Bosma v. U.S. Dept. of Agriculture

• Decision Date: 28 February 1985
• Docket Number: No. 83-7069,83-7069
• Parties: Jacob F. BOSMA d/b/a Chino Livestock Commission Company and Yardage, Petitioner, v. UNITED STATES DEPARTMENT OF AGRICULTURE, Respondent.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 804

754 F.2d 804

Jacob F. BOSMA d/b/a Chino Livestock Commission Company and Yardage, Petitioner, v. UNITED STATES DEPARTMENT OF AGRICULTURE, Respondent.

No. 83-7069.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Nov. 10, 1983.

Decided July 25, 1984.

Rehearing Denied Feb. 28, 1985.

James Craig, Clayson, Mann, Arend & Yaeger, Corona, Cal., for petitioner.

Virginia Strasser, U.S. Dept. of Agriculture, Washington, D.C., for respondent.

Petition for Review of a Decision and Order of the Secretary of Agriculture.

Before HUG and FLETCHER, Circuit Judges, and REDDEN, ^* District Judge.

FLETCHER, Circuit Judge:

Bosma petitions for review of an order of the Judicial Officer (J.O.) of the Department of Agriculture finding Bosma violated the Packers and Stockyards Act and assessing a civil penalty of $10,000.

Bosma is a market agent operating as "Chino Livestock Commission Company and Yardage." He deals in cows which have been consigned for sale by dairy farmers because they are not suitable for dairy operations. He sells the cows to packers for slaughter and receives a commission from the sellers.

A small percentage of the cows Bosma sold on consignment were sick or "distressed." Purchasers of such cows ran a risk that they might die before slaughter or be condemned by government inspectors after slaughter, making them worthless. Packers therefore preferred to buy such cows "subject," that is, subject to passing inspection. Bosma's consignors, on the other hand, preferred to sell their cows for a "live price," so that they would be paid something regardless of whether the animal passed inspection.

During the time when the alleged violations occurred, only one packer in Bosma's area would purchase the sick or distressed cows, and it offered a very low price. Because Bosma was not satisfied with the price offered, he made arrangements to sell the cows "subject" to a Los Angeles packer, Shamrock. Bosma bought outright over 500 sick or distressed cows himself, giving his consignors a higher "live" price than anyone else offered. He then had the cows slaughtered, sold the carcasses to Shamrock "subject," at a higher price, taking the risk that some would be condemned.

Although many of the cows Bosma bought were subsequently condemned, about 80% passed inspection. Bosma made on the average about $100 a head over the price he paid the consignors for the cows. In addition, he charged the consignors a commission of $7.50 a head. Bosma did not routinely inform his consignors that he was buying some of their cows himself. On the accounts of sale he gave them he listed the purchaser as "Shamrock."

The Department of Agriculture charged Bosma with purchasing consigned animals for speculation in violation of 7 U.S.C. Sec. 208 (1982) ¹ (prohibiting unjust and unreasonable practices by market agents), 7 U.S.C. Sec. 213 (1982) ² (prohibiting unfair and deceptive practices) and 9 C.F.R. Sec. 201.57 (1982) (prohibiting market agents from purchasing consigned livestock for speculative purposes), 9 C.F.R. Sec. 201.59 (1982) (requiring an agent to remit to the consignor profits on livestock the agent purchases on his own account and resells at a higher price the same day), and 9 C.F.R. Sec. 201.60(a) (1982) (prohibiting an agent from operating in a manner whereby it shares in the profits from the resale of consigned livestock). It also charged Bosma with failing to keep accurate records because his accounts of sale and purchase invoices did not show the correct name of the purchaser, in violation of 7 U.S.C. Secs. 208, 213, and 221 (1982) ³ (requiring market agents to keep records which fully and correctly disclose all transactions), 9 C.F.R. Sec. 201.43(a) (1982) (requiring market agents to include on accounts of sale the name of the purchaser), and 9 C.F.R. Sec. 201.59 (1982) (requiring a market agency that purchases out of consignment to show its own name as purchaser on accounts of sale).

The Administrative Law Judge ("ALJ") who heard the case concluded that Bosma's purchases out of consignment were not improper speculation, but were market support purchases not prohibited by the Act. She found that Bosma had been protecting his consignors' interests by purchasing the cows himself when he could not obtain a reasonable "live" price from the packers. The ALJ gave weight to the fact that all of the consignors who testified said they were satisfied with Bosma's services.

The ALJ found that Bosma had violated section 221 by failing to keep accurate accounts and records, and she ordered him to keep proper records. She found no evidence of unfair or deceptive practices and therefore refused to suspend Bosma as a registered agent or assess the $15,000 civil penalty requested by the Department.

The Department appealed to the J.O., who affirmed the ALJ's finding that Bosma's purchases out of consignment were made for market support purposes. However, he also concluded that Bosma's listing of "Shamrock" as the purchaser of the cows was itself a deceptive practice in violation of section 213(a), which, unlike section 221, provides for civil penalties. Rejecting the ALJ's conclusion that there was "no evidence of deceit or nondisclosure," the J.O. found that Bosma "knowingly and intentionally violated the regulatory [bookkeeping] requirements in order to keep his consignors from knowing he was the purchaser of their livestock." The J.O. determined that this was a serious violation and assessed a $10,000 civil penalty.

I. Violation of Section 213.

Bosma does not contest the Secretary's authority to declare his record-keeping unlawful under section 221 or to order him to keep appropriate records in the future. He does contest the J.O.'s authority to impose the $10,000 fine, arguing that the Department has not shown that these record-keeping violations are a deceptive practice in violation of section 213, the only section of the Act which provides civil penalties.

A. Standard of Review.

Bosma challenges the J.O.'s reversal of the ALJ's finding that there was no evidence of deceit or nondisclosure, or of any harm of the sort the Act was designed to prevent. The Department has announced a policy of not reversing an ALJ's factual findings unless the record compels such reversal. See In re Hampshire Open-Air Market, Inc., 41 Agric.Dec. 955, 957 (1982). Bosma argues that the J.O.'s reasons for reversing the ALJ's factual findings are insufficient and inconsistent and that he has improperly refused to follow his own standard without explanation.

We must uphold the J.O.'s factual findings if they are supported by substantial evidence, based on our reading of the entire record. Corona Livestock Auction, Inc. v. United States Department of Agriculture, 607 F.2d 811, 814 & n. 8 (9th Cir.1979). "On appeal from or review of the initial decision [by the ALJ], the agency has all the powers which it would have in making the initial decision except as it may limit the issues on notice or by rule." 5 U.S.C. Sec. 557(b) (1982). Cf. FCC v. Allentown Broadcasting Corp., 349 U.S. 358, 364, 75 S.Ct. 855, 859, 99 L.Ed. 1147 (1955) (Court of Appeals erred in concluding agency could not overrule ALJ's findings based on demeanor of a witness unless supported by a very substantial preponderance in the testimony). A reviewing court may consider the ALJ's findings as part of the record in determining whether substantial evidence supports the J.O.'s decision. Universal Camera Corp. v. NLRB, 340 U.S. 474, 496-97, 71 S.Ct. 456, 468-69, 95 L.Ed. 456 (1951). Where, as in this case, "credibility is at issue or when findings of motive or purpose depend entirely on credibility, the decision of the ALJ will be given special weight. Moreover ... the [agency's] findings of fact will be scrutinized more critically if they contradict those of the ALJ." Butler-Johnson Corp. v. NLRB, 608 F.2d 1303, 1305 (9th Cir.1979).

We agree that an agency may not depart arbitrarily from its own announced policies. See Airport Parking Management v. NLRB, 720 F.2d 610, 615 (9th Cir.1983). The J.O.'s announced policy of giving considerable weight to the ALJ's findings appears to be a proper recognition that the ALJ is in a better position to judge certain facts, which we consider in reviewing the J.O.'s decision. See Butler-Johnson, 608 F.2d at 1305. However, after carefully scrutinizing the record and the J.O.'s opinion, we find sufficient support for his finding that Bosma's conduct violated section 213.

B. Showing of Harm.

In order to prove a violation of Section 213, the Department must show that the challenged conduct "is likely to produce the sort of injury the Act is designed to prevent." Central Coast Meats, Inc. v. U.S.D.A., 541 F.2d 1325, 1327 (9th Cir.1976). One of the purposes of the Packers and Stockyards Act is to safeguard farmers and ranchers against receiving less than the true market value of their livestock. See H.Rep. No. 1048, 85th Cong., 2d Sess. reprinted in 1958 U.S.Code Cong. and Admin.News 5212, 5213.

In Central Coast Meats, we held that the Secretary had erred in ordering the joint owners of both a cattle buying business and a meat packing business to divest themselves of one of the businesses. 541 F.2d at 1327. Although recognizing that the "inherent evil" in the failure of the two businesses to operate independently and competitively is the elimination of "a buyer from the marketplace who would otherwise be there," we found "no evidence that this actually occurred, or even that it was a likely result ...." Id. We found the Secretary's reliance on the hypothetical possibility of harm, as presented by expert testimony, insufficient to support a finding of a violation, noting that "generalized expert testimony as to the mere specter of these evils" should not be used to deem conduct in violation of the Act "without regard to the actual likely effect of such conduct." 541 F.2d at 1327-28 n. 2.

Bosma contends the J.O.'s decision is...