SEC v. Chenery Corp.
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| SEC v. CHENERY | ||||||||||
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| Decided June 23, 1947 |
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| Holding | ||||||||||
| Court membership | ||||||||||
| Chief Justice: Fred M. Vinson Associate Justices: Hugo Black, Stanley Forman Reed, Felix Frankfurter, William O. Douglas, Robert H. Jackson, Harold Hitz Burton, Tom C. Clark, Sherman Minton |
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| Case opinions | ||||||||||
| Laws applied | ||||||||||
| Administrative Procedure Act | ||||||||||
This case, often cited in Administrative Law involved a Federal Water Company accused of illegal stock manipulation. The first time this case made it to the Supreme Court (Chenery I), the Court held that the acts committed by the company did not amount to common law fraud and therefore the SEC's stated rationale for the charges could not be sustained.
On remand the SEC charged the company's officials on different grounds, under its own enabling act. The court used the case as an opportunity to discuss the merits of policy making through adjudication and retroactive rule-making.
The court stated that policy making through administrative adjudication is not necessarily wrong and may be desirable. Adjudication is more flexible than rule-making and allows policy to be made on an ad hoc basis. This flexibility is important where there may be unforeseeable problems, inexperience with the problem, or the problem is so specialized in varied that a general rule would be impossible. Therefore, the choice between rule-making and adjudication lies in the informed discretion of the agency.
However, this particular adjudication might be the application of impermissible retroactivity in interpreting the statute because the SEC seems to have decided, based on their actions in Chenery I, after the fact that the officers actions were against the law. But, the type of retroactivity in this case was permissible.
The Court reversed the court of appeals on these grounds.
Justice Douglas dissented because he felt that the interpretation of its statute given by SEC was not within its power.
Justice Jackson dissented because he felt that the basis for Chenery I was that the SEC must do rule-making before it applies this principal of law. He felt that the change in opinion was due to the change in a composition of the Court. He also argued that deference to the agency's expertise made no sense where the agency had never seen the particular problem before.
