United States v. Jay Freeman Co., Inc., LR-C-77-348

• Decision Date: 27 July 1979
• Docket Number: LR-C-78-219.,No. LR-C-77-348,LR-C-77-348
• Citation: 473 F. Supp. 1265
• Parties: UNITED STATES of America v. JAY FREEMAN COMPANY, INC. consolidated with JAY FREEMAN COMPANY, INC. v. DEPARTMENT OF AGRICULTURE, PACKERS & STOCKYARDS ADMINISTRATION, Richard Davis, Jr., Director, Charles B. Jennings, Administrator, Packers & Stockyards Administration.
• Court: U.S. District Court — Eastern District of Arkansas

473 F. Supp. 1265

UNITED STATES of America v. JAY FREEMAN COMPANY, INC. consolidated with

JAY FREEMAN COMPANY, INC. v. DEPARTMENT OF AGRICULTURE, PACKERS & STOCKYARDS ADMINISTRATION, Richard Davis, Jr., Director, Charles B. Jennings, Administrator, Packers & Stockyards Administration.

Nos. LR-C-77-348, LR-C-78-219.

United States District Court, E. D. Arkansas, W. D.

July 27, 1979.

Don N. Curdie, Asst. U. S. Atty., Little Rock, Ark., for plaintiff.

William R. Wilson, Jr., Little Rock, Ark., for defendant.

MEMORANDUM OPINION

ROY, District Judge.

On August 9, 1977 the Secretary of Agriculture issued a subpoena duces tecum to Jay Freeman Company, Inc. commanding it to appear before the Secretary on the 17th of August, 1977 to produce for examination and copying described documents, books or records of the company. The subpoena stated that the records are essential to an investigation by the Secretary under the Packers and Stockyards Act, 7 U.S.C. § 181 et seq., concerning payments made by the company to its customers or employees of customers, to ascertain whether the company is in conformity with the requirements of the Act.

Affidavits in the record indicate that an employee of the United States Department of Agriculture called on the Jay Freeman Company on August 15 and 16, was permitted entry, and examined some of the business records. Before he was finished Mr. Jay Freeman, a company official, challenged the jurisdiction of the Secretary of Agriculture to review the records, stating that he had a legal opinion from his trade association that his firm was not subject to the Act. The subpoena was then served but Freeman continued to deny access to the records, on the advice of his attorney. The government then filed suit. LR-C-77-348.

The complaint prays that an order to show cause issue, directing the respondent, Jay Freeman Company, to appear before this court and show cause why an order should not issue requiring it to produce the documentary evidence described in the subpoena. Freeman answered the complaint and moved to quash the subpoena. It also filed a counterclaim alleging that the action of the Secretary is part of a scheme and conspiracy to disrupt its legitimate business efforts and divert its customers to competitors and cause its employees to quit, and that Freeman is entitled to damages, attorney fees, and costs.

On June 29, 1978 Freeman filed a complaint for declaratory judgment that Freeman is not a "packer" within the meaning of the Packers and Stockyards Act and is therefore not subject to the Act. LR-C-78-219. In addition it requests an injunction restraining and enjoining the Department of Agriculture and the Packers and Stockyards Administration from issuing subpoenas to Freeman in the future. These cases were consolidated.

A hearing in open court was held on June 30, 1978 where the parties appeared by attorney and argued the legal issues. The Jay Freeman Company did not present witnesses or other evidence although it was given an opportunity to do so.

The parties joined in a stipulation describing the nature of the Freeman business to aid the court in determining whether it is a "packer" within the meaning of the Packers and Stockyards Act as amended in 1976 by Pub.L. No. 94-410, 7 U.S.C. § 191. The other issues that have been raised are whether the subpoena amounts to a warrantless search under a recent Supreme Court opinion; whether the production of the records is unduly burdensome and the subpoena is overbroad; and whether the action taken by the Secretary was in bad faith.

I.

The Packers and Stockyards Act was amended in 1976. One of the changes in the Act broadened the definition of a "packer" to include persons in the business ". . . of marketing meats, meat food products, or livestock products in an unmanufactured form acting as a wholesale broker, dealer, or distributor in commerce." 7 U.S.C. § 191. It is this language that brought Jay Freeman Company within the definition of a "packer" and therefore under the jurisdiction of the Department of Agriculture.

It is stipulated that Freeman purchases foodstuffs, including meat, already processed and packed in sizes and quantities suitable for re-sale to institutions such as hospitals and schools and some restaurants and hotels. All food products sold by Freeman are in the same form, size, quantity, etc., as they were in when received by Jay Freeman Company from its suppliers. The parties have not questioned that Freeman, therefore, markets meats in a manufactured form.

Freeman asserts that the qualifying clause in § 191(c) "in an unmanufactured form," refers to persons engaged in the business of marketing meats and to a person marketing meat food products and because it markets meats in a manufactured form it is not a "packer." The government, on the other hand, claims that this qualifying clause refers only to the last antecedent in § 191(c), "livestock products."

The long standing rule of grammar is "that a modifying phrase or clause refers only to the last antecedent phrase or word which it can reasonably modify." It is only when the last antecedent word is separated from the modifying phrase or clause by a comma that it modifies all of the preceding words. T. I. McCormack Trucking Co. v. United States, 251 F.Supp. 526, 533 (D.N.J. 1966). Using this rule the marketed meats or meat food products need not be in an unmanufactured form to qualify the seller as a "packer" under the Act. The legislative history of the 1976 amendment is consistent with this construction of § 191.

Prior to 1976 one who marketed meats was specifically excluded from the definition of "packer" unless also engaged in the business of buying livestock for slaughter or engaged in manufacturing or preparing meats for sale. Senate Report No. 94-932 explained that the expanded definition of "packer" was to include businesses "marketing meats, meat food products, or livestock products" under regulation as packers. Senate Report No. 94-932, June 4, 1976, 94th Cong., 2d Sess. 10 (1976), reprinted in 1976 U.S.Code, Cong. & Admin. News, pp. 2267, 2276.

The Senate and the conference committee preferred to give the Secretary of Agriculture discretion to exempt "packers" included as such by the expanded definition from the burden of filing reports where it would not serve the purposes of the Act. Senate Report No. 94-932, supra; House Conference Report No. 94-1391, August 4, 1976, 94th Cong., 2d Sess. 4 (1976), 1976 U.S. Code Cong. & Admin.News, p. 2283. This provision does not appear in the amendment as enacted. The references in the reports do, however, give credence to the argument that the Congress intended to include businesses, such as Jay Freeman Company, which would not deal directly with livestock producers.

The inclusion of one such as Jay Freeman Company in the class of individuals defined as "packers" is also consistent with the legislative intent generally of the Packers & Stockyards Act "to protect consumers against unfair business practices in the marketing of meats . . . and the other products covered by the Act." Bruhn's Freezer Meats v. United States, 438 F.2d 1332, 1337-38, (8th Cir. 1971).

II.

Jay Freeman Company has moved to quash the subpoena issued by the Secretary of Agriculture on the ground it is the equivalent to a warrantless administrative search which has been declared unconstitutional in the United States Supreme Court decision, Marshall v. Barlows, Inc., 436 U.S. 307, 98 S.Ct. 1816, 56 L.Ed.2d 305 (1978). That case involved an attempt by an OSHA field officer to inspect the work areas of an employment facility to determine whether it harbored safety hazards and other violations of OSHA regulations. The search was attempted pursuant to Section 8(a) of the Occupational Safety and Health Act of 1970, 29 U.S.C. § 651 et seq. The Supreme Court held that warrantless searches of commercial enterprises are unreasonable and the fourth amendment "protects against warrantless intrusions during civil as well as criminal investigations." Id. 436 U.S. at 312, 98 S.Ct. at 1820.

The Barlows case is limited in its application and does not overrule or limit the decisions considering administrative subpoenas. The closing paragraph of the opinion limited its holding to a "declaratory judgment that the Act is unconstitutional insofar as it purports to authorize inspections without warrant or its equivalent and to an injunction enjoining the Act's enforcement to that extent." 436 U.S. at 325, 98 S.Ct. at 1827. (emphasis added)

The instant case involves, not an on-site search, but a subpoena requesting with particularity what appears to be all of Freeman's business records pertaining to sales of meat for an eleven-month period. Such a procedure, when authorized by proper legislative authority, is constitutional. Oklahoma Press Publishing Co. v. Walling, 327 U.S. 186, 66 S.Ct. 494, 90 L.Ed.2d 614 (1946). Under the rule set out in the Oklahoma Press case a subpoena will withstand a motion to quash or vacate on showing the following:

1. The investigation is authorized by Congress and

2. is for a purpose Congress can order;

3. the documents sought are relevant to the inquiry and

4. the requirement of reasonableness has been met. This includes specification of the documents to be produced which is adequate, but not excessive, for the purposes of the relevant inquiry.

Oklahoma Press Publishing Co. v. Walling, su...