De Jong Packing Co. v. U.S. Dept. of Agriculture

Decision Date07 April 1980
Docket NumberNos. 77-2722,77-2979,s. 77-2722
Citation618 F.2d 1329
Parties1980-81 Trade Cases 63,684 DE JONG PACKING COMPANY, and Mt. Vernon Meat Co., Inc., Petitioners, v. The UNITED STATES DEPARTMENT OF AGRICULTURE, Respondent. HYGRADE FOOD PRODUCTS CORPORATION, Petitioner, v. The UNITED STATES, the Secretary of Agriculture and the Packers and Stockyards Administration, Respondents.
CourtU.S. Court of Appeals — Ninth Circuit

James F. Henriot, Tacoma, Wash., for Hygrade Food Products Corp.

Ronald R. Glancz, Washington, D. C., on brief; James M. Kelly, Dept. of Agriculture, Washington, D. C., for U. S. Dept. of Agriculture.

Peter Jay Visser, Le Cocq, Simonarson & Visser, Lynden, Wash., for De Jong Packing Co.

On Petition to Review a Decision of the Secretary of Agriculture.

Before MERRILL and SNEED, Circuit Judges, and ZIRPOLI, * District Judge.

MERRILL, Circuit Judge:


The Packers and Stockyards Administrator instituted this administrative action under the Packers and Stockyards Act ("the Act"), 7 U.S.C. § 181 et seq., alleging violations of § 202(a), (e) and (g) of the Act. 1 The complaint alleged that a group of packers, petitioners here, had conspired to force auction stockyards to change their terms of sale, from "as is" sales of slaughter cattle, under which the packers bear the risk that the cattle will fail to pass government inspection, to "subject" sales those subject to the cattle's passing government inspection which place the risk of loss on the seller.

The administrative law judge found that petitioners had violated the Act as charged and that petitioner De Jong had violated 9 C.F.R. § 201.43(b) as well, and that appropriate cease and desist orders should issue. The government, contending that the cease and desist order was insufficiently broad, appealed to the Judicial Officer, who has final authority to decide cases within the Department of Agriculture. Petitioners also appealed, contending that the cease and desist orders should not have issued. The Judicial Officer sustained all findings of violations. In addition, he concluded Under the customary trade practices and marketing procedures of the northwest Washington livestock auction markets, the purchase of livestock is on an "as is" basis unless otherwise expressly specified prior to sale. When so purchased, the purchaser buys the animals as he sees them with no guarantee that they are suitable for any purpose. He assumes the risk of subsequently discovered defects, and full payment is due within one business day of purchase.

                that all petitioners, not just De Jong, had violated 9 C.F.R. § 201.43, because they had conspired with De Jong.  Accordingly, he broadened the scope of the cease and desist order.  2  Petitioners have appealed to this court

When slaughter cattle are sold at an auction market on a "subject" basis, the sale is contingent upon the animal passing federal inspection as fit for human consumption, and payment is not due until one business day after the animal has passed inspection.

It is not practicable or lawful to sell a particular animal at auction with some prospective buyers bidding on an "as is" basis, while others bid on "subject" terms. It is the responsibility of the stockyard owner to fix the terms of sale. 3 Under the practice at northwest Washington auctions, cattle are very rarely sold on "subject" terms; only cattle with visible defects or which have elicited no "as is" bid are so sold.

In early February, 1972, petitioners, with the exception of Hygrade, signed a letter to the stockyards which stated that in the future petitioners would purchase and pay for cattle only subject to their passing government inspection. 4 The stockyards promptly rejected the proposed change in policy. On March 8 and 9, 1972, the Packers and Stockyards Administration sent letters to the packers advising them that it considered their actions to be in violation of the Act, and that it would take further administrative action if the stockyards did Shortly after that decision became final, during April of 1974, each petitioner (now including Hygrade) sent a letter to the stockyards informing them that as of May 1, 1974 (in one case as of April 29, 1974), all bids would be subject to the cattle passing inspection, and that payment for cattle would be delayed for three bank days pending determination as to whether the cattle were fit for human consumption. (Hygrade's letter varied only in specifying that it would implement this policy by withholding the average price of two animals for the three-day period.)

not "reconsider." All packers but petitioner De Jong appear to have reconsidered. Their purchase of cattle continued on an "as is" basis and they promptly paid for all cattle purchased, in accordance with the practice. De Jong, however, refused to pay for any cattle sold to it which were subsequently condemned. The Washington State Department of Agriculture then initiated proceedings pursuant to the state's regulatory program, seeking to compel De Jong to pay. A state court found that De Jong had bought the cattle on "subject" terms and therefore, as a matter of contract law, was not required to pay.

From May 1, 1974, to May 15, 1974, petitioners adhered to their announced position and no cattle were purchased "as is." During the last two weeks of May, 1974, however, all petitioners notified the stockyards that they were rescinding their "subject" policy and resumed bidding for cattle on an "as is" basis.


It is clear that bidding for cattle on a "subject" basis is perfectly legal, and that any packer acting independently is free to bid on such terms. If what was done here constituted a violation of § 202, it was because concerted action was taken by petitioners. The existence of a conspiracy or agreement thus becomes critical. Petitioners contend that the record does not support the Judicial Officer's finding of conspiracy. Our question on review is whether the finding is supported by substantial evidence. Corona Livestock Auction, Inc. v. United States Department of Agriculture, 607 F.2d 811 (9th Cir. 1979).

It is clear that a conspiracy existed as of February 8, 1972, when petitioners (absent Hygrade) joined in advising the stockyards that all future bids would be "subject" bids. As the Judicial Officer noted in his decision:

"This case is quite unusual! 'Conspirators seldom sign articles of partnership in crime which may thereafter be conveniently put into evidence by the prosecution.' United States v. Morris, 225 F.2d 91, 95 (C.A.7), certiorari denied, 350 U.S. 901 (76 S.Ct. 179, 100 L.Ed. 792)."

The question, then, is whether a conspiracy existed in 1974, when petitioners individually notified the stockyards that their bids would be confined to "subject" bids in the future. Petitioners assert that they all simultaneously and independently arrived at the decision to send their 1974 letters as a result of De Jong's success in Washington state courts. This contention was rejected by the Judicial Officer. He noted that the state court success was founded on the state court finding that the livestock markets had accepted De Jong's bids knowing that they were "subject" bids. Thus, the co-operation of the livestock markets in continuing to accept "subject" bids was necessary to future success. The Judicial Officer stated:

" * * * the State Court decision was not likely to make each of the respondents, acting independently, come to the conclusion that he alone could force the auction markets to change their sales policy effective May 1, 1974 (or April 29, 1974)."

As to whether a 1974 conspiracy existed, the Judicial Officer stated:

"There is no evidence in this case that any of the conspirators withdrew from the conspiracy prior to mid-May 1974. Merely purchasing livestock in 1972 and 1973 without enforcing the terms of the February 1972 ultimatum is no evidence that the conspirators abandoned their conspiratorial purpose. In fact, I infer from their unity of action in 1974, following the State Court decision, that in 1972 and 1973, the respondents other than Hygrade We find this inference to be rational. Further, the parallel action taken in 1974 lends support to the inference that it was in response to a conspiracy. The similarity of the letters written by the individual petitioners, the manner in which terms and conditions of purchase were stated by each, and the coincidence of the effective dates selected by each (April 29, and May 1, 1974), all lend credence to the view that each petitioner was aware of the action taken by the others and was acting in concert with the other petitioners. It is conceded that there was "trade talk," of which petitioners were aware, regarding a boycott. While mere consciously parallel action is not sufficient to demonstrate conspiracy, neither is express agreement required; it is "enough that knowing that concerted action was contemplated or invited, (defendants) gave their adherence to the scheme and participated in it." Interstate Circuit Co. v. United States, 306 U.S. 208, 226, 59 S.Ct. 467, 474, 83 L.Ed. 610 (1939). Accord, Bogosian v. Gulf Oil Corp., 561 F.2d 434, 446 (3d Cir. 1977), cert. denied, 434 U.S. 1086, 98 S.Ct. 1280, 55 L.Ed.2d 791 (1978); Joseph E. Seagram & Sons, Inc. v. Hawaiian Oke & Liquors, Ltd., 416 F.2d 71, 84-85 (9th Cir. 1969), cert. denied, 396 U.S. 1062, 90 S.Ct. 752, 24 L.Ed.2d 755 (1970); Esco Corp. v. United States, 340 F.2d 1000, 1008 (9th Cir. 1965).

were merely biding their time awaiting the outcome of De Jong's activities in furtherance of the conspiracy."

Here, from the facts that petitioners combined to seek "subject" terms in 1972 and waited to act together again in 1974, it can be inferred that petitioners believed that concerted action was necessary to achieve their purpose, and that no petitioner would have acted as it did had it not believed that the others would do the same.


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