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6 months to 1 year. Each day during which the failure or refusali to apply continues is made a separate offense.
Furthermore, commission merchants and brokers are already subject to the penalty of denial of trading privileges on contract markets, a severe penalty in itself. They are or can be made liable to criminal penalties directly for violation of any provision of the act or of any rule or regulation made thereunder.
I think it is fair to say that the license provisions in this bill are the most far-reaching that have ever been imposed by the Federal Government on any business or calling. I might have to admit that there are apparent exceptions to this broad statement in the licensing provisions in the Agriculture Adjustment Act and the already expired similar provisions in the N. I. R. A. But in neither case was the license system made compulsory, and they are both hedged about with restrictions that are not presented in this bill. In all cases that I know of where the license system has been imposed in the past by the Federal Government, there has been some very unusual reason, ordinarily of a technical character, such as in the case of radio stations where the license system seems necessary to avoid interference and to enable this country to fulfill its international obligations. It is, I think you will agree, the most drastic type of governmental regulation. Whatever may be the form it takes or the language of the statute, the net effect is usually that the licensee must come before a Government agency every so often, not to prove himself not guilty of a particular charge of which there is evidence against him but rather to prove himself innocent of any charge. It reverses the relation between the citizen and his Government and deprives him of almost all safeguards against arbitrary or overhasty action.
It puts the licensee in a position where he cannot safely question any regulation or order of the licensing authority, no matter how arbitrary or illegal, without running the hazard of first being put out of business, at least temporarily. A man is frequently willing to take the hazard of a fine or imprisonment to contest an invalid regulation, but is not usually willing to hazard the loss of his business. There is no way that I know of that he can be given adequate protection in the courts against an arbitrary or politically-minded licensing authority when the latter has this weapon to use. As I stated, I am not referring to any individual now in authority.
I shall enumerate particular objections to the licensing provisions in H. R. 3009 very briefly. Some of them have already been mentioned, at least my implication. They are as follows:
First. The function of deciding whether or not John Doe, a licensee, is guilty of a violation of a regulation and should lose his license, is a judicial function. It should not be exercised by the same administrative officer that exercises the executive function in making the investigation and instituting the prosecution, or that exercises the legislative function of making the rule that is alleged to have been violated.
These trials should be by an independent tribunal of some sort, either in court or in a separate body that does nothing but hear cases of this type. I cannot claim that I think that the form of commission now set up under the Grain Futures Act is ideal for
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this purpose. It consists of three Cabinet officers who cannot possibly give their time and attention in an adequate manner and who cannot possibly become familiar enough with the field to be called experts, and one of whom is the prosecutor. This judicial function really belongs to the courts.
If there are good reasons why it should not be placed there, it should be confided to a specialized court-call it a commission if you will—say, of three persons who do nothing but hear and decide cases.
Second. The licenses should not be for a limited period of time, but should be for indefinite periods, namely, until suspended or revoked. This bill plainly intends that disciplinary measures shall be taken by suspension or revocation and not by refusal to renew a license. Yet, you will find that wherever provision is made for a license that has to be renewed every so often, the tendency is for the licensing authority to use the application for renewal as the method of discipline rather than suspension or revocation proceedings. This has been done regularly by the Federal Radio Commission and the Federal Communications Commission seems to be following in the same path with regard to radio licenses. By this method the licensing authority is usually able to throw the burden of proof upon the applicant to prove himself innocent and to save itself the burden of alleging and proving specific charges. If the matter of annual license fees is important, it can be taken care of by a provision that failure to pay is likewise a ground for revocation or suspension.
Third. There is no provision for automatic or other type of stayorder pending an appeal to the courts so as to protect the licensee in the right to do business in the interim. An interruption of his business for any period of time will usually mean the distruction of it.
Fourth. The power given to the Secretary to require any and all information from applicant and licensees is too broad and is subject to no legislative standard or limitation.
Fifth. The causes for suspension and revocation are too broad. A license should not be revoked for isolated violations of trivial regulations. There should, I submit, be a requirement of a showing that the violations are substantial and persistent. Trivial violations should be punished by fine only.
Sixth. The practical effect of the language in the bill is to limit judicial review to questions of law and to make the Secretary's decision on issues of fact final and binding on the courts. I suggest that there should be a review on both the law and the facts. This can be done if provision to this effect is made for an appeal to the United States Court of Appeals of the District of Columbia. It is my impression, after some experience in attempts to get review of the decisions of administrative officials, that a review on questions of law only is worth next to nothing in 99 out of 100 cases and will not reach arbitrary decisions which are premised on erroneous findings of fact.
Seventh. The bill should, I submit, require that so far as possible the hearings take place in the district where the alleged offender, and probably all of the witnesses, reside. Under this bill it is possible to require that every hearing be held in Washington.
Mr. Chairman, I have not attempted to cover various defects in phraseology and of a comparatively less important character. The two witnesses who follow me will deal with the practical aspects of the matter.
The CHAIRMAN. Mr. Caldwell, the floor broker is simply the agent, as a rule, for the commission man, is he not? Mr. CALDWELL. I would say so; yes, sir.
The CHAIRMAN. His is technical work. He has to have technical knowledge ?
Mr. CALDWELL. Mr. Chairman, on the technical questions, the two witnesses who will follow me are floor brokers, and I would rather not attempt to answer that type of question.
The CHAIRMAN. Well, let me aproach it this way:
The floor broker has the privilege of trading for himself as well as executing customers' orders. Mr. CALDWELL. I understand so.
The CHAIRMAN. They stay on the floor of the exchange and execute the orders.
Mr. CALDWELL. Mr. Chairman, I must again warn you that I am only a lawyer, in Washington.
The CHAIRMAN. I will tell you that they do that, if you do not know it. I have learned it from others.
Now, being on the floor, executing customers' orders, they may engage in the scalping of orders, in executing their own orders, in connection with that customer's interest. Now, you do not think that ought to be permitted; you do not think the man ought to be an agent, or a trustee, or a representative of one man, and then engage in a business that conflicts with his interests? Mr. CALDWELL. Well, Mr. Chairman
The CHAIRMAN. As a general proposition, you would say that that is so, as a matter of law ?
Mr. CALDWELL. Let us assume that that should not happen. Well, I contend that that cannot be reached by license; it should be reached first by the exchange through their disciplinary methods, and that their own treatment is as effective, if not more effective, than this sort of legislation.
The CHAIRMAN. As you agree, you recognize the fact that a man should not represent conflicting interests? Mr. CALDWELL. That certainly is true. The CHAIRMAN. That is a general proposition of law that is sound. Now, you are a licensed lawyer, are you not? Mr. CALDWELL. I am.
The CHAIRMAN. And we license all lawyers and doctors? Mr. CALDWELL. Oh, yes; you license members of several of the professions, usually under certain regulations.
The CHAIRMAN. Now, do you not feel, as a lawyer, while you are representing a client, if you undertook to represent a conflicting interest that probably your license should be taken away from you or any lawyer?
Mr. CALDWELL. Well, that, of course, is true under certain limitations, under the canons of ethics, but there is this very great difference. A lawyer is more than a man engaged in a profitable business. He is an officer of the court. He is a quasi-public official, if you will.
The CHAIRMAN. It is a trust relationship.
The CHAIRMAN. That is true of any fiscal agency or any agency where a man has the authority to protect or promote his client's financial rights, is it not?
Mr. CALDWELL. Yes; but you will find, Mr. Chairman, that the discipline of the lawyer is hedged about by safeguards far greater than you will find in this bill.
The CHAIRMAN. This requires that he may be suspended, or his license revoked after notice and hearing in accordance with the procedure prescribed in paragraph (d) of section 6 of the original Grain Futures Act which has been in effect many years, and that provides that after the commission has decided to suspend a license—and the license feature is written all over the bill of ten years ago-after the license is suspended, then the one affected may appeal to the circuit court of appeals of the district in which he is doing business and have it reviewed by that court and then by the supreme court in the regular way.
Mr. CALDWELL. That appeal, as I stated, Mr. Chairman, is worth next to nothing in ninety-nine out of a hundred cases, because of the construction given by the courts to this language. Questions of review are restricted to questions of law. Their action is usually based upon a finding of fact; of course the courts could find that they were not supported by the evidence.
The CHAIRMAN. That is what all procedure is in appeal.
The CHAIRMAN. If the facts are not sufficient to sustain the judgment, then, of course, the courts may reverse the judgment. That is true in any court or anything that goes to the circuit court of appeals.
Mr. CALDWELL. There is a far greater difference between review of administrative acts and review of the lower court's action by an appellate court. The appellate court has very broad jurisdiction in upsetting the decisions of the lower courts on questions of fact.
The CHAIRMAN. Not only on questions of fact but of law, and if there is not sufficient evidence to sustain the judgment of the lower court, it may be set aside.
Mr. CALDWELL. That is an entirely different rule. In this type of rule, where there is one scintilla of evidence, that is usually found to be sufficient to support a finding.
The CHAIRMAN. Now, there has to be evidence which is sufficient to justify a decision of the court in each case.
Mr. CALDWELL. Not in the review of these administrative tribunals. The court will usually sustain the finding if there is a scintilla of evidence.
The CHAIRMAN. This is not exactly an administrative matter. They are given sort of a judicial function to this commission of three people. Mr. CALDWELL. Yes, sir.
The CHAIRMAN. And that was done, as I remember, and I was here when the original act was passed, because you people did not want one man to have this power, so in response to that suggestion of yours, or the suggestion of those who appeared at that time representing these institutions, they made a sort of court of three Cabinet officers to hear the appeal before these licenses could finally be taken away, and they exercise judicial functions almost like a trial court. You
could not run to and bother the courts every time a thing first came up, but it was safeguarded in every way by giving the right of appeal, as you would be from any judicial tribunal.
Mr. CALDWELL. Now, the theory of that is good, but in practice it has not worked, because the three men whom you did set up as such a board have not either the time nor
The CHAIRMAN (interposing). They have not abused it; they have not put you fellows out of business as you all thought, or alleged they would.
Mr. CALDWELL. Of course, my statement was in connection with taking that away and putting it all back into the hands of the Secretary of Agriculture.
Let me finish what I was saying about the lawyers. When a lawyer is up against losing his license, does he go before his prosecutor, or before the man making the rules by which he will lose his license? Not at all. He goes before a court, not his prosecutor, not the man who made the rules and has a fair trial. He gets all of the necessary safeguards.
The CHAIRMAN. He goes before a court that is established by the Congress or the State governing authority, just like this board was established by the National Government authority.
In each instance, the institution was established by a legislative fiat.
Mr. CALDWELL. The difference here is this, you are putting the commission men and the brokers before a judge who is also the prosecutor and the man who made the rules.
The CHAIRMAN. No; the Secretary of Agriculture is not prosecuting anybody. He is an administrative officer. Mr. CALDWELL. I am using that in a technical sense.
The CHAIRMAN. He has a man in his department who administers this and he does not do it. The Secretary is one who is supposed to be fair to everybody. Surely you would not say that a Cabinet officer is going around prosecuting folks.
Mr. CALDWELL. I am not referring to the present Secretary. I have heard of Cabinet officers who do that.
The CHAIRMAN. I think that he acts simply in a representative manner, as a representative or an agent. He ought to exercise good faith. If you put him out of business, if he violates the law, and goes and two-times somebody, the commission people ought to be glad to have him exposed.
Mr. CALDWELL. Here is the situation, Mr. Chairman: This man is alleged to have done something wrong. Somebody is sent out to make an investigation who is probably convinced that he has. He comes back and this same man is the prosecutor. He comes before these same subordinate officials of the department and they have already made up their minds, that he is probably guilty. That is not what constitutes a fair trial. What similar parallel of that do you find in connection with the revocation of the licenses of lawyers or any other proceeding of that character ?
The CHAIRMAN. Well, we might argue that all day. I wanted to call it to your attention.
Mr. ANDRESEN. Are you familiar with the packer and stockyards act?
Mr. CALDWELL. Superficially, only.