Goetz v. U.S., 98-1155-JTM.

Decision Date23 May 2000
Docket NumberNo. 98-1155-JTM.,98-1155-JTM.
PartiesJerry GOETZ, d/b/a Jerry Goetz and Sons, Plaintiff, v. UNITED STATES of America; United States Department of Agriculture, Dan Glickman, Individually and as The Secretary of the United States Department of Agriculture; and The Acting Administrator of the Agricultural Marketing Service, United States Department of Agriculture, Defendants.
CourtU.S. District Court — District of Kansas

Clarence L. King, Jr., Hampton & Royce, L.C., Salina, KS, David Klaassen, Marquette, KS, for plaintiff.

Robin Barkett Moore, Office of United States Attorney, Wichita, KS, Thomas W. Millet, Frank W. Hunger, U.S. Dept. of Justice, Civil Division, Washington, DC, Felicia L. Chambers, U.S. Dept. of Justice, Washington, DC, for defendants.

MEMORANDUM AND ORDER

MARTEN, District Judge.

Plaintiff Jerry Goetz brings this appeal pursuant to the Administrative Procedure Act ("APA"), 5 U.S.C. § 551, et seq. Under the Beef Promotion and Research Act ("BPA"), the Secretary of Agriculture ("Secretary") has ordered Goetz to pay assessments, late charges and a civil penalty. Goetz filed a separate civil rights action challenging the constitutionality of the Secretary's decision, which has been separately terminated in the Secretary's favor. The present action involves the Secretary's imposition of civil penalties against Goetz.

I. Factual Background

Goetz has been in the cattle buying business in Kansas since 1949. He does some farming and does his cattle buying and selling as the owner and operator of Jerry Goetz and Sons. He visits a different sale barn each day, where he buys and sells cattle. He keeps some cattle at his feedlot, but often promptly resells the cattle he purchases. Goetz buys up to 200 cattle per day.

In the BPA, Congress declared it to be "in the public interest to authorize the establishment ... of an orderly procedure for financing ... and carrying out a coordinated program of promotion and research designed to strengthen the beef industry's position in the marketplace and to maintain and expand domestic and foreign markets and uses for beef and beef products." 7 U.S.C. § 2901(b). The BPA directs the Secretary to establish, by way of a Beef Promotion and Research Order, such a program and to provide for its financing "through assessments [paid by cattle producers and importers] on all cattle sold in the United States and on cattle, beef, and beef products imported into the United States." Id. §§ 2901(b), 2903, 2904(8)(A)-(C). The BPA specifies the required terms and conditions of any such order, id. § 2904, and empowers the Secretary to include any terms and conditions necessary to effectuate an order's provisions. Id. § 2904(12).

The Beef Research and Promotion Order ("Beef Promotion Order"), 7 C.F.R. Part 1260, Subpart A, promulgated pursuant to notice and comment, establishes the Beef Promotion and Research Board ("Board") and the Beef Promotion Operation Committee ("Committee"), both comprised of private parties, to administer the Beef Promotion Order under the oversight of the Secretary. Id. §§ 2904(1)-(7); 7 C.F.R. §§ 1260.141, 1260.161.

The BPA requires cattle producers in the United States to pay a $1.00 per head assessment on cattle sold in this country.1 7 U.S.C. §§ 2904(8)(A), (C); 7 C.F.R. §§ 1260.172(a)(1), 1260.310. Each person making payment to a cattle producer for cattle is designated as a "collecting person" under the BPA and Beef Promotion Order and is required to collect per-head assessments and remit them to a qualified state beef council in the state in which the collecting person resides or, if there is no qualified state beef council within such state, to the Board. 7 U.S.C. § 2904(8)(A); 7 C.F.R. §§ 1260.311(a), 1260.312(c). The assessment, deducted from the money the purchaser pays to the seller, is commonly referred to as a "checkoff." Each collecting person must report to the Board specified information for each calendar month at the time assessments are remitted, 7 U.S.C. § 2904(11); 7 C.F.R. §§ 1260.201, 1260.312(a)-(c), and must maintain and make available for inspection by the Secretary the records necessary to verify the required reports. 7 U.S.C. § 2904(11); 7 C.F.R. § 1260.202.

The Secretary is authorized to conduct investigations and to issue subpoenas to determine whether any person subject to the BPA has engaged in or is about to engage in any act that constitutes or will constitute a violation of the BPA, the Beef Promotion Order or implementing rules and regulations. 7 U.S.C. § 2909. The Secretary, after providing an opportunity for an administrative hearing, may issue an order to restrain or prevent a person from violating the Beef Promotion Order and may assess a civil penalty of up to $5,000 for violation of the BPA and Beef Promotion Order. Id. § 2908(a). Alternatively, or in addition, the Secretary may request that the Attorney General initiate a civil action to enforce, and to restrain a person from violating, any order or regulation promulgated by the Secretary under the BPA. Id. §§ 2908(b), (c).

Goetz allegedly failed to remit assessments as the "collecting person" in transactions involving over 24,000 cattle. Goetz's alleged failure to remit assessments was first brought to his attention in a letter dated June 1, 1987 from the Kansas Beef Council. In February and June 1992, the Kansas Beef Council again sent Goetz letters concerning his alleged failure to comply with the Beef Promotion Order.

More facts will be discussed below as they become relevant to the court's analysis.

II. Procedural History

By filing a complaint on October 29, 1993, the Acting Administrator of the Agricultural Marketing Service, United States Department of Agriculture ("Administrator"), instituted this proceeding under the BPA (7 U.S.C. §§ 2901-2911); the Beef Promotion Order (7 C.F.R. §§ 1260.101-.217); the Rules and Regulations (7 C.F.R. §§ 1260.301-.316) ("Beef Promotion Regulations"); and the Rules of Practice Governing Formal Adjudicatory Proceedings Instituted by the Secretary Under Various Statutes (7 C.F.R. §§ 1.130-.151) ("Rules of Practice").

The complaint alleged that Jerry Goetz, d/b/a Jerry Goetz and Sons ("Goetz"): (1) willfully violated section 1260.201 of the Beef Promotion Order (7 C.F.R. § 1260.201) and section 1260.312 of the Beef Promotion Regulations (7 C.F.R. § 1260.312) by failing to submit required reports; (2) willfully violated section 1260.201 of the Beef Promotion Order (7 C.F.R. § 1260.201) and section 1260.312 of the Beef Promotion Regulations (7 C.F.R. § 1260.312) by failing to submit necessary information in required reports; and (3) willfully violated section 1260.172 of the Beef Promotion Order (7 C.F.R. § 1260.172) and sections 1260.311 and 1260.312 of the Beef Promotion Regulations (7 C.F.R. §§ 1260.311, .312) by failing to remit the assessments due for the purchase and sale of cattle. The Administrator sought the issuance of an order or orders as authorized under the BPA, including an order requiring Goetz to cease and desist from violating the Beef Promotion Order and Beef Promotion Regulations and assessing civil penalties against Goetz in accordance with section 9 of the BPA (7 U.S.C. § 2908). On December 10, 1993, Goetz filed an answer denying the material allegations of the complaint and contending that the BPA, the Beef Promotion Order, and the Beef Promotion Regulations are unconstitutional, unauthorized, unreasonable, arbitrary, void and unenforceable.

On August 2, 1994, Goetz filed an action in the United States District Court for the District of Kansas challenging the constitutionality of the BPA and seeking a temporary restraining order to prevent a hearing from being held in the administrative proceeding. The court issued an order requiring an audit by the accounting firm of Wendling, Noe, Nelson & Johnson of Topeka, Kansas of Goetz's books and records pertaining to his raising, buying, selling, and trading of cattle and Goetz's collection of monies, if any, under the BPA and enjoined the administrative proceeding pending the completion of the audit. The accounting firm completed the audit on November 23, 1994,2 and the court issued a decision on February 28, 1996, rejecting each of Goetz's constitutional challenges to the BPA and set aside prior orders which enjoined and stayed the administrative proceeding.3 The Tenth Circuit affirmed this decision and the Supreme Court denied Goetz's petition for certiorari. See Goetz v. Glickman, 920 F.Supp. 1173 (D.Kan.1996), aff'd, 149 F.3d 1131 (10th Cir.1998), cert. denied, 525 U.S. 1102, 119 S.Ct. 867, 142 L.Ed.2d 769 (1999).

On September 25 and 26, 1996, Administrative Law Judge James W. Hunt ("ALJ") conducted a hearing in Wichita, Kansas. On February 26, 1997, he filed a decision and order, which: (1) concluded that Goetz failed to collect and remit assessments to a State Cattlemen's Beef Promotion and Research Board for 22,118 cattle during the period October 1, 1986 through June 30, 1994 in violation of section 1260.172 of the Beef Promotion Order (7 C.F.R. § 1260.172) and sections 1260.311 and .312 of the Beef Promotion Regulations (7 C.F.R. §§ 1260.311, .312); (2) ordered Goetz to cease and desist from violating the BPA, the Beef Promotion Order, and the Beef Promotion Regulations; (3) assessed a civil penalty of $46,624 against Goetz; and (4) ordered Goetz to pay past-due assessments and penalties to the Kansas Beef Council in the amount of $68,742.

Both Goetz and the Administrator appealed the ALJ's decision and order to the Judicial Officer ("JO") to whom the Secretary has delegated authority to act as the final decision-maker in the Department's adjudicatory proceedings subject to 5 U.S.C. §§ 556 and 557. On November 3, 1997, the JO issued a decision and order, which: (1) concluded that Goetz willfully violated section 1260.172 of the Beef Promotion Order and sections 1260.311 and 1...

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