Petition for Writ of Certiorari — Five Smiths, Inc. v. Hollaway

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SUPREME COURT OF THE UNITED STATES —

OCTOBER. TERM, 1974

No 73.-. 2046

THE FIVE SMITHS, INC., Petitioner,

WILLIAM H. HOLLAWAY, et al., Respondents.

THE FIVE, SMITHS, INC., Petitioner,

UNITED STATES OF AMERICA, Respondent.

PETITION FOR A WRIT OF CERTIORARI

To the Temporai~ Emergency Court of Appeals

Of the United States ae

MARTIN E. KILPATRICK

EMMET J. BONDURANT II

Counsel for Petitioner

Of Counsel:

Susan A. CAHOON

KILPATRICK, CODY, ROGERS,

McCLATCHEY & REGENSTEIN

3100 Equitabie Building

100 Peachtree Street

Atlanta, Georgia 30303

JoHN A. WELLS

STANLEY GODOFSKY

Rocers & WELLS

Pan American Building

200 Park Avenue

New York, New York 10017

INDEX

OPINION BELOW

JURISDICTION

QUESTIONS PRESENTED

STATUTORY PROVISIONS AND EXECUTIVE

ORDER INVOLVED

STATEMENT OF THE CASE

REASONS FOR GRANTING THE WRIT

I. Because the President Is Subject to the Ad-

ministrative Procedure Act in Exercising

the Rulemaking Powers Delegated by Cong-

ress in the Economic Stabilization Act, the

Temporary Court Was Required by Section

706(2)(D) to Set Aside Executive Order

11615 upon Finding it Was Issued in Viola-

tion of Section 553

The President violated the Administra-

tive Procedure Act in promulgating Ex-

ecutive Order 11615

. The Temporary Court could not ignore

the mandate of the Administrative Pro-

cedure Act that Executive Order 11615

be set aside because the President failed

to observe the procedure required by

law

. The holding of the Temporary Emer-

gency Court of Appeals sets a dangerous

precedent in tolerating violation of the

Administrative Procedure Act

INDEX \

II. The Temporary Court Abdicated its Re-

sponsibility as an Article II] Court to Afford

Independent Judicial Review of Administra-

tive Interpretations of Law and Ignored

Decisions of this Court Defining that Re-

sponsibility by “Rubber Stamping” Under

the Rubric of the “Great Deference’”’ Rule

Guidelines and Interpretations Issued by

the OEP Without any Stated Reasons or

Evidence of Developed Expertise by the OEP

in Making Such Interpretations 19

CONCLUSION OU

APPENDIX A-1

CITATIONS

Cases

A. E. Staley Mfg. Co. v. United States, 310 F.

Supp. 485 (D. Minn. 1969) 17

Amalgamated Meat Cutters v. Connally, 337 F.

Supp. 737 (D.D.C. 1971) 12, 22

American Ship Building Co. v. NLRB, 380 U.S.

300 (1965) 24, 25

Appalachian Power Co. v. EPA, 477 F.2d 295

(4th Cir. 1973) 15

Bowles v. Willingham, 321 U.S. 503 (1944) 22

Buckeye Power, Inc. v. EPA, 481 F.2d 162 (6th

Cir. 1973) 16

Burlington Truck Lines, Inc. v. United States,

371 U.S. 156 (1962) 28

CITATIONS ili

Davies Warehouse Co. v. Brown, 137 F.2d 201

(Emer. Ct. App. 1943), aff'd sub nom.

Davies Warehouse Co. v. Bowles, 321 U.S.

144 (1944) 22, 23

Duquesne Light Co. v. EPA, 481 F.2d 1 (8rd Cir.

1973) 15

Fast v. DiSalle, 193 F.2d 181 (Emer. Ct. App.

1951) | 22

FCC v. RCA Communications, Inc. 346 U.S. 86

(1953) 26

FTC v. Sperry & Hutchinson Co. 405 U.S. 233

(1972) | 28, 29

Haggar Co. v. Helvering, 308 U.S. 389 (1940) 27

Kelly v. United States Department of the Inte-

rior, 339 F. Supp. 1095 (E.D. Cal. 1972) | 16

NLRB v. Brown, 380 U.S. 278 (1965) 25, 26

National Motor Freight Traffic Association v.

United States, 268 F. Supp. 90 (D.D.C.

1967), aff'd 393 U.S. 18 (1968) aa:

Pharmaceutical Manufacturers Association v.

Finch, 307 F. Supp. 858 (D. Del. 1970) .... 17

Power Reactor Development Co. v. International

Union of Electrical Radio & Machine Work-

ers, 376 U.S. 346 (1961) ..——s—s... .

St. Joseph Stockyards Co. v. United cious 298

US. 26 C908)... ee . 8

SEC v. Chenery Corp., 318 U.S. 80 (1943) 26, 27, 29

Skidmore v. Swift & Co., 323 U.S. 1384 (1944) 27

iv CITATIONS

Social Security Board v. Nierotko, 327 U.S. 358

(1946) 26

Texaco, Inc. v. FPC, 412 F.2d 740 (3rd Cir.

cc rhe eee 16, 17

Texas Gas Transmission Corp. v. Shell Oil Co.,

363 U.S. 263 (1960) 26, 29

Udall v. Tallman, 380 U.S. 1 (1965) 20

United States v. Great Atlantic & Pacific Tea Co.,

342 F. Supp. 272 (D. Md. 1972) 19

University of Southern California v. Cost of

Living Council, 472 F.2d 1065 (Temp.

Emer. Ct. App. 1972), cert. denied, 410 U.S.

928 (1973) 7, 20

Yakus v. United States, 321 U.S. 414 (1944) 22

Youngstown Sheet & Tube Co. v. Sawyer, 343

U.S. 579 (1952) 13

Zuber v. Allen, 396 U.S. 168 (1969) 20

Statutes

Administrative Procedure Act, 5 U.S.C. §§551

et seq. (1970):

| EU re Aiea or fetrinoas Mich mT EE RS

§553 passim

§706 . Ne oe os as, < a

Economie Stabilization Act, Pub. L. No. 91-379,

84 Stat. 796 (Aug. 15, 1970) .. B

Economic Stabilization Act Amendments of 1971,

Pub. L. No. 92-210, 85 Stat. 743 (Dec. 22,

1971):

STATUTES Vv

§205

$207 1

§211 z,

28 U.S.C. §1331 (1970)

“ @© Ot-)

Regulations

Executive Order No. 11615, 36 Fed. Reg. 15727

(Aug. 15, 1971) passim

OEP Reg. No. 1, 36 Fed. Reg. 16515 (Aug. 21,

1971), as amended 36 Fed. Reg. 16585

(Aug. 24, 1971) 6

OEP Cir. No. 11, 36 Fed. Reg. 18315 (Sep. 11,

1971) 6

OEP Cir. No. 101, 36 Fed. Reg. 18739 _ 21,

1971) 6

OEP Cir. No. 102, 36 Fed. —_ 20482 (et 20,

1971) er arte ae

Miscellaneous

S. Rep. No. 507, 92d Cong., Ist Sess., U.S. Code

Cong. & Ad. News 2283 (1971) 15

United States Department of Justice, Attorney

General’s Manual on the Administrative

Procedure Act (1946) bs aideicasttevei: ae

IN THE

SUPREME COURT OF THE UNITED STATES

October Term, 1974

THE FIVE SMITHS, INC., Petitioner,

WILLIAM H. HOLLAWAY, et al., Respondents.

THE FIVE SMITHS, INC., Petitioner,

UNITED STATES OF AMERICA, Respondent.

PETITION FOR A WRIT OF CERTIORARI

To the Temporary Emergency Court of

Appeals of the United States

The petitioner, The Five Smiths, Inc., respectfully

prays that a writ of certiorari issue to review the

judgment and opinion of the Temporary Emergency

Court of Appeals of the United States entered in these

proceedings on June 20, 1974.

OPINION BELOW

The opinion of the Temporary Emergency Court

of Appeals is not yet reported and appears at pp.

A-1-39 of the Appendix. No opinion on the merits

was rendered by the United States District Court for

the Northern District of Georgia.

JURISDICTION

The judgment of the Temporary Emergency

Court of Appeals was entered on June 20, 1974. The

jurisdiction of this Court is invoked under Section

211(g) of Economic Stabilization Act Amendments of

1971, Pub. L. No. 92-210, 85 Stat. 743 (Dec. 22, 1971).

QUESTIONS PRESENTED

1. Could the Temporary Court, having conceded

that the President promulgated the Executive Order

imposing 2a 90-day wage and price freeze in violation

of the APA’s rulemaking procedures, nevertheless

refuse to set aside the Order as required by section

706(2)(D) of the APA?

2. Did the Temporary Court abdicate its respon-

sibility as an Article II] Court to make an independent

judicial interpretation of the Executive Order, rather

than merely rubber-stamping the OFP’s position un-

der the “great deference” rule?

3. Was the retroactive application of the August

15, 1971 Executive Order to require the Falcons to

refund price increases ‘“‘charged, assessed and received”

for tickets sold prior to that date authorized by a

proper construction of the Executive Order, and, if

so, does such construction violate the constitutional

prohibition against ex post facto laws, and deprive the

Falcons of vested property rights without due process

of law?!

' Petitioner submits that these constitutional issues are of

substantial public importance. However, consideration of such

issue would be pertermitted if this Court granted review and

on the merits either concurred with petitioner that ‘ye Execu-

tive Order was invalid or agreed that the Temporary Court

inappropriately applied the “great deference” rule. Accord-

ingly, petitioner has not briefed the third question presented.

ST. ATUTORY PROVISIONS AND EXECUTIVE

ORDER INVOLVED

1. The Administrative Procedure Act, 5 U.S.C.

§§551, 553, 706 (1970).?

2. Executive.Order No. 11615, 36 Fed. Reg. 15727

(August 15, 1971).

STATEMENT OF THE CASE

These consolidated cases involve the validity un-

der the Administrative Procedure Act of Executive

Order No. 11615 which was issued by the President on

August 15, 1971 and imposed a 90-day period of wage

and price controls known as Phase I. Also involved is

the standard of judicial review of informal guides or

administrative interpretations of the Executive Order

by the Office of Emergency Preparedness which were

accepted and ordered enforced by the lower court out

of “great deference” without affording petitioner the

kind of independent judicial review which Article II]

and due process of law demand.

The petitioner (hereinafter referred to as the

“Atlanta Faleons”) is the owner of the National Foot-

ball League team known as the Atlanta Falcons. In

1970, petitioner made the decision to increase the

prices of tickets to the Falcons’ home games to be

played during the 1971 season. These price increases

were publicly announced in January 1971, and order

forms reflecting the increased prices were mailed to

* Appendix pp. A-40-43.

* Appendix pp. A-44-48.

season ticket holders in February 1971. During Feb-

ruary and March 1971, the Falcons received 41,000

orders for season tickets at the increased prices, each

of which was accompanied by a $10.00 deposit. In

April of 1971, the Falcons mailed invoices to the sea-

son ticket purchasers for the balances due en their

ticket orders, and by the end of June 1971, the Falcons

had received full payment for 41,590 season tickets

(71.4‘, of the capacity of Atlanta Stadium). On Au-

gust 2, 1971, the Falcons mailed more than 328,000

fully-paid individual game tickets, all of which were

delivered to the purchasers prior to August 15, 1971.

Prior to August 15, 1971, the Faleons made num-

erous financial commitments in reliance upon the addi-

tional revenues produced by the 1971 price increases,

including contracting to pay veteran players $117,300

more in salaries for 1971 over 1970, acquiring new

players, the contracting for and conducting of the

training camp at Furman University, and renting of

the Atlanta Stadium, all preparatory to the playing of

football games during the 1971 season.

On August 15, 1971, the President issued Execu-

tive Order No. 11615, imposing economic controls for

a 90-day period commencing August 15, 1971 and end-

ing on November 13, 1971. The Executive Order pro-

vided in pertinent part:

Section 1. (a) Prices, rents, wages, and sal-

aries shall be stabilized for a period of 90 days

from the date hereof at levels not greater than

the highest of those pertaining to a substantial

volume of actual transactions by each individual,

business, firm or other entity of any kind during

the 20-day period ending August 14, 1971, for like

or similar commodities or services. If no transac-

tions occurred in that period, the ceiling will be

the highest price, rent, salary or wage in the near-

est preceding 30-day period in which transactions

did occur. No person shall charge, assess, or re-

ceive, directly or indirectly in any transaction

prices or rents in any form higher than those per-

mitted hereunder, and no person shail, directly

or indirectly, pay or agree to pay in any transac-

tion wages or salaries in any form, or to use any

means to obtain payment of wages and salaries

in any form, higher than those permitted here-

under, whether by retroactive increase or other-

wise.

It was stipulated by the respondents that the

President did not, prior to the issuance of the Executive

Order, give notice of an intention to issue such order,

that the President did not give interested persons an

opportunity to submit written data, views or argu-

ments, and that, alternatively, the President did not

make any finding that notice and public procedure

thereon impracticable, unnecessary or contrary to the

public interest, or incorporate such a finding and the

reasons therefor in the record as a part of the Execu-

tive Order. Stipulation ‘17, Appendix p. A-49.

Shortly after September 7, 1971, the Director of

the Office of Emergency Preparedness [OEP], to

whom power to administer the Executive Order had

been delegated, issued an interpretative ruling to the

National Football League Players Association, the

union representing NFL players, stating that players

who were in training camps prior to August 15, 1971

were entitled to receive salary increases prescribed by

their respective contracts, even though such players

had not participated in any NFL football games prior

to the commencement of Phase I on August 15, 1971.

During Phase I, the OEP sporadically issued what

were known as “Circulars” containing various OEP

interpretations of the Executive Order. These Cir-

culars expressly stated that they were issued “for gen-

eral information only ... [as] general guides compiled

from OEP Economic Stabilization Circulars and do

not constitute legal rulings.” OEP Cir. No. 101, 36

Fed. Reg. 18739 (Sep. 21, 1971).

These Circulars provide a tentative and often

shifting interpretation of the Executive Order. A good

example is control of school tuitions. Complete exemp-

tion was provided in OEP Reg. No. 1, 36 Fed. Reg.

16515 (Aug. 21, 1971), but revoked three days later by

an amendment. 36 Fed. Reg. 16585 (Aug. 24, 1971).

Then during the following month the OEP provided

that tuition could be increased if there were substan-

tial transactions during the base period, confirmed by

deposits. OFP Cir. No. 101, §403(9), 36 Fed. Reg.

18739 (Sep. 21, 1971). One month later, the OEP pro-

vided that any deposit during the base period was suf-

ficient to make the tuition a complete transaction. OEP

Cir. No. 102, §403(5), 36 Fed. Reg. 20482 (Oct. 20,

1971).

On September 11, 1971, the OP issued Circular

No. 11 which contained the OEP’s only statement with

reference to the application of the Executive Order to

sales of tickets to sporting events played during Phase

I. Circular No. 11 provided in pertinent part:

The freeze applies to prices of advance sale

tickets for sporting events occurring during the

f.eeze.

Stipulation £25(b), (ce), Appendix p. A-49. This ad-

ministrative interpretation of the Executive Order was

held by the lower court to be binding on the federal

courts under the so-called “great deference rule” as

applied by the Temporary Emergency Court of Ap-

peals in a series of Economic Stabilization Act cases

beginning with the decision in University of Southern

California v. Cost of Living Council, 472 F.2d 1065

(Temp. Emer. Ct. App. 1972), cert. denied, 410 U.S.

928 (1973).

The Atlanta Falcons played five home games dur-

ing Phase I. The team had sold, delivered and had been

fully paid for 217,151 tickets to these games at in-

creased prices prior to the issuance of the Executive

Order on August 15, 1971. The Faleons sold an addi-

tional 45,601 tickets to these five games at increased

prices during Phase I.

On September 23, 1971, the Falcons instituted a

declaratory judgment action in the United States Dis-

trict Court for the Northern District of Georgia seek-

ing a judicial determination of the application of the

Executive Order to its sales of tickets at increased

prices piior to and during Phase I. The Five Smiths,

Inc. v. Hollaway, et al. On September 25, 1971, the

Government filed an action for an injunction against

the Falcons. United States v. The Five Smiths, Inc.

Jurisdiction in the cases arose under 28 U.S.C. §1331

(1970), §205 cf the Economic Stabilization Act of 1970,

Pub. L. No. 91-379, 84 Stat. 799 (Aug. 15, 1970), and

related jurisdictional statutes. On February 6, 1974,

the district court certified as substantial the constitu-

tional issues raised by the Falcons to the Temporary

Emergency Court of Appeals as required by §211(c)

of the Econoriie Stabilization Act Amendments of

1971. The Court of Appeals consolidated the cases and

ordered that all issues be presented to the Court of Ap-

peals for disposition pursuant to a stipulation of facts.

On June 20, 1974, the Court of Appeals rendered

an opinion and judgment in which it rejected the Fal-

cons’ challenges to the Economie Stabilization Act,

the Executive Order and the implementing regulations,

and remanded the case to the district court with di-

rections that the court frame an appropriate remedy

for the restitution of the price increases to the five

Falcons games played during Phase I. In reaching this

conclusion, the Court of Appeals ruled that:

(a) Although the President was assumed to be an

“agency” as defined in Section 551(1) of the Adminis-

trative Procedure Act, and was engaged in rulemak-

ing within the meaning of section 553 of the APA

when he issued Executive Order No. 11615, the Exec-

utive Order would not be set aside even though it had

been stipulated by the Government that the President

did not give notice of such rulemaking or alternatively

make any findings that such notice was “impractical,

unnecessary cr contrary to the public interest” or re-

flect such findings and the reasons therefor on the

record as a part of the Executive Order, despite the

mandatory requirements of section 553 of the APA to

the contrary. Appendix pp. A-22-25.

(b) The federal courts were obligated to accord

“great deference” to the interpretation of the Execu-

tive Order by the OEP contained in Circular 11, and

were, therefore, precluded from exercising independ-

ent judicial review (or as the Court pui it “de novo”

review) of this interpretation as applied to the Fal-

cons’ sales of season tickets. Appendix pp. A-14-15.

The effects of these rulings were to convert Phase I

from a “freeze” to a “roll back” of the Falcons’ ticket

prices, contrary to the stated intentions of the Presi-

dent, and to impose a retroactiv: price freeze upon

completed sales of football tickets to the Falcons’

games without a corresponding wage freeze upon the

salaries of the Falcons’ players who were to perform

in the same games.

Because these rulings of the Temporary Emer-

gency Court of Appeals present issues of great public

importance which are in direct conflict with control-

ling provisions of the Administrative Procedure Act,

precedent in other Courts of Appeal, and decisions of

this Court defi..ing the relationship between the Arti-

cle III courts and administrative agencies, the peti-

tioner seeks review of these rulings by this petition

for writ of certiorari.

REASONS FOR GRANTING THE WRIT

I. Because the President Is Subject to the Admin-

istrative Procedure Act in Exercising the Rulemaking

Powers Delegated by Congress in the Economic Sta-

bilization Act, the Temporary Court Was Required by

Section 706(2)(D) to Set Aside Executive Order 11615

upon Finding it Was Issued in Violation of Section

553.

Whatever claims the President may have to in-

herent executive authority, he is clearly subject to

statutory restriction in the exercise of delegated leg-

islative powers. It is equally clear that the Adminis-

trative Procedure Act was intended to prescribe pro-

cedures for administrative actions of the Executive

Branch, including the President. In promulgating

Executive Order 11615, the President was engaged in

“rulemaking” as defined by the APA. Section 553 re-

quires that such rules may only become effective af-

ter 30 days notice and an opportunity for interested

persons to submit written data, views, or arguments.

The Government admits that the President did not

follow this procedure. Section 553(b)(B) provides an

exception to the rulemaking procedural requirements

when the agency for good cause finds (and incor-

porates the finding and a brief statement of rea-

sons therefor in the rules issued) that notice and

public procedure thereon are impracticable, un-

necessary, or contrary to the public interest.

The Government admits that the President made no

such finding, and consequently no finding or state-

ment of reasons therefor was incorporated in the

regulation.

The petitioner contends that the Temporary

Emergency Court of Appeals made a serious error on

aii important question of federal law in holding that

the President’s violation of section 553 of the APA

did not affect the validity of the Executive Order.

The result of this holding is that no sanction at all is

imposed cn the President’s violation of the law. The

Temporary Court’s after-the-fact conclusion that the

President would have been justified in making the

finding required by section 553(b)(B) is no substitute

“cy the eetual compliance required by the APA for

exception to the usual procedures. Presumably aware

that the Executive Order here in question was promul-

gated by a defective procedure, the President later

sought Congressional ratification of regulations is-

sued pursuant to the Economic Stabilization Act.

Congress refused to approve such a measure, and

further refused to amend the Act so as to make sec-

tion 553 of the APA inapplicable to regulations prom-

ulgated thereunder. What Congress declined to au-

thorize, the Temporary Court has in this case approved

—the exercise of rulemaking authority by the Presi-

dent in defiance of the restrictions placed on that

authority by Congress in the APA.

The petitioner further contends that the decision

of the Temporary Court is in conflict with other Court

of Appeals and District Court decisions holding that

the procedural requirements in section 553 of the APA

must be strictly enforced. Other courts have stead-

fastly demanded full compliance witii the APA, but

the Temporary Court has shown a willingness to tol-

erate what it terms “technical” violations. The de-

cision of the Temporary Court itself thus violates

section 706(2)(D) of the APA, which requires a re-

viewing court to set aside agency action taken with-

out observance of procedure required by law.

A. The President violated the Administrative

Procedure Act in promulgating Executive Order

11615.

The President promulgated Executive Order 11615

pursuant to a delegation of legislative power in section

202 of the Economic Stabilization Act, Pub. L. No. 91-

379, 84 Stat. 796 (Aug. 15, 1970). Therefore the Pres-

ident’s exercise of this power could be restricted by any

procedural or substantive restrictions Congress wished

to enact. Such restrictions would raise no separation-

of-powers questions, since the President’s rulemaking

was not an exercise of purely executive authority, but

of a delegated legislative power. Certainly the Presi-

dent had no “inherent” authority to freeze wages and

prices. See Youngstown Sheet & Tube Co. v. Sawyer,

343 U.S. 579, 587 (1952).

Not only could the President be subjected to pro-

cedural restrictions, but it is clear that Congress did

intend the APA to apply administrative actions by the

President. The APA defines “agencies” to include com-

prehensively “each authority of the Government of the

United States” and expressly excludes “Congress” and

“the courts,” but not the President. 5 U.S.C. §551(1)

(1970). It thus seems clear that the APA was in-

tended to apply to the third branch, including the Presi-

dent. See Amalgamated Meat Cutters v. Connally, 337

F.Supp. 737, 761 (D.D.C. 1971), and authorities cited

therein. While the Temporary Court in the instant

case declined to decide this question, it was willing to

assume argquendo “that the President is an agency

within the meaning of the APA.” Appendix p. A-22.

Executive Order 11615 was a “rule” as defined by

section 551(4) of the APA:

an agency statement of general or particular ap-

plicability and future effect designed to imple-

ment, interpret or prescribe law or policy . .. and

includes the approval or prescription for the fu-

ture of rates, wages... prices....

Before such substantive rules can be made effective,

section 553 requires the agency to follow the APA’s

‘“notice-and-comment” rulemaking procedure. This

procedure involves 30 days advance notice of the sub-

stance of the proposed rule and an opportunity for

interested persons to submit comments. The Govern-

ment h: 3 stipulated that the President did not follow

the procedures of section 553 in promulgating Execu-

tive Order 11615. Stipulation £17, Appendix p. A-49.

Section 553(b)(B) provides a limited exception

to the usual rulemaking procedures when prompt ac-

tion without prior notice is required in the public in-

terest. This exception is subject to specific conditions

imposed by Congress: the agency must find for good

cause that notice and public procedure would be “im-

practicable, unnecessary, or contrary to the public in-

terest,” and must incorporate in the rule itself this

finding and a statement of reasons in support of it. The

Government has stipulated that the President made no

such finding in the instant case, and consequently

Executive Order 11615 contains no express finding or

statement of reasons as to the inadvisability of rule-

making proceedings. Stipulation £17, Appendix p. A-49.

Thus the President’s failure to follow the APA’s

notice-and-comment rulemaking procedure was not ex-

cused under section 553(b)(B).

It is clear that the President violated section 553

of the APA in promulgating Executive Order 11615.

The only question at issue, then, is whether this pro-

vision of the APA should be enforced. The Temporary

Court itself framed this question as “whether we

must set aside the Order for failure to conform with

the procecural requirements of 5 U.S.C. §553.” Ap-

pendix p. A-23. Of the violation of the APA’s pro-

cedural requirements, there can be no dispute.

B. The Temporary Court could not ignore the

mandate of the Administrative Procedure Act that

Executive Order 11615 be set aside because the Pres-

ident failed to observe the procedure required by

law.

Congress intended that regulations, such as this

one, should be invalidated by the courts if not adopted

by the proper procedure. The Temporary Court as-

serted that it could not “agree that Congress intended

to visit such consequence [setting aside the order]

upon a technical violation of §553(b) ... .” Appendix

p. A-25. This conclusion is plainly contrary to the ju-

dicial review provisions of the APA, which require a

reviewing court to

(2) hold unlawful and set aside agency action,

findings and conclusions found to be...

(D) without observance of procedure required by

law.

5 U.S.C. §706 (1970). Thus the Temporary Court itself

violated the APA in refusing to invalidate a regulation

promulgated without observance of the procedure re-

quired by section 553.

It is true that Congress has the power to exempt

certain kinds of administrative action from the APA’s

procedural requirements, but nothing could be clearer

than the intent of Congress that such requirements

should apply to rulemaking under the F'conomic Stabili-

zation Act.4 The Act was amended in December 1971

to provide a partial exemption from the APA, but Con-

gress provided specificaily that sections 552, 553, and

555(e) would continue to govern actions taken under

the Act. Pub. L. No. 92-210, §207(a), 85 Stat. 743,

(Dec. 22, 1971). Moreover, Congress rejected an ad-

ministration bill which would have ratified all regula-

tions theretofore promulgated under the Economic

Stabilization Act. See S. Rep. No. 507, 92d Cong., 1st

Sess., U.S. Code Cong. & Ad. News 2283, 2295-97

(1971).

Other than its unsupported speculation as to con-

gressional intent, it is difficult to discover reasons

for the Temporary Court’s holding that failure to com-

ply with the APA does not invalidate the Executive

Order. The Temporary Court judicially neticed various

reasons for not giving advance warning of a wage and

price freeze, and then justified upholding the regula-

tion “where the reasons for exempting the President’s

action from the notice requirement are so obvious and

compelling.” Appendix p. A-25. This approach simply

emasculates section 553(b)(B) of the APA, since the

President admittedly failed to make the findings spe-

4 This factor sharply distinguishes the two cases cited by

the Temporary Court, Duquesne Light Co. v. EPA, 481 F.2d

1, 8 (3d Cir. 1973), and Appalachian Power Co. v. EPA, 477

F.2d 295, 502-03 (4th Cir. 1973), which held that Congress

intended to create an exception to the APA’s rulemaking pro-

cedure in the Clean Air Act.

cifically required by Congress in that section. This

ruling is an unprecedented departure from prior cases

which have held that the procedural requirements of

section 553 should be strictly enforced and rules prom-

ulgated in violation thereof invalidated. The holding

of the Temporary Court conflicts with decisions of

the Third and Sixth Circuits, as well as several lower

federal courts. Buckeye Power, Inc. v. EPA, 481 F.2d

162 (6th Cir. 1973); Texaco, Inc. v. FPC, 412 F.2d

740 (3rd Cir. 1969); Kelly v. United States Depart-

ment of the Interior, 339 F. Supp. 1095 (E.D. Cal.

1972).

In Buckeye Power, Inc. v. EPA, the court invali-

dated the agency’s approval of state air pollution plans

for failure to follow the rulemaking procedures of

section 553. 481 F.2d at 170-71. In Texaco, Inc. v. FPC,

the court held that the failure of the FPC to follow

the rulemaking procedures of section 553 rendered the

regulation invalid and without force of law. 412 F.2d

at 744. In Kelly v. United States Department of Inte-

ric’, the court held an administrative regulation invalid

for failure to follcw the notice-and-comment pro-

cedures required by section 553. The regulation was

found not to fall within the exception of section

553(b) (B) because of a deficient statement of reasons

for the agency’s finding that notice and public pro-

cedure were inadvisable. The Kelly court forcefully

rejected the Government’s argument that the failure

to comply with section 553 should be disregarded as

merely a technical violation:

Upholding regulations which we think were

defectively issued, furthermore, emasculates the

Administrative Procedure Act. As the Court of

Appeals for the Ninth Circuit has said, ‘If notice

of a proposed rule is not published in the Federal

or if good cause is not found and published for

the immediate issuance of a rule, the rule cannot

be legally issued. (Emphasis ours.) Hotch v.

United States, supra, 212 F.2d at 284. We there-

fore find the amended regulations to have been

illegally issued.

... In our opinion, therefore, the 30-day com-

ment period should be closely guarded and the

‘good cause’ exception sparingly used. See Texaco,

Ine. v. Federal Power Commission, 412 F.2d 740

3rd Cir. 1969).

339 F.Supp. at 1102. Other cases have also invalidated

rules promulgated in violation of section 553 pro-

cedures. See A. E. Staley Mfg. Co. v. United States, 310

F.Supp. 485, 488 (D. Minn. 1970); Pharmaceutical

Manufacturers Association v. Finch, 307 F.Supp. 858,

862-63, 868 (D. Del. 1970); National Motor Freight

Traffic Association v. United States, 268 F.Supp. 90,

95-97 (D.D.C. 1967), aff’d 393 U.S. 18 (1968).

C. The holding of the Temporary Emergency

Court of Appeals sets a dangerous precedent in toler-

ating violation of the Administrative Procedure Act.

The holding of the Temporary Court is a startling

departure from the general principle that the pro-

cedural requirements of the APA must be followed in

order that administrative actions be valid. Section 553

requires either notice-and-comment opportunity or a

finding that such procedure would be inadvisable, and

the Government has admitted that the President com-

plied with neither alternative. The Temporary Court’s

conclusion that the President could have found that

advance notice was contrary to the public interest does

not alter the fact that he did not make such a finding.

Although the APA was not designed to prevent

administrative action of an emergency nature, its

requirements for such an exception are explicit. As

the Attorney General noted in commenting on the Com-

mittee Print of the bill which became the APA:

This subsection is not intended to hamper the

agencies in cases in which there is good cause for

putting a rule into effect immediately, or at some

time earlier than 30 days. The section requires,

however, that where an earlier effective date is

desired the agency should make a finding of good

cause therefor and publish its finding along with

the rule. [Emphasis added. ]

U.S. Department of Justice, Attorney General’s Man-

ual on the Administrative Procedure Act 128 (1946).

Since the Government has admitted that no such find-

ing was either made or published, the regulation can-

not fall within the exception of section 553(b) (B).

Other regulations pertaining to the wage and price

freeze have attempted to comply with the exception pro-

visions. OEP Regulation No. 1 was later amended to

include a statement that public proceedings were im-

practicable and contrary to the public interest. Pay

Board regulations of November 14, 1971 were adopted

without notice-and-comment procedures but included

a finding of impracticability. In sustaining the regula-

tions, a district court observed: “The Pay Board find-

ing obviates the necessity of providing an administra-

tive hearing before the regulation may become effec-

tive.” United States v. Great Atlantic & Pacific Tea Co.,

342 F.Supp. 272, 277 (D. Md. 1972). With regard to

the Executive Order, of course, there was no such find-

ing. Thus it is clear that the Executive Order should be

held to have violated the APA.

It is clear that Congress intended administrative

action in violation of the APA’s procedures to be held

invalid, and section 766(2)(D) so provides. Such a

provision is the only possible sanction for failure to

comply with the procedural requirements of section

553. If the existence of good cause to dispense with

rulemaking proceedings could be determined by a re-

viewing court after the fact, then an agency would

not need to risk committing itself in advance to a

particular rationale for acting unilaterally. For the

requirement of an on-the-record finding of good cause

in section 553(b)(B) to have any effect at all, then

it must be enforced. The decision of the Temporary

Court sets a dangerous precedent in refusing to en-

force the procedural requirements of the APA. These

requirements must be enforced in the instant case if

the APA is to continue to have its intended effect in

prescribing administrative procedure.

The Temporary Court Abdicated its Responsibility

as an Article UI Court to Afford Independent Judicial

Review of Administrative Interpretations of Law and

Ignored Decisions of this Court Defining that Respon-

sibility by “Rubber Stamping” Under the Rubric of

the “Great Deference” Rule {informal Guidelines and

Interpretations Issued by the OEP Without any Stated

Reasons or Evidence of Developed Expertise by the

OEP in Making Such Interpretations.

The decision below is only one of a series of cases in

which the Temporary Emergency Court of Appeals has

ruled that the federal courts are obligated to give

“great deference” to even the most informal guidelines

and interpretations issued by the OEP and has granted

such interpretations judicial enforcement without mak-

ing an independent reasoned judicial evaluation of the

correctness of the administrator’s position. The Tem-

porary Court’s expansive interpretation of the “great

deference” test was first enunciated by that Court in

University of Southern California v. Cost of Living

Council, 472 F.2d 1065 (Temp. Emer. Ct. App. 1972),

cert. denied, 410 U.S. 928 (1973), and has been subse-

quently applied by that Court in a series of wage-

price control cases. See Appendix pp. A-5-6. As the

court below acknowledged, the “great deference” rule

has been “fundamental to the development of the law

of this Court,” that broad “reliance has come to be

placed upon . . . the opinion, analysis and application

of the ‘great deference test’ in the context of economic

controls administration.” Appendix p. A-5.

The lower court’s interpretation of the so-called

“great deference” rule constitutes an unprecedented

expansion of the decisions of this Court in Power Re-

actor Development Co. v. International Union of Elec-

trical Radio & Machine Workers, 367 U.S. 396, 408

(1961), and Udall v. Tallman, 380 U.S. 1, 16-17

(1965). Such expansion flies in the face of this Court’s

explanation in Zuber v. Allen, 396 U.S. 168, 192-94

(1969), that the rule giving “great weight” to contem-

poraneous administrative construction “is only one

input in the interpretational equation” and that “'t]he

Court may not .. . abdicate its ultimate responsibility

to construe the language employed by Congress.” The

Falcons submit that precisely such an abdication of

the judicial function to review rather than rubber-

stamp administrative decisions has occurred in this

case. The ruling below constitutes a fundamental al-

teration in the relationship between the federal courts

and administrative agencies heretofore defined by this

Court in a long series of cases. Unless the proper

standard of review is re-established by this Court, the

ill-conceived and constitutionally-infirm “great defer-

ence” theory adopted by the TECA will be applied by

the lower federal courts.

Article III of the Constitution demands that when

the judicial process is invoked to enforce executive or

administrative determinations, it is the duty and re-

sponsibility of the federal courts to make an inde-

pendent, reasoned, judicial determination whether en-

forcement is warranted, and to deny enforcement when

the courts determine that it is not. The opinion of Mr.

Justice Brandeis in the St. Joseph Stockyards Co. v.

United States is a classic statement of the role of the

federal courts in the administrative process:

The supremacy of law demands that there

shall be opportunity to have some court decide

whether an erroneous rule of law was applied [by

an administrative agency] ....

298 U.S. 38, 84 (1936).

The constitutional right of judicial review is no

less applicable in the area of price controls than in any

other area of administrative action. Thus, in decisions

. 22

upholding the constitutionality of the Emergency Price

Control Act of 1942, Yakus v. United States, 321 U.S.

414 (1944), and Bowles v. Willingham, 321 U.S.

503 (1944), this Court went to great lengths to explain

that, although the Congress had altered the procedure

for obtaining judicial review, these alterations were

not a denial of due process so long as “the opportun ity

given for the ultimate judicial determination of the

liability is adequate.” [Emphasis added.] 321 U.S. at

920. See also Davies Warehouse Co. v. Bowles, 321 U.S.

144 (1944) ; Fast v. DiSalle, 193 F.2d 181, 184 (Emer.

Ct. App. 1951).

In Davies Warehouse Co. v. Bowles, supra, this

Court independently reviewed and set aside an admin-

istrative interpretation by the OPA of the Emergency

Price Control Act of 1942 and rejected the contention

that the Court should defer to the OP. .’s contemporane-

ous administrative construction of the Act. In that

case, the Price Administrator had ruled that public

Warehouses were not “public utilities’ whose rates

were exempted from price controls under the Emer-

gency Price Control Act and the General Maximum

Price Regulation issued pursuant thereto by the Ad-

“Cf. Amalgamated Meat Cutters v. Connally, 337 F Supp.

737, 747 (D.D.C. 1971), in which the three-judge court placed

particular reliance upon the availability of judicial review as

salvaging the constitutionality of the Economic Stabilization

Act by confining to constitutionally permissible bounds the

broad authority delegated by Congress to the President. The

Falcons also raised the delegation argument in the proceed-

ings below, and the court, relying on Meat Cutters, upheld

the constitutionality of the Act. Yet, the Temporary Court

eviscerated the very safeguard of judicial review upon which

Meat Cutters relied by adopting the aberrant “great defer-

ence” standard which the Falcons now ask this Court to re-

view.

ministrator. In a lengthy opinion, the Emergency Court

of Appeals sustained the ruling of the Price Admin-

istrator, citing in support of its conclusior, the ordi-

nary meaning of the term “public utilities” as not in-

cluding warehouses, the need for nationwide uniformi-

ty in the administration of price regulations (it was

the Davies’ contention that the courts should follow

the state law in California which regulated ware-

housemen’s prices as “public utilities”), the existence

of a wartime emergency, and the fact that the Price

Administrator had himself made a contemporaneous

construction of the Act immediately after its passage

as excluding utilities, but not warehouses. Davies

Warehouse Co. v. Brown, 137 F.2d 201 (Emer. Ct. App.

1943). Of particular significance to this case was the

ruling of the Emergency Court in which it said:

Finally, we cannot overlook the fact that by

Amendment No. 1 to Supplemental Regulation No.

11, the Price Administrator granted complete ex-

emption to nine classes of common carriers and oth-

er public utilities without any regard to their sta-

tus as to existing rate regulation [but which did

not exempt warehouses.] This contemporaneous

administrative construction of the scope of the ex-

emption appears to have met with the approval of

the Congress, for in Section 1 of the amendatory

act of October 2, 1942....

137 F.2d at 206. In reversing the Emergency Court of

Appeals, the Supreme Court specifically addressed it-

self to the contention that it should defer to the Admin-

istrator’s contemporaneous construction of the Act as

reflected by his regulations. Mr. Justice Jackson said:

Lastly, it is contended that we should accept

the Administrator’s view in deference to adminis-

trative construction. The administrative ruling in

this case was no sooner made than challenged. We

cannot be certain how far it was determined by

the considerations advanced, mistakenly as we

think, in its defense in this case. It has hardly

seasoned or broadened into a settled administrative

practice. If Congress had deemed it necessary or

even appropriate that the Administrator’s order

should in effect be final in construing the scope

of the national price-fixing policy, it would not

have been at a loss for words to say so. We do not

think it should overweigh the considerations we

have set forth as to the proper construction of the

statute.

321 U.S. at 156.

This Court has repeatedly held in other cases that

“the deference owed to an expert tribunal cannot be

allowed to slip into a judicial inertia . . .” American

Ship Building Co. v. NLRB, 380 U.S. 300, 318 (1965),

and that the validity of any administrative action is

a question for the independent determination by the

federal courts. See, e.g., NLRB v. Brown, 380 U.S. 278,

290-91 (1965). The American Ship Building case and

NLRB v. Brown involved adjudicative determinations

of the NLRB made after lengthy evidentiary hearings

before the agency (something which was not available

here), which had condemned employers’ conduct as un-

fair labor practices. In each case, the Courts of Appeals

had made independent determinations of the issues, and

had denied enforcement of the orders. Before this

Court, it was the Government’s contention that the

lower courts should not have made an independent de-

termination of the issues, but should have deferred to

the expert judgment of the NLRB. Although the NLRB

has proven itself to be far more competent and suc-

cessful in administering the labor laws of the United

States than were either the OEP and the Cost of Living

Csuncil in administering the Economy, this Court em-

phatically refused to defer to the agency’s rulings and

made an independent determination that the adminis-

trative rulings were invalid. In NLRB v. Brown the

Court said:

It is argued, finally, that the Board’s decision

is within the area of its expert judgment and that,

in setting it aside, the Court of Appeals exceeded

the authorized scope of judicial review. .. . Review-

ing courts are not obliged to stand aside and

rubber-stamp their affirmance of administrative

decisions that they deem inconsistent with a statu-

tory mandate or that frustrate the congressional

policy underlying a statute. Such review is always

properly within the judicial province, and courts

would abdicate their responsibility if they did not

fully review such administrative decisions. Of

course due deference is to be rendered to agency

determinations of fact, so long as there is substan-

tial evidence to be found in the record as a whole.

But where, as here, the review is not of a question

of fact, but of a judgment as to the proper balance

to be struck between conflicting interests, ‘[t]he

deference owed to an expert tribunal cannot be

allowed to slip into a judicial inertia which results

in the unauthorized assumption by an agency of

major policy decisions properly made by Congress.’

American Ship Building Co. v. National Labor Re-

lations Board, 380 U.S., at 318, 85 S.Ct., at 967.

Courts must, of course, set aside Board de-

cisions which rest on an ‘erroneous legal founda-

tion.” National Labor Relations Board v. Babcock

Wilcox Co., supra, at 112-113, 76 S.Ct. 679....

380 U.S. at 290-95.

The decision below is at odds with the standard of

judicial review established by this Court and reflected

by its decision in the Davis Warehouse case, NLRB v.

Brown, and by a long series of other cases involving

regulatory schemes of equal or greater complexity than

that established by the Executive Order. See Texas Gas

Transmission Corp. v. Shell Oil Co., 363 U.S. 263, 270

(1960) (FPC) ; Social Security Board v. Nierotko, 327

U.S. 358, 368-69 (1946) ; SEC v. Chenery Corp., 317

U.S. 80 (1943); FCC v. RCA Communications, Inc.,

346 U.S. 86 (1953). The teaching of these cases is that

the federal courts are not obligated to sit by passively

out of deference to agency interpretations, but are

obligated to make an independent determination as to

whether the administrative position is right or wrong.

A further illustration of the extent to which the

ruling of the Temporary Court is out of step with prior

rulings of this Court defining the relationship of the

courts to the administrative process is the fact that

the Temporary Court has enforced an administrative

guideline which consisted of a single conclusory sen-

tence in Circular 11 despite the fact that it was un-

accompanied by either findings or a statement of

reasons to explain or justify the OEP’s conclusion.

The Temporary Court lost sight of the fact that

such informal “guides” as those represented by Circu-

lar 11 issued by administrative agencies are not en-

titled to the same weight as substantive legislative rules

or adjudicatory determinations which are published

after extensive investigations, hearings and studies by

the agencies. This Court has repeatedly held that such

“guides” are no more than statements of someone’s

opinion as to the meaning of a controlling statute (or

as in this case an Executive Order having the force of

statute) and are not entitled to any special weight

beyond the “thoroughness evident in its consideration,

validity of its reasoning, its consistency with earlier

and later pronouncements, and all those factors which

give it the power to persuade...” Skidmore v. Swift &

Co., 323 U.S. 134, 140 (1944); Haggar Co. v. Helver-

ing, 308 U.S. 389, 398 (1940).

This Court has repeatedly held since the Chenery

case that, even in areas of agency discretion, a state-

ment of the grounds for agency action is an essential

prerequisite to judicial review and enforcement —

without a statement of grounds, judicial enforcement

of agency action must be denied. As this Court em-

phasized:

[A] simple but fundamental rule of adminis-

trative law...is... that a reviewing court, in

dealing with a determination or judgment which

an administrative agency alone is authorized to

make must judge the propriety of such action

solely on the grounds invoked by the agency. If

those grounds are inadequate or improper, the

court is powerless to affirm the administrative

action....

SEC v. Chenery Corp., 332 U.S. 194, 196 (1943). This

Court has also held that the grounds for agency action

must be stated by the agency itself on the record. “The

courts may not accept appellate counsel’s post hoc

rationalizations for agency action.” Burlington Truck

Lines, Inc. v. United States, 371 U.S. 156, 168 (1962);

accord, FTC v. Sperry & Hutchinson Co., 405 U.S. 233

(1972). As the Temporary Court acknowledged in the

Southern California case, Circular 11 stands alone

without any statement of grounds for the extraordi-

nary ruling of the OEP. See 472 F.2d at 1072 & n.12.

In summary, it is apparent that the Temporary

Court was awed by what it believed to be the enormity

of the task and the expertise of the OEP in administer-

ing the program of economic controls, and mutely ac-

cepted the OEP’s unexplained interpretation of the

Executive Order without requiring even the most basic

statement of grounds for the agency’s position which

were an essential prerequisite to meaningful judicial

review. In uncritically accepting the OEP’s interpre-

tation, the Temporary Court disregarded thiz Court’s

warning that, although

[e]xpert discretion is the lifeblood of the ad-

ministrative process, .. . ‘unless we make the re-

quirements for administrative action strict and

demanding, expertise, the strength of modern gov-

ernment, can become a monster which rules with

no practical limits on its discretion’.

Burlington Truck Lines, Inc. v. United States, 371 U.S.

156, 167 (1962).

Since the OEP’s interpretation of the Executive

Order is unsupported by any record statement of the

findings or reasons on which it was based, certiorari

should be granted and enforcement of this interpreta-

tion against the Falcons should be denied. SEC v.

Chenery Corp., supra; FTC v. Sperry & Hutchinson

Co., supra. Alternatively, the case should be summarily

remanded to the lower court with directions that Cir-

cular 11 be disregarded, and that it make its “own

independent determination of the correct application of

the governing principles,’ Texas Gas Transmission

Corp. v. Shell Oil Co., 363 U.S. 263, 270 (1960), to

the Falcons’ ticket sales, under proper standards of

judicial review, uninfluenced by the exaggerated

“great deference” rule which was misapplied by the

Temporary Court in this and other cases.

CONCLUSION

For these reasons, a writ of certiorari should issue

to review the judgment and opinion of the Temporary

Emergency Court of Appeals.

Respectfully submitted,

MarTIN E. KILPATRICK —

EMMET J. BONDURANT II

Counsel for Petitioner

Of Counsel:

SUSAN A. CAHOON

KILPATRICK, CODY, ROGERS,

McCCLATCHEY & REGENSTEIN

3100 Equitable Building

100 Peachtree Street

Atlanta, Georgia 30303

JOHN A. WELLS

STANLEY GODOFSKY

ROGERS & WELLS

Pan American Building

200 Park Avenue

New York, New York 10017

CERTIFICATE OF SERVICE

I, Martin E. Kilpatrick, counsel for The Five

Smiths, Inc., do hereby certify that I have on this date

served each of the opposing parties with three copies of

the within and foregoing Petition of The Five Smiths,

Inc. by depositing the same in the United States mails

in envelopes containing adequate postage, properly ad-

dressed to their counsel of record as follows:

The United States of America by serving :

Solicitor General of the United States

United States Department of Justice

Washington, D.C. 20530

and

Mr. Paul T. Michael, Attorney

United States Department of Justice

Room 3334

10 Constitution Avenue

Washington, D.C. 20530

Burt DeRieux by serving:

Mr. James A. Eichelberger

Suite 1515, Peachtree Center South

225 Peachtree Street, N. E.

Atlanta, Georgia 30303

This 19th day of July, 1974.

Martin E. Kilpatrick

Attorney for

The Five Smiths, Inc.

APPENDIX

Opinion of the Temporary Emergency Court of

Ne ae tt fa eh Fes wan) bce « A-1

Administrative Procedure Act

eT a Cees Fyn xo 6 0 v0 o'r va 9 A-40

ete See pC ey ke Fo 5 6 kbd bop oo A-41

tetas boa sb ada vo kes A-43

Executive Order No. 11615 ................ A-44

Excerpts from Stipulation of Facts ......... A-49

a ETERS 2 Nee

APPENDIX

OPINION OF THE TEMPORARY

EMERGENCY COURT OF APPEALS

(June 20, 1974)

TEMPORARY EMERGENCY COURT

OF APPEALS

OF THE UNITED STATES

No. 5-6

BURT DeRIEUX, et al.,

Plaintif f-Appellee,

Vv.

THE FIVE SMITHS, INC.,

Defendant-A ppellant.

No. 5-7

THE FIVE SMITHS, INC.,

Plaintif f-Appellant,

Vv.

WILLIAM H. HOLLAWAY, et al.,

Defendants-A ppellees.

No. 5-8

UNITED STATES OF AMERICA,

Plaintif f-Appellee,

Vv.

THE FIVE SMITHS, INC.,

Defendant-Appellant.

A-2

Before TAMM, Chief Judge, VAN OOSTERHOUT

and HASTINGS, Judges. HASTINGS, Judge.

These consolidated cases are before us pursuant

to §211(c) of the Economic Stabilization Act of 1970,

as amended! (the amended Act), upon certification

by the district court of substantial constitutional is-

sues. We granted the joint motion of the parties to

have the entire cases in Nos. 5-7 and 5-8 presented to

us for consideration, and subsequently ordered that

No. 5-6 be consolidated therewith. Since it now ap-

pears that all facts necessary for a complete adjudi-

cation of this controversy have been stipulated,? we

shall exercise our discretion under §211(c) to decide

the cases in their entirety at this time.*

At the heart of all three cases is a single question:

did the Atlanta Falcons professional football team

violate the Economic Stabilization Act by playing foot-

ball games during the “Phase I” price freeze at prices

which exceeded those charged for games played dur-

ing 1970? Phase I was initiated by Executive Order

11615, 36 Fed. Reg. 15727 (1971). and was effective

during the 90-day period from August 15 through No-

vember 15, 1971.

The Five Smiths, Inc. (the Falcons) operate the

Aulanta Falcons as a member of the National Football

' 12 U.S.C.A. $1904 n. (Supp. 1974).

- The parties have jointly filed 4 stipulation of facts, with

exhibits, to which plaintiff in No. 56 haa filed a “caveat”

reserving the right to present evidence en particular issues.

* See United States v. Ohio, T.E.C.A., 487 F.2d 936, 938

(1973), cert, granted, 42 U.S.L.W. 3457 (Feb. 19, 1974);

National Petroleum Refiners Association v. Dunlop, T.E.C.A.,

486 F.2d 1388, 1391-1392 (1973).

A-3

League (NFL). In No. 5-6, the Falcons are defendant

in a class action brought by Burt DeRieux, an Atlanta

lawyer, on behalf of all season ticket holders for the

1971 Falcon football season. DeRieux originally sought

reimbursement of illegal overcharges. By amendment

to the complaint he now additionally seeks treble dam-

ages, attorneys fees and costs under §210(b) of the

amended Act.

No. 5-7 is an action by the Falcons against the

Office of Emergency Preparedness (OEP), its Direc-

tor and Regional Director, the Cost of Living Council

(CLC), the Executive Director and individual mem-

bers of the CLC, and the Commissioner of Internal

Revenue. The complaint seeks declaratory and injunc-

tive relief against the application and enforcement of

the Phase ! freeze with respect to Falcons 1971 foot-

ball ticket prices.

Finally, No. 5-8 was brought by the United States

pursuant to §205 of the original Economic Stabiliza-

tion Act of 19704 (the 1970 Act), to enjoin ticket price

violations and to require the Falcons to refund

amounts already illegally received.

The docket numbers of the cases reflect the order

in which they were filed during September, 1971, all

in the Northern District of Georgia. Proceedings in all

three cases eventually were stayed, by agreement of the

parties, pending the outcome of similar litigation in-

volving University of Southern California season foot-

ball tickets. See University of Southern California v.

Cost of Living Councii, T.E.C.A., 472 F.2d 1065

4 Pub. L. 91-379, 84 Stat. 796 (Aug. 15, 1970).

A-4

(1972). A petition for certiorari in University of

Southern California was denied by the Supreme Court

on February 20, 1973. 410 U.S. 928. Thereafter, the

Government filed motions for summary judgment in

Nos. 5-7 and 5-8. Without reaching the merits of the

motions, the district court on February 6, 1974 certi-

fied the constitutional issues in all three cases to this

court.

In 1970, the Faleons’ management decided to raise

ticket prices for home games during the 1971 football

season. The price increases were announced in Jan-

uary, 1971, and amounted to $1.50 and $2.50 per game,

depending upon seat location. Prices were not raised

for a few “ground” and “field level” seats; however,

such seats represented a small percentage of the

58,000-seat capacity of Atlanta Stadium. Sales of sea-

son tickets at the new prices were commenced on Feb-

ruary 1, 1971, at which time the Falcons mailed order

forms for 1971 season tickets to past season ticket

holders. By the end of June, 41,590 season tickets had

been sold and fully paid for. These tickets were mailed

to purchasers on August 2, 1971, and all were delivered

prior to August 15, the date the freeze went into

effect.

The Falcons played five home games during the

freeze, the first of which was a pre-season “exhibi-

tion” game. Unlike many NFL teams, the Falcons did

not play any exhibition games at home prior to August

15. Of the total number of individual game tickets

eventually sold for the five games played during the

freeze, 217,151 were sold prior to August 15 (mostly

in the form of season tickets) and 45,601 were sold

thereafter. The amount of revenue from these five

A-5

games which is attributable to the challenged price in-

creases is $407,912.00. It is this sum (trebled in No.

5-6)5 which is the subject of the present litigation.

The Falcons’ argument before this court may fair-

ly be described as a frontal assault upon two decisions

which have become fixtures in the scheme of economic

stabilization law. Amalgamated Meat Cutters & Butch-

er Workmen v. Connally, D.D.C., 337 F. Supp. 737

(1971) (Meat Cutters), decided by a three-judge dis-

trict court prior to the establishment of the Temporary

Emergency Court of Appeals, upheld the constitution-

ality of the Economic Stabilization Act as it existed

in August, 1971, when Phase I was initiated. Even

more fundamental to the development of the law of

this court has been University of Southern California

v. Cost of Living Council, supra (USC). The rather

narrow issue decided in that case — whether the Phase

I freeze applied to tickets sold prior to the freeze for

sporting events occurring during the freeze — ap-

parently has not been laid to rest. See Manning v. Uni-

versity of Notre Dame Du Lac, T.E.C.A., 484 F.2d 501

(1973) ; Oakland Raiders v. Office of Emergency Pre-

paredness, N.D. Calif. (No. C-71-2213, Jan. 2, 1974),

appeal docketed, T.E.C.A. No. 9-11 ( March 21, 1974);

and cf. Murphy v. O’Brien, T.E.C.A., 485 F.2d 671

(1973). Broader reliance has come to be placed upon

a more general aspect of USC, namely, the opinion’s

analysis and application of the “great deference test”

in the context of economic controls administration.

USC, supra, pp. 1068-1069. See United States v. IBEW

5 Possibly because DeRieux purports to represent season

ticket holders only, the recovery sought in 5-6 is somewhat

less than three times the $407,912.00 figure.

A-6

Local 11, T.E.C.A., 475 F.2d 1204, 1209 (1973);

Plumbers Local 519 v. Construction Industry Stabiliza-

tion Committee, T.E.C.A., 479 F.2d 1052, 1056 (1973) ;

Baldwin County Electric Membership Corp. v. Price

Commission, T.E.C.A., 481 F.2d 920, 923, cert. denied,

414 U.S. 909 (1973) ; Pacific Coast Meat Jobbers Asso-

ciation, Inc. v. Cost of Living Council, T.E.C.A., 481

F.2d 1388, 1392 (1973); Murphy v. O’Brien, supra,

p. 674; City of Groton v. Federal Power Commission,

T.E.C.A., 487 F.2d 927, 934 (1973) ; United States v.

Ohio, T.E.C.A., 487 F.2d 936, 941 (1973), cert.

granted, USS. (Feb. 19, 1974). See also, United

States v. Lieb, T.E.C.A., 462 F.2d 1161, 1166 (1972),

decided prior to USC.

In arguing that Meat Cutters and USC were

wrongly decided, the Falcons offer five contentions

which form the principal issues common to all three

cases now under consideration:

(1) Properly interpreted, Executive Order

11615 does not forbid these price increases;

(2) The Economic Stabilization Act of 1970,

as it existed during Phase I, represents an uncon-

stitutional delegation of legislative authority to

the executive branch of the Government;

(3) Executive Order 11615 violated §202(b)

of the Economic Stabilization Act;

(4) Executive. Order 11615 and the regula-

tions issued thereunder violated §553 of the Ad-

ministrative Procedure Act; and

(5) The application of Executive Order 11615

to forbid these price increases represents (a) an

unconstitutional bill of attainder or ex post facto

A-7

law; (b) an unconstitutional taking of property

without just compensation; and (c) an unconstitu-

tional deprivation of due process of law.

No. 5-6 raises a sixth issue, namely, whether

either the 1970 Act or the December 22, 1971 amend-

ments thereto® (the 1971 Amendments) created a pri-

vate right of action to recover for Phase I price vicla-

tions occurring prior to the enactment of the amend-

ments.

Issues 1 and 2 only were actually litigated in USC

and Meat Cutters. With respect to such issues, the Fal-

cons urge that we overrule USC and refuse to follow

Meat Cutters. The Falcons have mounted their attack

with skill and resolve, as evidenced by their principal

brief of 155 pages. Still, we are not persuaded. We

have concluded that the Falcons violated a lawful

Executive Order issued pursuant to a constitutional

statute, and that the ticket price increases must be re-

funded.

We have further concluded in No. 5-6 that viola-

tions of the Order which occurred during the Phase I

freeze period are not subject to private actions by in-

dividuals or class plaintiffs.

Executive Order 11615 and the relevant regula-

tions and interpretations issued thereunder are fully

described in the USC opinion, 472 F.2d at 1066-1067.

“ Economic Stabilization Act Amendments of 1971, Pub.

L. 92-210, 85 Stat. 743.

A-8

We have set out the pertinent section of the Order be-

low.’ In brief, the Order established a 90-day freeze

on prices, rents, wages and salaries, effective August

15, 1971. Permissible price levels were to be deter-

mined by reference to the nearest preceding 30-day

period during which a “substantial volume of active

transactions” had occurred. Since the Falcons had not

played any home football games during the 30 days

preceding August 15, the definition of “actual trans-

actions” became crucial in determining proper “ceiling

price” for their upcoming games. If a football game

“transaction” did not “occur” until the games were

actually played, the ticket price charged during the

1970 season would establish the proper ceiling price

for 1971 games.

Cost of Living Council Order No. 1, 36 Fed. Reg.

16215 (Aug. 20, 1971), delegated the CLC’s authority

to implement the Order to the OEP. Subsequently, the

7 “Section 1. (a) Prices, rents, wages, and salaries shall

be stabilized for a period of 90 days from the date hereof

at levels not greater than the highest of those pertaining to

a substantial volume of actual transactions by each individual,

business, firm or other entity of any kind during the 30-day

period ending August 14, 1971, for like or similar commodi-

ties or services. If no transactions occurred in that period, the

ceiling will be the highest price, rent, salary or wage in the

nearest preceding 30-day period in which transactions did

occur. No person shall charge, assess, or receive, directly or

indirectly in any transaction prices or rents in any form

higher than those permitted hereunder, and no person shall,

directly or indirectly, pay or agree to pay in any transaction

wages or salaries in any form, or to use any means to ob-

tain payment of wages and salaries in any form, higher than

those permitted hereunder, whether by retroactive increase or

otherwise.”

A-9

OEP issued Economic Stabilization Regulation No. 1,

36 Fed. Reg. 16515 (Aug. 21, 1971) which elaborated

on the requirements of Executive Order 11615, but was

nevertheless “very brief and basic in content.” USC at

1067. The Regulation defined various terms contained

in the Order and Regulation, but did not define the

phrase, “actual transactions.” By amendment dated

August 24, 1971, the Regulation announced that the

OEP would from time to time issue “circulars con-

taining implementing instructional material.” Circu-

lar No. 7, issued September 2, stated that a service

transaction occurs “when the service is performed.”

Nine days later, in Circular No. 11, the OEP issued the

statement which was to become the focal point of the

USC case:

“The freeze applies to prices of advance sale

tickets for sporting events occurring during the

freeze.”

In USC we held that the “implied assertion that a

sporting event constituted a service,” and the con-

clusion in Circular No. 11 that the freeze applied to

advance sale tickets for sporting events, represented

“a reasonable and consistent interpretation of the

Executive Order, and one entitled to this court’s re-

spect.” 472 F.2d at 1072.

1. Did USC correctly interpret Executive Order

11615?

The Falcons advance two interpretative argu-

ments. First, they argue that the sale and delivery of

the season tickets prior to August 15 constituted com-

pleted transactions within the meaning of the Execu-

A-10

tive Order and Regulation. If so, the Faleons would

have been entitled both to retain the full amounts al-

ready received and to charge an equally high price for

tickets sold after August 15 (since the pre-freeze sales

would have established the proper ceiling price). Sec-

ond, in the alternative, they contend that irrespective

of whether a higher ceiling price was established prior

to August 15, the Falcons did not “charge, assess or

receive” a price after August 15 with respect to some

41,000 season tickets and therefore the prices of those

tickets were exempt from the freeze.

It is conceded that USC fully disposed of the first

argument adversely to the Falcons. As for their second

contention, the Falcons urge that the USC court was

not presented with the precise argument here put for-

ward. In fact, in Part IV of USC, pp. 1069-1070, the

court specifically considered and rejected a retroactiv-

ity argument. While it is unclear whether the words

“charge, assess, or receive” were there given the force-

ful emphasis accorded them by the Falcons, it is beyond

dispute that USC undertook to authoritatively inter-

pret the Executive Order in light of a nearly identical

set of facts. The Falcons have not brought to our at-

tention any additional factors (such as legislative his-

tory) which were not presented in USC. They rely en-

tirely upon the text of the Order itself, the relevant

portion of which comprises a single paragraph. Under

these circumstances, USC must be regarded as dis-

positive of both interpretative arguments here raised.

We subscribe fully to the reasoning and holding of

USC, and deem it unnecessary to repeat what was set

forth in that opinion. In light of the Falcons’ strenuous

effort to upset USC, and because of one factual dif-

A-11

ference based on the Falcons’ status as a professional

football team, some additional comments directed to

two of their arguments are nevertheless appropriate.

First: The Falcons generally urge that the OEP

position with regard to ticket prices was inconsistent

with its rulings in other areas, ¢.g., university tuition,

and that even the ticket price policy was reversed for

purposes of Phase II. The identical arguments were

considered and rejected in USC (pp. 1071-1072). We

merely note that when the agency was again required

to implement a general price freeze at the outset of

Phase IV, as opposed to the more flexible systems of

controls represented by Phase II, it once again inter-

preted the freeze to apply to advance ticket sales. See

CLC Freeze Group Questions and Answers Release No.

4, 38 Fed. Reg. 16651 (1973); and cf. Murphy v.

O’Brien, supra.

The Falcons also contend that they were subject

to a particular inconsistency with regard to the salaries

paid to their football players. Falcons players were

employed under two separate contracts. The first was

a collective bargaining agreement negotiated by the

players’ union, the NFL Players Association. This

agreement established, inter alia, the pay schedule for

the 1971 pre-season “exhibition” games. The second

agreement was the “standard player contract,” the

salary provisions of which varied and which were

negotiated on an individual player basis. The standard

player contract provided compensation for the players’

services during the regular season of football play.

Prior to August 15, the Falcons agreed to pay $117,300

in increased salaries under standard player contracts.

A-12

Sometime subsequent to September 7, 1971, OEP

Director George A. Lincoln issued an interpretative

ruling to the NFL Players Association. The ruling

recited that “[a]ecording to a decision of the CLC on

September 7, 1971,” players who were already in

training camps prior to August 15 under 1971 stand-

ard player contracts were entitled to receive any in-

creases prescribed therein. We have not been informed

of any effort by the Falcons to contest this ruling. The

Faleons now argue, however, that the ruling has

placed the OEP “in the incongruous position of advo-

cating a price freeze on the sale of tickets without a

corresponding wage freeze on the salaries of the play-

ers who performed in the same games.”

In USC, we stated that “[i]f the haste necessitated

[by the freeze] gave rise to unreasonable inconsisten-

cies in the administrative interpretations, or to actions

plainly without the purpose and scope of the Order,

then we will readily rectify them.” 472 F.2d at 1069.

We cannot say that the alleged disparity here repre-

sents an unreasonable inconsistency in the agency’s

administration of the Order. It is clear that the stand-

ard player contract was not limited to the regular

football season.8 Conversely, in addition to setting

8 Paragraph 1 of the contract provides that “[t]he term

of this contract shall be from the date of execution hereof

* * *” The OEP ruling was expressly limited to players

“who have signed 1971 contracts.” Paragraph 2 of the con-

tract recites the player’s agreement “during the term of this

contract to report promptly for the Club’s training sessions

and, at the Club’s direction, to render his full time services

during such training sessions and to participate in all prac-

tice sessions and in all League and other football games

scheduled for or by the Club.” Further, Paragraph 3 ex-

A-18

salarieg for preseason games, the collective agreement

established minimum salaries for the regular season

as well. The collective agreement contemplated, and

indeed required, the signing of individual standard

player contracts. The two agreements thus covered

different aspects of a single period of employment.

Under the OEP ruling, salary provisions contained in

the player contracts escaped the freeze only if per-

formance of this single employment service was be-

gun prior to August 15. In sum, the continuing service

required of a football player under these contracts is

sufficiently different from the discrete services per-

formed by the Falcons — i.e., performance of football

games — to justify this result.

Second: The Falcons argue that USC erroneously

focused on the provisions of the Executive Order which

relate to ceiling price, and ignored the portion of the

Order which describes the actual conduct to be pro-

hibited. The language relied upon is contained in the

third sentence of §1(a) of the Order, quoted supra

n. 7. In pertinent part, the third sentence provides

that “[n]o person shall charge, assess, or receive * * *

in any transaction prices * * * in any form higher

than those permitted hereunder * * *.” Closely related

to this contention is the argument that USC erred in

according “great deference” to an agency interpre-

tation which is in alleged conflict with the clear mean-

ing of the quoted language. That meaning, the Fal-

cons assert, is that prices which have been fully col-

lected prior to August 15 are beyond the Order’s reach.

pressly provides that the Club shall pay board, lodging and

travel expenses for away-from-home training or games dur-

ing the pre-season period.

A-14

We begin by emphasizing that there is textual

support for the OEP’s interpretation of the Order, the

Falcons’ contention to the contrary notwithstanding.

The Order proscribes higher prices “in any transac-

tion.” For ceiling price purposes, the Order expressly

looks to prices “pertaining to * * * actual transac-

tions.” It is not unreasonable to construe the third

sentence of the Order to incorporate this same con-

cept, /.e., te prescribe higher prices which pertain to

future transactions, even though payment may already

have been conditionally received. Just as a service

transaction may reasonably be said to “occur” at the

time of performance, a price may be deemed to be

“charged” as of that same date. Cf. CLC Release No. 4,

supra, 38 Fed. Reg. 16651. This is particularly true

when it is realized that under the Falcons’ alternative

interpretation, patrons who had purchased tickets well

in advance of the freeze would pay higher prices to

sit side by side with fans who bought tickets after

August 15. Thus, even if we were to yield to the Fal-

cons’ insistence that we interpret the Order de novo,

it is not at all clear that we would reach a result dif-

ferent from that of the OEP.

The point of USC was that such a de novo analysis

by the courts is both unnecessary and improper. “In

delegating to the agencies the duty to develop the very

definitions of the words used in the Order, the broadest

possible delegation of power was given.” USC at 1068.

The delegation by the 1970 Act itself was no less broad.

Congress, in §202(a), had said only that prices might

not be reduced below the levels of May 25, 1970.9 See

9 #909. Presidential authority

(a) The President is authorized to issue such orders

and regulations as he may deem appropriate to stabilize pric-

A-15

USC at 1070. It is no abdication of our constitutional

role for this court to recognize the breadth of the dele-

gations involved in this particular statute and this

particular Order. The Supreme Court has stated in

the context of an earlier price control statute that “the

ultimate criterion is the administrative interpretation,

which becomes of controlling weight unless it is plainly

erroneous or inconsistent with the regulation.” Bowles

v. Seminole Rock & Sand Co., 325 U.S. 410, 414

(1945) .!© As discussed above and as fully explained in

USC, Circular No. 11 was not “plainly erroneous or

inconsistent” with Executive Order 11615. According-

ly, we hold once again that such ticket price increases

violated the Executive Order.

2. Was the 1970 Act an unconstitutional delega-

tion of legislative power?

Relying upon A. L. A. Schechter Poultry Corp. v.

United States, 295 U.S. 495 (1935), and Panama Re-

fining Co. v. Ryan, 239 U.S. 388 (1935), the Falcons

urge that the 1970 Act is void as representing an un-

es, rents, wages, and salaries at levels not less than those pre-

vailing on May 25, 1970. Such orders and regulations may

provide for the making of such adjustments as may be neces-

sary to prevent gross inequities.”

' The Falcons emphasize that the cited quotation is fol-

lowed by this sentence: “The legality of the result reached

by this process, of course, is quite a different matter.” The

“legality” referred to is the regulation’s validity under the

enabling statute and the Constitution. 325 U.S. at 414, 418-

419. As noted above, the Act itself requires only that prices

be stabilized at levels not below those of Miy 25, 1970. The

constitutional validity of the Order as interpreted and ap-

plied is discussed elsewhere in this opinion.

A-16

constitutional delegation of legislative power to the

President. It is conceded that subsequent to Schechter,

no federal statute had been held unconstitutional by

the Supreme Court on that basis. Among the statutes

to survive a delegation challenge was the Emergency

Price Control Act of 1942. Yakus v. United States, 321

U.S. 414 (1944).

In Amalgamated Meat Cutters & Butcher Work-

men v. Connally, D.D.C., 337 F. Supp. 737 (1971),

supra, a three-judge district court upheld the 1970

Act in the face of a delegation challenge. Several other

district courts have reached the same result.'! The ex-

haustive and learned opinion by Judge Leventhal in

Meat Cutters has been favorably cited by this court on

several occasions. See United States v. Lieb, supra, p.

1165; USC, supra, p. 1070; IBEW Local 11 v. Boldt,

T.E.C.A., 481 F.2d 1392, 1295, cert. denied, 414 U.S.

1092 (1973). It appears, however, that this is the first

occasion upon which our court has been called to di-

rectly decide the delegation question. This likely is due

in part to the fact that the 1971 Amendments appear

to have eliminated any doubt as to the Act’s validity

under Article I of the Constitution.

We are in substantial agreement with the reason-

ing of Meat Cutters, and concur in the result there

reached. It would serve only to unduly prolong this

opinion were we to further elaborate our views on this

subject. Accordingly, on the authority of Meat Cutters,

we hold that the Economic Stabilization Act of 1970,

'! See, e.g., California Teachers Association v. Newport

Mesa Unified School District, C.D. Calif., 333 F. Supp. 436,

446-447 (1971); United States v. Cincinnati Transit, Inc.,

S.D. Ohio, 337 F. Supp. 1068, 1072 (1972).

A-17

as it existed on August 15, 1971, was not an unconsti-

tutional delegation of legislative power to the Presi-

dent.

3. Did Executive Order 11615 violate §202(b) of

the Economic Stabilization Act?

As originally enacted on August 15, 1970, the Eco-

nomic Stabilization Act did not restrict the President’s

authority to institute selective economic controls. Ac-

cordingly, on March 29, 1971, the President issued

Executive Order 11588, 36 Fed. Reg. 6339, which pro-

vided for the stabilization of wages and prices in a

single industry (the construction industry). Less than

two months later, Congress amended §202 of the 1970

Act to add the following provision:

“(b) The authority conferred on the Presi-

dent by this section shall not be exercised with

respect to a particular industry or segment of the

economy unless the President determines, after

taking into account the seasonal nature of em-

ployment, the rate of employment or underem-

ployment, and other mitigating factors, that

prices or wages in that industry or segment of

_the economy have increased at a rate which is

grossly disproportionate to the rate at which prices

or wages have increased in the economy generally.”

Pub. L. 92-15, 85 Stat. 38 (May 18, 1971).

This provision remained in effect until the enactment

of the 1971 Amendments on December 22, 1971. No

comparable provision was retained in the amended

Act.

A-18

The Falcons argue that Executive Order 11615 vio-

lated §202(b) because (1) the Order affected “a par-

ticular industry or segment of the economy” only, and

(2) no prior determination was made by President

that prices or wages in the affected segment increased

at a rate which was grossly disproportionate to the

rate at which prices or wages increased in the economy

generally. The parties stipulated that the following

segments of the economy were not subject to regula-

tion under the Order: (1) raw agricultural products,

(2) exports, (3) interest rates, (4) corporate stocks

and bonds and municipal bonds, and (5) corporate

dividends. On brief, the Faleons assert that the ex-

cluded segments represent business receipts during

1971 of 555 billion dollars, or approximately 20 per

cent of total business receipts in the United States.

The parties have further stipulated that at the time

of the issuance of Executive Order 11615, the Presi-

dent did not determine that prices and wages affected

by the Order had increased at a grossly dispropor-

tionate rate when compared with the economy gener-

ally.

We initially note that of the five listed exempt

categories, only raw agricultural products were ex-

pressly excluded by the Order. Prices of exports and

stocks were first exempted by OEP Regulation No. 1,

pursuant to the agency’s authority under §4(a) of the

Order to grant exemptions. 36 Fed. Reg. at 16515. In-

terest rates and corporate dividends were not subject

to the freeze because they were not “prices, rents,

wages, or salaries” within the meaning of the Act and

the Order. See OEP Circular Nos. 1 and 3, 36 Fed. Reg.

16587 and 17345 (1971); and see Conf. Rep. No.

A-19

91-1386, 91st Cong., 2d Sess., p. 7 (1970).!2 Since

§202(b) refers only to the rate at which “prices or

wages” have increased in the economy generally, the

relevance of economic data pertaining to dividends and

interest is questionable.

In any event, in light of both the language of

§202(b) and the legislative purpose behind its enact-

ment, the Faleons’ contention is without merit. Even

if 8) per cent of the economy may be literally re-

garded as a “segment” of the entire economy, it sure-

ly is not a “particular * * * segment” within the

meaning of §202(b). It would be anomalous to require

a finding that wages and prices comprising 80 per cent

of the economy had increased at a rate “grossly dis-

proportionate” to such increases in the “economy gen-

erally.” Finally, the Report of the Senate Committee

on Banking, Housing and Urban Affairs relative to

§202(b) confirms that the finding requirement was

directed only at the imposition of controls over rela-

tively small segments of the economy:

“The committee has serious reservations about

applying the price and wage control authority to

a single industry. An industry subject to price

controls has no control over the price it must pay

for the products of other industries. Likewise,

workers subject to wage controls have no protec-

tion against a continued rise in the cost of liv-

ing. Ries

“As a restriction on using the wage-price con-

trol authority on a single industry, the committee

a Interest and dividends subsequently were brought with-

in the Act’s coverage by $$ 202 and 203(a)(2) of the 1971

Amendments.

A-20

approved an amendment requiring a specific find-

ing by the President. Under the amendment, the

President is prohibited from using the authority

in a single industry unless he determines that

wages or prices in that industry have increased

at a rate which is grossly disproportionate to the

rate for the economy as a whole, after taking into

account any mitigating factors such as the season-

al nature of employment or the rate of unemploy-

ment or under employment in the particular in-

dustry.” S. Rep. No. 92-89, 92d Cong., 1st Sess., 1

U.S. Code Cong. & Admin. News 1971, pp. 1048-

1049 (emphasis added).

Since §202(b) does not apply to the controls in-

stituted by Executive Order 11615, the President’s

action need only fall within the general authority con-

ferred by §202(a), supra. Such section clearly author-

ized the imposition of controls over something less than

the entire economy.

4. Did Executive Order 11615 and the regulations

thereunder violate the Administrative Pro-

cedure Act?

The Falcons contend that Executive Order 11615,

CLC Order No. 1, and OEP Reguiation No. 1 were

issued without observance of procedures required by

§4 of the Administrative Procedure Act (APA), 5

U.S.C. §553. In pertinent part, §553 provides as fol-

lows:

“(b) General notice of proposed rule making

shall be published in the Federal Register * * *.

A-21

Except when notice or hearing is required by

statute, this subsection does not apply —

(A) to interpretative rules, general state-

ments of policy, or rules of agency organiza-

tion, procedure, or practice; or

(B) when the agency for good cause finds

(and incorporates the finding and a brief

statement of reasons therefor in the rules is-

sued) that notice and public procedure there-

on are impracticable, unnecessary, or contrary

to the public interest.

agency shall give interested persons an opportunity

to participate in the rule making * * *.

(d) The required publication or service of a

substantive rule shall be made not less than 30

days before its effective date, * * *.”

No general notice of proposed rule making pre-

ceded the issuance of any of the orders or regulations

here challenged. Further, neither Executive Order

11615 nor CLC Order No. 1 contained an express

finding, accompanied by reasons, that “notice and pub-

lic procedure * * * are impracticable, unnecessary, or

contrary to the public interest.” OEP Regulation No. 1

did contain such a finding, but only by virtue of an

amendment to the Regulation dated November 12,

1971, 7.¢., one day before Phase I was to expire.

Since each of the three challenged actions raise

somewhat different problems, we shall treat them

separately.

A-22

a. Executive Order 11615

The first question raised by the Executive Order

is whether the President is an “agency” within the

meaning of the APA. The case for subjecting the Presi-

dent to the provisions of APA is a strong one.'3 Courts

have shown some reluctance to decide the question,

however, in view of potential ramifications under the

Freedom of Information Act, see Soucie v. David,

D.C, Cir., 422 F.2d 1067, 1073 (1971), and the judicial

review provis‘ons of the APA,! see Senate Select

Committee on Presidential Campaign Activities vy. Nix-

on, D.D.C., 366 F. Supp. 51, 58 (1973). Upon this

certification the Government has not made known its

position with regard to this important question. We

shall therefore assume, arguendo, that the President is

an agency within the meaning of the APA.

'*§ U.S.C. $551 defines “agency,” for purposes of $$ 551-

559, to mean “each authority of the Government of the Unit-

ed States, whether or not it is within or subject to review by

another agency, but does not include — (A) the Congress ;

(B) the courts of the United States; * * * .” “The President”

is not in terms excluded. In view of the glaring exclusion of

two of the three principal branches of the Government, an

intention not to exempt the President may be readily infer-

red. Cf. the Federal Register Act, 44 U.S.C. $1501 et seq.,

in which “agency” is defined by listing included offices, and

where “the President” is included and “the legislative or

judicial branches of the Government” are excluded. In Meat

Cutters, supra, Judge Leventhal without deciding the ques-

tion cited three leading scholars for the proposition that “the

term ‘agency’ in the APA includes the President.” 337 F.

Supp. at 761.

45 U.S.C. $552.

'*5 U.S.C. $§ 701-706. As is here relevant, the definition

of “agency” contained in $701 is identical to that in $551.

A-23

The issue thus becomes whether we must set aside

the Order for failure to conform with the procedural

requirements of 5 U.S.C. §553. In Meat Cutters, supra,

these requirements were recognized but were deemed

to be of little practical consequence in view of the

exception provided by §553(b)(B), supra, 337 F.

Supp. at 761. The problem here cannot be so easily dis-

missed since the Government has stipulated that the

finding required to invoke the exception was not made.

At the outset, we are satisfied that there was in

fact “good cause” to find that advance notice of the

freeze was “impracticable, unnecessary, or contrary to

the public interest” within the meaning of §553(b)

(B). This conclusion is based upon facts so obvious that

they may be judicially noticed. Had advance notice is-

sued, it is apparent that there would have ensued a

massive rush to raise prices and conduct “actual trans-

actions”—or avoid them—before the freeze deadline.

Each price increase would have generated further in-

creases in a growing spiral of inflation. We note in

this connection the remarks of George P. Schultz, Di-

rector of the Office of Management and Budget, made

during the course of an August 15, 1971 press con-

ference, immediately prior to the President’s an-

nouncement of the freeze:

“* * * It is very difficult for the people in the

administration to talk public'y about something

like a wage-price freeze or something of that kind

because immediately people raise their prices. In

fact, I would say — and I don’t have any really

strong evidence to this effect — but I would say

that the very large increase in the industrial com-

ponent of the wholesale price index in July that

A-24

was reported a week or so ago probably reflects a

reaction to all of the talk, with people putting

their list prices up. * * *’’16

While the legislative history of the 1970 Act does

not reveal consideration of the problem discussed by

Director Schultz,'’ it is clear that Congress anticipated

the need for abrupt action in dealing with inflation.

The Report of the House Committee on Banking and

Currency repeatedly refers to the President’s power

under the Act as “standby authority.” H.R. Rep. No.

91-1330, 91st Cong., 2d Sess., pp. 9, 11, 20 (1970). It

would appear that a major factor in the decision of

Congress to delegate such authority was its belief that

only the Executive could properly react to day-to-day

changes in the economy.!8 The psychological value of

a “dramatic” initiation of controls appears also ts

have been contemplated. Meat Cutters, supra, p. 752.

And although not phrased in terms of a finding for pur-

poses of §553(b)(B), supra, the preamble to the Or-

'* CCH Economic Controls €8367, p. 8406 (1972).

'? The House Committee on Banking and Currency subse-

quently did acknowledge this reason for secrecy in connection

with Phase I, however. See H.R. Rep. No. 92-714, 92d Cong.,

Ist Sess., p. 4 (1971).

'SIn response to criticism that the freeze should be in-

stituted by Congress directly, and not by the President, the

Committee Report states: “[A wage-price freeze] is not a

legislative function, both in terms of appropriate timing in

instituting the controls and removing them, since only the

Executive can determine the appropriate time for instituting

the controls and removing them * * * .” Further: “if the

Congress had mandated such action through to the termina-

tion date [of the Act], it would well be days or weeks before

such action would be rescinded by the Congress if needed

*** ” H. R. Rep. No. 91-1330, Supra, p. 11.

A-25

der itself refers to another ground for urgency:

“Whereas, the present balance of payments situation

makes it especially urgent to stabilize prices, rents,

wages, and salaries * * *.”

The Falcons argue that because (1) the Govern-

ment has stipulated that no finding was made, and (2)

no finding and statement of reasons was incorporated

in the Executive Order, the Order should now be set

aside. We cannot agree that Congress intended to

visit such consequence upon a technical violation of

§553(b) where tne reasons for exempting the Presi-

dent’s action from the notice requirement are so ob-

vious and compelling. Cf. Appalachian Power Co. v.

Environmental Protection Agency, 4 Cir., 477 F.2d

495, 502-503 (1973) ; Duquesne Light Co. v. Environ-

mental Protection Agency, 3 Cir., 481 F.2d 1, 8 (1973).

A failure to incorporate in rules a statement of basis

and purpose, in technical violation of §553(c), has

been held not to void the rules where “[b]oth the basis

and purpose are obvious from the specific governing

legislation and the entire trade was fairly apprised of

them by the procedure followed.” Hoving Corp. v.

Federal Trade Commission, 2 Cir., 290 F.2d 803, 807

(1961). In both cases upon which the Falcons princi-

pally rely,!® the inquiry was quite properly directed at

whether the agency in fact had good cause to bypass

the notice requirement. We hold that Executive Order

11615 did not violate §4 of the Administrative Pro-

cedure Act.

1® Texaco, Inc. v. Federal Power Commission, 3 Cir., 412

F.2d 740 (1969); Kelly v. Dept. of Interior, E.D. Calif., 339

F. Supp. 1095 (1972).

A-26

b. CLC Order No. 1

On August 17, 1971, the CLC issued its Order No.

1 under the title, “Delegation of Authority.” 36 Fed.

Reg. 16215. The Order consisted of five brief para-

graphs. The first and second paragraphs delegated the

CLC’s authority under §§ 1, 4(a), 5 and 7 of Execu-

tive Order 11615 to the Director of the OEP. Para-

graph 3 of Order No. 1 directed executive departments

and agencies to assist the Director pursuant to 31

U.S.C. §691; paragraph 4 required consultation with

the CLC on significant policy decisions; and para-

graph 5 permitted the Director to redelegate the au-

thority thereby conferred.

Section 553(b)(A) excepts, inter alia, “rules of

agency organization, procedure, or practice” from the

notice requirement of §553. Nothing contained in CLC

Order No. 1 goes beyond the matters thus excluded.

Accordingly, Order No. 1 did not violate the APA.

c. OEP Regulation No. 1

The bulk of OEP Regulation No. 1 merely re-

phrases and interprets the Executive Order. Indeed,

section 1 of the Regulation states that the Regulation’s

purpose is to “promulgate initial guidance and pro-

cedures” for implementing the freeze. To the extent

that the Regulation is thus an “interpretative rule,”

it falls within the exception to §553 provided by

§553(b) (A). To the extent that it arguably may pre-

scribe non-exempt rules (none of which would appear

to affect the Falcons in this case), the considerations

previously set forth with respect to the Executive Order

. MOTD

A-27

apply with equal force to the Regulation. We thus

need not decide whether the amendment to the Regula-

tion dated November 12, 1971, which was nothing

more than a pro forma statement of the obvious,”®

could retroactively cure a technical flaw in the rule.

5. Additional constitutiona) guestioxs: Does Exce-

utive Order 11615 as applied represent an ex

post facto law or bill of attainder, a taking of

property without just compensation, or a de-

nial of due process of law?

The Falcons finally advance a variety of constitu-

tional arguments relating to the allegedly retroactive

nature of the Executive Order as here applied. Similar

arguments on previous occasions have been uniformly

rejected by our court. See USC, supra, p. 1070; IBEW

Local 11 v. Boldt, supra, p. 1395 (just compensation) ;

Western States Meat Packers Association, Inc. v. Dun-

lop, T.E.C.A., 482 F.2d 1401, 1403-1404 (1973) (just

compensation ) ; see also, Meat Cutters, supra, pp. 763-

764 (due process); Taylor v. Brown, Emer. Ct. App.,

137 F.2d 654, 659-660, cert. denied, 320 U.S. 787

(1943) (ex post facto, just compensation).

The Falcons argue from the assumption that their

rights in the season ticket sale proceeds were “vested”

and “unqualified” as of August 15, 1971. Such assump-

tion is faulty inasmuch as the Falcons concede, else-

where in their brief, that if the games had not been

2” “Because of the need for prompt determinations, notice

of proposed rule making and public procedure thereon have

been found to be impracticable and contrary to the public

interest.” 36 Fed. Reg. 21761 (1971).

A-28

performed they would have been liable for the pur-

chase price. See, e.g., De La Ysla v. Publix Theatres

Corp., 26 P.2d 818 (Utah 1933). The authorities cited

by the Falcons do not so much indicate that a ticket is

not a contract, as hold that the seller’s duty and the

remedies for breach thereof are limited. A ticket does

not create an irrevocable right of entry, Marrone v.

Washington Jockey Club, 227 U.S 633 (1913), nor

does it warrant against personal injuries, Jordan v.

Concho Theatres, Inc., 160 S.W.2d 275 (Tex. Civ. App.

1941). We are cited to no case, however, which indi-

cates that the Falcons could refuse to perform the

scheduled games with impunity on the ground that

their prior rights were “unqualified.”2!

It is well settled that Congress may interfere with

private contractual obligations where such interference

is a necessary incident of otherwise valid legislation.

Norman v. Baltimore & Ohio R. Co., 294 U.S. 240, 307-

311 (1935) ; Louisville & Nashville R. Co. v. Mottley,

219 U.S. 467, 480-483 (1911); USC, supra, p. 1070.

That one of the contracting parties may have com-

pletely performed his obligations does not remove this

“congenital infirmity” (Norman, supra, p. 308) which

is a part of every contract subject to Congressional

power. Louisville & Nashville R. Co. v. Mottley, supra.

As for the ex post facto clause, the Order cannot

be said to punish the Falcons for prior conduct within

the meaning of such cases as Fletcher v. Peck, 10 U.S.

(6 Cranch) 87 (1809), and Cummings v. Missouri, 71

*! Contrast Louisville Joint Stock Land Bank y. Radford,

295 U.S. 555 (1935), holding that a statute which deprived

mortgagees of substantial existing rights in specific mort-

gaged property violated the Fifth Amendment.

A-29

U.S. (4 Wall.) 277 (1867). See also, Calder v. Bull,

3 U.S. (3 Dall.) 386, 390-391 (1798). Neither is the

Order a bill of attainder, see United States v. Brown,

381 U.S. 437, 447 (1965). It is true that §204 of the

1970 Act prescribes fines for willful violations. How-

ever, the Government has sought only an injunction

and restitution under §205, for which there is no re-

quirement of willfulness, and none of the letters or

telegrams referred to in the Falcons’ complaint threat-

en criminal action or accuse the Falcons of willful

wrongdoing. In Manning v. University of Notre Dame

Du Lac, T.E.C.A., 484 F.2d 501, 503-504 (1973), on

nearly identical facts, we indicated that the viciation

likely was not willful within the meaning of §208(a)

of the amended Act (the successor to §204). In any

event, any fine which might be imposed would be

based upon willful conduct which occurred after the

effective date of the Order.

No. 5-6 arises out of plaintiff Burt DeRieux’s pur-

chase of four Atlanta Falcons season tickets in June

1971. On August 27, 1971, DeRieux by letter demanded

the return of $1.50 per ticket per game; the demand

was rejected by the Falcons on September 2. There-

after, on September 10, DeRieux filed the present class

action on behalf of all Falcons season ticket holders.

DeRieux’s action preceded by seventeen days the Gov-

ernment’s suit for injunction and restitution (No.

enforcement action only as a result of his persistent protests,

which included the August 27 letter to the Falcons, a com-

plaint with the Internal Revenue Service dated September 9

and, shortly thereafter, the present lewsuit.

A-30

Both the original and first amended complaints

alleged that the action arose under the Economic Sta-

bilization Act of 1970, and invoked federal jurisdiction

under 28 U.S.C. §1331.2 The complaints recognized,

however, that the plaintiff sought relief “not provided

for in the Economic Stabilization Act, Executive Order

11615, or in any other administrative forum, and which

only this Court can grant.” By amendment to the com-

plaint, filed July 23, 1973, DeRieux alleged for the

first time that his claim was based upon §210 of the

amended Act.

*4 Apparently recognizing the jurisdictional problem posed

by Snyder v. Harris, 394 U.S. 332 (1969), and Zahn v. Inter-

national Paper Co., 414 U.S. 291 (1973), DeRieux now addi-

tionally claims that jurisdiction is conferred by 28 U.S.C. §

1337, under which there is no requirement of a $10,000 mini-

mum amount in controversy.

*4 “$210. Suits for damages or other relief

(a) Any person suffering legal wrong because of any

act or practice arising out of this title, or any order or regu-

lation issued pursuant thereto, may bring an action in a

district court of the United States, without regard to the

amount in controversy, for appropriate relief, including an

action for a declaratory judgment, writ of injunction (subject

to the limitations in section 211), and ‘or damages.

(b) In any action brought under subsection (a) against

any person renting property or selling goods or services who

is found to have overcharged the plaintiff, the court may, in

its discretion, award the plaintiff reasonable attorney’s fees

and costs, plus whichever of the following sums is greater:

(1) an amount not more than three times the

amount of the overcharge upon which the action is based,

(2) not less than $100 or more than $1,000; ex-

cept that in any case where the defendant establishes

that the overcharge was not intentional and resulted

from a bona fide error notwithstanding the maintenance

of procedures reasonably adapted to the avoidance of

A-31

The amendment further alleged that the Falcons

“have and continue to willfully refuse to refund the

amount due * * * despite the decision of the Tempo-

rary Emergency Court of Appeals in [USC].” Finally,

the amendment sought treble damages in the ammount

of $1,140,000.00, attorneys fees and costs pursuant to

§210(b) of the amended Act.

The principal question now presented is whether

either the 1970 Act or §210 of the amended Act create

a private right of action for Phase I violations which

occurred prior to December 22, 1971, the date on which

§210 was enacted.

In terms, the 1970 Act, in §205, provided only for

injunctive relief in actions brought by an agency of the

United States:

“Whenever it appears to any agency of the

United States, authorized by the President to ex-

ercise the authority contained in this section * * *

that any person has engaged, is engaged, or is

about to engage in any acts or practices con-

such error the liability of the defendant shall be limited

to the amount of the overcharge: Provided, that where

the overcharge is not willful within the meaning of sec-

tion 208(a) of this title, no action for an overcharge may

be brought by or on behalf of any person unless such per-

son has first presented to the seller or renter a bona fide

claim for refund of the overcharge and has not received

repayment of such overcharge within ninety days from

the date of the presentation of such claim.

charge’ means the amount by which the consideration for the

rental of property or the sale of goods or services exceeds the

applicable ceiling under regulations or orders issued under

this title.”

A-32

stituting a violation of any regulation or order

under this title, it may in its discretion bring an

action * * * to enjoin such acts or practices, and

upon a proper showing a permanent or temporary

injunction or restraining order shall be granted

without bond. Upon application of the agency, any

such court may also issue mandatory injunctions

commanding any person to comply with any regu-

lations or order under this title.”

Section 7(b) of the Executive Order conferred upon

the CLC the authority “in its discretion” to request

the Department of Justice to bring actions for injunc-

tions under §205.

Faced with the absence of any express authority

for a private right of action under the 1970 Act, De-

Rieux argues that such a right may be implied from

the purposes and policies of the Act. See Allen v. State

Board of Elections, 393 U.S. 544 (1969); J. I. Case

Co. v. Borak, 377 U.S. 426 (1964). More specifically,

the argument is that “the class’s claim is within the

scope of the very rights which the statute and the

Executive Order were attempting to protect.” The

purpose of the Act, DeRieux argues, was “to protect

consumers from an increase in prices.”

The question of implied private rights of action

was most recently the subject of Supreme Court review

in National Railroad Passenger Corp. v. National As-

sociation of Railroad Passengers, U.S. (No. 72-

1289, Jan. 9, 1974). There, the Court undertook to

construe §307(a) of the Amtrak Act,” 45 U.S.C.

§547(a). Section 307(a) authorized enforcement ac-

tions by the Attorney General and, in cases involving a

A-33

labor agreement, by affected employees or their repre-

sentatives. After examining legislative history and the

policies of the Act, the Court concluded that §307(a)

provided the exclusive remedies for violations and that

no additional private right of action could properly be

inferred.

In some respects, the problem in Railroad Passen-

gers was different than that posed by §205 of the

Economic Stabilization Act. Since the Amtrak Act ex-

pressly authorized some private actions (by employees

under a labor agreement), the maxim expressio unius

est exclusio alterius applied with particular force to

other private actions not so authorized. In addition, in

drafting the final Amtrak bill Congress had consid-

ered and rejected a proposal to permit suits by any

“aggrieved person.” Our review of the legislative his-

tory of the Economic Stabilization Act of 1970 has

failed to reveal any specific consideration of proposals

to create or limit private rights of action.”

We are not left totally without guidance, how-

ever. In interpreting the 1970 Act, the provisions of

prior economic controls legislation are significant.

Meat Cutters, supra, p. 748. Both the Emergency Price

Control Act of 1942 and the Defense Production Act

of 1950 provided for private damage actions in addi-

tion to Government suits for injunctions and fines. 56

Stat. 23, 34; 64 Stat. 798, 811. The similarity in

25 The adequacy of the Act’s enforcement provisions were

challenged, however, both in hearings and on the floor of the

House. See Hearings on H.R. 17880 before the House Com-

mittee on Banking and Currency, 91st Cong., 2d Sess., pp.

83-84; 116 Cong. Rec. 26837 (1970) (remarks of Represen-

tative Anderson).

A-34

language between §205 and the injunction provisions

of the two earlier statutes indicates that §205 was

derived from those provisions; this is confirmed by the

legislative history.“ From this background of prior

law, Congress surely was aware of the possibility of

private enforcement, and its failure to expressly pro-

vide for private actions in the 1970 Act can only be re-

garded as intentional.

Further, an examination of the purpose of the

1970 Act supports the conclusion that the remedies con-

tained in §205 were intended to be exclusive. Congress

anticipated that the President would implement the

Act by imposing a short term freeze of only two or

three months’ duration. H.R. Rep. No. 91-1330, supra,

p. 9. The purpose of the anticipated freeze was to break

the nation’s “inflationary psychology” and to provide

a breathing period during which longer term controls

could be formulated. See Meat Cutters, supra, pp. 747-

748, 751-752; Hearings on H.R. 17880, supra n. 25, pp.

6, 11-12. It is entirely reasonable that Congress would

choose not to confer individual rights of action with

respect to controls of such short duration and uncer-

tain consequence.

The difference between the Economic Stabilization

Act of 1970 and statutes under which an implied pri-

vate right of action has been recognized is apparent.

Unlike the Voting Rights Act of 1965,?7 the Securities

26 Remarks of Representative Reuss, Hearings on H.R.

17880, supra n. 25, pp. 5-6 (1970): “The language of title II

is derived from the battle-tested language of the Emergency

Price Control Act of 1942.”

27 See Allen vy. State Board of Elections, 393 U.S. 544

(1969).

A-35

Exchange Act of 1934, or the Federal Safety Appli-

ance Acts, 2 the Economic Stabilization Act was not

designed to protect or confer “private rights” within

the usual meaning of that phrase. Indeed, as the pres-

ent case well illustrates, the effect of the Act and Order

in many instances was destructive of private contract

rights. Rather, the Act prescribed emergency medicine

to remedy an affliction affecting the entire national

economy. Individuals were ultimately sought to be

benefitted, but as a consequence of overall economic

stabilization. There was no intention to benefit a spe-

cific class. Cf. Daly v. Columbia Broadcasting System,

Inc., 7 Cir., 309 F.2d 83 (1962). Even when Congress

amended the Act to provide for individual actions, in

§210, its principal concern was deterrence and effective

enforcement, and not the vindication of individual

“rights” as such. See H.R. Rep. No. 92-714, 92d Cong.,

1st Sess., pp. 8, 28 (1971). We conclude that a private

right of sction cannot be inferred from the 1970 Act.

DeRieux next argues that even if no implied right

of action was created by the 1970 Act, the December

22, 1971 amendments to the Act supplied the previously

missing remedy. The question is whether §210 of the

amended Act, supra n. 24, may be read to have retro-

spective effect.

2s See J. 1. Case Co. v. Borak, 377 U.S. 426 (1964).

2° See Texas & Pacific Ry. Co. v. Rigsby, 241 U.S. 33

(1916).

% Accord, ICA Southeast, Inc. v. Optimum Systems, Inc.,

E.D. La., CCH Economic Controls €9999A (1), p. 9991(1971).

Cf. Heavy Contractors Association, Inc, v. Operating Engi-

neers Local 571, D. Neb., 328 F. Supp. 897 (1971); and see

Acorn Iron & Supply Co. v. Bethlehem Steel Co., E.D. Pa.,

96 F. Supp. 481 (1951).

A-36

If §210 were solely concerned with perfecting a

remedy for previous violations of the law, it might well

permit the construction here urged. See Bradley v.

Richmond School Board, U.S. | (No. 72-1322, May

15, 1974); Koger v. Ball, 4 Cir., | F.2d (No. 73-

2332, May 10, 1974). But the 1971 Amendments did

more than merely make recovery more convenient or

more certain. Section 210(b) provides for the awarding

of a sum equal to the greater of (1) three times the

amount of the overcharge, or (2) not less than $100

nor more than $1,000. Thus, the damages available

under §210(b) are punitive in nature and substantial-

ly larger than those previously recoverable in Govern-

ment actions for restitution. The amendment to the

complaint here invokes these very provisions in seeking

treble damages in excess of $1,100,000.

For this reason, we believe that §210 represents

an exception to the general rule regarding retrospective

application in pending cases of changes in the law.

That rule, as recently articulated by the Supreme Court

in Bradley v. Richmond School Board, supra, is that

“even where the intervening law does not explicitly

recite that it is to be applied to pending cases, it is to

be given recognition and effect.” Slip op. at 17-18. The

Bradley Court was nevertheless careful to state that

courts need not always apply intervening law in the

absence of clear legislative direction to the contrary.

Rather, exceptions should be drawn where application

of the intervening statute would result in manifest in-

justice. The Court further indicated that the question

of retrospective application was to be determined in

each case by analysis of “(a) the nature and identity

of the parties, (b) the nature of their rights, and (c)

A-37

the nature of the impact of the change in law upon

those rights.” Jd. at 20.

Here, the decisive factor is the impact of §210

upon the Falcons’ rights. Unlike the Bradley situation,

where the intervening statute merely provided for an

award of attorneys fees to which plaintiffs arguably

already were entitled, the application of §210 would

impose “an additional [and] unforeseeable obligation”

in the form of potential treble damages. /d. at 24. Even

though such an award is discretionary with the dis-

trict court, its prospect alone might have caused the

Falcons to order their conduct differently so as to

avoid the risk. Id. at 23. In light of the new obligation

imposed, §210 should not be construed to act retro-

spectively.*!

This conclusion is fortified by the deterrent pur-

pose of §210, above referred to. Only future conduct

can be deterred. Further, where Congress desired that

the 1971 Amendments apply to pending cases (or, by

analogy, to previous violations), it did not lack for

words to make such purpose clear. Compare §210(a),

supra n. 24, with §211(a) and ( h).32 We do not read

“’ Accord, Piaskoski v. Associated Hospital Service, Ine.,

E.D. Wis., 347 F. Supp. 470 (1972). See also, United States

y. St. Regis Paper Co., S.D. N.Y., 106 F. Supp. 286, 291

(1952) (amended regulation under Defense Production Act).

#2 “$911, Judicial review

(a) The district courts of the United States shall have

exclusive original jurisdiction of cases or controversies aris-

ing under this title, or under regulations or orders issued

thereunder * * *.

(h) The provisions of this section apply to any actions

or suits pending in any court, Federal or State, on the date

A-38

Bradley to hold that evidence of legislative intent short

of express statutory language is irrelevant to the retro-

activity question, and we believe these factors are sig-

nificant.

DeRieux finally argues that §210 applies pro-

spectively to the Falcons’ continuing refusal to refund

the overcharges. Such contention was squarely rejected

in Manning v. University of Notre Dame Du Lac, su-

pra, where we held that the “overcharge” occurred, at

the latest, at the time the football games were placed.

The argument that the “legal wrong” language of

§210(a) provides a separate basis for relief was also

there rejected. 484 F.2d at 504.

It is true that Manning applied the provisions of

§210 in a class action based upon a Phase I violation.

Manning did not recognize or treat the threshuld retro-

activity issue, however, and is therefore in no way

contrary to our disposition of this case. See Webster

v. Fall, 266 U.S. 507, 511 (1925).

DISPOSITION

Pursuant to the authority granted by §211(c) and

(h) of the Economic Stabilization Act of 1970, as

amended, this court now makes the following disposi-

tion of these consolidated cases:

The complaint in No. 5-6 fails to state a claim upon

which relief may be granted. Accordingly, No. 5-6 is

of enactment of this section in which no final order or judg-

ment has been rendered. Any affected party seeking relief

shall be required to follow the procedures of this title.”

A-39

remanded to the district court with directions to dis-

miss the complaint.

In No. 5-7, defendants are entitled to judgment as

a matter of law. No. 5-7 is therefore remanded to the

district court with directions to enter judgment in ac-

cordance with this opinion in favor of defendants.

In No. 5-8, the United States is entitled to judg-

ment as a matter of law. Accordingly, No. 5-8 is re-

manded to the district court with directions to enter

judgment in accordance with this opinion in favor of

plaintiff. The district court is further directed to de-

termine and carry out such remedies as it may deem .

appropriate, including the amount and manner in

which restitution should be made. See University of

Southern California v. Cost of Living Council, supra,

472 F.2d at 1070; Murphy v. O’Brien, supra, 485 F.2d

at 676, compare Manning v. University of Notre Dame

Du Lac, supra.

REMANDED WITH DIRECTIONS.

A-40

ADMINISTRATIVE PROCEDURE ACT

§551. Definitions

(1) “agency” means each authority of the Govern-

ment of the United States, whether or not it is within

or subject to review by another agency, but does not

include—

(A) the Congress;

(B) the courts of the United States;

sessions of the United States;

(D) the government of the District of Colum-

bia;

or except as to the requirements of section 552 of this

title—

(E) agencies composed of representatives of

the parties or of reprsentatives of organizations of

the parties to the disputes determined by them;

(F) courts martial and military commis-

sions;

(G) military authority exercised in the field

in time of war or in occupied territory; or

(H) functions conferred by sections 1738,

1739, 1743, and 1744 of title 12; chapter 2 of title

41; or sections 1622, 1884, 1891-1902, and former

section 1641(b) (2), of title 50; appendix;

” ” * * *

(4) “rule” means the whole or a part of an agency

statement of general or particular applicability and fu-

ture effect designed to implement, interpret or pre-

scribe law or policy or describing the organization, pro-

A-41

cedure, or practice requirements of an agency and in-

cludes the approval or prescription for the future of

rates, wages, corporate or financial structures or reor-

ganizations thereof, prices, facilities, appliances, ser-

vices or allowances therefor or of valuations, costs, or

accounting, or practices bearing on any of the fore-

going ;

§553. Rule making

(a) This section applies, according to the provi-

sions thereof, except to the extent that there is in-

volved—

(1) a military or foreign affairs function of

the United States; or

(2) a matter relating to agency management

or personnel or to public property, loans, grants,

benefits, or contracts.

(b) General notice of proposed rule making shall

be published in the Federal Register, unless persons

subject thereto are named and either personally

served or otherwise have actual notice thereof in ac-

cordance with law. The notice shall include—

(1) astatement of the time, place, and nature

of public rule making proceedings ;

(2) reference to the legal authority under

which the rule is proposed ; and

(3) either the terms or substance of the pro-

posed rule or a description of the subjects and

issues involved.

Except when notice or hearing is required by statute,

this subsection does not apply—

A-42

(A) to interpretative rules, general state-

ments of policy, or rules of agency organization,

procedure, or practice; or

(B) when the agency for good cause finds

(and incorporates the finding and a brief state-

ment of reasons therefor in the rules issued) that

notice and public procedure thereon are imprac-

ticable, unnecessary, or contrary to the public in-

terest.

agency shall give interested persons an opportunity

te participate in the rule making through submission

of written data, views, or arguments with or without

opportunity for oral presentation. After consideration

of the relevant matter presented, the agency shall in-

corporate in the rules adopted a concise general state-

ment of their basis and purpose. When rules are re-

quired by statute to be made on the record after op-

portunity for an agency hearing, sections 556 and 557

of this title apply instead of this subsection.

(d) The required publication or service of a sub-

stantive rule shall be made not less than 30 days be-

fore its effective date, except—

(1) a substantive rule which grants or recog-

nizes an exemption or relieves a restriction;

(2) interpretative rules aud statements of

policy; or

(3) as otherwise provided by the agency for

good cause found and published with the rule.

(e) Each agency shall give an interested person

the right to petition for the issuance, amendment, or

repeal of a rule.

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§706. Scope of review

To the extent necessary to decision and when pre-

sented, the reviewing court shall decide all relevant

questions of law, interpret constitutional and statutory

provisions, and determine the meaning or applicability

of the terms of an agency action. The reviewing court

shall—

(1) compel agency action unlawfully with-

held or unreasonably delayed; and

(2) hold unlawful and set aside agency ac-

tion, findings, and conclusions found te be—

(A) arbitrary, capricious, an abuse of

discretion, or otherwise not in accordance with

law;

(B) contrary to constitutional right,

power, privilege, or immunity;

authority, or limitations, or short of statutory

right;

(D) without observance of procedure re-

quired by law;

(E) unsupported by substantial evidence

in a case subject to sections 556 and 557 of

this title or otherwise reviewed on the record

of an agency hearing provided by statute; or

(F) unwarranted by the facts to the ex-

tent that the facts are subject to trial de novo

by the reviewing court.

In making the foregoing determinations, the court shall

review the whole record or those parts of it cited by a

party, and due account shall be taken of the rule of pre-

judicial error.

SUPE AIT ONSITE RD re mA DS

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EXECUTIVE ORDER No. 11615

August 17, 1971, 36 F.R. 15727

PROVIDING FOR STABILIZATION OF PRICES,

RENTS, WAGES, AND SALARIES

WHEREAS, in order to stabilize the economy, re-

duce inflation, and minimize unemployment, it is

necessary to stabilize prices, rents, wages, and sal-

aries; and

WHEREAS, the present balance of payments sit-

uation makes is especially urgent to stabilize prices,

rents, wages, and salaries in order to improve our com:

petitive position in world trade and to protect the pur-

chasing power of the dollar:

NOW, THEREFORE, by virtue of the authority

vested in me by the Constitution and statutes of the

United States including the Economic Stabilization Act

of 1970 (P.L. 91-379, 84 Stat. 799), as amended, it

is hereby ordered as follows:

Section 1. (a) Prices, rents, wages, and salaries

shall be stabilized for a period of 90 days from the date

hereof at levels not greater than the highest of those

pertaining to a substantial volume of actual transac-

tions by each individual, business, firm or other entity

of any kind during the 30-day period ending August 14,

1971, for like or similar commodities or services. If no

transactions occurred in that period, the ceiling will be

the highest price, rent, salary or wage in the nearest

preceding 30-day period in which transactions did oc-

cur. No person shall charge, assess, or receive, directly

ei |

A-45

or indirectly in any transaction prices or rents in any

form higher than those permitted hereunder, and no

person shall, directly or indirectly, pay or agree to pay

in any transaction wages or salaries in any form, or

to use any means to obtain payment of wages and sal-

aries in any form, higher than those permitted here-

under, whether by retroactive increase or otherwise.

(b) Each person engaged in the business of selling

or providing commodities or services shall maintain

available for public inspection a record of the highest

prices or rents charged for such or similar commodities

or services during the 30-day period ending August 14,

1971.

not apply te the prices charged for raw agricultural

products.

Sec. 2. (a) There is hereby established the Cost of

Living Council which shall act as an agency of the

United States and which is hereinafter referred to as

the Council.

(b) The Council shall be composed of the following

members: The Secretary of the Treasury, the Secretary

of Agriculture, the Secretary of Commerce, the Secre-

tary of Labor, the Director of the Office of Manage-

ment and Budget, the Chairman of the Council of Ec-

onomic Advisers, the Director of the Office of Emer-

gency Preparedness, and the Special Assistant to the

President for Consumer Affairs. The Secretary of the

Treasury shall serve as Chairman of the Council and

the Chairman of the Council of Ecciomie Advisers

shall serve as Vice Chairman. The Chairman of the

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Board of Governors of the Federal Reserve System

shall serve as adviser to the Council.

Council a Special Assistant to the President shall serve

as Executive Director of the Council, and the Execu-

tive Director is authorized to appoint such personnel as

may be necessary to assist the Council in the perform-

ance of its functions.

Sec. 3. (a) Except as otherwise provided herein,

there are hereby delegated to the Council all of the

powers conferred on the President by the Economic

Stabilization Act of 1970.

(b) The Council shall develop and recommend to

the President additional policies, mechanisms, and pro-

cedures to maintain economic growth without inflation-

ary increases in prices, rents, wages, and salaries after

the expiration of the 90-day period specified in Section

1 of this Order.

of agriculture, industry, labor and the public concern-

ing the development of policies, mechanisms and pro-

cedures to maintain economic growth without inflation-

ary increases in prices, rents, wages, and salaries.

(d) In all of its actions the Council will be guided

by the need to maintain consistency of price and wage

policies with fiscal, monetary, international and other

economic policies of the United States.

(e) The Council shall inform the public, agricul-

ture, industry, and labor concerning the need for con-

A-47

trolling inflation and shall encourage and promote vol-

untary action to that end.

Sec. 4. (a) The Council, in carrying out the pro-

visions of this Order, may (i) prescribe definitions for

any terms used herein, (ii) make exceptions or grant

exemptions, (iii) issue regulations and orders, and

(iv) take such other actions as it determines to be nec-

essary ani appropriate to carry out the purposes of

this Order.

(b) The Council may redelegate to any agency,

instrumentality or official of the United States any

authority under this Order, and may, in administering

this Order, utilize the services of any other agencies,

Federal or State, as may be available and appropriate.

each Executive department or agency is authorized

and directed, consistent with law, to furnish the Coun-

cil with available information which the Council may

require in the performance of its functions.

(d) All Executive departments and agencies shall

furnish such necessary assistance as may be author-

ized by section 214 of the Act of May 3, 1945 (59 Stat.

134; 31 U.S.C. 691).

Section. 5. The Council may require the main-

tenance of appropriate records or other evidence which

are necessary in carrying out the provisions of this

Order, and may require any person to maintain and

produce for examination such records or other evi-

dence, in such form as it shall require, concerning

prices, rents, wages, and salaries and all related mat-

A-48

ters. The Council may make such exemptions from any

requirement otherwise imposed as are consistent with

the purposes of this Order. Any type of record or

evidence required under regulations issued under this

Order shall be retained for such period as the Council

may prescribe.

Sec. 6. The expenses of the Council shall be paid

from such funds of the Treasury Department as may

be available therefor.

Sec. 7. (a) Whoever willfully violates this Order

or any order or regulation issued under author-

ity of this Order shall be fined not more than $5,000

for each such violation.

(b) The Council shall in its discretion request the

Department of Justice to bring actions for injunctions

authorized under Section 205 of the Economic Stabili-

zation Act of 1970 whenever it appears to the Council

that any person has engaged, is engaged, or is about

to engage in any acts or practices constituting a viola-

tion of any regulation or order issued pursuant to this

Order.

RICHARD NIXON

THE WHITE Howse,

August 15, 1971.

0 OR te i Se erm at ee i rt

4-49

EXCERPTS FROM STIPULATION OF FACTS

17.

At the time of the issuance of Executive Order

No. 11615, neither the President nor any delegate

acting on his behalf gave general notice of the in-

tention to issue the Executive Order in the Federal

cluding defendant) an opportunity to submit written

data, views or arguments, with reference to the Execu-

tive Order, nor conducted a hearing with respect

thereto, nor made any finding that such notice and

public procedure were impracticable, unnecessary or

contrary to the public interest.

25.

(a) On August 24, 1971, the Director of OEP is-

sued Circular No. 1 as a guideline which provided in

pertinent part:

The ceiling price for the sale of a commodity

or service is the highest price at which a sell-

er delivered or furnished during the base

period such commodity or service to pur-

chasers in a substantial number of transac-

tions.... (36 Fed. Reg. 16586)

(b) On September 11, 1971, the Directors of the

OEP issued Circular No. 11 as a guideline which pro-

vided in pertinent part:

“The freeze applies to prices of advance

sale of tickets for sporting events occurring

during the freeze.” (36 Fed. Reg. 18315).

A-50

itself, nor any delegate of either of them, gave any

general notice of an intention to issue the portion of

Circular No. 11 quoted above in the Federal Register

or otherwise, nor gave interested persons (including

the Atianta Falcons) an opportunity to submit written

data, views or arguments with respect thereto, nor

did they make any finding at that time that such no-

tice and public procedure were impracticable, unneces-

sary or contrary to the public interest.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.