United States v. High Plains Livestock, LLC
| Decision Date | 11 April 2016 |
| Docket Number | No. 15-CV-680 MCA/WPL,15-CV-680 MCA/WPL |
| Parties | UNITED STATES OF AMERICA, Plaintiff, v. HIGH PLAINS LIVESTOCK, LLC, dba PRODUCERS LIVESTOCK AUCTION, MICHAEL FLEN, CALVIN PAREO, and DARCIE PAREO, Defendants. |
| Court | U.S. District Court — District of New Mexico |
This matter is before the Court sua sponte. For the reasons set forth below, the Court dismisses Counts I through VIII of the Complaint for Injunctive Relief and Civil Penalties [Doc. 1] for lack of jurisdiction.
The United States brought this suit alleging numerous violations of the Packers and Stockyards Act, 7 U.S.C. § 181 et seq. (PSA). In this suit, the United States asks this Court to assess in the first instance civil penalties for Defendants' violations of the PSA [Doc. 1, Counts I through XIII]; to enjoin Defendants "from operating as a market agency or as a dealer without registration as required by 9 C.F.R. § 201.10" [Doc. 1, ¶ 156]; to order Defendants to comply with particular statutory provisions and regulations [Doc. 1, p. 22, ¶ 2(a)-(c)]; and to issue a preliminary injunction under 7 U.S.C. § 228a of the PSA [Doc. 1, p. 22, ¶¶ 3, 4]. As grounds for the assessment of civil penalties, the United States alleges that Defendants violated the PSA by: failing to remit the full purchase price of cattle to the sellers [Doc. 1, Count I]; failing to disclose the true ownership of High Plains Livestock [HPL] [Doc. 1, Count II]; charging undisclosed and unapproved rates and commissions [Doc. 1, Count III]; fraudulently altering scale tickets post-auction [Doc. 1, Count IV]; failure to identify the true purchaser of the cattle [Doc. 1, Count V]; having custodial account shortages [Doc. 1, Count VI]; misuse of custodial funds [Doc. 1, Count VII]; and failing to sell consigned livestock at the highest bid [Doc. 1, Count VIII].
After an early status conference in this case, the Court referred the matter of the appointment of a receiver to Magistrate Judge Lynch. [Doc. 18] During a four-day evidentiary hearing, the United States made a showing that the appointment of a receiver was necessary and appropriate; and, therefore, the Magistrate Judge appointed a receiver. [Doc. 55, pp. 29-32] However, on the objections of the Defendants, and after additional hearings and proceedings during which the pragmatic problems with the appointment of a receiver were identified, this Court stated:
Considering the evidence as a whole, the Court concludes that there would be sufficient justification to warrant the extraordinary remedy of the appointment of a receiver prior to the determination of the merits in this case. However, the difficulty which has become clear since December 8, 2015, is that there may not be any individual willing and qualified to act as a receiver in this case.
[Doc. 103, p. 15] The Court, therefore, appointed a Special Master to report to the Court regarding particular aspects of Defendants' operations. [Doc. 103; Doc. 104]
In the midst of the proceedings regarding the appointment of a special master, this Court sua sponte entered an Order to Show Cause, directing the parties to file briefs toassist the Court in determining whether this case should be dismissed or stayed based on the operation of the doctrine of primary jurisdiction. [Doc. 97, pp. 5-6] The Magistrate Judge then held a Rule 16 Scheduling Conference and discovery has commenced in this case. [Doc. 120; Doc. 131] Defendants filed a Motion to Stay Discovery pending a determination regarding jurisdiction. [Doc. 115] The Magistrate Judge denied this Motion and Defendants have now filed Defendants' Objections to Order Denying Motion to Stay Discovery (Doc. 130) [Doc. 149] as well as Defendant[s'] Request for Expedited Status Conference with District Court Judge Armijo [Doc. 133].
The parties have also now filed briefs on the doctrine of primary jurisdiction. [Doc. 107; Doc. 108] Having considered the cases argued therein, as well as other pertinent Supreme Court precedent, the Court concludes that Counts I through VIII of this case must be dismissed, not based on application of the doctrine of primary jurisdiction, but for the reasons set forth in Pan American World Airways, Inc. v. United States, 371 U.S. 296 (1963). Defendants' Objections to Order Denying Motion to Stay Discovery (Doc. 130) [Doc. 149] and Defendant[s'] Request for Expedited Status Conference with District Court Judge Armijo [Doc. 133] are DENIED AS MOOT. If further issues arise regarding the scope of discovery, the parties are instructed to file any necessary motion with the Magistrate Judge in accordance with Federal Rule of Civil Procedure 72(a).
In each count of its Complaint in which the United States seeks civil penalties, the United States proceeds under 7 U.S.C. § 208 () and 7 U.S.C. § 213. Section 213(a) states:
It shall be unlawful for any stockyard owner, market agency, or dealer to engage in or use any unfair, unjustly discriminatory, or deceptive practice or device in connection with determining whether persons should be authorized to operate at the stockyards, or with the receiving, marketing, buying, or selling on a commission basis or otherwise, feeding, watering, holding, delivery, shipment, weighing, or handling of livestock.
7 U.S.C. § 213(a). In addition, the United States alleges violations of 7 U.S.C. § 221, "Accounts and records of business; punishment for failure to keep," which expressly grants the Secretary the authority to set rules regarding record keeping, and upon a failure to follow the Secretary's order, to seek criminal prosecution.1 [Doc. 1, Counts I, II, III] The United States also references 7 U.S.C. § 205, which allows the Secretary of the Department of Agriculture to revoke the registration of a market agency for failure to follow the orders of the Secretary, and 7 U.S.C. § 206, which requires market agency rates to be just, reasonable and nondiscriminatory. [Doc. 1, Count III] Finally, among other provisions, the United States alleges violations of regulations which govern trusts funds and custodial accounts, 9 C.F.R. § 201.42, and market agencies selling on commission and purchasing from consignment, 9 C.F.R. § 201.56. [Doc. 1, Counts VI, VIII] All of the violations alleged by the United States are acts defined as unlawful by Congress in the PSA.
In the PSA, Congress defined not only the violations of the Act (which, as relevant are set out above) and the Secretary's tools to address the illegal conduct (including finesand cease and desist orders), but also the specific process by which the Secretary is to enforce the provisions of the PSA. In particular circumstances expressly delineated by Congress, the Secretary of the Department of Agriculture may bring various causes of action to the Attorney General, who must then file suit. For example, under 7 U.S.C. § 203, where the Secretary has determined that a person is acting as a stockyard and has required that person to register as a market agency or dealer, the United states may bring a civil action in the district court for each action as a stockyard. 7 U.S.C. § 203 (); see also United States v. Haun, 124 F.3d 745, 750 (6th Cir. 1997) (); Colorado v. United States, 219 F.2d 474, 476-77 (10th Cir. 1954) (). Further, where the Secretary has issued an order under particular sections of the PSA (7 U.S.C. §§ 211, 212, or 213), and a party violates that order, the offending party 7 U.S.C. § 215(a). In addition, "the Secretary, or any party injured thereby, or the United States by its Attorney General, may apply to the district court . . . for the enforcement" of a non-monetary order issued by the Secretary that a stockyard owner, market agency or dealer fails to obey. 7 U.S.C. § 216. Where the Secretary has assessed fines under 7 U.S.C. § 213 of the PSA and the violator fails to pay those fines, "the Secretary may refer the matter to the Attorney General who may recover such penalty by an action in the appropriate district court of the United States." 7 U.S.C. § 213(b). Finally, while the United States is seeking a cease and desist order from the Secretary, the United States may seek from the Court temporary injunctive relief or a restraining order. 7 U.S.C. § 228a.
Directly applicable to this case, Congress delegated the powers to make cease and desist orders and to assess civil penalties under the PSA directly to the Secretary. Under 7 U.S.C. § 213(b) of the PSA:
[W]henever the Secretary has reason to believe, that any stockyard owner, market agency, or dealer is violating the provisions of subsection (a) of this section, the Secretary after notice and full hearing may make an order that he shall cease and desist from continuing such violation to the extent that the Secretary finds that it does or will exist. The Secretary may also assess a civil penalty of not more than $10,000 for each such violation. In determining the amount of the civil penalty to be assessed under this section, the Secretary shall consider the gravity of the offense, the size of the business involved,...
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