Finer Foods Sales Co., Inc. v. Block, 82-1843

• Decision Date: 27 May 1983
• Docket Number: No. 82-1843,82-1843
• Citation: 708 F.2d 774,228 U.S.App.D.C. 205
• Parties: FINER FOODS SALES CO., INC., Petitioner, v. John R. BLOCK, Secretary of Agriculture, United States Department of Agriculture, and United States of America, Respondents.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 774

708 F.2d 774

228 U.S.App.D.C. 205

FINER FOODS SALES CO., INC., Petitioner, v. John R. BLOCK, Secretary of Agriculture, United States Department of Agriculture, and United States of America, Respondents.

No. 82-1843.

United States Court of Appeals District of Columbia Circuit.

Argued March 16, 1983.

Decided May 27, 1983.

Petition for Review of an Order of the Department of agriculture.

John H. Vetne, Washington, D.C., for petitioner.

Thomas D. Edmondson, Atty., Dept. of Agriculture, Washington, D.C., with whom James Michael Kelly, Associate Gen. Counsel, and Raymond W. Fullerton, Asst. Gen. Counsel, Washington, D.C., were on the brief, for respondents.

Before WILKEY and GINSBURG, Circuit Judges, and FRIEDMAN, ^* Circuit Judge, United States Court of Appeals for the Federal Circuit.

Opinion for the Court filed by Circuit Judge FRIEDMAN.

FRIEDMAN, Circuit Judge:

This is a petition for review of a decision of the Secretary of Agriculture that the petitioner, Finer Foods Sales Co., Inc., a licensee under the Perishable Agricultural Commodities Act, 7 U.S.C. Secs. 499a-499s (1976 & Supp. V 1981) ("Act"), was guilty of "flagrant and repeated" violations of the Act. The effect of that determination is to prohibit any person "responsibly connected" with the petitioner from working for another licensee for at least a year. We affirm.

I.

The Perishable Agricultural Commodities Act requires persons who buy or sell significant quantities of perishable agricultural commodities at wholesale in interstate commerce to have a license issued by the Secretary of Agriculture. 7 U.S.C. Sec. 499c (1976). The Act subjects licensees to various requirements and prohibitions. Section 2(4) of the Act, 7 U.S.C. Sec. 499b(4) (1976), the provision here involved, makes it unlawful for any licensee "to fail or refuse truly and correctly to account and make full payment promptly in respect of any transaction in any such commodity to the person with whom such transaction is had."

The petitioner was a licensee under the Act. It was first licensed in 1977, and its license was renewed annually until 1980. The Judicial Officer of the Department of Agriculture, to whom the Secretary has delegated his adjudicatory functions under the Act (7 C.F.R. Sec. 2.35 (1982)), found that "[a]t the time of its licensing in 1977 [the petitioner] was fully advised of the ... responsibilities of licensees under the Act to make full and prompt payment for its perishable agricultural commodities purchases."

In January 1978, the petitioner obtained a revolving loan from the BVA Credit Corporation ("BVA"), a division of the Bank of Virginia. The loan was computed on a daily basis, and was secured, apparently, by a pledge of the petitioner's accounts receivable and inventory.

In February 1979, Paris Foods sold and delivered to the petitioner two shipments of green beans at an invoice price of $27,257. When Paris Foods had not been paid by May, it submitted an informal complaint to the Department of Agriculture, which notified the petitioner of the complaint. The latter admitted its indebtedness and agreed to pay the amount due in two installments. The petitioner sent its check for the first installment of $14,000 in June, as agreed.

Before the check was presented for payment, however, BVA had taken possession of the petitioner's assets and "frozen" its bank account. It took this action the day after the petitioner's president had told BVA that his company was considering making an assignment for the benefit of creditors. Several days later the petitioner made the assignment.

As a result of BVA's "freezing" of the petitioner's bank account, the petitioner's $14,000 check to Paris Foods was not paid. Paris Foods notified the Department of the default, and the Department began an investigation of the reasons for nonpayment. Upon ascertaining that the petitioner had made an assignment for the benefit of creditors and was insolvent, the investigator reviewed the petitioner's books and records and discovered that the petitioner had made 23 other purchases of perishable agricultural commodities for which it had not paid. These debts, which involved transactions over a period of almost five months, covered 18 transactions with one seller totaling approximately $21,000 and five transactions with another seller totaling approximately $27,000.

After it learned of the petitioner's insolvency, the Department began a formal reparations proceeding on behalf of Paris Foods against the petitioner. In its answer to the reparations complaint, the petitioner admitted that it owed the money as alleged. On February 12, 1980, the Judicial Officer entered an order concluding that the petitioner had violated section 2 of the Act and directing the petitioner to pay Paris Foods $27,257 within 30 days.

Four days earlier the insolvency trustees of the petitioner, following their sale of the petitioner's assets, had made a seven percent pro rata payment to all the creditors, including Paris Foods. The latter never received any additional payments under the reparations order.

On January 24, 1980, the Secretary issued a formal disciplinary complaint against the petitioner based upon the 24 transactions in which the petitioner had failed to pay its debts. After a hearing, the Administrative Law Judge issued a recommended decision that the petitioner had violated the Act and that its license should be revoked.

The petitioner appealed the decision to the Judicial Officer, who in June 1982 upheld the finding of violation. He held that the petitioner's failure to make payment in the 24 transactions constituted "flagrant and repeated violations of the Act and the Regulations." The Judicial Officer further ruled that because the petitioner's officials had acted with "full knowledge of what they were doing," the violations were "willful" under the Administrative Procedure Act.

The Judicial Officer modified the recommended order by eliminating the provision revoking the petitioner's license. He did so because the license had expired, the petitioner was insolvent, and it was no longer actively involved in a business the Act covered. In these circumstances, he concluded, revocation would be a meaningless act. He ordered, however, publication of the finding that the petitioner flagrantly and repeatedly had violated the Act. Publication of the Judicial Officer's decision would have the same effect as a license revocation upon the ability of certain officials of the petitioner to be employed by other licensees. See infra pp. 782-783.

II.

The petitioner does not challenge the Judicial Officer's determination that its failures over a five-month period to pay $75,000 due on 24 transactions were "flagrant and repeated violations" of the Act. It argues only that in reaching that decision the Judicial Officer violated procedural requirements of the Administrative Procedure Act and the Perishable Agricultural Commodities Act, that he improperly failed to consider mitigating circumstances, and that he should have excepted the current employment of the petitioner's president from the statutory bar upon employment by other licensees of persons "responsibly connected" with the petitioner.

III.

A. Section 9(c) of the Administrative Procedure Act, 5 U.S.C. Sec. 558(c) (1976), provides that "[e]xcept in cases of willfulness ...," a license may not be revoked unless the licensee has been given "(2) opportunity to demonstrate or achieve compliance with all lawful requirements." The petitioner contends that the Secretary violated this provision because he did not give the petitioner the opportunity to show or achieve compliance with section 2(4) of the Perishable Agricultural Commodities Act before instituting the disciplinary proceeding. The Judicial Officer correctly held, however that the petitioner's violations were willful, so that the opportunity-to-comply requirement of section 9(c) was inapplicable.

"Under [the Perishable Agricultural Commodities Act], an action is willful if a prohibited act is done intentionally, irrespective of evil intent, or done with careless disregard of statutory requirements." American Fruit Purveyors, Inc. v. United States, 630 F.2d 370, 374 (5th Cir.1980). See also George Steinberg & Son, Inc. v. Butz, 491 F.2d 988, 994 (2d Cir.), cert. denied, 419 U.S. 830, 95 S.Ct. 53, 42 L.Ed.2d 55 (1974). The Judicial Officer had ample basis for concluding that the petitioner's violations of the Act were willful.

As noted, the Judicial Officer found that when the petitioner received its license in 1977, it was "fully advised of the ... responsibilities of licensees under the Act to make full and prompt payment for its perishable agricultural commodities purchases." He further found that the petitioner's officers "were fully aware of the potential for non-payment which was a condition pregnant in the loan agreement" with BVA, and "had full knowledge of what they were doing." When the loan was negotiated, the officers were aware of the somewhat precarious financial condition of petitioner, which "had been losing money since fiscal year 1977."

The petitioner knew that under the loan agreement BVA could and was likely to take possession of the petitioner's assets, including its bank account, if it appeared that the petitioner was in sufficient financial trouble to raise doubts about its ability to repay the loan. That was precisely what happened when BVA foreclosed on the collateral the day after the petitioner's president told the lending institution that the petitioner was considering making an assignment for the benefit of creditors.

Despite the petitioner's awareness of (1) the statutory requirement of full and prompt payment, (2) the likelihood that BVA would foreclose on its collateral if it believed that its loan was threatened, and (3) the company's serious financial problems, the petitioner continued to purchase perishable agricultural commodities. As the...