B.T. Produce Co., Inc. v. Robert A. Johnson Sales, 03 CIV. 5634VM.

• Decision Date: 14 December 2004
• Docket Number: No. 03 CIV. 5634VM.,03 CIV. 5634VM.
• Citation: 354 F.Supp.2d 284
• Parties: B.T. PRODUCE CO., INC., Petitioner, v. ROBERT A. JOHNSON SALES, INC., Respondent.
• Court: U.S. District Court — Southern District of New York

354 F.Supp.2d 284

B.T. PRODUCE CO., INC., Petitioner, v. ROBERT A. JOHNSON SALES, INC., Respondent.

No. 03 CIV. 5634VM.

United States District Court, S.D. New York.

December 14, 2004.

Mark Charles Hewitt Mandell, Annandale, NJ, for Petitioner.

Leonard A. Rodes, Trachtenberg, Rodes & Friedberg, L.L.P., New York City, for Respondent.

DECISION AND ORDER

MARRERO, District Judge.

Petitioner B.T. Produce Co., Inc. ("BTP") has appealed a June 30, 2003 reparation order (hereinafter, "Reparation Order") rendered by a Judicial Officer of the United States Department of Agriculture ("USDA") in favor of respondent Robert A. Johnson Sales, Inc. ("RAJS"), awarding RAJS $34,171.75 plus interest and costs. Under Section 499g(c) of the Perishable Agricultural Commodities Act ("PACA"), 7 U.S.C. § 499a et seq., such an appeal is reviewed de novo by a federal district court, "except that the findings of fact and order or orders of the Secretary shall be prima-facie evidence of the facts therein stated." 7 U.S.C. § 499g(c). BTP's appeal was filed with this Court on July 30, 2003.

RAJS has now moved for summary judgment on the appeal pursuant to Fed.R.Civ.P. 56.¹ The Court grants RAJS's motion, concluding that BTP has failed to produce any evidence that reasonably calls into question the validity of the Reparation Order.

I. BACKGROUND

A. BTP'S INVOLVEMENT IN CORRUPTION AT HUNTS POINT PRODUCE MARKET

The reparations proceeding that is the subject of the instant motion is one of many that arose out of corrupt practices at the Hunts Point Wholesale Produce Market in the Bronx, New York. See Koam Produce, Inc. v. DiMare Homestead, Inc., 213 F.Supp.2d 314 (S.D.N.Y.2002) (hereinafter, "Koam I") (affirming PACA reparation award arising out of corrupt practices at Hunts Point); Koam Produce, Inc. v. Dimare Homestead, Inc. 222 F.Supp.2d 399 (S.D.N.Y.2002) (hereinafter, "Koam II") (awarding attorney's fees to prevailing party in reparation proceeding under PACA), aff'd, 329 F.3d 123 (hereinafter, "Koam III") (affirming Koam I and Koam II). As uncovered by federal investigators and as discussed in Koam I, 213 F.Supp.2d at 317-18, produce wholesalers operating out of the Hunts Point Market would regularly pay small bribes to USDA inspectors and supervisors, who in exchange for the bribes would artificially downgrade produce in official inspections requested by the wholesalers. The wholesalers would then be able to use the fraudulent inspections as leverage with produce suppliers to negotiate a reduction in the price paid by the wholesalers to the suppliers, who were not present during the inspections and who had no reasonable means of calling the inspections' results into question. This conduct occurred from at least the beginning of 1996, when the federal government began an investigation it called "Operation Forbidden Fruit," through October 27, 1999, when twenty-one people, including eight USDA inspectors and thirteen owners and employees of produce wholesalers were arrested for their roles in the bribery scheme. See id.; United States Department of Agriculture, Report and Analysis of the Hunts Point Bribery Incident (hereinafter, "USDA Report"), attached as Ex. C to RAJS's Request for Court to Take Judicial Notice of Matters in Support of RAJS's Motion for Summary Judgment, dated Aug. 31, 2004 (hereinafter, "RAJS Request for Judicial Notice").²

Though this point is disputed by BTP in its pleadings and two brief affidavits submitted on its behalf, numerous documents indicate that an employee and part-owner of BTP, William Taubenfeld ("Taubenfeld"), had paid bribes and received benefits under the illicit arrangement from at least 1996 until he was arrested and indicted on October 27, 1999.³ Although Taubenfeld's indictment only charged him with thirteen bribes of USDA inspectors between March and August of 1999, see Indictment, United States v. Taubenfeld, 99 Cr. 1094 (S.D.N.Y. Oct. 27, 1999), attached as Ex. A to Plaintiff-Appellant's Request for the Court to Take Judicial Notice, dated Sept. 30, 2004 (hereinafter, "BTP Request for Judicial Notice"), his Plea Agreement permitted him to plead guilty to only one count of bribery in exchange for a promise from the Government that he would not "be further prosecuted criminally ... for his participation, from in or about 1996 through in or about October 27, 1999, in making cash payments to United States Department of Agriculture produce inspectors in connection with inspections of fresh fruit and vegetables at B.T. Produce Co., Inc." Plea Agreement at 2, United States v. Taubenfeld, 99 Cr. 1094 (S.D.N.Y. Feb. 2, 2000) (hereinafter, "Taubenfeld Plea Agreement"), attached as Ex. A to RAJS Request for Judicial Notice (emphasis added).⁴ Furthermore, in Taubenfeld's sentencing hearing, neither Taubenfeld nor his attorney objected when Judge Cote of this Court described Taubenfeld's illegal conduct as occurring between January 1996 and October 1999, and asked if there were any remaining factual issues in dispute related to the Government's case against Taubenfeld. See Transcript at 3-4, United States v. Taubenfeld, 99 Cr. 1094 (S.D.N.Y. May 11, 2000) (hereinafter, "Taubenfeld Sentencing Hearing"), attached as Ex. B to RAJS Request for Judicial Notice.⁵ BTP nonetheless insists that there is no evidence that Taubenfeld bribed any USDA inspectors on its behalf before the fall of 1998, at the earliest. (See BTP's Memorandum of Law in Opposition to Motion for Summary Judgment (hereinafter, "BTP Mem. of Law") at 3-4.) In support of its assertions, BTP puts forth two declarations by USDA inspectors who pled guilty to taking bribes and preparing fraudulent inspections as part of the corrupt practices at the Hunts Point Market, and who claim that Taubenfeld had not begun bribing them or other inspectors until the later half of 1998, at the earliest. (See Declaration of Michael Tsamis, dated Sept. 25, 2004 (herinafter, "Tsamis Decl."), attached to Plaintiff-Appellant's Counter-Statement of Contested Material Facts (hereinafter, "BTP Rule 56.1 Statement"), ¶ 3 ("I did, occasionally receive $50.00 payments from Billy Taubenfeld in 1999, but I have no recollection of receiving such payments from anyone at BT Produce prior to late 1998."); Declaration of Glenn Jones, dated Sept. 24, 2004 (hereinafter, "Jones Decl."), attached to BTP Rule 56.1 Statement, ¶ 4 ("I was personally aware when Billy Taubenfeld, a salesman at B.T. Produce ..., first began making payments to inspectors when they were present at that wholesaler to perform inspections on produce shipments. Such payments did not begin until the later half of 1998.").)

B. THE DISPUTE BETWEEN THE PARTIES

In 1996 and 1997, RAJS, a California supplier of grapes, sold several shipments of grapes to BTP at the Hunts Point Market that had been inspected by USDA inspectors and found below grade. On the basis of these inspections, RAJS had agreed to reduce the prices it would otherwise have charged BTP for the shipped grapes. Upon learning of the corrupt practices at the Hunts Point Market during that period of time, RAJS filed a PACA reparation claim against BTP on March 24, 2000, seeking reimbursement for the amount by which ten separate shipments of grapes to BTP during 1996 and 1997 were devalued as a result of allegedly fraudulent inspections.⁶ BTP filed counterclaims related to the ten shipments, alleging that it was fraudulently induced to overpay for the shipments by more than $100,000.

The resulting Reparation Order denied RAJS's claims as to five of the shipments and BTP's counterclaims in their entirety, but granted reparations against BTP for the five other devalued shipments. The Reparation Order first acknowledged that there was no explicit evidence on the record that any of the inspections of the ten challenged shipments were fraudulent. It further noted that five of the ten challenged shipments were inspected by USDA employees who were not implicated in the bribery scheme. The Reparation Order thus denied RAJS's reparation claims related to those five shipments, concluding that RAJS could not demonstrate that the inspections were tainted by bribes. See Reparation Order at 13. The other five inspections, however, were undertaken by USDA inspectors who were charged and convicted of accepting bribes from wholesalers. The Reparation Order determined that these inspections were procured by Taubenfeld acting as an agent for BTP, and that Taubenfeld's actions could thus be charged to BTP. See id. at 21. Because the inspections were procured by an individual who had admitted to committing bribes during the period at issue, and conducted by USDA inspectors who had been found to have accepted bribes during that same period, the Reparations Order concluded that the allowances or downward price adjustments that RAJS had agreed to accept as a result of the five corrupt inspections could be set aside on the grounds of misrepresentation or unilateral mistake. See id. at 24. It denied BTP's counterclaims on the grounds that they were time-barred under PACA's nine-month statute of limitations and were not supported by evidence that the parties had reached an accord and satisfaction on the shipments that served as the basis for its counterclaims. Id. at 18-19.

Since BTP had no evidence independent of the allegedly fraudulent inspection certificates to support its claims that RAJS's produce was damaged at the time it was accepted, the Reparations Order required BTP to pay damages to RAJS reflecting the amount by which the produce was devalued as a result of the inspections. For three of the shipments, designated as Shipments 3, 7, and 8 in the Reparation Order, damages were calculated as the difference between the contract price BTP had originally agreed to pay RAJS and the amount it ultimately paid after RAJS agreed to make adjustments as a result of the inspections. Those damages totaled $18,120.00. The other two shipments, designated as Shipments 9...