Cole v. U.S. Dept. of Agriculture

• Decision Date: 13 September 1994
• Docket Number: No. 93-8230,93-8230
• Citation: 33 F.3d 1263
• Parties: Graham L. COLE, Plaintiff-Counter-Defendant, Appellee, v. UNITED STATES DEPARTMENT OF AGRICULTURE, Agricultural Stabilization and Conservation Service, Defendants-Counter-Claimants, Appellants.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1263

33 F.3d 1263

Graham L. COLE, Plaintiff-Counter-Defendant, Appellee, v. UNITED STATES DEPARTMENT OF AGRICULTURE, Agricultural Stabilization and Conservation Service Defendants-Counter-Claimants, Appellants.

No. 93-8230.

United States Court of Appeals Eleventh Circuit.

Sept. 13, 1994.

Edgar W. Ennis, Jr., U.S. Atty., H. Randolph Aderhold, Jr., Asst. U.S. Atty., Macon, GA, Barbara C. Biddle, Edward R. Cohen, Appellate Staff, Civ.Div., Dept. of Justice, Washington, DC, for appellants.

C. Saxby Chambliss, David R. Tyndall, Moultrie, GA, for appellee.

Appeal from the United States District Court for the Middle District of Georgia.

Before ANDERSON and DUBINA, Circuit Judges, and GODBOLD, Senior Circuit Judge.

ANDERSON, Circuit Judge:

The United States Department of Agriculture imposed monetary penalties on plaintiff-appellee Graham L. Cole, a tobacco dealer, under statutes and regulations governing the marketing of tobacco. After unsuccessfully challenging the penalties at the administrative level, Cole brought the present action in district court, eventually moving for summary judgment on the ground that the Secretary of Agriculture lacked specific statutory authority to impose a penalty for Cole's conduct. The district court agreed and granted Cole's motion. We are presented with an appeal from a grant of summary Although in the district court Cole asserted several factual defenses to the imposition of the penalty in this case, Cole's motion for summary judgment, and the district court's grant thereof, were based solely upon Cole's argument that there was no statutory authority for the imposition of this particular penalty. Cole concedes that the penalty assessed against him was imposed pursuant to a correct application of the regulations at issue; accordingly, Cole's argument is that there is no statutory authority for the regulations. The gist of Cole's argument is that the statute authorizes the imposition of a penalty when a producer sells over-quota tobacco to a dealer, but does not authorize the imposition of a penalty upon the next stage in the marketing process, i.e., upon the dealer's resale. Because the regulations focus on the second event (the dealer's resale), and because the penalty in the instant case was imposed upon dealer Cole on account of his resale, Cole argues that the regulation and the penalty imposed in this case are beyond statutory authority. In other words, Cole argues that the regulation imposes the penalty on the wrong event. In response, the government argues that proof of the second event triggers a presumption by virtue of which the first event is inferred; that is, that a regulatory presumption operates to sap Cole's argument of all of its force. A brief review of the statutory and regulatory framework is required for an understanding of this case.

judgment involving issues of law; therefore we review the district court's ruling de novo. Akins v. Snow, 922 F.2d 1558, 1560 (11th Cir.1991); Frio Ice, S.A. v. Sunfruit, Inc., 918 F.2d 154, 157 (11th Cir.1990).

STATUTORY AND REGULATORY FRAMEWORK

The marketing of tobacco is subject to government regulation pursuant to the Agricultural Adjustment Act of 1938 (codified as amended at 7 U.S.C. Sec. 1311 et seq.). In addition to statutory guidelines, the Act authorizes the Secretary of Agriculture to issue regulations for the enforcement of the marketing scheme. ¹ 7 U.S.C. Sec. 1375. The amount of tobacco marketed is controlled by a quota system that establishes an allotment to each tobacco-producing farm. The marketing of tobacco in excess of a producer's allotment is subject to a penalty, as specified in 7 U.S.C. Sec. 1314(a):

The marketing of ... any kind of tobacco in excess of the marketing quota for the farm on which the tobacco is produced ... shall be subject to a penalty of 75 per centum of the average market price ... for such kind of tobacco for the immediately preceding market year. Such penalty shall be paid by the person who acquired such tobacco from the producer but an amount equivalent to the penalty may be deducted by the buyer from the price paid to the producer

....

Thus, the statute provides that when a dealer or other purchaser buys tobacco from a producer in excess of the producer's allotment (over-quota tobacco), the purchaser must remit the penalty to the government; the purchaser may then recover the penalty from the producer. Cole acknowledges that he is a dealer who purchases tobacco from producers, among other sources. Any person who acquires over-quota tobacco--a broad class that includes dealers such as Cole--is subject to collection of a penalty under Section 1314(a).

The marketing scheme involves a regulatory record-keeping mechanism that accounts for all tobacco sales and purchases. The Department of Agriculture ("USDA") issues a marketing card to each producer. A marketing card shows the producer's total allotment or quota; every time the producer sells tobacco, the quantity of the sale is noted on the card. Purchasers from a producer should, and as a practical matter do, look at the producer's card at the time of each purchase; and thus, it is readily apparent to any purchaser when the producer has sold his The USDA's regulations also provide for penalties when dealers sell more tobacco than they have reported purchasing or fail to report the resale of tobacco. These regulations--the subject of this action--provide as follows: ³

quota of tobacco. In addition, parties who purchase tobacco (including dealers) are required to report the amount of each purchase to the USDA. Similarly, each purchaser is required to report each resale. Thus there is a reported accounting each time the ownership of a pound of tobacco changes. ²

(d) Dealer's tobacco. The flue-cured tobacco resales by a dealer which are in excess of his total prior flue-cured tobacco purchases shall be considered to be a marketing of excess tobacco and penalty thereon shall be due at the time the marketing takes place which results in the excess....

7 C.F.R. Sec. 725.94(d) (1989 ed.) (parenthetical material omitted).

(e) Resales not reported. Any resale of tobacco which is required to be reported by a warehouseman or dealer, but which is not so reported within the time and in the manner required, shall be considered to be a marketing of excess tobacco, unless and until such warehouseman or dealer furnishes a report of such resale which is acceptable to the State executive director. The penalty thereon shall be paid by the warehouseman or dealer who fails to make the report as required.

7 C.F.R. Sec. 725.94(e) (1989 ed.).

DISCUSSION

Accepting Cole's argument that the regulations impose the penalty on the wrong event, the district court concluded that the regulation went beyond the statutory authority. The flaw in the district court's analysis of this case was its failure to recognize that the relevant regulations create a rebuttable presumption that dealer Cole purchased over-quota tobacco from a producer. The district court never addressed the government's indication that the regulations impose a presumption. Nor did Cole address the presumption issue in the district court. On appeal, Cole acknowledges that the regulations create a presumption. Appellee's Br. at 13 n. 6, 19. ⁴ However, apparently failing to recognize the significance of that fact, Cole does not address the legal significance of the presumption or the legal principles governing regulatory presumptions.

The government contends that 7 C.F.R. Sec. 725.94(d) and (e) create a presumption: when a tobacco dealer sells more tobacco than he has reported buying, or when a dealer fails to report a resale of tobacco, it is presumed that the tobacco sold was over-quota tobacco, i.e., tobacco purchased from a producer in excess of that producer's quota. The relevance of this presumption is obvious. The presumed fact--purchase of over-quota tobacco from a producer--is the fact, Cole acknowledges, that triggers the statutory penalty. ⁵ Thus, if the presumed fact properly flows from the predicate fact--a dealer's resale of more tobacco than he reported buying or a dealer's failure to report a resale--then Cole's argument must fail.

As mentioned, Cole acknowledges for purposes of summary judgment that the fact to be presumed would authorize the penalty. Nor does Cole in this summary judgment posture contest the predicate fact, i.e., that in fact he did resell more tobacco than he reported purchasing or that he did fail to report resales. Thus, if the presumed fact properly flows from the predicate fact, it is clear that the penalty at issue was appropriately imposed.

Viewed in proper perspective, the true issue in this appeal is the validity of the regulatory presumption. The law is well established that presumptions may be established by administrative agencies, as long as there is a rational nexus between the proven facts and the presumed facts. Alabama By-Products Corp. v. Killingsworth, 733 F.2d 1511 (11th Cir.1984); Atchison, T. & S.F. Ry. v. ICC, 580 F.2d 623, 629 (D.C.Cir.1978). In Killingsworth, this court was confronted with a challenge to a regulatory presumption adopted under the Federal Coal Mine Health and Safety Act of 1969. Although that case, unlike the present one, involved a direct challenge to the constitutionality of the presumption under the Due Process Clause, the standard employed in Killingsworth is generally applicable: a presumption is valid "if there is some rational connection between the fact proved and the ultimate fact presumed, and the inference of one fact from proof of another is not so unreasonable as to be a purely arbitrary mandate." Alabama By-Products Corp. v. Killingsworth, 733 F.2d at 1517 (citing Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 28, 96 S.Ct. 2882, 2898, 49 L.Ed.2d 752 (1976)). See also Atchison, T. & S.F. Ry. v. ICC, 580 F.2d 623, 629 (D.C.Cir.1978) (adopting the rational connection test when...