Rowse v. Platte Valley Livestock, Inc.

• Decision Date: 01 November 1984
• Docket Number: No. CV84-L-227.,CV84-L-227.
• Citation: 597 F. Supp. 1055
• Parties: Dean ROWSE and Helen Rowse, Plaintiffs, v. PLATTE VALLEY LIVESTOCK, INC., a Nebraska corporation, Defendant.
• Court: U.S. District Court — District of Nebraska

597 F. Supp. 1055

Dean ROWSE and Helen Rowse, Plaintiffs, v. PLATTE VALLEY LIVESTOCK, INC., a Nebraska corporation, Defendant.

No. CV84-L-227.

United States District Court, D. Nebraska.

November 1, 1984.

Richard A. Koehler, Geneva, Neb., for plaintiffs.

Robert M. Cook, Norfolk, Neb., for defendant.

Sally Johnson, Asst. U.S. Atty., Lincoln, Neb., for intervenor United States of America.

MEMORANDUM AND ORDER ON MOTION FOR SUMMARY JUDGMENT AND MOTION TO DISMISS

URBOM, Chief Judge.

The plaintiffs are seeking by this lawsuit to enforce a reparations order issued in their behalf by the Secretary of Agriculture under § 309 of the Packers and Stockyards Act of 1921, as amended, 7 U.S.C. § 210. The plaintiffs have filed a motion for summary judgment, filing 9, and the defendant has filed a motion to dismiss, filing 14. Because it affects the jurisdiction of this court, I shall address the defendant's motion first.

The defendant is a market agency selling livestock on commission and operating a posted stockyard at Gering, Nebraska. As such, it is registered with the Secretary of Agriculture under the Packers and Stockyards Act and is subject to the provisions of the Act and regulations promulgated under its authority. The plaintiffs filed a reparation complaint with the Secretary of Agriculture on March 13, 1980. On February 3, 1984, the office of the Secretary issued a decision and order finding that the defendant had engaged in an unjust practice prohibited by the second clause of § 307(a) of the Act, 7 U.S.C. § 208(a), and awarding to the plaintiffs the net proceeds from the sale by the defendant of 108 cows ($57,184.33) and the defendant's commission on the sale ($692.80), a total of $57,877.13, plus interest thereon at 13 per cent from April 1, 1980, until paid. The defendant has paid no part of that award.

The jurisdiction of this court is based upon the jurisdiction of the Secretary to have entertained the complaint in the first instance. The jurisdiction of the Secretary is an issue of law to be reviewed de novo here, 5 U.S.C. § 706, but the findings and orders of the Secretary are prima facie evidence of the facts stated, 7 U.S.C. § 210(f). Otherwise, the suit "shall proceed in all respects like other civil suits for damages." Id. In reviewing the findings and orders of the Secretary, the substantial-evidence-on-the-record standard of 5 U.S.C. § 706(2)(E) applies. Rice v. Wilcox, 630 F.2d 586, 591 (C.A. 8th Cir.1980).

The defendant contends that the Secretary lacked jurisdiction, because the transaction for which the plaintiffs seek damages was an "isolated instance" which does not constitute a "practice" within the meaning of 7 U.S.C. § 208(a). Section 208(a) provides:

"It shall be the duty of every stockyard owner and market agency to establish, observe, and enforce just, reasonable, and nondiscriminatory regulations and practices in respect to the furnishing of stockyard services, and every unjust, unreasonable, or discriminatory regulation or practice is prohibited and declared to be unlawful."

The United States, which has intervened to defend the Secretary's jurisdiction, argues that Congress intended that a "practice," under the second clause, be read to mean a course of conduct of the industry as a whole rather than a course of conduct of a particular respondent. The defendant cites Rice v. Wilcox, supra, at 591, in which the court said, "we emphasize that isolated transactions do not constitute a practice."

One way to read Rice is to say that it sets an "every dog gets one free bite" rule. In that case Wilcox purchased cattle from Rice seventeen times over a six-month period by paying for the cattle one week after the sale with checks drawn on the account of Davis, to whom Wilcox consigned the cattle for sale; each time Davis honored the checks. Then Wilcox made two more purchases of cattle from Rice, but neither Wilcox nor Davis paid Rice for the cattle; after Davis sold the cattle on consignment, he retained the proceeds to satisfy Wilcox's debt to him, even though Davis knew that Rice had not been paid. The Secretary found that both Wilcox's failure to pay for the cattle and Davis' retention of the sale proceeds and nonpayment of the debt after making a practice of honoring Wilcox's debts to Rice were unjust practices under 7 U.S.C. § 208. The appellate court affirmed the district court's decision sustaining the reparation orders. Although it said that an isolated transaction is not a practice, the court observed that several acts of dishonoring checks are not required and that dishonoring two drafts after inducing Rice's reliance upon Davis' history of extending credit to cover Wilcox's purchases was a deceptive practice within the Secretary's authority to stop.

The reasoning laid out in Rice leaves unclear whether the "practice" was the entire course of action, including honoring 17 checks, or was the two instances of dishonoring checks. The latter was the unfair practice found by the Secretary and upheld by the actual holding of the case. Unless the court believed that honoring the first 17 was deceptive because Davis intended all along to dishonor the last two, which I doubt, then the unfair practice was connected with the last two. Because the court said an isolated transaction was insufficient for a practice, it must have meant either that two unfair transactions do constitute a practice, regardless of the context of prior fair transactions, or that one or two transactions become a practice when they derive their unfairness from the defendant's abrupt change of a previous course of conduct on which the plaintiff has relied to his detriment. I believe the latter is the proper explanation for the Rice result, and the court was not consciously adopting a "one free bite" rule. Rather the court was giving a broad reading to the power of the Secretary to protect cattle sellers while heeding the idea that the Packers and Stockyards Act was not meant to make the Secretary a collecting agency or provide a federal administrative remedy for every worthless check or dishonored draft. Id. at 591 n. 5.

The policy from Rice applies to the present facts, although those facts are distinguishable. For purposes of the motion to dismiss, the facts alleged by the plaintiff, in this case the findings of the Secretary, must be taken as true. The Secretary's decision indicates that the defendant's application of a portion of the net sale proceeds to satisfy a debt owed by the dealer to the defendant when the dealer had not paid the plaintiff was not an isolated transaction on the part of the defendant, although the defendant may not have had a related transaction with the plaintiff. On January 19, 1980, the defendant had sold 159 head of cattle consigned to it by the same dealer, Ken Kaba, and retained a portion of the net sale proceeds to pay a debt owed it by Kaba and gave Kaba a check for the balance. Shortly after that the sellers of the cattle, the Rezac brothers, informed the defendant that Kaba had not paid them. The defendant stopped payment of the check to Kaba and on February 28, 1980, paid the Rezacs the full net proceeds of the January 19 consignment sale. Meanwhile, on February 16, 1980, Kaba and the plaintiffs agreed to the sale of 108 cows, which Kaba picked up on February 20 and 21. Kaba gave the plaintiff two checks in payment on February 21, and the Rowses deposited them into their account the next day. The defendant sold the Rowse cattle on February 27; at this time the president of the defendant knew that Kaba had bought the cattle from Dean Rowse and that Kaba had recently failed to pay for livestock purchased from the defendant, from Dennis Rezac, and from Dale Van Wyk. The next day, the same day that the defendant paid the proceeds of the sale of the 159 steers to the Rezacs, the defendant, with Kaba's knowledge, paid a portion of the net sale proceeds from the Rowse cattle to itself to satisfy a debt owed it by Kaba and paid the rest to Van Wyk to satisfy Kaba's debt to him. On March 3 the Rowses learned that the Kaba checks to them were being returned for insufficient funds.

The case of Mid-South Order Buyers, Inc. v. Platte Valley Livestock, Inc., 210 Neb. 382, 315 N.W.2d 229 (1982), is crucial to the question of whether the present defendant's action was a "practice" under section 208, not because of the legal principle applied in that case, but because of the facts found by the state court. As the Secretary found in the present case, the defendant here also was the defendant in Mid-South. In that case, the plaintiff sold cattle to a dealer, Tige Enterprises, in three lots, but received no payment. Tige consigned the cattle to Platte Valley, and they were sold. Platte Valley then paid the proceeds to itself to cover a debt owed it by Tige, although Mid-South had already informed Platte Valley that Tige had not paid for the cattle. This occurred in 1973. Seven years later, according to the Secretary's decision, Platte Valley did the same thing to the Rowses.

Even under the narrowest reading of Rice v. Wilcox, the defendant already has had its free bite, either in the Mid-South transaction in 1973 or in the Rezac transaction in 1980, and the repetition makes it a "practice." However, it is notable that Rice cited Neugebauer v. Ryken, 34 Agric. Dec. 1712 (D.S.D.1975), for the proposition that several acts of dishonoring checks are not necessary. In discussing this point, the Supreme Court of Nebraska in Mid-South noted that Neugebauer involved a single transaction involving a misrepresentation and quoted the portion of the decision that distinguished nonpayment of bills as a mere part of the "ordinary debtor-creditor relationship," which is unlike a misrepresentation about the breed of cattle, the latter being "`inextricably within the term of "furnishing stockyard services."'" 210 Neb. at 393, 315 N.W.2d at 235. The Nebraska court concluded that "the term `practice' may...