Russet Valley Produce, Inc., Matter of

• Decision Date: 11 October 1995
• Docket Number: No. 20872,20872
• Citation: 904 P.2d 566,127 Idaho 654
• Parties: , 37 U.S.P.Q.2d 1307 In the Matter of the Revocation of the Certification License of RUSSET VALLEY PRODUCE, INC. IDAHO POTATO COMMISSION, Plaintiff-Respondent-Appellant on Appeal-Cross Respondent, v. RUSSET VALLEY PRODUCE, INC., Defendant-Appellant-Respondent on Appeal-Cross Appellant. Boise, December 1994 Term
• Court: Idaho Supreme Court

Page 566

904 P.2d 566

127 Idaho 654, 37 U.S.P.Q.2d 1307

In the Matter of the Revocation of the Certification License of RUSSET VALLEY PRODUCE, INC. IDAHO POTATO COMMISSION, Plaintiff-Respondent-Appellant on Appeal-Cross Respondent, v. RUSSET VALLEY PRODUCE, INC., Defendant-Appellant-Respondent on Appeal-Cross Appellant.

No. 20872.

Supreme Court of Idaho,

Boise, December 1994 Term.

Oct. 11, 1995.

Moffatt, Thomas, Barrett, Rock & Fields, Boise, for appellant. Robert E. Bakes argued.

Taylor & Groom, Twin Falls, for respondent. G. Kent Taylor argued.

SILAK, Justice.

I. NATURE OF THE CASE

This case began as an administrative proceeding before the Idaho Potato Commission (Commission) to revoke the license of Russet Valley Produce, Inc. to use the "Grown in Idaho" trademark on potatoes. The Commission previously entered an administrative order that only "Russet Burbank" potatoes could be packaged with a "Grown in Idaho" label, and that all other potatoes had to have the variety indicated on the package. (Research had shown that most consumers believed they were purchasing Russet Burbanks when buying "Idaho" potatoes.) Russet Valley made two shipments without properly labeling the non-Russet Burbank potatoes. Hearings occurred before the Commission, and the Commission issued an order revoking Russet Valley's license and imposing a $15,000 fine. However, the Commission's order allowed reinstatement if Russet Valley fulfilled certain conditions, including payment of the fine and the Commission's costs and attorney fees. Appeals followed.

II. ISSUES

The parties have appealed numerous issues, some of which we need not discuss. The major issues addressed below are as follows:

1) Did the Commission comply with the notice requirements of I.C. § 67-5214(c)?

2) Does substantial competent evidence support the Commission's finding of a packing violation in October 1992?

3) Were Russet Valley's packing violations in November 1992 "continuing violations" under I.C. § 22-1213?

4) Did the Commission improperly assess investigatory costs and fees against Russet Valley as a condition for reinstating its license?

5) Was the district court's award of attorney fees against the Commission under I.C. § 12-117 proper?

III. BACKGROUND AND PROCEEDINGS

In August 1992, the parties executed a license agreement permitting Russet Valley to use the word "Idaho," and the "Grown in Idaho" seal on potato products. The license agreement provided, among other things, that Russet Valley would comply with the current regulations adopted by the Commission, and that any violation of the regulations would be considered a violation of the license agreement, and an infringement of the trademarks.

A hearing officer for the Commission found that in the fall of 1992, most likely on October 14 or 15, a shipment of potatoes was delivered to Russet Valley's packing house. From this shipment, Russet Valley's employees packed approximately 300 boxes of Grade A "Russet Frontier" potatoes, and placed some of those boxes in a cooler for later shipment. On November 4, 1992, an employee of the Idaho Department of Agriculture was present on Russet Valley's business premises and observed potatoes being packed or repacked for shipment out of state. Those potatoes had characteristics inconsistent with Russet Burbank potatoes, and were placed in boxes not marked as to variety. They were then shipped to a retail location in Ohio. Similarly, on November 13, 1992, the hearing officer found that Russet Valley packed or repacked potatoes in boxes not labeled as to variety. Those potatoes were shipped to a wholesaler in Florida. The Commission intercepted two potato containers from the foregoing shipments through purchases in Ohio and Florida. Genetic testing confirmed that the potatoes were Russet Frontiers and not Russet Burbanks. The Commission then initiated these proceedings.

In findings of fact and conclusions of law dated February 11, 1993, the hearing officer concluded that Russet Valley violated both the licensing agreement and the Commission's regulations by packing and then shipping unlabeled Russet Frontier potatoes to Ohio on or about November 3, 1992, and to Florida on or about November 13, 1992.

In its "Order Following Findings of Fact and Conclusions of Law Entered By Hearing Officer," dated February 18, 1993 (hereafter "February 18th order"), the Commission adopted the hearing officer's findings of fact and conclusions of law, but also entered additional findings and conclusions. In the February 18th order, the Commission concluded, among other things, that Russet Valley committed one initial violation by packing Russet Frontiers in unlabeled containers on October 14 or 15, 1992. The Commission also concluded Russet Valley committed two "continuing" violations. The first continuing violation was for packing or repacking and shipping to Ohio unlabeled Russet Frontier potatoes on November 3, 1992, with that violation continuing until at least November 13, 1992. The second continuing violation was for packing or repacking Russet Frontiers on November 13, 1992, and shipping them to Florida, with that violation continuing until at least November 28, 1992. The February 18th order concluded that Russet Valley may be assessed a civil penalty of $1,000 per violation and $1,000 for each day of a continuing violation, pursuant to I.C. § 22-1213. The order revoked Russet Valley's license, but allowed it to be reinstated under certain conditions, including payment of a $15,000 civil penalty, and reimbursement to the Commission of $13,156.68 for the Commission's administrative costs and attorney fees. The order provided that if any further violations occurred, the license could be revoked immediately, without notice. The order recited that Russet Valley waived its right to notice and hearing. The order further provided that it was applicable to Russet Valley Produce, Inc., to its principal stockholders Ken and Jennifer Mulberry individually, and to any other related business entity that Russet Russet Valley appealed to the district court. The district court entered a memorandum decision on July 15, 1993 affirming the hearing officer's findings of fact and conclusions of law, but vacating the Commission's February 18th order, and remanding to the Commission for a new hearing on the proper sanctions to be imposed. The district court found there were no "continuing violations," but rather two independent violations when the two shipments were made. The court further found that the Commission did not have authority to assess costs of the inspection and attorney fees at the administrative level against Russet Valley, and awarded Russet Valley part of its costs and attorney fees ($4,943.80) in the appeal to the district court. The Commission appealed, and Russet Valley cross-appealed.

[127 Idaho 657] Valley or its principal stockholders might own.

IV. STANDARD OF REVIEW

This Court reviews an agency's decision independently of the district court's appellate decision. Boise Group Homes v. Dept. of Health, 123 Idaho 908, 909, 854 P.2d 251, 252 (1993). The reviewing court will uphold an agency's findings of fact if supported by substantial and competent evidence, and it may not substitute its judgment for that of the administrative hearing officer on questions of fact. Id. (citing Van Orden v. State, Dep't of Health & Welfare, 102 Idaho 663, 667, 637 P.2d 1159, 1163 (1981)). We exercise free review over the agency's conclusions of law. E.g., O'Loughlin v. Circle A. Constr., 112 Idaho 1048, 1051, 739 P.2d 347, 350 (1987). The reviewing court may reverse the agency's decision or remand for further proceedings only if substantial rights of the appellant have been prejudiced under the circumstances set forth in I.C. § 67-5215(g). ¹ Dovel v. Dobson, 122 Idaho 59, 61, 831 P.2d 527, 529 (1992).

V. ANALYSIS

A. NOTICE OF LICENSE REVOCATION PROCEEDINGS, I.C. § 67-5214(c)

The first matter for consideration is a procedural issue raised by Russet Valley on cross-appeal. Russet Valley contends it has been denied procedural due process and that the proceedings initiated against it are void. Russet Valley claims the Commission failed to give notice and an opportunity to correct any problems and come into compliance, pursuant to I.C. § 67-5214(c), before instituting the proceeding to revoke the license. Section 67-5214(c) provided ² in part:

No revocation, suspension, annulment, or withdrawal of any license is lawful unless, prior to the institution of agency proceedings, the agency gave notice by mail to the licensee of facts or conduct which warrant the intended action, and the licensee was given an opportunity to show compliance with all lawful requirements for the retention of the license. If the agency finds that public health, safety, or welfare imperatively requires emergency action, and incorporates a finding to that effect in its order, summary suspension of a license may be ordered pending proceedings for revocation or other action. These proceedings shall be promptly instituted and determined.

(emphasis added). Russet Valley's first written notice was on December 11, 1992, when it was served via telecopy with a notice of In the February 18th order, the Commission rejected Russet Valley's due process argument stating that after Russet Valley raised this argument, the Chairman of the Commission agreed to reschedule the initial hearing in this matter from January 11, 1993 to January 29, 1993, to afford Russet Valley an opportunity for an informal meeting to show compliance with the terms of its license. Such a meeting was held and Russet Valley was unable to show it had fully complied with its license agreement. Thus, the Commission contends, it provided Russet Valley with the notice and opportunity to demonstrate compliance specified in I.C. § 67-5214(c), or at least, the Commission substantially complied. We agree.

[127 Idaho 658] hearing and the Commission's ...