Syverson v. US DEPT. OF AGRICULTURE, 08-3245.

• Decision Date: 09 April 2010
• Docket Number: No. 08-3245.,08-3245.
• Citation: 601 F.3d 793
• Parties: Todd SYVERSON, doing business as Syverson Livestock Brokers, Petitioner, v. UNITED STATES DEPARTMENT OF AGRICULTURE, Respondent.
• Court: U.S. Court of Appeals — Eighth Circuit

601 F.3d 793

Todd SYVERSON, doing business as Syverson Livestock Brokers, Petitioner, v. UNITED STATES DEPARTMENT OF AGRICULTURE, Respondent.

No. 08-3245.

United States Court of Appeals, Eighth Circuit.

Submitted: November 17, 2009.

Filed: April 9, 2010.

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E. Lawrence Oldfield, argued, Oak Brook, IL, (James H. Turk, Mankato, MN, on the brief), for petitioner.

Leslie K. Lagomarcino, argued, Washington, DC, (J. Michael Kelly, on the brief), for respondent.

Before RILEY,¹ Chief Judge, WOLLMAN, and SHEPHERD, Circuit Judges.

WOLLMAN, Circuit Judge.

In this Packers and Stockyards Act case, see 7 U.S.C. §§ 181-229, Todd Syverson appeals from the judgment of the judicial officer of the United States Department of Agriculture. The judicial officer determined that Syverson had engaged in unfair and deceptive trade practices, in violation of 7 U.S.C. § 213(a), and failed to keep sufficient accounts, records and memorandum of his business, in violation of 7 U.S.C. § 221. The judicial officer determined that Syverson unfairly and deceptively overcharged a customer in a series of transactions in which he acted as a market agency and that he failed to produce documentation of his transactions in a timely manner. The judicial officer issued a cease and desist order to Syverson and suspended his registration under the Act for five years. We affirm the judicial officer's judgment in part, reverse in part, and remand to the judicial officer for reconsideration of the sanction.

I.

Syverson has bought and sold livestock since 1989, doing business as Syverson Livestock Brokers in Wanamingo, Minnesota. He is registered under the Packers and Stockyards Act (PSA) as both a market agency and a dealer. This dual registration means that he can traffic in livestock either as a market agency working on a commission basis, gleaning profit from the fees charged for arranging transactions, or as a dealer, deriving profit from the difference between his cost basis and sale price. In 2001, Syverson was ordered to cease and desist from "issuing accounts of purchase or sale which fail to show the true and correct nature of the livestock transaction accounted for therein" and "causing false records to be prepared." In re: Todd Syverson, P & S Docket No. D-99-0011, 2-3 (June 12, 2001).

In the spring of 2002, Syverson entered into an arrangement with Lance Quam, in which Quam sought to purchase approximately sixty cows during the coming summer.² Quam intended to breed the cows. Syverson agreed to provide the cows at his purchase price, plus a commission of $15, and additional expenses, including trucking.³

During the summer of 2002, Syverson purchased cattle at the Zumbrota Livestock Auction in Zumbrota, Minnesota. The auction sold different types of cattle on different days of the week. The Monday auction included a variety of cattle, including open (not pregnant) cows, feeder cattle, calves, market cattle, fat cattle, and dairy cows being sold for slaughter. Typically, although not always, cattle sold at the Monday auction were sold for slaughter and priced by the pound. The Monday auction is colloquially known as the slaughter or cull auction, and most cattle sold at this auction are slaughtered shortly thereafter. Cattle sold at the Monday auction are given a four-digit identification tag, commonly known as a slaughter tag.

On Tuesdays, dairy cows are auctioned. Cows sold at the dairy auction are generally bound for dairy farms and priced by the head rather than by weight. Compared to the cattle sold at the Monday slaughter auction, cows sold on Tuesday tend to be of higher quality and are typically more expensive. In order to be sold at the Tuesday auction, a cow must have received a veterinary inspection that evaluates the overall health of the cow and the state of the udders. The cow must also be tested for brucellosis and tuberculosis. A cow that passes the veterinary inspection can be given a three-digit identification tag, marking it as suitable for the Tuesday dairy auction. Importantly, a cow that has already received a four-digit slaughter tag can have its slaughter tag replaced with a three-digit dairy auction tag if it passes a veterinary inspection.

At both auctions, an individual that puts cattle up for sale is known as the consigner, as they have consigned their cattle to the auction for sale. The consigner remains the owner of the cattle during the auction and bears the risk that the cattle may die while at auction. Ownership is transferred when a successful bid is made for the cattle. If the consigner does not feel the bidding is at a fair price, then he may either (1) stop the bidding and withdraw his cattle from the auction at no charge (known as a "no-sale") or (2) repurchase the cattle from his own consignment, incurring auction fees.

On at least eight occasions during the summer of 2002, Syverson bought cattle at the Monday slaughter auction, had the cattle inspected by a veterinarian, re-tagged for the dairy auction, and then consigned for sale the next day in the Tuesday dairy auction. Syverson repurchased the cows from his own consignment and paid auctioneering fees of approximately twenty to twenty-five dollars per head. Syverson then delivered some of these repurchased cows to Quam, accompanied by an invoice that showed the Tuesday dairy auction price, a commission of $15, a veterinary fee, and the cost of trucking.⁴

To understand these transactions, it is useful to consider an example. At the Monday slaughter auction on August 19, 2002, Syverson bought a cow weighing 790 pounds, at a price of $30 per hundredweight, for a total purchase price of $237. The cow's four digit slaughter tag was # T4827. After passing a veterinarian examination that evening, the cow was re-tagged # 565 for the Tuesday dairy auction.

At the Tuesday dairy cow auction the following day, Syverson consigned cow # 565 to the auction and then repurchased the same cow from his own consignment for $475. Syverson had the auction segregate the cow into its own pen and invoice the cow as "Order 2" for Quam. The cow was then taken to a veterinarian for various shots and delivered to Quam later that day. For this cow, Syverson invoiced Quam $515.50, which included $475 for Syverson's purchase price, a $15 commission, a $15.50 veterinary fee, and $10 for trucking. With the invoice, Syverson included his Tuesday dairy auction receipt, representing that he had paid $475 for the cow. Syverson did not disclose that he had repurchased the cow from his own consignment or that the cow had been initially purchased at the Monday slaughter auction. As a result, the total amount invoiced to Quam was $278.50 greater than the amount Syverson paid for the cow at the Monday slaughter auction.

In February 2003, Quam received eight cows from Syverson. The trucker making the delivery, Jim Klecker, said to Quam, "Oh, you're the one," and then related rumors circulating at the Zumbrota auction, "that Todd Syverson was buying these cattle on Monday and turning around and running them up on Tuesday and selling them to somebody and they didn't know who." Klecker reported that he had spoken to Syverson about this rumor and that Syverson had responded, "Well, just keep it quiet about who we tell about where we got cattle there. Nobody else needs to know."

Acting on this information, Quam acquired veterinary records from the Zumbrota auction. The records showed that Syverson had been repurchasing dairy cows from the Tuesday dairy auction that he had initially purchased at the Monday slaughter auction, confirming what Klecker had said. On May 8, 2003, Quam complained to the Grain Inspection, Packers and Stockyard Administration (GIPSA) about his dealings with Syverson. Robert Merritt, the Minnesota resident agent for GIPSA, commenced an investigation. GIPSA requested that Syverson produce for inspection his business records for 2002. Syverson did not turn over records of his business with Quam, stating that he had lost the records during a move. Although Syverson turned over other records, the records of transactions with Quam were missing. After speaking with his lawyer, Syverson produced some records of his business with Quam, claiming that they had been misfiled. These records, however, did not include the initial price or source of the cows that were supplied to Quam.

On December 14, 2004, GIPSA filed a formal complaint against Syverson, alleging that his self-dealing violated 7 U.S.C. § 213(a) as an unfair or deceptive practice and that his failure to keep proper business records violated 7 U.S.C. § 221. GIPSA's complaint sought a cease and desist order, a fine, and suspension of Syverson's registration under the PSA.

An administrative law judge (ALJ) held a two-day hearing on April 4-5, 2006. The ALJ issued her decision on August 31, 2007, concluding that Syverson, acting as a dealer under the PSA, had violated 7 U.S.C. § 213(a) by engaging in a deceptive and unfair practice, and had violated 7 U.S.C. § 221 for his failure to produce his business records for inspection. In re: Todd Syverson, P & S Docket No. D-05-0005, 2007 WL 3170335 (Aug. 31, 2007) (Syverson I). The ALJ found that Syverson had intentionally withheld the invoices that he had sent to Quam. The ALJ assessed a civil penalty of $5,000 and ordered Syverson to cease and desist from similar violations of the PSA.

On September 27, 2007, GIPSA appealed the ALJ's decision to the judicial officer. GIPSA argued that Syverson had acted as a market agency, not as a dealer, and that his violations were serious violations of the PSA. GIPSA emphasized that Syverson had been ordered in 2001 to cease and desist from misrepresenting important facts about livestock purchases and sales to his customers. According to GIPSA, a five-year suspension was warranted. Syverson denied that he had violated the PSA and argued that no sanction should be imposed.

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