United States v. Carlo Bianchi and Company/Dissent Douglas

by William O. Douglas

United States Supreme Court

373 U.S. 709

United States  v.  Carlo Bianchi and Company

 Argued: April 29, 1963. --- Decided: June 3, 1963

Mr. Justice DOUGLAS, with whom Mr. Justice STEWART concurs, dissenting.

The petition to the Court of Claims alleged that changed subsurface conditions required respondent to install permanent tunnel protection by the use of steel arch ribs and steel liner plates, that that work delayed completion of the project and increased its cost, for which respondent should be reimbursed, and that the decision of the Corps of Engineers in rejecting the claim was 'caparicious' or 'arbitrary.'

The Wunderlich Act, 41 U.S.C. § 321, makes 'final and conclusive' any decision by a federal agency under customary disputes clauses in government contracts with several exceptions 'unless the same is fraudulent or capricious or arbitrary or so grossly erroneous as necessarily to imply bad faith, or is not supported by substantial evidence.'

I think the decision was 'capricious or arbitrary' because evidence was considered by the Appeals Board in making its decision which the claimant did not see and which he had no opportunity to refute. I therefore think that a de novo hearing was permissible before the Court of Claims.

The Board found that respondent at the start should have used temporary protection against fall-ins and that, had it done so, permanent tunnel protection would not have been required. In February 1948, before the hearing, a letter from the Acting District Engineer to the Chief of Engineers reported a conversation the Corps' resident engineer for this project had had with an expert from New York's Bureau of Mines. The only inference that could be drawn from that report was that the expert believed that the tunnel was in safe condition shortly after it was bored and that its later unsafe condition was caused by the fact that respondent 'had not had the foresight to gunite the exposed tunnel roof with cement as the excavation progressed to seal it against air slacking (sic) * * *.' Somehow, in a manner not disclosed by the record, this letter came into the hands of the Appeal Board and was considered by it before a decision was rendered on the appeal.

After the decision respondent learned of this expert's alleged statements and called him as a witness at the hearing before the Court of Claims, where he testified on the basis of his inspection that permanent, not temporary, protection against fall-ins was necessary from the beginning. As respects the guniting of the tunnel, one of the Government's own witnesses testified at the hearing before the Court of Claims that it would have served no useful purpose.

This issue-whether only temporary protection was needed-was one of the main issues in the case. When the agency making the decision relies on evidence that the claimant has no chance to refute, the hearing becomes infected with a procedure that lacks that fundamental fairness the citizen expects from his Government. Cf. Willner v. Committee on Character & Fitness, 373 U.S. 96, 83 S.Ct. 1175; Gonzales v. United States, 348 U.S. 407, 75 S.Ct. 409, 99 L.Ed. 467; Morgan v. United States, 304 U.S. 1, 58 S.Ct. 773, 82 L.Ed. 1129.

This irregularity points up what Judge Madden, writing for the Court of Claims, said in Volentine & Littleton, v. United States, 145 F.Supp. 952, 954, 136 Ct.Cl. 638, 641-642:

'* * * the so-called 'administrative record' is in many cases a mythical entity. There is no statutory provision for these administrative decisions or for any procedure in making them. The head of the department may make the decision on appeal personally or may entrust anyone else to make it for him. Whoever makes it has no power to put witnesses under oath or to compel the attendance of witnesses or the production of documents. There may or may not be a transcript of the oral testimony. The deciding officer may, and even in the departments maintaining the most formal procedures, does, search out and consult other documents which, it occurs to him, would be enlightening, and without regard to the presence or absence of the claimant.'

We are dealing, in other words, with subnormal administrative procedures. While the regulations governing hearings before the Corps of Engineers are published and provide many protective features (33 CFR § 210.4), they lack some of the safeguards normally accorded claimants in administrative proceedings. Thus they are specifically exempt from § 5 and from § 7 of the Administrative Procedure Act. 5 U.S.C. §§ 1004, 1006. The exemption from § 7 is highlighted in this case. That section provides in part:

'Every party shall have the right to present his case or defense by oral or documentary evidence, to submit rebuttal evidence, and to conduct such cross-examination as may be required for a full and true disclosure of the facts.' (Emphasis supplied.)

That provision, if applicable, would have made reliance by the Board on the ex parte hearsay statement of this outside expert reversible error. Lax procedural standards may at times do no harm. But where, as here, opinion evidence on the vital issue in the case was obtained ex parte and where that evidence is shown to have been false, the conclusion that the decision was 'capricious' or 'arbitrary' seems to me unavoidable.

A remand to the agency to determine whether the agency's decision is 'capricious' or 'arbitrary' seems obviously inappropriate, since it is the court, not the agency, that should determine that question. Since these administrative proceedings are exempt from the protective provisions of § 7 of the Administrative Procedure Act, there is no procedure whereby a contractor can determine whether the agency's decision rested on the testimony of 'faceless' or secret witnesses, as in this case. Like the case where a contractor seeks reformation of his contract (cf. Blake Constr. Co. v. United States, 111 U.S.App.D.C. 271, 296 F.2d 393), the only place he can get the hearing Congress intended him to have on whether the decision was 'capricious' or 'arbitrary' is in the courts.

Notes