Twigger v. Schultz

• Decision Date: 21 August 1973
• Docket Number: No. 72-1851.,72-1851.
• Citation: 484 F.2d 856
• Parties: William J. TWIGGER, Petitioner, v. George P. SCHULTZ, Secretary, Department of the Treasury, and Eugene T. Rossides, Assistant Secretary, Department of the Treasury.
• Court: U.S. Court of Appeals — Third Circuit

484 F.2d 856 (1973)

William J. TWIGGER, Petitioner, v. George P. SCHULTZ, Secretary, Department of the Treasury, and Eugene T. Rossides, Assistant Secretary, Department of the Treasury.

No. 72-1851.

United States Court of Appeals, Third Circuit.

Argued May 18, 1973.

Decided August 21, 1973.

Dina G. McIntyre, McIntyre & McIntyre, Pittsburgh, Pa., for petitioner.

Harriett S. Shapiro, Walter H. Fleischer, U. S. Dept. of Justice, Washington, D. C., for respondents.

Before VAN DUSEN, GIBBONS and ROSENN, Circuit Judges.

OPINION OF THE COURT

GIBBONS, Circuit Judge.

Petitioner Twigger, the holder of a customhouse broker's license issued under the Tariff Act of 1930, 19 U.S.C. § 1202 et seq., seeks review, pursuant to 19 U.S.C. § 1641(b), of an order of the Secretary of the Treasury suspending that license for five years. He has held the license since 1949. The Tariff Act authorizes the Secretary of the Treasury to prescribe rules and regulations governing the licensing of customhouse brokers, and regulations issued on that authority are found at 19 C.F.R. Part 111. On July 27, 1971, Twigger was served with a notice to show cause and specification of four charges:

(1) failing to promptly pay or otherwise account to clients for refunds received for them from the Government;

(2) failing to exercise due diligence in paying increased duties assessed in connection with various entries;

(3) knowingly giving false information to customs agents concerning payment of refunds to certain clients; and

(4) failing to maintain current records of accounts reflecting his financial transactions in an orderly and correct manner.

Prior to the service of the July 27, 1971 notice to show cause, Twigger had on April 16, 1971, been served with a notice of preliminary proceedings, signed by the District Director of Customs at Philadelphia, Pennsylvania, advising him that that office was considering formal proceedings looking to the revocation of his license. That notice of preliminary proceedings informed him that 5 U.S.C. §§ 554 and 558 would be applicable if formal proceedings were necessary.¹ The same District Director of Customs signed the July 27, 1971 notice to show cause. On November 17, 1971, the same District Director of Customs, acting as Hearing Officer for the Bureau of Customs, conducted a hearing on the charges. On March 27, 1972, the same District Director of Customs addressed to the Secretary of the Treasury Government's Findings and Conclusions and Recommendations. He concluded that Twigger was guilty of all four charges and recommended that his license be revoked. The District Director forwarded the entire record to the Secretary. Eugene T. Rossides, Assistant Secretary of the Treasury, reviewed the agency record and in effect accepted the conclusions of the District Director on the charges. He suspended Twigger's license for five years rather than revoking it as the District Director had recommended. It is that decision which we review.

Twigger's petition for review makes these contentions:

I. That Charges (1)(2) and (4) should have been dismissed because the Bureau of Customs did not sustain its burden of proof on these charges. See 5 U.S.C. § 556(d).

II. That Charges (1)(2) and (4) should have been dismissed because the Bureau of Customs failed to comply with 5 U.S.C. § 558(c) in that it failed to give him an opportunity to achieve compliance with all lawful requirements.

III. That the entire administrative procedure was unlawful because the hearing officer also performed investigative and prosecutorial functions. This combination of functions, Twigger contends, violates 5 U.S.C. § 554(d)² and the due process clause of the fifth amendment.

Each of these contentions were made and rejected in the agency proceedings. See 19 U.S.C. § 1641(b).

The agency record establishes that Mr. Twigger's difficulties commenced with an audit by a special agent of the Bureau of Customs, made at the behest of the District Director. The agency regulations require that the special agent submit his investigative report to the District Director and to the Commissioner of Customs. 19 C.F.R. § 111.55. The District Director reviews the report and recommends to the Commissioner of Customs, his supervisor, whether or not charges should be preferred. 19 C.F.R. § 111.56. If the Commissioner of Customs agrees that charges should be preferred, a statement of charges is prepared by the District Director, and reviewed by the Commissioner. 19 C.F.R. § 111.57. The District Director then prepares and serves a notice of preliminary proceedings, to which the broker may respond in writing or orally. 19 C.F.R. § 111.59. The District Director then makes a recommendation to the Commissioner, who decides whether to proceed with charges. 19 C.F.R. § 111.61. If the Commissioner directs him to proceed, the District Director serves the notice of hearing, 19 C.F.R. § 111.64, and presides at the hearing, 19 C.F.R. § 111.67. He thereafter certifies the entire record, with his recommended decision, to the Secretary of the Treasury, 19 C.F.R. § 111.69, who affords the parties an opportunity for additional submittals, 19 C.F.R. § 111.70. The course outlines in the regulations was followed in Twigger's case.

Thus, although technically the decision to initiate formal revocation or suspension proceedings was made by the Commissioner of Customs, that decision was made as a result of an investigation initiated and reviewed by the District Director and after consideration of his recommendations. This investigating officer presided at the hearing and recommended a decision. And although technically the decision was made by an Assistant Secretary, it was made on the agency record compiled by the District Director and in the light of his recommended decision. Plainly, then, if Section 5(c) of the Administrative Procedure Act, 5 U.S.C. § 554(d) applies to customhouse broker's license revocation proceedings, it was violated. See, e.g., Amos Treat & Co. v. S.E.C., 113 U.S. App.D.C. 100, 306 F.2d 260 (1962). The Secretary urges, however, that the outlined administrative procedure is provided for by 19 U.S.C. § 1641(b) and is exempt from the requirements of the Administrative Procedure Act. Section 7(a) of that Act, 5 U.S.C. § 556(b), provides in part:

"This subchapter does not supercede the conduct of specified classes of proceedings, in whole or in part, by or before boards or other employees specifically provided for by or designated under statute."

This savings clause, the Secretary contends, makes § 5(c), 5 U.S.C. § 554(d), inapplicable to proceedings "provided for" by 19 U.S.C. § 1641(b).

The Secretary misinterprets the savings clause, however, as an examination of the original text of the Administrative Procedure Act will disclose. That act, as originally adopted in Pub.L. No. 404, 60 Stat. 237 (1946) is set out in 4 K. Davis, Administrative Law Treatise 397 et seq. (1958) and 1946 U.S. Code Cong. & Ad. News, p. 1195, 79th Cong. 2d Sess. 288. It is organized in twelve sections. Section 5 deals with adjudication, and Section 5(c) deals with separation of functions. The prohibition against combining investigative or prosecuting functions with adjudicating functions appears in this subsection. Section 7 deals generically with hearings, both rule making hearings to which § 4 applies and adjudicatory hearings to which § 5 applies. Section 7(a) deals with presiding officers and provides in part:

"There shall preside at the taking of evidence (1) the agency, (2) one or more members of the body which comprises the agency, or (3) one or more examiners appointed as provided in this Act; but nothing in this Act shall be deemed to supersede the conduct of specified classes of proceedings in whole or in part by or before boards or other officers specially provided for by or designated pursuant to statute."

5 U.S.C. § 556(b) is derived from § 7(a). Plainly the savings clause is intended to authorize continuance of the use of statutory boards or presiding officers who are neither "the agency", nor "one or more members of the agency", nor "one or more examiners appointed as provided in the Act". The clause cannot reasonably be construed, as the Secretary urges, as excepting entirely from the operation of the Administrative Procedure Act any statutory administrative procedure calling for a class of presiding officer other than one of the three classes specified in § 7(a). A more reasonable construction of the entire Act, which we adopt, is that there may be presiding officers other than those listed in § 7(a), but that the procedural safeguards of the Act, and specifically the separation of functions safeguard of § 5(c), apply to such presiding officers to the same extent as to those presiding officers listed in § 7(a).

This construction is entirely consistent with 19 U.S.C. § 1641(b), which provides in relevant part:

"The appropriate officer of the customs may at any time for good and sufficient reasons, serve notice in writing upon any customhouse broker so licensed to show cause why said license shall not be revoked or suspended, which notice shall be in the form of a statement specifically setting forth the ground of complaint. The appropriate officer of customs shall within ten days thereafter notify the customhouse broker in writing of a hearing to be held before him within five days upon said charges." (emphasis added).

The italicized language is, of course, ambiguous, since the appropriate officer of the customs (not elsewhere defined) might be one of the classes of presiding officers designated in Section 7(a) of the Administrative Procedure Act. However, the italicized language only came into § 1641(b) in 1970. Pub.L. 91-271, Title III, § 301(jj), 84 Stat. 291, 1970 U.S.Code Cong. & Ad. News, p. 3188, 91st Cong. 2d Sess. 322, 342. Prior to 1970 and in 1946, when the Administrative Procedure Act was adopted, in place of "appropriate officer of the customs" appeared ...