Sid Goodman & Co., Inc. v. U.S.

• Decision Date: 01 October 1991
• Docket Number: No. 90-2209,90-2209
• Citation: 945 F.2d 398
• Parties: 1992-1 Trade Cases P 69,719 NOTICE: Fourth Circuit I.O.P. 36.6 states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Fourth Circuit. SID GOODMAN & COMPANY, INCORPORATED, Petitioner, v. UNITED STATES Of America, United States Department of Agriculture, Agricultural Marketing Service, Clayton Yeutter, Secretary, U.S. Department of Agriculture, Respondents.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 398

945 F.2d 398

1992-1 Trade Cases P 69,719

NOTICE: Fourth Circuit I.O.P. 36.6 states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Fourth Circuit.

SID GOODMAN & COMPANY, INCORPORATED, Petitioner, v. UNITED STATES Of America, United States Department of Agriculture, Agricultural Marketing Service Clayton Yeutter, Secretary, U.S Department of Agriculture, Respondents.

No. 90-2209.

United States Court of Appeals, Fourth Circuit.

Argued May 6, 1991.

Decided Oct. 1, 1991.

On Petition for Review of an Order of the United States Department of Agriculture (89-523-D)

Argued: Geoffrey Richard W. Smith, McDermott, Will & Emery, Washington, D.C., for petitioner; Leslie Karen Lagomarcino, Office of the General Counsel, United States Department of Agriculture, Washington, D.C., for respondents.

On Brief: Edward M. Ruckert, Matthew C. Rosser, McDermott, Will & Emery, Washington, D.C., for petitioner; James Michael Kelly, Associate General Counsel, Raymond W. Fullerton, Assistant General Counsel, Margaret M. Breinholt, Deputy Assistant General Counsel, Office of the General Counsel, United States Department of Agriculture, Washington, D.C., for respondents.

Dept. of Agr.

AFFIRMED.

Before WIDENER, and NIEMEYER, Circuit Judges and JOSEPH H. YOUNG, Senior United States District Court Judge for the District of Maryland, sitting by designation.

OPINION

PER CURIAM:

Goodman & Sons, Co. Inc. ("Goodman") is a Maryland corporation and a wholesale distributor of agricultural produce, located at the Maryland Wholesale Produce Market in Jessup, Maryland. Goodman is a licensed perishable agricultural commodities dealer, pursuant to the licensing requirements of the Perishable Agricultural Commodities Act ("PACA"). It purchases produce in wholesale lots from outof-state shippers and sells the produce in wholesale quantities to customers in the District of Columbia and Baltimore areas. Goodman also accepts produce on consignment from out-of-state shippers and sells it on consignment in the District of Columbia and Baltimore areas. Magruder, Inc. ("Magruder") and Fresh Value, Inc. ("Fresh Value") are among Goodman's customers.

M. Offutt Co., Inc., a Texas produce shipper, requested that the Agricultural Marketing Service ("AMS") of the United States Department of Agriculture ("USDA") investigate Goodman's business, seeking reparation from Goodman for five lots of produce that Goodman handled for it on consignment.

The investigation uncovered accounting and reporting deficiencies that led to the discovery that Goodman "surreptitiously" made 25 cents per-package payments to the employees of Magruder and Fresh Value, in order to induce those employees to purchase produce from Goodman rather than from a competitor. ¹

From January 1987 through September 1988, these payments to Bill Crandall, Assistant Vice President and Produce Buyer for Magruder, totalled more than $66,000 for the produce Crandall purchased from Goodman on behalf of Magruder's fourteen retail grocery stores. From April 1987 through September 1988, Goodman issued checks totalling $41,000 to the wife of Henry Hernandes, the produce buyer for Fresh Value's four retail supermarkets.

The supervisors at Fresh Value and Magruder were unaware of the payments. The invoices and accountings did not reflect the payments and Goodman clearly did not tell them. In addition, neither Crandall nor Hernandes reported to their superiors the payments received for purchasing the products. As a result of the investigation, AMS determined that Goodman had failed to make full and prompt payment to M. Offutt Co. of over $5000. ²

Although both stores have policies forbidding employees from taking gifts or gratuities of any kind, there was evidence that employees of both stores received promotional gifts offered publicly by suppliers on an incentive basis to the retail food industry. These gifts included sports tickets, pens, bottles of wine, hats, and jackets.

On April 18, 1989, AMS issued a complaint against Goodman alleging that Goodman willfully, flagrantly, and repeatedly violated section 2(4) of the Act, 7 U.S.C. § 499b(4) by regularly and surreptitiously giving employees of two wholesale customers a total of more than $107,000 to induce those employees to buy perishable agricultural commodities from Goodman. On May, 10, 1989, Goodman filed an answer denying violation of PACA and a motion for a more definite statement of the violations alleged. Goodman also asserted that Magruder and Fresh Value extorted the kickback payments by threatening not to purchase perishable agricultural commodities from Goodman if it did not make the per-package payments to their buyers.

In its more definite statement of the issues, the agency charged Goodman specifically with violations of the first three unnumbered clauses of section 2(4) of the PACA. ³ The complaint thus alleged that Goodman made fraudulent, false, or misleading statements in connection with transactions involving perishable agricultural commodities; failed or refused truly and correctly to account and make full payment promptly in respect of any transaction in any such commodity; and failed to perform any specification or duty, express or implied, arising out of any undertaking in connection with any such transaction.

Following a hearing, the Administrative Law Judge ("ALJ") concluded that Goodman willfully violated section 2(4) of the PACA. The ALJ found that Goodman's reporting, accounting, and payment violations arose out of its surreptitious payments to the its customers. He further found that Goodman violated the PACA (1) by making false statements on the invoices it submitted to its customers, Magruder and Fresh Value; (2) by making false statements in accounting to its consignors and by failing to account truly and correctly, or to make full payment promptly to those consignors; and (3) by failing to perform an implied duty owed by Goodman to its wholesale customers and by not informing those customers of the perpackage kickback payments made to their employees. The ALJ ordered publication of these facts and also revoked Goodman's PACA license on the grounds that the violations were flagrant and repeated.

On May 2, 1990, Goodman appealed the ALJ's decision to USDA's Judicial Officer ("JO"). Goodman argued that the ALJ erred in concluding that section 2(4) of the PACA establishes an implied duty to refrain from making surreptitious kickback payments to employees of a PACA licensee's customers and that its due process rights were violated by the imposition of such a duty. Goodman also argued that the ALJ's findings of violations were not supported by substantial evidence on the record.

The JO adopted the ALJ's Decision and Order as final. Goodman filed a petition for review with this Court on September 25, 1990. By Order dated October 29, 1990, the JO stayed the revocation of Goodman's PACA license pending the outcome of the appeal.

I

Goodman does not contest that it marked up the price by 25 cents per-package on produce sold in wholesale lots to Magruder and Fresh Value. Nor does it dispute that it paid 25 cents per-package to the produce buyers employed by Magruder and Fresh Value in order to induce them to buy from Goodman rather than from a competitor. Further, Goodman admits that it concealed the mark-up from both Magruder and Fresh Value, and that it omitted the mark-up from the invoices it submitted to its consignor, M. Offutt Co. However, Goodman argues that the plain language of the statute makes no mention of payments, bribery or corruption and that the statute addresses omissions and not obligations.

The plain language of the statute is the point at which interpretation commences. Mallard v. United States District Court, 490 U.S. 296, (1989). The broad statutory language reflects the breadth of the PACA:

It shall be unlawful in or in connection with any transaction in interstate or foreign commerce-- ... (4) ... or to fail, without reasonable cause, to perform any specification or duty, expressed or implied, arising out of any undertaking in connection with any transaction ..." (emphasis added).

7 U.S.C. § 499b(4).

The key word is "any." Congress' intention to regulate the perishable commodities market is shown by its failure to specify individual transactions which it considered to be unlawful. This term is all encompassing to include all unlawful transactions without exception. The implied duty clause broadens the scope of the Act to afford the Secretary the authority to exercise the expertise and discretion necessary to regulate specialized problems that may arise in the perishable agriculture commodities industry on a case-by-case basis. "Congress used the terms '... express and implied duties ...' rather than specify all practices that would be a violation of the PACA, for that is an impossible task." JO's Dec. at 21. The PACA's regulations state:

It is impracticable to specify in detail all of the duties of brokers, commission merchants, joint account partners, growers' agents and shippers because of the many types of businesses conducted. Therefore, the duties described in these regulations are not to be considered as a complete description of all of the duties required but is merely a description of their principal duties. The responsibility is placed on each licensee to fully perform any specification or duty, express or implied, in connection with any transaction handled subject to the Act. 7 C.F.R. § 46.26 (1989).

The Secretary found that commercial bribery ⁴ was a violation of the PACA's implied duty clause. The Secretary has consistently enforced the PACA to ensure that members of the industry deal fairly with one another at arm's length. See United Fruit and Vegetable Co., 40 Agric. Dec. 396, 402 (1981), aff'd sub nom. United Fruit...