Beef Nebraska, Inc. v. U.S.

• Citation: 807 F.2d 712
• Decision Date: 10 December 1986
• Docket Number: No. 85-2534,85-2534
• Parties: BEEF NEBRASKA, INC., a Nebraska Corporation, Petitioner, v. UNITED STATES of America, United States Department of Agriculture, Respondent.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

Page 712

807 F.2d 712

55 USLW 2369

BEEF NEBRASKA, INC., a Nebraska Corporation, Petitioner, v. UNITED STATES of America, United States Department of

Agriculture, Respondent.

No. 85-2534.

United States Court of Appeals,

Eighth Circuit.

Submitted Oct. 15, 1986.

Decided Dec. 10, 1986.

Steven D. Johnson, Omaha, Neb., for petitioner.

Raymond W. Fullerton, Washington, D.C., for respondent.

Before FAGG, BOWMAN and TIMBERS, ^* Circuit Judges.

TIMBERS, Circuit Judge.

Petitioner Beef Nebraska, Inc. ("Beef Nebraska"), a "packer" subject to the provisions of the Packers and Stockyards Act, 7 U.S.C. Secs. 181-231 (1982 & Supp. III 1985) ("the Act"), petitions this court to set aside a decision and order entered November 26, 1985 by respondent United States Department of Agriculture ("USDA"), Donald A. Campbell, Judicial Officer, ordering Beef Nebraska to cease and desist from paying for livestock with checks drawn on remote, distant, or country bank accounts. The judicial officer held that Beef Nebraska's use of checks drawn on a distant bank to pay for livestock often lengthened the check-clearing process by at least one day, and hence delayed the "collection of funds" in violation of Sec. 409(c) of the Act, 7 U.S.C. Sec. 228b(c) (1982) ("Sec. 228b(c)"). In its petition, Beef Nebraska claims, first, that its use of checks drawn on the distant bank did not delay the "collection of funds" within the meaning of Sec. 228b(c), and, second, that an administrative law judge, in denying its motions to require USDA to answer certain interrogatories, deprived it of its right to pre-hearing discovery under the United States Constitution and certain statutes and regulations. ¹

We hold that Beef Nebraska's use of checks drawn on the distant bank delayed the collection of funds in violation of the unambiguous proscription of Sec. 228b(c). We further hold that the administrative law judge did not deprive Beef Nebraska of its right to obtain answers to its interrogatories, to whatever extent such right exists. We deny the petition for review and affirm the order.

I.

Beef Nebraska conceded at oral argument before us that, if the judicial officer interpreted Sec. 228b(c) correctly, the record before him contained sufficient evidence to support the conclusion that Beef Nebraska violated the Act. Beef Nebraska thus does not dispute the facts, but rather disputes the judicial officer's interpretation of Sec. 228b(c). We summarize only those facts believed necessary to an understanding of the issues raised in the petition.

Beef Nebraska is engaged in the business of buying livestock in commerce for slaughter and sale. Hence it is a "packer" subject to the provisions of the Act. 7 U.S.C. Sec. 191 (1982). Its sole processing plant is in Omaha, Nebraska. Its daily purchases of livestock average $305,000. They are from livestock sellers located throughout the midwestern United States.

The acts leading to the instant petition began in July 1982. At that time Beef Nebraska's use of a new checking account to pay livestock sellers often increased the period of time between the point at which it tendered a check to a seller and the point at which the seller had unconditional access to the funds pursuant to the check. Prior to July 1982, Beef Nebraska paid livestock sellers with checks drawn on its ordinary corporate account at the Omaha National Bank ("ONB"). In view of ONB's location in Omaha, the Federal Reserve System classifies it as a "city" bank. Livestock sellers paid with checks drawn on Beef Nebraska's ONB account would deposit such checks in their own banks. These banks often granted the sellers provisional credit. Provisional credit became final only after the checks cleared Beef Nebraska's ONB account. When a check drawn on that account was presented to the Federal Reserve Bank in Omaha ("the Federal Reserve Bank"), the check cleared at a time determined under Federal Reserve System schedules applicable to city banks. At that time the funds became available to the depositing bank. In general, under these schedules a check drawn on Beef Nebraska's ONB ordinary corporate account cleared on the same day that the check was presented to the Federal Reserve Bank. When the checks were presented to commercial clearinghouse associations--private collection systems with which ONB maintained agreements for such purposes--the checks cleared at least as quickly.

Presentments of checks drawn on the accounts of ONB's customers are made throughout the day at the Federal Reserve Bank. The same is true of checks presented to several commercial clearinghouse associations and by other banks directly to ONB. These numerous presentments prevent ONB from predicting accurately the value of checks which will clear against its customers' ordinary checking accounts on any given day. As a result, Beef Nebraska either had to maintain large idle balances in its checking account or had to pay overdraft charges on checks drawn on insufficient funds. To avoid this dilemma, Beef Nebraska opened a "controlled disbursement" checking account ("controlled account") at ONB on June 28, 1982. A check drawn on the controlled account appeared on its face to have been drawn on the State Bank of Palmer ("the Palmer Bank"), a small bank located in Palmer, Nebraska, 125 miles west of Omaha. In fact, however, pursuant to an agreement between ONB and the Palmer Bank, ONB would intercept the check at the Federal Reserve Bank, process the check, and debit its customer's controlled account. The Palmer Bank never received or processed the check. In view of its remote geographic location, the Palmer Bank is classified by the Federal Reserve System as a "country" bank. Under Federal Reserve System schedules applicable to country banks, a check drawn on the Palmer Bank generally cleared the day after it was presented to the Federal Reserve Bank. It therefore generally cleared one day later than did a check drawn on ONB, a city bank. The Palmer Bank was not a member of any commercial clearinghouse association. In view of its size and remote location, it did not receive direct presentments from other banks. ONB therefore could take advantage of the additional day between presentment and clearing to predict accurately the value of the checks that would clear the next day against its customers' controlled accounts.

On July 12, 1982 Beef Nebraska began paying livestock sellers with checks drawn on its ONB controlled account. Since those checks appeared to have been drawn on the Palmer Bank, Beef Nebraska gained an extra day in the check-clearing process. Concurrently, livestock sellers often faced a delay of one day between the time of deposit and the time they had final credit. During this period they could not collect the funds to which they were entitled pursuant to Beef Nebraska's checks.

On January 27, 1983 the Secretary of USDA ("the Secretary") served an administrative complaint on Beef Nebraska. 7 U.S.C. Sec. 193 (1982). The complaint charged that its use of checks drawn on the Palmer Bank constituted an unfair practice under Sec. 202(a) of the Act, 7 U.S.C. Sec. 192(a) (1982), in that such use violated Sec. 228b(c). Section 228b(c) provides that "[a]ny delay ... by a ... packer purchasing livestock, [in] the collection of funds as herein provided ... shall be considered an 'unfair practice' in violation of this chapter...."

A hearing on the complaint took place before an administrative law judge ("the ALJ") on September 27 and 28, 1983. 7 U.S.C. Sec. 193. Prior to the hearing the ALJ denied motions by Beef Nebraska to require USDA to answer certain interrogatories. The ALJ's denial of these motions serves as the basis for Beef Nebraska's claim before us that its right to prehearing discovery was violated.

On April 3, 1985 the ALJ filed his decision and order requiring Beef Nebraska to cease and desist from paying livestock sellers with checks drawn on the Palmer Bank. On May 8, 1985 Beef Nebraska filed an appeal from the decision and order of the ALJ to the judicial officer. The Secretary had delegated authority to the judicial officer to make final decisions of the USDA. 7 C.F.R. Sec. 2.35 (1986).

In a decision and order filed November 26, 1985, the judicial officer, after a comprehensive analysis of the language and legislative history of Sec. 228b(c), concluded that Beef Nebraska's use of the controlled account delayed the collection of funds and hence constituted an unfair practice under the Act. The judicial officer also concluded that the ALJ did not deprive Beef Nebraska of its right to discovery. He ordered that Beef Nebraska, "in connection with its operations as a packer, shall cease and desist from issuing checks in payment for livestock drawn on remote, distant, or country accounts including any accounts with [the Palmer Bank]...."

On December 31, 1985, Beef Nebraska petitioned this court to set aside the order of the judicial officer.

We deny the petition for review and affirm the decision and order of the USDA.

II.

We turn first to the issue whether Beef Nebraska's use of checks drawn on the Palmer Bank resulted in a delay in the collection of funds within the meaning of Sec. 228b(c).

Between 1958 and early 1975, 167 meatpackers went bankrupt, leaving sellers unpaid to the extent of more than $43 million worth of livestock. S.Rep. No. 932, 94th Cong., 2d Sess. 4-5, reprinted in 1976 U.S.Code Cong. & Ad.News 2267, 2271. This prompted Congress in 1976 to amend the Act to add, among other things, the "prompt payment" provisions of Sec. 228b. Pub.L. No. 94-410, Sec. 7, 90 Stat. 1250 (1976). Section 228b(a) sets forth methods and time limits for payment. A packer may pay a livestock seller in cash, by wire transfer, or by check. If payment is made by check, absent unusual circumstances the packer physically must deliver the check to the seller before the close of the business day following transfer of possession of the livestock. Section 228b(c), the...