Quinn v. Butz, 72--1396
| Decision Date | 06 January 1975 |
| Docket Number | No. 72--1396,72--1396 |
| Citation | 166 U.S.App.D.C. 363,510 F.2d 743 |
| Parties | Carl Norman QUINN, Petitioner, v. Earl L. BUTZ, Secretary of Agriculture, and United States of America, Respondents. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Curtis E. von Kann, Washington, D.C., with whom William O. Bittman, Washington, D.C., was on the brief, for petitioner.
Neil Koslowe, Atty. Dept. of Justice, of the bar of the Supreme Court of Georgia, pro hac vice, by special leave of court, for respondents. Walter H. Fieischer and Greer S. Goldman, Attys., Dept. of Justice, were on the brief for respondents.
Before BAZELON, Chief Judge, and LEVENTHAL and ROBINSON, Circuit Judges.
Petitioner, Carl Norman Quinn, seeks review of orders 1 of the Secretary of Agriculture rendering him ineligible for employment by any licensee under the Perishable Agricultural Commodities Act 2 for a period of one year. These orders rest upon determinations that DeVita Fruit Company, a corporate licensee, had flagrantly and repeatedly violated the Act, and that Quinn had then been 'responsibly connected' with the company because he served nominally as its vice-president. Finding that the administrative record, in its present posture, does not support the action taken against Quinn, we remand the case to the Secretary for further proceedings.
To facilitate an understanding of the issues presented for our review, we pause initially to briefly examine the purpose and principal features of the Act. Originally passed in 1930, this legislation was designed to combat a pattern of unfair practices prevalent in the perishable agricultural commodities industry. 3 The basic problem was victimization of growers and shippers by unscrupulous dealers to whom such commodities were sold or consigned for sale. 4 A conspicuous example was a sale followed by a decline in the market for the commodity and the dealer faced financial loss if he accepted shipment, paid the contract price and then sold on his own account. In such instances, dealers frequently rejected shipments on false grounds, notably that the commodities arrived in a condition other than as promised. 5 It was to eradicate these and other machinations that Congress settled on a statutory scheme which has been regarded as one of the Nation's most successful regulatory programs. 6
In broad outline, the Act regulates the shipment of perishable agricultural commodities in interstate and foreign commerce through a system of licensing and administrative supervision of the conduct of licensees. Commission merchants, dealers and brokers in such commodities must obtain from the Secretary of Agriculture a license as a precondition to doing business. 7 By Section 2, licensees are forbidden to engage in specified unfair practices, 8 which include failure to make full payment promptly for commodities dealt in. 9 An unfair practice subjects the licensee to liability to the injured party for damages, recoverable either in a proceeding before the Secretary or by suit in court. 10 The Secretary is authorized to investigate complaints of unfair practices 11 and, finding a violation, to issue a reparation order requiring the offending licensee to pay damages. 12 Failure to obey the order automatically suspends the license during noncompliance. 13
The Secretary is also empowered to suspend or revoke licenses for unfair practices, 14 and to limit employment within the industry of those who violate the Act and those who are 'responsibly connected' with violators. 15 Section 8(b) of the Act, in respects highly relevant to this case, provides that except with the Secretary's approval no licensee may employ any person, or anyone 'responsibly connected' with a person, whose license has been revoked or is currently suspended, or who has been found to have committed any flagrant or repeated violation of Section 2, or against whom there is an unpaid reparation order issued within two years. 16 Section 1(9), another provision bearing importantly on this case, specifies that a person is 'responsibly connected' with an offending licensee if he is affiliated with the licensee as officer, director or holder of more than 10% of its outstanding stock. 17
The material facts of the case at bar emerge without substantial dispute. Quinn commenced employment in the wholesale fruit and vegetable industry in 1944. During the first 12 years he worked as a truck driver and a buyer and seller of produce for different firms. In 1956, he was hired by John A. DeVita, who then conducted as a sole proprietorship a fruit and vegetable business in Lima, Ohio. Quinn supervised other employees in the packing and loading of produce; he also loaded trucks and made deliveries himself. From 1968 to 1970, his primary activity was buying and selling produce by telephone.
In 1964, DeVita incorporated his business. The assets and liabilities of the sole proprietorship were transferred to DeVita Fruit Company, a newly-organized Ohio corporation, in exchange for all of its issued stock. To meet a requirement of Ohio law, DeVita asked Quinn to become vice-president and Quinn assented. 18 Quinn's officership was purely nominal, and in no wise did his activities for the business change in consequence of the incorporation. DeVita remained sole stockholder and exercised full and exclusive control over the corporation's operations.
From October, 1964, onward DeVita Fruit Company obtained successive one-year licenses authorizing it to do business as a commission merchant, dealer and broker of perishable agricultural commodities in interstate and foreign commerce. 19 Between November, 1969, and July, 1970, however, the company failed to make full payment for 47 lots of fruits and vegetables shipped to it from outside Ohio. One of the shippers filed a complaint with the Department of Agriculture and on September 14, 1970, was awarded reparations. 20 When, 30 days later, the award remained unsatisfied, the company's license was automatically suspended by force of the Act. 21
In the meantime, on September 5, 1970, pursuant to the Bankruptcy Act, DeVita Fruit Company filed a petition in the District Court for the Northern District of Ohio for an arrangement with its creditors. 22 A few days previously, the company had terminated Quinn's employment, and on October 1, 1970, he took a job with another wholesale fruit and vegetable company licensed to do business under the Act. 23 On December 8, 1970, DeVita Fruit Company was adjudged a bankrupt, but apparently never received a discharge. 24
Several months later the Department of Agriculture moved against DeVita Fruit Company. On April 27, 1971, the Department's Consumer and Marketing Service sent a letter to the company calling attention to its outstanding financial obligations to the unpaid shippers. The letter advised that '(s)uch violations are sufficient grounds for instituting disciplinary action which could result in the revocation or suspension of your license,' and that the company's explanation should be submitted within 20 days. 25 On June 22, no response having been received, the Service filed a complaint charging the company with violations of the Act by reason of its failure to pay the shippers and seeking revocation of the company's license. 26 Copies of the letter and complaint were sent to the company's officers, including Quinn, and no formal answer to the complaint was filed within the 20-day period allowed therefor. 27
On July 13, 1971, however, during the period for answering the complaint, Quinn's attorney sent to the Division a letter asking for the opportunity to appear at a hearing 'to present factual evidence and legal arguments which will show that (Quinn) was not 'responsibly connected' with the DeVita Fruit Company at the time of the alleged violations of the (Act) which form the basis for the subject complaint.' The letter recited the facts disclosing the nature of Quinn's relationship with the company and was accompanied by supporting affidavits.
On August 16, 1971, the Division moved for the issuance of a hearing examiner's report in default proceedings 28 and again recommended that DeVita Fruit Company's license be revoked. A copy of this motion was sent to Quinn's attorney on August 19 together with a letter stating the Division's view that the request for a hearing to show that Quinn was not 'responsibly connected' with the company was 'not responsive to the allegations of the complaint,' and so was not considered an answer to the complaint.
On August 25, Quinn's counsel wrote that he wished to dispute the charge that the company's violations were 'flagrant or repeated' on the ground that the company's default was occasioned by reasonable expectations of a large business loan which did not materialize. 29 In response to the hearing examiner's direction that Service state on the record its position on counsel's request, the Service filed an opposition on the ground that 'no useful purpose would be served in holding an oral hearing on the violations alleged in the Complaint because on its face the Request shows there is no issue as to whether the violations were repeated.' The opposition added that '(t)here is no assertion that the violations did not occur, but rather an implicit admission that they did, with an expressed intention merely to challenge the character of those violations. . . . Whether these violations constitute flagrant violations of the Act need not be considered since the Act speaks in the disjunctive as regards 'repeated or flagrant' violations, and 47 violations are clearly 'repeated." In turn, Quinn's counsel replied that his letter of August 25 was not intended to suggest 'that we conceded that the violations actually occurred or that if any did occur they were 'repeated'...
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