Tri-County Wholesale Produce Co., Inc. v. U.S. Dept. of Agriculture, TRI-COUNTY

• Decision Date: 07 July 1987
• Docket Number: TRI-COUNTY,No. 86-1139,86-1139
• Citation: 822 F.2d 162
• Parties: WHOLESALE PRODUCE CO., INC., Petitioner, v. U.S. DEPARTMENT OF AGRICULTURE and United States of America, Respondents.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 162

822 F.2d 162

262 U.S.App.D.C. 31

TRI-COUNTY WHOLESALE PRODUCE CO., INC., Petitioner, v. U.S. DEPARTMENT OF AGRICULTURE and United States of America,

Respondents.

No. 86-1139.

United States Court of Appeals, District of Columbia Circuit.

Argued March 9, 1987.

Decided July 7, 1987.

Stephen P. McCarron, Silver Spring, Md., for petitioner.

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

Before WALD, Chief Judge, EDWARDS and GINSBURG, Circuit Judges.

Opinion PER CURIAM.

PER CURIAM:

In a disciplinary proceeding brought by the Department of Agriculture, the Secretary of Agriculture determined that petitioner, Tri-County Wholesale Produce Co., Inc., violated section 8(b) of the Perishable Agricultural Commodities Act 7 U.S.C. Sec. 499a, et seq. ("PACA"), by continuing to employ a "restricted individual" without posting the required bond and obtaining the approval of the Department of Agriculture. The Secretary revoked petitioner's license to deal in perishable agricultural commodities. We affirm that decision.

I.

Congress enacted PACA in 1930 in an effort to assure business integrity in an industry thought to be unusually prone to fraud and to unfair practices. A later Congress summarized the purpose of the Act succinctly:

[PACA] was enacted in 1930 for the purpose of providing a measure of control and regulation over a branch of industry which is engaged almost exclusively in interstate commerce, which is highly competitive, and in which the opportunities for sharp practices, irresponsible business conduct, and unfair methods are numerous. The law was designed primarily for the protection of the producers of perishable agricultural products--most of whom must entrust their products to a buyer or commission merchant who may be thousands of miles away, and depend for their payment upon his business acumen and fair dealing--and for the protection of consumers who frequently have no more than the oral representation of the dealer that the product they buy is of the grade and quality they are paying for. (S.Rep. 2507, 84th Cong., 2nd Sess. 3 (1956)).

As this court has stated previously, "the goal of [PACA is] that only financially responsible persons should be engaged in the businesses subject to the Act." Finer Foods Sales Co., Inc. v. Block, 708 F.2d 774, 782 (D.C.Cir.1983), citing Zwick v. Freeman, 373 F.2d 110, 117 (2d Cir.), cert. denied, 389 U.S. 835, 88 S.Ct. 43, 19 L.Ed.2d 96 (1967), quoted in Marvin Tragash Co. v. United States Dep't of Agric., 524 F.2d 1255, 1257 (5th Cir.1975). To this end, PACA requires dealers in perishable agricultural commodities to obtain licenses from the Secretary of Agriculture.

Dealers are required to pay accounts promptly, correctly, and in full. 7 U.S.C. Sec. 499b. The Department of Agriculture can suspend or revoke the license of a dealer who fails to comply with these requirements. 7 U.S.C. Sec. 499h(a). PACA also provides an administrative procedure to resolve payment disputes between dealers and producers. 7 U.S.C. Sec. 499f. This procedure may result in a reparation award against a dealer that is found to be in default on a disputed obligation. 7 U.S.C. Sec. 449g.

The license of a dealer who does not pay a reparation award is automatically suspended. 7 U.S.C. Sec. 499g(d). Furthermore, an individual responsible for a dealer that does not pay a reparation award may not lawfully be employed by any other dealer licensed under PACA, unless the employing dealer obtains the approval of the Secretary of Agriculture and maintains a surety bond as assurance that it's business will be conducted in accordance with PACA. 7 U.S.C. Sec. 499h(b).

II.

A license to do business under PACA was issued to Robert A. Ferwerda, doing business as Four Seasons Wholesale Produce, on November 23, 1979. The license terminated in November 1981 when Four Seasons failed to pay the annual license fee. Between December 1981 and August 1982, USDA issued six reparation awards against Robert and Four Seasons. He failed to pay these awards, and therefore became ineligible to be employed by any PACA licensee without special approval for two years from the date of the last reparation award.

In August 1981, Robert was hired by Tri-County Wholesale Produce Co., Inc., which was licensed under PACA and owned by Arend Ferwerda, Robert's father. In February 1982, after several of the reparation awards had been issued against Robert, the Secretary of Agriculture informed Tri-County that it could not employ Robert unless it posted a bond, in an amount to be set by the Department of Agriculture. The Secretary also notified Tri-County that it could jeopardize its license if it continued to employ Robert without posting the bond and obtaining the approval of the Department after 30 days from the receipt of the notification letter. Various correspondence passed between Tri-County and the Department between February and June 1982 regarding the setting of a bond and the status of Robert Ferwerda.

In a letter to the Department dated June 4, 1982, Arend Ferwerda represented that Tri-County had not employed Robert since March 25, 1982. In September 1982, the Department set the amount of the bond at $125,000 and emphasized once again that Tri-County could endanger its license by employing Robert without posting the bond and obtaining the approval of the Secretary. Tri-County did not post the $125,000 bond.

In June 1983, the Department filed an administrative complaint against Tri-County, charging that the firm had employed Robert Ferwerda from January 1982 to the present, despite the Department's February 1982 warning, and despite Tri-County's failure to post the $125,000 bond. Tri-County answered the administrative complaint later the same month and again asserted that it had not employed Robert, within the meaning of PACA, since March 25, 1982. Tri-County claimed that Robert's status since March 25, 1982, had been that of an independent contractor to, not an employee of, the company.

In January 1984, Tri-County amended its answer to the June 1983 administrative complaint to assert for the first time, as defenses, that the amount of the surety bond was excessive, and that it was set in an arbitrary and capricious manner.

At a hearing before an Administrative Law Judge (ALJ), numerous witnesses testified with respect to Robert Ferwerda's relationship to Tri-County after March 25, 1982. These witnesses testified that Robert had, on specific occasions known to them, purchased produce, solicited business, and accepted deliveries on behalf of Tri-County. He answered Tri-County's telephone and frequented its premises. Other evidence revealed that Robert was still covered by the...