Trademark Office, (42) the Federal Land Office, (43) and the Bureau of Immigration. (44)
On the other hand, for types of regulation that touched on subject matter at the outer edge of the police power, judicial review was more exacting. As Ben Avon demonstrated, the federal... |
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