Veg-Mix, Inc. v. U.S. Dept. of Agriculture, VEG-MI

CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)
Writing for the CourtBefore MIKVA, STARR and WILLIAMS; WILLIAMS; MIKVA
Citation832 F.2d 601
Parties, Petitioner, v. U.S. DEPARTMENT OF AGRICULTURE and United States of America, Respondents. KUZZENS, INC., Petitioner, v. U.S. DEPARTMENT OF AGRICULTURE and United States of America, Respondents. Charles M. HARRIS, Petitioner, v. U.S. DEPARTMENT OF AGRICULTURE and United States of America, Respondents.
Decision Date30 October 1987
Docket NumberINC,86-1202,Nos. 85-1771,86-1201,VEG-MI

Page 601

832 F.2d 601
266 U.S.App.D.C. 1
VEG-MIX, INC., Petitioner,
v.
U.S. DEPARTMENT OF AGRICULTURE and United States of America,
Respondents.
KUZZENS, INC., Petitioner,
v.
U.S. DEPARTMENT OF AGRICULTURE and United States of America,
Respondents.
Charles M. HARRIS, Petitioner,
v.
U.S. DEPARTMENT OF AGRICULTURE and United States of America,
Respondents.
Nos. 85-1771, 86-1201, 86-1202.
United States Court of Appeals,
District of Columbia Circuit.
Argued March 3, 1987.
Decided Oct. 30, 1987.

Alexander J. Pires, Jr., with whom John M. Himmelberg and Jeffrey A. Knishkowy, Washington, D.C., were on the brief, for petitioners.

Aaron B. Kahn, U.S. Dept. of Agriculture, Washington, D.C., for respondents. James Michael Kelly, Associate Gen. Counsel, Raymond W. Fullerton, Asst. Gen. Counsel and Thomas D. Edmondson, U.S. Dept. of Agriculture, Washington, D.C., were on the brief, for respondents.

Before MIKVA, STARR and WILLIAMS, Circuit Judges.

Opinion for the Court filed by Circuit Judge WILLIAMS.

Opinion dissenting in part and concurring in part filed by Circuit Judge MIKVA.

WILLIAMS, Circuit Judge:

The Perishable Agricultural Commodities Act ("PACA") attempts to facilitate interstate commerce in fresh fruits and vegetables. 7 U.S.C. Sec. 499a et seq. (1982 & Supp. III 1985). To help instill confidence in parties dealing with each other on short notice, across state lines and at long distances, it provides special sanctions against dishonest or unreliable dealing. In the cases before us, the sanctions provided evidently failed to deter one merchant, and the Department of Agriculture launched its enforcement machinery. The main culprit having disappeared, it proceeded against lesser lights, with results that we do not find fully in conformity with the law.

PACA makes it unlawful for certain merchants of fresh fruits and vegetables to fail to pay fully and promptly for their purchases. 7 U.S.C. Sec. 499b(4). It allows the Secretary of Agriculture to revoke the licenses of those whose offenses are "flagrant or repeated." Id. Sec. 499h(a). Persons "responsibly connected" to such a violator may be barred from a PACA license for two years and from employment with any licensee for a year. Id. Secs. 499a(9), 499d(b), 499h(b).

Our decision covers three connected cases. In No. 85-1771, petitioner Veg-Mix, Inc., challenges the Secretary's determinations of flagrant and repeated PACA violations, and in Nos. 86-1201 and 86-1202, petitioners Kuzzens, Inc., and Charles M. Harris challenge orders finding them to be

Page 605

responsibly connected with Veg-Mix. For the reasons given below, we remand the Veg-Mix decision (No. 85-1771) for a limited factual determination, affirm in Kuzzens (No. 86-1201), and remand in Harris (No. 86-1202).

I. BACKGROUND

Veg-Mix was a fruit and vegetable business conceived by William Lipman (acting on behalf of Kuzzens) and Larry Watkins, who was to become its president and part owner, and whose manipulations and ultimate disappearance are at the root of these cases. Early in September 1982 Watkins and Kuzzens entered into a preincorporation agreement, and articles of incorporation were filed with the Florida Secretary of State that same month. Shortly thereafter, Veg-Mix obtained a PACA license.

By the terms of the preincorporation agreement, Kuzzens invested $30,000 directly ($12,000 in exchange for equity, $18,000 for debt) and lent Watkins $20,000 for him to invest; Kuzzens was to own 60 percent and Watkins 40 percent. The agreement obliged Watkins to "devote his undivided time and attention and use the utmost of his skills and ability to the furtherance of the Corporation" and gave him complete management authority over day-to-day affairs, subject to review by the board of directors.

The directors designated in both the agreement and the articles of incorporation were Watkins, Wayne M.D. Press, and Charles M. Harris. Press and Harris were relatives of William Lipman and salesmen for Six L's Packing Company, another enterprise owned in part by the Lipman family and operating in the same offices as Kuzzens, Inc. William Lipman originally designated Press and Harris as directors without their knowledge, although Harris, a lawyer, learned of his directorship when Lipman directed him to prepare the articles of incorporation. No scheduled directors' meetings, shareholders' meetings, or other corporate formalities were observed during Veg-Mix's single season of operations, from November 1982 to late May or early June 1983.

In March 1983, Watkins offered to buy Kuzzen's interest in Veg-Mix for $100,000. Lipman and Watkins shook hands in agreement on the deal, but they never prepared or signed a written agreement and Watkins never paid up. Though the sales agreement remained executory, it led to the resignations of Press and Harris either in late March or early April, as we shall see in more detail in reviewing the "responsibly connected" findings.

At the end of the marketing season, in late May or early June 1983, Veg-Mix ceased merchant operations. (Bookkeeping activity continued.) Kuzzens officials discovered in October 1983 that Watkins had written checks on Veg-Mix's accounts without proper authorization. Watkins himself had by this time disappeared. The Kuzzens representatives took steps to staunch the flow of funds, temporarily re-involving Press and Harris in Veg-Mix's affairs. In March 1984 a bankruptcy petition was filed on Veg-Mix's behalf. The petition was prepared by lawyer who examined Veg-Mix documents, Joint Appendix ("J.A.") B-385-86, and was signed by Paula Berry, as Secretary, for Veg-Mix. The petition listed Harris and Press as directors and Kuzzens and Watkins as shareholders.

The Agriculture Department's Agricultural Marketing Service, Fruit and Vegetable Division filed an administrative complaint in August 1984 alleging that Veg-Mix violated 7 U.S.C. Sec. 499b(4) during the February-July 1983 period by failing to make full, prompt payment of agreed purchase prices for 50 lots of fruits and vegetables in interstate commerce. The total sum asserted was $191,306.60, owed to six sellers. J.A. B-387. It further alleged that these failures were willful, flagrant, and repeated, and thus it requested publication of the relevant facts and circumstances pursuant to 7 U.S.C. Sec. 499h(a). (The de-licensing remedy of Sec. 499h(a) was moot because Veg-Mix had already lost its license for failure to pay the required annual fee.) Also in August, the agency notified Harris, Press, Kuzzens, and others of a preliminary determination that they were "responsibly connected" with Veg-Mix.

Page 606

After various delays, the administrative law judge ("ALJ") issued a dispositive order against Veg-Mix. In re Veg-Mix, Inc., PACA Docket No. 2-6612 (June 26, 1985). Veg-Mix appealed unsuccessfully to a judicial officer and then, equally unsuccessfully, petitioned for reconsideration. Meanwhile, the cases of Kuzzens and Harris were considered in a consolidated hearing on May 22, 1985. In In re Kuzzen's [sic], Inc., PACA RC 84-1022 (September 27, 1985) and In re Harris, PACA RC 84-1024 (September 30, 1985), the presiding officer determined that both were responsibly connected with Veg-Mix during the period at issue. Soon afterwards the same officer found Press not so connected. In re Press, PACA RC 84-1023 (October 16, 1985). The administrator of the agricultural marketing service summarily affirmed the Kuzzens and Harris decisions on February 6, 1986.

II. VEG-MIX'S CLAIMS

Veg-Mix challenges the agency's determination on several grounds. First, it claims that the ALJ should not have considered the bankruptcy pleadings and invoices that formed the principal documentary evidence. Second, it contends that it was wrongly denied an evidentiary hearing, in violation of the agency's procedural rules and in the face of material factual disputes. Third, it claims that the judicial officer erred by insufficiently addressing the issues Veg-Mix raised in its appeal and in not admitting newly discovered evidence. We disagree with all these contentions.

A. The Invoices and the Bankruptcy Petition

The strongest evidence against Veg-Mix consisted of 50 invoices from transactions which the agency contended had not been fully and promptly paid. Veg-Mix contends that the ALJ should not have considered these. The business records exception to the hearsay rule ordinarily requires "the testimony of the custodian or other qualified witness." Fed.R.Evid. 803(6). As that was not offered, Veg-Mix argues, the invoices lacked authentication.

Laxer standards of admissibility, however, apply to administrative tribunals. See, e.g., 3 K. Davis, Administrative Law Treatise Sec. 16.5 (1980). Generally, for example, if hearsay evidence meets the standards of the Administrative Procedure Act by being relevant, material, and unrepetitious, see 5 U.S.C. Sec. 556(d) (1982), agencies are entitled to weigh it according to its "truthfulness, reasonableness, and credibility," see Johnson v. United States, 628 F.2d 187, 190-91 (D.C.Cir.1980); see also National Association of Recycling Industries, Inc. v. Federal Maritime Commission, 658 F.2d 816, 825 (D.C.Cir.1980) (finding agency's disregarding of probative hearsay evidence to be arbitrary and capricious).

This case is not one for testing the outer limits of these more permissive rules. Veg-Mix stresses the agency's purported technical error, rather than the truthfulness of the invoices. Brief for Petitioner at 28-32. In the absence of a serious, nonspeculative argument that the records were something other than they appeared to be, the practical standards applicable to administrative proceedings are not offended.

Veg-Mix makes a similarly technical objection with regard to the ALJ's taking official notice of Veg-Mix's bankruptcy petition. The bankruptcy petition listed debts that generally corresponded to the debts shown by the sales invoices. The papers were signed by...

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46 practice notes
  • BellSouth Corp. v. F.C.C., No. 98-1019
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • December 22, 1998
    ...dealing with each other on short notice, across state lines and at long distances...." [Veg-Mix, Inc. v. United States Dep't of Agric., 832 F.2d 601, 604 (D.C.Cir.1987) ]. This legislative and executive resolve to guarantee that PACA transactions by firms employing persons "responsibly conn......
  • Hart v. RCI Hospitality Holdings, Inc., No. 09 Civ. 3043PAE.
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • March 11, 2015
    ...Liberty Mutual Ins. Co. v. Rotches Pork Packers, Inc., 969 F.2d 1384, 1388 (2d Cir.1992) )); Veg–Mix, Inc. v. U.S. Dept. of Agriculture, 832 F.2d 601, 607 (D.C.Cir.1987) (“Courts may take judicial notice of official court records ....” (citing, inter alia, Freshman v. Atkins, 269 U.S. 121, ......
  • Scholes v. Lehmann, Nos. 94-2039
    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • July 12, 1995
    ...F.2d 364, 369 (7th Cir.1983); Colonial Penn Ins. Co. v. Coil, 887 F.2d 1236 (4th Cir.1989); Veg-Mix, Inc. v. U.S. Dept. of Agriculture, 832 F.2d 601, 607 (D.C.Cir.1987), established the defendants' liability (with the partial exception of the ex-wife). It is true that in affidavits submitte......
  • Lugo v. U.S. Dep't of Justice, Civil Action No. 15-879 (RDM)
    • United States
    • U.S. District Court — District of Columbia
    • September 30, 2016
    ...filed in this matter, and related court records of which the Court can take judicial notice. See Veg–Mix, Inc. v. U.S. Dep't of Agric. , 832 F.2d 601, 607 (D.C. Cir. 1987).On March 8, 2000, Lugo entered custody of the New York State Department of Corrections and Community Supervision. Dkt. ......
  • Request a trial to view additional results
46 cases
  • BellSouth Corp. v. F.C.C., No. 98-1019
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • December 22, 1998
    ...dealing with each other on short notice, across state lines and at long distances...." [Veg-Mix, Inc. v. United States Dep't of Agric., 832 F.2d 601, 604 (D.C.Cir.1987) ]. This legislative and executive resolve to guarantee that PACA transactions by firms employing persons "responsibly conn......
  • Hart v. RCI Hospitality Holdings, Inc., No. 09 Civ. 3043PAE.
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • March 11, 2015
    ...Liberty Mutual Ins. Co. v. Rotches Pork Packers, Inc., 969 F.2d 1384, 1388 (2d Cir.1992) )); Veg–Mix, Inc. v. U.S. Dept. of Agriculture, 832 F.2d 601, 607 (D.C.Cir.1987) (“Courts may take judicial notice of official court records ....” (citing, inter alia, Freshman v. Atkins, 269 U.S. 121, ......
  • Scholes v. Lehmann, Nos. 94-2039
    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • July 12, 1995
    ...F.2d 364, 369 (7th Cir.1983); Colonial Penn Ins. Co. v. Coil, 887 F.2d 1236 (4th Cir.1989); Veg-Mix, Inc. v. U.S. Dept. of Agriculture, 832 F.2d 601, 607 (D.C.Cir.1987), established the defendants' liability (with the partial exception of the ex-wife). It is true that in affidavits submitte......
  • Lugo v. U.S. Dep't of Justice, Civil Action No. 15-879 (RDM)
    • United States
    • U.S. District Court — District of Columbia
    • September 30, 2016
    ...filed in this matter, and related court records of which the Court can take judicial notice. See Veg–Mix, Inc. v. U.S. Dep't of Agric. , 832 F.2d 601, 607 (D.C. Cir. 1987).On March 8, 2000, Lugo entered custody of the New York State Department of Corrections and Community Supervision. Dkt. ......
  • Request a trial to view additional results

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