United States v. Carlo Bianchi & Company, Inc.

PETITIONER:United States
RESPONDENT:Carlo Bianchi & Company, Inc.
LOCATION:Beaumont Mills

DOCKET NO.: 529
DECIDED BY: Warren Court (1962-1965)
LOWER COURT:

CITATION: 373 US 709 (1963)
ARGUED: Apr 29, 1963
DECIDED: Jun 03, 1963

Facts of the case

Question

Audio Transcription for Oral Argument – April 29, 1963 in United States v. Carlo Bianchi & Company, Inc.

Earl Warren:

[Inaudible]

David L. Rose:

Mr. Chief Justice, may it please the Court.

This case presents a narrow question of statutory interpretation, but a question which is fundamental to the process of resolving disputes under government contracts.

In this case, the Court of Claims has reversed administrative findings of fact as not supported by substantial evidence on the basis of evidence, which had never been presented to the administrative decision maker.

The administrative findings were made pursuant to the Standard Disputes Clause of government contracts, which in effect charges certain government officials with resolving factual disputes arising under the contract and it makes their decisions final.

The Wunderlich Act, which is before us here today, provides for judicial review of such decisions for arbitrariness fraud or lack of substantial evidence.

And the question presented therefore is whether, as the Court of Claims has held, a Court reviewing such findings is free to upset them as not being supported by substantial evidence or as being arbitrary on the basis of evidence, which has never been presented to the administrative decision maker.

It is of course our position that judicial review under the Wunderlich Act, like judicial review in most other instances, is to be made only on the administrative record and not on the basis of evidence, which is never been before the administrative decision maker.

I’ll note that our position is supported by the decision of every District Court and Court of Appeals, which has passed on this issue.

[Inaudible]

David L. Rose:

Well, I would say that at least one has clearly.

I think that two others have clearly indicated that this is the view they take.

In order to set the issue in its context, I should like briefly to recall to the Court the facts which give rise to it.

In July 1946, the respondent was a successful bidder on a contract to build an earthen dam in Upper New York State.

Included in the contract was the construction of certain outlet works, including a tunnel, which was to be 710 feet in length and which was to be aligned with concrete.

The tunnel was designed to carry water from in front of the dam to the stream below it, it was not designed for the people to go through.

The tunnel was to be constructed through rock and was to be free standing that is, it was designed on the premise that the rock was sufficiently stable to allow the tunnel to stand without any permanent ceiling supports, except for a short period — short piece at either end of 50 feet in length.

By the end of March 1947, a subcontractor had dug the tunnel through or, hold the tunnel out to use the engineering terminology, without ceiling supports of any kind either permanent or temporary.

Before placing the concrete however, a factual dispute arose.

The respondent took the position that the underground rock was materially different from that which have been shown in this specifications in borings and that permanent steel supports were necessary in order to hold the tunnel up and that they should be installed at the government’s expense before placing the concrete.

It sought the payment under Article 4 of the contract, which has to do with conditions materially different from those shown in the specifications are normally to be expected.

The contracting officer denied the respondent’s claim on the ground that the rock was in fact sufficiently stable for a free standing tunnel, and that it was of a kind which was to be expected from the borings in specifications.

Pursuant to the disputes clause, respondent appealed to the Corps of Engineers Claims and Appeals Board, which held a full trial type hearing where each side introduced all the evidence it desired to introduce.

Respondent produced nine witnesses there, but introduced the testimony of only four, including engineers and a geologist.

The government introduced the testimony of three witness, all of whom had personal knowledge of the fact and whose testimony fully supported the government’s position.

I think the geologist’s testimony on each side is the critical testimony before the Board.

The record before the Board was in our view, a classic instance of sharply conflicting testimony by lay and expert witnesses who had personal knowledge of the facts and where the finder of fact could reasonably find either way.

The Board found that the underground rock was of a kind to be expected and that permanent tunnel protection was unnecessary, thereby sustaining the contracting officer’s decision.

The respondent filed a suit in the Court of Claims approximately six years later.

Potter Stewart:

Any statute limitation?

David L. Rose:

Yes, it is six years, Your Honor.

I think they just came under the limit.

I should add that the hearing before the Board was conducted, three years prior to the Wunderlich Act and that the suit was filed here approximately a few months after the Wunderlich Act.

The testimony was heard before a Commissioner of the Court of Claims who took evidence de novo over the strenuous objections of Government Counsel, evidence which had never been presented to the Board.

The respondent introduced testimony of approximately 15 witnesses and approximately six or seven times as many exhibits as it had in the administrative hearing.

The Commissioner made independent findings, principally on the basis of the evidence, which had not previously been presented on the basis of the evidence, which was not before the Board, and the Court of Claims overturned the Board’s findings and awarded judgment to the respondent of approximately $150,000.

It did not find that the Board’s findings where arbitrary or unsupported by substantial evidence on the basis of the evidence before the Board, but it held that it was entitled to receive evidence de novo, which had never been before the Board and that on the basis of all the evidence, including the evidence received de novo, the Board’s decision was not supported by substantial evidence.

[Inaudible]

David L. Rose:

No, I think first, Your Honor, they read the statute as authorizing the reception of evidence de novo, although the standard of review is substantial evidence.

We had then —

Potter Stewart:

The government put in evidence de novo as well, did it not?

David L. Rose:

Yes, only after making the objections and after its objections had been overruled.

Potter Stewart:

Yes.

David L. Rose:

And there was no assertion here of any waiver of the government’s position.

We then have the principal issue here, which is whether, as the Court of Claims has held, a reviewing Court may overturn factual findings on the basis of evidence never before it or as the Courts of Appeals and District Courts have held, review is limited to the evidence, which was before the Administrative Board that is to the administrative record.

Potter Stewart:

I have a preliminary argument — difficulty with your argument.

You’ve used the word repeatedly reviewing Court and review.

I suppose or you tell me if I’m wrong, if jurisdiction in the Court of Claims wasn’t based in this case on its — on the general jurisdiction statute, which I think is 28 United States Code, Section 1491(4).

David L. Rose:

Yes.

Potter Stewart:

Which says the Court of Claims shall have jurisdiction to render judgment upon any claim against the United States founded upon any express or implied contract to the United States, is that it?

David L. Rose:

Yes, I think that’s the jurisdictional grant, Your Honor, but I think the Wunderlich Act itself, which is incidentally entitled an act to provide review is specifically was specifically designed with that in mind, that is to provide, to authorize judicial review in spite of the provision of the Standards Disputes Clause, which says that the administrative determination is to be final.

Potter Stewart:

Well, don’t we have to kind of begin, at least we have to kind of begin with the general function and power of the Court of Claims under that statute.

The way that language reads, it’s not a Reviewing Court, it’s not an Appellate Court, it’s the Trial Court.

David L. Rose:

Well that’s right Your Honor, just as the District Court as the Trial Court and has jurisdiction under the Tucker Act under 1346 (a) (2).

Potter Stewart:

Yes.

David L. Rose:

Each jurisdictional statute gives the Court authority to hear disputes, cases arising under contracts.

Now if there were no Disputes Clause in the contract, then each Court could proceed to trial in the normal course.

This Court, in a line of decisions going back to 1878, has upheld Disputes Clauses such as this one in government contracts.

And in the Wunderlich decision, which was in 1951, the Court held if there is no judicial review except in the cases of fraud and bad faith.

So that — although the Wunderlich Act is not a jurisdictional grant, it does provide that the Standard Disputes Clause provision will not be read to limit or prevent judicial review.

Potter Stewart:

You say — it’s not only it’s not a jurisdictional grant, it’s a withdrawal of jurisdiction I suppose you say —

David L. Rose:

No I think —

Potter Stewart:

— withdrawal of the general jurisdiction conferred by 28 U.S.C 1491(4).

David L. Rose:

The Court has jurisdiction and under that — with that jurisdiction Your Honor, in the Wunderlich case, this Court held that there was no judicial review before the passage of the Wunderlich Act, there was no judicial review except in cases of fraud or bad faith, except to that extent there is judicial review, but as in other cases of arbitration there is no review.

So, that this statute is putting back to the Courts both the District Courts and the Court of Claims the authority to review in spite of the agreement of the parties that the decision was to be final and conclusive.

[Inaudible]

David L. Rose:

No, I think they would not, because the statute itself —

[Inaudible]

David L. Rose:

Yes, the statute says, “Any such decision shall be final and conclusive, unless the same is fraudulent, capricious, arbitrary or so grossly erroneous as necessarily to imply bad faith, or is not supported by substantial evidence.”

So, here we have both the statute and the contract, which makes the decision final except in these limited circumstances.

[Inaudible]

David L. Rose:

No, my argument is divided into three parts basically.

I’m going to discuss the language of the act, legislative history, and the purposes of the Disputes Clause and since this is a question of legislative intent, I’d like to turn first to the most authoritative source of that intent, namely the language of the statute, which I’ve just recited as found in pages on two and three of our brief.

What we understand that statute to mean is this simply, that the administrative decision is to be final and conclusive, if it was honestly made and if it was reasonable.

I think the terms that Congress has used here are the subtle and traditional terms for a review of factual findings both by the administrative bodies and it’s quite an analogous to the situation of the Court in a jury case.

The term fraudulent is merely preserving the pre-Wunderlich situation and it’s not involved in this case.

The terms arbitrary and capricious are antonyms of course for the term reasonable.

Similarly, a decision cannot be so grossly erroneous as necessarily to imply bad faith, if it’s a reasonable decision, because if a reasonable man could make it, then there is no need or no possibility indeed of inferring bad faith.

And lastly, the term supported by substantial evidence as the House Report, which reported the final bill, which became the Wunderlich Act stated quoting this Court’s decision in the Consolidated Edison Company Case, “the term substantial evidence means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.”

In other words, evidence that a reasonable person could accept.

As we see it then, Congress in this traditional and subtle language has said that the administrative resolution of factual disputes is binding if it was honestly made and if it’s reasonable and the Court’s function therefore, as we understand it, is limited to seeing to it that the adjudicator, the administrative officials acted honestly and reasonably and their review is limited to that scope.

Potter Stewart:

Another — a little difficulty I have is your repeated use of administrative agency finding, the administrative process and so on.

This is all, but here is a contract between two contracting parties and here is the so-called administrative finding and the finding by one of the parties to the contract, it’s a little different from a disinterested jury, isn’t it?

David L. Rose:

It is Your Honor, but that is what the parties contracted to do and indeed in the Martinsburg railroad case, we have the same situation where a railroad entered into a contract of this kind with a private contractor and named its Chief Engineer as the factual arbiter.

And as I have indicated, both this Court in a line of decisions going back to 1878 has approved this kind of a clause and Congress indeed by the passage of the act here in making such decisions final and conclusive has put its stamp of approval on it too.

Arthur J. Goldberg:

Well, Congress did not approve the clause [Inaudible]

David L. Rose:

Well, with that qualification, yes Your Honor.

I think that’s — so the Standard Disputes Clause in this form was before Congress at the time of the passage of the act.

Arthur J. Goldberg:

[Inaudible]

David L. Rose:

Right.

Arthur J. Goldberg:

[Inaudible]

David L. Rose:

Precisely.

Potter Stewart:

So you both agree, both you and your adversary agree that the Disputes Clause doesn’t mean what it says.

The only question is how much —

David L. Rose:

Review —

Potter Stewart:

Less does it mean, and what it actually does —

David L. Rose:

That’s right.

Well, we think it means that it’s final if it’s a reasonable decision.

Potter Stewart:

Yeah, but that isn’t what it says?

David L. Rose:

No, that’s quite right.

And since the Court’s function is limited as we understand it to determining whether the Board acted reasonably, we think it’s quite apparent from the ordinary use of language that you can’t go beyond the evidence, which was before the Board.

If the term is arbitrary, a decision cannot be condemned as being arbitrary or capricious on the basis of evidence, which was never before the decision maker.

And similarly, the term so grossly erroneous is necessary to imply bad faith, which is a term found in the decisions of this Court prior to the Wunderlich Act.

This Court in the Ripley case, Ripley versus United States in 220 U.S, 222 U.S and 223 U.S said that in substance that you can’t condemned and overturn this kind of administrative decision, except on the basis of facts known to the decision maker.

And lastly, the term substantial —

Byron R. White:

[Inaudible]

David L. Rose:

That’s right.

Byron R. White:

[Inaudible]

David L. Rose:

Board.

Byron R. White:

[Inaudible]

David L. Rose:

That’s correct.

Byron R. White:

[Inaudible]

David L. Rose:

The prevailing view in the Court of Claims was that there was a review for arbitrary —

Byron R. White:

[Inaudible]

David L. Rose:

I don’t think so Your Honor.

I think the Needles case, which we cite in the Dean case or Young case, indicate that the Court of Claims could not base its decision on evidence, which was not before the decision maker.

At any rate, this Court in the Ripley case, which I have just referred to made that quite clear.

There are three cases, three decisions in the same case there, where this Court sent the case back to the Court of Claims to ascertain what the decision maker knew.

And since that — that was the only basis in which the decision could be overturned, on the basis of what the decision maker knew, on the basis of evidence that was before him.

And therefore, as we understand it, the review was for reasonableness in factual findings.

David L. Rose:

And if it is a review for reasonableness, the evidence which was never before the decision maker can have no bearing on that review, because the decision can’t be condemned as unreasonable on the basis of material that was never before the decision maker.

Now the term substantial evidence is of course by now deeply routed in our jurisprudence both in decisions and statutes.

And we think it is quite significant that in every statute in which Congress has passed providing for such review, judicial review for substantial evidence, it has met judicial review upon the administrative record.

We collect some of those statutes in pages 24 and 25 of our brief.

And indeed in every statute where Congress has provided for judicial review without setting forth a standard, it has been held by this Court and it has been held and Congress has gone along, that review was on the administrative record.

As Mr. Justice Brandeis, said speaking for Unanimous Court, a proceeding under the Packers and Stockyards Act is a judicial review, it’s not a trial de novo, this is page 26 of our brief.

The validity of an order of the secretary therefore like that of an order of the Interstate Commerce Commission must be determined upon the record of the proceedings before him.

So that there was a subtle meaning to this term substantial evidence and the other terms are arbitrary, capricious before Congress passed this Act.

Arthur J. Goldberg:

[Inaudible]

David L. Rose:

Absolutely Your Honor, indeed the title of the Act is an Act to provide review, meaning judicial review.

Well, that brings us then to the legislative history of the Act.

The Court of Claims has indeed recognized the logical weakness in its position, but has said in effect that this is what Congress intended and therefore we have to go along.

It’s our position that the legislative history shows not only that Congress intended to use these terms, these subtle terms in their traditional and subtle meaning to provide for judicial review on the administrative record, but also that Congress added the standard of substantial evidence specifically to require each side to present it’s case fully and openly to the administrative officers or Board.

And that its intent is only consistent therefore with a view that substantial evidence means substantial evidence before the decision maker.

That Congress used the terms in their traditional and subtle meaning, is clear from the House Report the report on the final bill.

On page four of that report there is reference to the terms arbitrary and capricious and Congress notes that these are the terms that’s used in the Administrative Procedure Act, and also refers to the Ripley case to which I have just adverted and where this Court said, a Court of Claims decision could be upset only in the basis of facts known to the decision maker.

Similarly, the term substantial evidence Congress noted was included in the Administrative Procedure Act where of course review for substantial evidence is on the administrative record.

And Congress referred to this Court’s decision in the consolidated Edison case, which was a case under the National Labor Relations Act where again review is on the administrative record.

So we think it is clear that Congress intended to use these terms, knew it was using terms that had a subtle meaning and knew what that meaning was.

Now, the main purpose of the Wunderlich Act, I think as everyone will concede was to provide or restore judicial review in situations other than fraud and bad faith, but there is another purpose and I would like to direct the Court’s attention to that.

In the last two pages of our brief, pages 59 and 60, we quote from the House Report and I’ll summarize, it’s at the bottom of pages 59 and 60, and I’ll summarize the beginning of that.

It had come to the attention of Congress that some of the administrative hearings were not full hearings in that the records were inadequate and Congress sought to change that situation and how, what instrument that it used to change the situations, the substantial evidence test.

If you look at the last line of page 59, this is the House Report on the bill that was finally reported.

It is believed that if the standard of substantial evidence is adopted this condition will be corrected and the records of hearing officers will here after contain all the testimony and evidence upon which they have relied in making their decisions.

And Congress went on to say, this is in effect to require each party to present openly its side of the controversy and afford an opportunity of rebuttal.

Now Congress could use that term substantial evidence in order to effect this result, only if it understood the term substantial evidence to mean substantial evidence on the record, because if either side could withhold evidence from the Board and then introduce it in Court to sustain or upset the decision there would not be this necessity of introducing it’s case fully before the Board.

Potter Stewart:

This so called administrative agency doesn’t have any subpoena power, does it?

David L. Rose:

It has none Your Honor.

I should add though that the very authority cited by counsel for respondent indicates that in almost every instance that’s the article in — for practicing lawyer, in almost all cases the parties have been able to obtain the desired witnesses and documents.

Potter Stewart:

Is a transcript made and are the exhibits all preserved?

David L. Rose:

Yes I would say that in this instance counsel for petitioner, counsel for respondent excuse me, withdrew a number of the exhibits and these were hard to find six years later or about eight years later when the case came to trial, but all of the record was made, a transcript was taken, it’s reproduced verbatim in this record here.

Potter Stewart:

Is a transcript routinely made and preserved with the –?

David L. Rose:

Yes, upon the request there is a provision for summary before some of the agencies where counsel for each side agreeing that this is what the testimony was.

Earl Warren:

[Inaudible]

William H. Matthews:

Mr. Chief Justice, may it please the Court.

Government counsel hasn’t commented at all on the testimony of the witnesses before the congressional committees of the Senate and the House at the hearings in connection with this legislation.

We deem that’s very important to arrive at a fair interpretation of the provisions of this statute.

Now the main force behind this legislation was the construction industry and the representatives of that industry were very wrote up over the Wunderlich decision.

They were joined by the General Accounting Office who felt that their statutory authority had been taken away from them, the authority to adjust and settle claims by and against United States have been taken away from them by the Wunderlich decision and so they joined industry in an effort to obtain this legislation.

Now the only opposition to the legislation was the Department of Justice.

The industry witnesses have hailed the Wunderlich decision in strongest terms barring again and again from the dissenting opinions, the language used in the dissenting opinion in the Wunderlich decision.

The plea of the industry and all of this is on the record, was that they get back to the position that they were in prior to the Wunderlich decision and that the Court of Claims be permitted to exercise the same jurisdiction that it always had exercised over — in testing the decisions of these contracting agencies.

And their testimony is very clear that they interpreted the proposed legislation as doing just that.

The testimony of the many witnesses to this effect is referred to in our brief.

One of the leading Advocates of this legislation was the Associated General Contractors and their plea was that the Committee draft legislation that will grant the Courts, “Jurisdiction to hear determine and enter judgment against United States on any claims in which the Courts – in which the contractors will seek review.”

Now they act as a substantial evidence standard, be applied and that the Courts be authorized to render judgment, “On the evidence presented to the Court.”

The testimony of the General Accounting Office witness with respect to the proposed bill was and I quote that there should — “that they would be restored to the Courts and to the General Accounting Office, their present jurisdiction or their normal proper jurisdiction.”

The bill as finally enacted, adapted the language proposed by the General Accounting Office.

There really was no sponsor before the Congressional Committees for the government’s present position that review be restricted to the administrative record.

Congress was made fully aware of these standards applied by the Court of Claims in reviewing these contracting agency decisions.

They were informed that over a period of many years the standards arbitrary and capricious had been employed and that the Court of Claims had also recognized the substantial evidence rule.

Government counsel states here that pre-Wunderlich the standard was limited to fraud and bad faith.

In that connection may I read from the government’s petition for writ in this case.

At page 10, they say there is no doubt that Congress passed the Wunderlich statute in order to make certain that judicial review of an administrative decision under the disputes clause would also be available where the contractor establishes arbitrariness and capriciousness.

In this respect, Congress can be said simply to have codified the view many times by — reiterated by this Court prior to its decision in United States v. Wunderlich.

Congress was also, in this testimony taken at these hearings, fully appraised of the fact that the Court of Claims permitted the presentation of evidence in open court in testing these administrative decisions of these contracting agencies and that they had done so over a period of many, many years going back to 1911 in the Ripley decision.

And Congress was informed why it was so necessary for the contractors that the Court of Claims exercise jurisdiction in this manner, that this disputes clause was not a matter of negotiation between the contractor and the contracting officer, but neither had the authority to modify it or change it in anyway.

Congress was told to through the mouths of the witnesses that a Board composed of employees of the contracting agency was no adequate substitute for an impartial review by the Court so that it will be just as impartial as trying a case before a jury composed entirely of the contractors.

Congress was told about the inadequate hearing procedures afforded by these contracting agencies.

The fact that the contractor would go in and present their witnesses, they would be subjected to cross-examination.

William H. Matthews:

The Government would produce no witnesses of its own or in those cases where the government did produce witnesses, the Congress was informed that these Boards relied on ex-party statements, some of which were made by the very officials whose decisions where the subject matter of the appeal.

These contracting agencies had no statutory power to conduct a fair hearing, whether or not a hearing was afforded or whether a record was made less entirely in the discretion of the head of the department.

[Inaudible]

William H. Matthews:

If there had been no act, the contractors would still have had the right which they’ve always had under the Tucker Act to bring an original proceeding in the Court of Claims to test the decision of the contracting agency.

[Inaudible]

William H. Matthews:

In spite of the disputes clause for 50 years — 50 years, contractors have been permitted to go into the Court of Claims and test the administrative decisions whether those of a Board or whether in the — going back 50 years ago like in the Ripley case.

[Inaudible]

William H. Matthews:

Well the Wunderlich decision would have made, that’s the reason they needed the legislation as far as —

[Inaudible] absent the act?

William H. Matthews:

Absentee Act they had no adequate remedy at all.

[Inaudible]

William H. Matthews:

Despite of all the defeciencies in the hearing they had no adequate remedy in the Courts.

[Inaudible]

William H. Matthews:

But Congress gave them, but if you go to the report and the report itself is — everything in the report is grounded on the testimony of the witnesses who appeared before the Congressional Committee.

Now the very important —

[Inaudible]

William H. Matthews:

Sir?

[Inaudible]

William H. Matthews:

The Department of Justice defended the Wunderlich decision; that was it.

[Inaudible]

William H. Matthews:

That was the only — as far as the decision is concerned, but there was no testimony indicating a desire to change the usual procedures in the Court of Claims in applying the standards arbitrary and capricious that the standards that have been implied over a period of many, many years.

[Inaudible]

William H. Matthews:

That was the decision of the Department of Justice in substance.

Now, these Boards had no statutory powers, they hadn’t any power to administer an oath or to compel the attendance of witnesses or to compel the attendance of documents.

[Inaudible]

William H. Matthews:

I would say yes, judging from the actions taken by the Board.

[Inaudible]

William H. Matthews:

Well I’ll give you an illustration on that.

I’d like to refer to page 45 of the petitioner’s brief, where petitioner and this is in the present case, he makes the statement and I quote, “Since the Board normally adjourned referring to this Board hearing, at 5:00 PM the Board limited respondent’s presentation in order to allow the government time to present its case, citing record page 109.”

Now page 109 in the record will show that the limitation imposed on these two witnesses, the total time that they were to — had to testify was one hour.

William H. Matthews:

In the Court of Claims the same two witnesses, their testimony took almost a full day.

[Inaudible]

William H. Matthews:

But I would say that the counsel for the respondent didn’t object, but certainly the reason it seems to me to be obvious that he wouldn’t want to antagonize the Chairman of the Board.

[Inaudible]

William H. Matthews:

Well in this — before the Court of Claims there is 3,000 pages of testimony and before the Board I think there are 100 pages of testimony and there are about 100 pages of exhibits which — many of which are not included in this printed record.

[Inaudible]

William H. Matthews:

Well I would say that there have many, many times, there are many recurrent problems in connection with these hearings, because there is no power to subpoena the witnesses.

Take for example, and this is just one of many, an engineer, a resident engineer in charge of a project leaves the government.

He is an important witness, there is no adequate substitute for his testimony yet he refuses to testify.

The government can’t get him and the contractor can’t get him and there are many, many illustrations and that happens all the time.

And with respect to this improvement in the hearing procedures a witness who interpreted the proposed legislation as maintaining the usual procedures in the Court of Claims testified before the committee that with the addition of the substantial evidence rule, there would be marked improvement in these hearing procedures, which would be of great value to the contractors.

Now that certainly does — then the committee reported — the committee adopted this suggestion, even incorporated some of the language of the witness in their report, but it seems unlikely that the committee would use the material drawn from a testimony of a witness who interpreted the act as not restricting review from the administrative record and from that testimony draw a conclusion entirely different from that of the witness, of this same witness who testified with respect to the conduct of the proceedings and commenting on the substantial evidence rule, made reference to the Administrative Procedure Act to show that it had comparable substantive standards with a body of law interpreting them.

A like reference was made in the committee report to these substantive standards.

Now it seems clear that if the committee had intended to restrict review like in the Administrative Procedure Act, it would have at least made reference in the report to some of these procedural standards.

Without question I take it the power of Congress to do what the government claims it did.

William H. Matthews:

I don’t question the —

Don’t have any constitutional —

William H. Matthews:

I have no constitutional due process argument.

Now the petitioner counsel for government refers to statutes containing specified standards of review where review is restricted to the administrative record.

Now if Congress has intended to ask the Court of Claims of jurisdiction under the Tucker Act, it seems it would do exactly what all of these statutes do.

They provide procedural safeguards to conduct a fair and full hearing.

They all provide for the making of a record.

They grant the — they all grant the administrative agencies, the basic powers to conduct full and fair hearings, give them the subpoena, all the subpoena powers and the other powers necessary to do that.

And such procedural safeguards are also found in the statutes referred to by the government counsel without specified standards of review where review is restricted to the administrative record.

The government counsel seems to concede that a fair trial and a complete record is essential to test the decisions of the contracting agencies.

They make that admission in their brief.

Now in many instances it is impossible for several reasons.

In the first place, to paraphrase the language of Mr. Justice Jackson and his dissenting opinion in the Wunderlich decision, one who acts as a judge of his own department maybe influenced by his own loyalties and it is true there unconsciously at times an employee of department, loyalty to his department will influence his decision.

Now can these administrative irregularities be cured by a stay?

As indicated by the counsel for the petitioner, the Court of Claims has no power to remand to a contracting agency and in the case of United States against Jones, this Court made clear that the Court of Claims had no such power.

William H. Matthews:

And it certainly has no power to please the administrative agencies to assure that a full and fair hearing is granted.

We submit that the only fair interpretation of the statute is that Congress did not intend to change the usual procedures in the Court of Claims permitting the presentation of evidence de novo.

Now we submit that in the present case, the administrative irregularities committed by the Board, but wants the Court of Claims to render its decision on the basis of evidence presented de novo.

At the trial of this action before the Court of Claims, we established that the Board considered and relied on two documents, the contents of which were not made known to the respondent at the time of the Board hearing.

The principal document was a letter from the residential engineer in Baltimore to the Chief of Engineers of the Army, forwarding the contracting officer’s findings and all the appeal papers and this letter contained six pages of comments on the merits of the case and recommended that all of the claims be disallowed.

Mr. Matthews suppose the Court of Claims under this statute, was of the view that for some reason or other evidence which should have been taken or was — had not been presented, should have been heard by the contracting officer, could it send the case back to —

William H. Matthews:

It had no authority to — that was made clear in the case of the — in the Jones case, that the Court of Claims has no power to remand at all, to — they didn’t have any power to remand in that case to the —

Was that before or after the Wunderlich Act in John’s case?

William H. Matthews:

Well the Wunderlich Act certainly doesn’t give them any part.

I realize that, but it does change the —

William H. Matthews:

That was before the Wunderlich case.

It has changed.

William H. Matthews:

Before the Wunderlich yeah.

Before the Wunderlich.

William H. Matthews:

Yes.

[Inaudible] so much later.

William H. Matthews:

No it doesn’t.

Hugo L. Black:

[Inaudible]

William H. Matthews:

Well as far as the contractors are concerned, a great deals was accomplish by the Act Mr. Justice Black.

Hugo L. Black:

[Inaudible]

William H. Matthews:

As far as —

Hugo L. Black:

[Inaudible]

William H. Matthews:

As far as the determination by the Board it had no effect, but it did — it took — the Act took away this absolute power that invested in this Board which was just composed of employees of the other party to the contract.

Hugo L. Black:

[Inaudible]

William H. Matthews:

Well it has the same effect, except that the — they’d have to apply the standards and they’d apply them in the way that they always applied them before.

Hugo L. Black:

[Inaudible]

William H. Matthews:

Well after actually the Wunderlich, before the — after the Wunderlich decision the contractor had no remedy at all practically in the Court of Claims, because it had to prove not only fraud, but conscious fraud.

I mean fraud of conscious wrong doing.

Hugo L. Black:

Did he have it before [Inaudible]

William H. Matthews:

Well, and again I read a portion of the government’s petition there.

William H. Matthews:

It seems — I think that prior to the Wunderlich decision, the standards of arbitrary and capricious were employed which gave the contractor more of a remedy than just a strict standard of fraud.

Hugo L. Black:

[Inaudible]

William H. Matthews:

Well that was held in the cases — in Kleeberg case and other cases, the Gleason case and other case decided by the government in their petition.

Hugo L. Black:

[Inaudible] the Court of claims nevertheless had power to [Inaudible]

William H. Matthews:

I think that’s correct Mr. Chief — Mr. Justice Black but the Congress wasn’t changed — showed no intent whatsoever to change the usual procedures and they were apprised of these procedures.

And they felt that the contract —

Hugo L. Black:

[Inaudible]

William H. Matthews:

Well they knew that the nature of the remedy afforded in the Court of Claims and they extended the — they broadened the standard from fraud to arbitrary and capricious and not supported —

Hugo L. Black:

[Inaudible]

William H. Matthews:

They reversed the Court of Claims in the Mormon case.

Hugo L. Black:

[Inaudible]

William H. Matthews:

I would call the —

Hugo L. Black:

[Inaudible]

William H. Matthews:

I don’t go quite that far Mr. Justice Black.

I say it’s admissible in evidence.

It’s admissible in evidence and it carries with it a very strong presumption and I just read in answer to your question what the Court of Claim said in the Needles case which was before this Wunderlich Act and this the test they applied, this is on page 11 of our brief.

“If this Court is satisfied that no reasonable man could have determined the dispute upon all the relevant facts and data as the Administrative Officer did, then the Court is justified in inferring as a fact that the decision was not made impartially or in good faith.”

In other words this standard, this was decided before the Wunderlich, I mean before Wunderlich Act.

Hugo L. Black:

How long?

William H. Matthews:

It’s 101 Court of Claims, that must have been several years before wouldn’t you say.

Hugo L. Black:

[Inaudible]

William H. Matthews:

That I think was after Mormon.

Hugo L. Black:

[Inaudible]

William H. Matthews:

And I think this was before Mormon.

Hugo L. Black:

[Inaudible]

William H. Matthews:

I think the Court of Claims has more rigidly enforced these standards in the last — since the Wunderlich Act or since the Wunderlich decision.

And then, I refer on page 10 to the — I mean I just mention one thing.

I want to take exception and strong exception to the request here by Government Counsel for this Court to pass on the sufficiency of the evidence before the Board and it’s my understanding that, that has been their request.

They’re asking this Court to do so and I refer in that connection to footnote 20 — footnote 1 of page 20 of the Government’s brief, where they say there is no issue before this Court as to the vein of the facts, before the — and that the government’s petition solely on the important legal question whether the Court of Claims was restricted to the administrative record.

That footnote completely misled us and we therefore thought we shouldn’t burden this Court with this wrong statement of facts about — the statement of facts of what transpired at the Board hearing.

William H. Matthews:

So there is a record here, substantial record and it’s unlike any case that’s I’m familiar with where the Court has passed on the sufficiency of the evidence below.

But as this Court feels that it’s before the Court why we trusted we will be permitted to file a statement of facts before the Board.

I don’t feel — I think it’s clear that the government has made it clear in their brief that they were going to request this Court to pass on the sufficiency of the evidence.

Hugo L. Black:

[Inaudible]

William H. Matthews:

I have referred to it.

I’m very familiar with it Mr. Justice Black.

Hugo L. Black:

[Inaudible]

William H. Matthews:

That was one of the points that the Court raised in it’s opinion, and I think there is a lot substance to that.

Now take for example our own case, assuming that the Board had given us a decision in our favor, we had an issue that the Boards have no authority whatsoever to determine liability for unliquidated damages, so that in our case, we were seeking damages for delay.

The delay was an issue before the Board.

If the Board had rendered a decision in our favor, we would have had to bring a suit in the Court of Claims and claim for damages arising out of the same identical facts that our claim for changed conditions and adjustments in the contract, which were all within the scope of the contract, that the Board has authority to determine, so we get X dollars before the Board.

And going to the Court of Claims, we have two suites — a separate suite.

Hugo L. Black:

[Inaudible]

William H. Matthews:

And furthermore there is this point — as I pointed out in one of the amicus brief submitted here, the government has a right to counterclaim.

They have to start if they want a counterclaim.

They have to start an original — I mean how you can counterclaim against something they started — that they usually counterclaimed as they have to in the Court of Claims.

Hugo L. Black:

[Inaudible]

William H. Matthews:

I say no attention — I don’t say no attention should be paid to it, because they give a great deal of weight to the — it seems to me from the Needles case and other cases that the Court of Claims has given a great deal of weight to the decision of the Board, and they apply the same rule — they apply the substantial evidence rule as indicated in the committee report.

Hugo L. Black:

[Inaudible]

William H. Matthews:

May I illustrate it this way just by giving one answer.

In the 15 years prior, this in the record of the hearings, in the 15 years prior to the Wunderlich decision, there are only 48 cases out of thousands and hundred — apparently, thousands and thousands that went to the Court of Claims under the disputes clause and of those 48 cases, only 16 where the Board decisions were reversed.

They only had about three a year, but it’s vital.

The important part of it is the contracting officer and even back at that level, this is all under testimony, knows that his decision isn’t going to be final as soon as it reaches a level of the head of department that sometime a Court can look at it and it makes a fair deal between the government and the contractor.

Hugo L. Black:

[Inaudible]

William H. Matthews:

Yes Mr. Justice Black.

Earl Warren:

Mr. Rose?

David L. Rose:

I should like to make two points in the time allowed to me.

The first is that I would agree that the association of General Contractors of America was a moving force in the Wunderlich Act.

Page 29 of the senate hearings, this is the review that they sought.

The position of the association as we believe that any decision should be subject to judiciary review in order to guarantee that such decision is reasonable, made with due regards to the rights of both contracting parties, and this is a key part, and supported by the evidence upon which the decision was based, and that is what they sought and that we submit as what they got, when they got the substantial evidence test.

David L. Rose:

Mr. Gaskins who was a contractor representative and one of the leading spokesman for the contractors when asked what kind of review it would be in Court, said “It will be an appellate review.”

Now the term appellate review to me, means review on the record and that is precisely what we contend here.

Hugo L. Black:

[Inaudible]

David L. Rose:

They can suspend their proceedings Your Honor, just as they do in the ICC case, the Pennsylvania Railroad case that we cite, suspend their proceedings with an indication that that they want the record rectified and we cite — I see absolutely no reason why the same thing couldn’t be done here at this Court in Pennsylvania railroad case approved that Court of Claims procedure in ICC cases.

Now, I should like to make this point at the end.

The purpose of the disputes clause is to provide an expert an inexpensive forum for the quick resolution of factual disputes.

This court has approved the disputes clause and Congress in the very passage of the Wunderlich Act approved it subject to judicial review for substantial evidence.

The taking of evidence de novo frustrates that purpose in two basic ways.

It makes the resolution of factual disputes both expensive and time consuming.

Here we have 17 years that this dispute has been going on whereas the dispute before the Board was over an year-and-a-half, and the tremendous expense of two trials on the same issue of liability the — whereas one hearing before the Board, there were three hearings in three separate cities San Francisco, Washington and Boston in the Court of Claims.

There is a tremendous expense involved and a tremendous duplication of effort.

Our opposition will eliminate one whole trial type hearing and therefore accord with the original intent, which was to provide an expeditious and inexpensive forum.

William J. Brennan, Jr.:

[Inaudible]

David L. Rose:

Absolutely if there was —

William J. Brennan, Jr.:

[Inaudible]

David L. Rose:

I would say Your Honor, where the contractor has so clearly established his case in the evidence before the Board, that there is no reasonable mind could come to a contrary conclusion, then the Court of Claims could enter judgment.

William J. Brennan, Jr.:

[Inaudible]

David L. Rose:

Well, that is —

William J. Brennan, Jr.:

[Inaudible]

David L. Rose:

Well, in our view, the Congress by the inclusion of the substantial evidence test clearly intended that there should be a record made and that’s what the —

Byron R. White:

[Inaudible]

David L. Rose:

Well, I think they should suspend proceedings and have a record made.

Byron R. White:

[Inaudible]

David L. Rose:

Well —

Byron R. White:

[Inaudible]

David L. Rose:

Well, that would still not affect the case that we have here.

I would think that’s a possibility Your Honor.

Byron R. White:

[Inaudible]

David L. Rose:

Well, in the extreme case where there is no record, this would be a possibility Your Honor.

I would indicate that although there is no express power to remand, there is this power to suspend and there would be the sanction of imposing judgment.

Byron R. White:

[Inaudible]

David L. Rose:

Absolutely and there is no contention here that the contractor was denied an opportunity to present all the evidence he wished to before the Board.

The record is clear to that effect.

Hugo L. Black:

[Inaudible]

David L. Rose:

No, I think that the procedure followed in the Pennsylvania Railroad case could be followed here that indeed one of the purposes for judicial review was we think to cure the procedural defects as well as substantive defects, and in the primary jurisdiction cases the ones I’m referring to the Court of Claim is merely suspend its proceedings and the case does in fact go back to the administrative agency and the proceedings are held there, and I think that would be the comparable situation here with the sanction to impose judgment if the —

Hugo L. Black:

[Inaudible]

David L. Rose:

Yes, absolutely, and we think that one should be.

It’s our view that it should be remand, but either would cover the situation here and neither is before the Court here in our view, because here we think that each party was afforded full opportunity to present its evidence and there was ample evidence to support either conclusion before the Board.