Wayne Cusimano, Inc. v. Block, 81-4397

CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)
Citation692 F.2d 1025
Docket NumberNo. 81-4397,81-4397
PartiesWAYNE CUSIMANO, INC., Petitioner, v. John R. BLOCK, Secretary, United States Department of Agriculture, Respondent.
Decision Date06 December 1982

Peter D. Derbes, New Orleans, La., for petitioner.

Margaret M. Breinholt, U.S. Dept. of Agriculture, Washington, D.C., for respondent.

Petition for Review of an Order of the Department of Agriculture.

Before WISDOM, RANDALL and TATE, Circuit Judges.

TATE, Circuit Judge:

This petition is for judicial review of the administrative revocation of a produce dealer's license issued to him under the Perishable Agricultural Commodities Act ("the Act"), 7 U.S.C. Secs. 499a et seq. The principal issue concerns the constitutional validity of a provision of the Act that permits unannounced, warrantless searches and examination, section 13(a), (b), 7 U.S.C. Sec. 499m(a), (b), of a dealer's records and accounts that are required by the Act to be maintained by him, section 9, 7 U.S.C. Sec. 499i. At the administrative hearing to revoke the license, the produce dealer objected to the admission of evidence 1 offered to prove a violation of the Act, as having been obtained in violation of the dealer's Fourth Amendment rights against unreasonable searches and seizures. Finding no constitutional defect in the Congressionally authorized warrantless searches in aid of the comprehensive regulatory scheme presently before us, we reject the petitioner's contention in this regard. Likewise finding no merit in other contentions advanced, we deny the petition for review.

Context Facts

This petition is to review an order issued as a result of an administrative complaint procedure authorized by the Act to determine regulatory violations. Section 13(c), 7 U.S.C. Sec. 499m(c). See 7 C.F.R. Secs. 1.130-.151. Originally enacted in 1930, the Act regulates the perishable agricultural commodities industries and promotes fair dealings in transactions with regard to fresh fruits and vegetables. Subject to limitations not here applicable, any person engaged in the business of buying or selling fresh fruits and vegetables in wholesale or jobbing quantities is required to obtain a license as a "dealer" and to comply with various detailed regulations regarding records and dealings in these perishable commodities. By the present petition for review, the petitioner-corporation ("Cusimano") seeks judicial review of an order issued by the agency, after the administrative hearing proceedings, that revoked its license as a produce dealer.

The license was revoked under authority of section 8 of the Act, Sec. 499h(a), which permits revocation for "flagrant or repeated" violations of any of the provisions of section 2 of the Act, Sec. 499b. The particular violation upon which revocation is based is Cusimano's failure "to account and make full payment promptly," section 2(4), Sec. 499b(4), on 150 lots of produce obtained from eighteen produce dealers in an amount exceeding $135,000 purchased by Cusimano between June 1978 and September 1979. The administrative regulations that require "full payment promptly" define this as requiring payment for produce purchased by a buyer within ten days, 7 C.F.R. Sec. 46.2(aa)(5), absent express agreement to pay at some other time, Sec. 46.2(aa)(9).

At the time of the hearing in July, 1980, Cusimano's witness did not deny the substance of the complaint as to the long unpaid June 1978-September 1979 accounts. Her sole testimony, with regard to them, was: " * * * we contacted each of our creditors and made arrangements for payment, and now payments are being made each week to those whom we still owe." No documentary or other evidence was introduced in support of this statement.

By its petition for review, Cusimano principally contends that certain documents obtained during a warrantless examination of its files were improperly admitted, as being the fruits of an unreasonable search and seizure. Cusimano also contends (a), that substantial evidence does not support the administrative determination that its nonpayment of amounts due was "wilful" and "flagrant" so as to justify revocation (instead of merely suspension) of its license and (b), that, at any rate, the maximum penalty of revocation was not appropriate in view of the undeveloped record.

Reasonableness of the Search; Warrant Requirement

In its reasonable-search argument, Cusimano relies upon jurisprudential holdings that the Fourth Amendment's prohibition against unreasonable searches applies to administrative inspection of private commercial property, including the rule that warrantless searches are generally unreasonable. Marshall v. Barlow's, Inc., 436 U.S. 307, 311-12, 98 S.Ct. 1816, 1819-20, 56 L.Ed.2d 305 (1978).

However, this decision--which invalidated Congressional authority to Occupational Safety and Health Act inspectors to make random warrantless inspections of business premises to ascertain whether they complied with the myriad of safety regulations imposed by that Act--also recognized that an exception from the search warrant requirement is recognized for pervasively regulated businesses subject to close supervision and inspection, noting that "[c]ertain industries have such a history of governmental oversight that no reasonable expectation of privacy" could exist for those engaged therein. 436 U.S. at 313, 98 S.Ct. at 1820-21. The Court's observation in these regards were based on the holdings in United States v. Biswell, 406 U.S. 311, 92 S.Ct. 1593, 32 L.Ed.2d 87 (1972), and Colonnade Catering Corp. v. United States, 397 U.S. 72, 90 S.Ct. 774, 25 L.Ed.2d 60 (1970).

The Colonnade-Biswell exception to the warrant requirement was recently once again recognized and reaffirmed by the Court in Donovan v. Dewey, 452 U.S. 594, 101 S.Ct. 2534, 69 L.Ed.2d 262 (1981). There, pointing out that legislative schemes authorizing warrantless administrative searches of commercial property do not necessarily violate the Fourth Amendment, the Court held to be valid a provision of a federal mine safety statute that authorizes warrantless inspections. In so holding, referring to Colonnade and Biswell, supra, the Court stated:

These decisions make clear that a warrant may not be constitutionally required when Congress has reasonably determined that warrantless searches are necessary to further a regulatory scheme and the federal regulatory presence is sufficiently comprehensive and defined that the owner of commercial property cannot help but be aware that his property will be subject to periodic inspections undertaken for specific purposes.

452 U.S. at 600, 101 S.Ct. at 2539.

Colonnade, Biswell, and Donovan, supra, held that Congress could, in appropriate circumstances, validly authorize warrantless searches for specific purposes in industries comprehensively regulated, at least where the commercial owner can reasonably expect such warrantless inspection as an incident of the regulation to which he is subject. Similar to the regulated industries of those cited decisions, the present perishable commodities industry is subject to a comprehensive regulatory scheme with sufficiently defined contours as to justify Congressional authorization of warrantless examinations of business records required to be maintained by the Act, in order to effectuate statutory purposes. The Court quoted with approval: " 'The businessman in a regulated industry in effect consents to the restrictions placed upon him.' " Marshall v. Barlow's, Inc., supra, 436 U.S. at 313, 98 S.Ct. at 1821.

The perishable commodities industry has been pervasively regulated by the Act since 1930. It was enacted to provide regulation to protect producers of perishables, as well as consumers thereof, in a largely interstate industry subject to irresponsible business conduct and to delivery of deficient produce. 2 The licensing and record-keeping required by the Act are essential components of the regulatory scheme, as are the investigations and the suspension or revocation of licenses provided for by the Act in order to assure compliance by the licensees with the regulations established or authorized by the Act. 3 See George Steinberg and Son, Inc. v. Butz, 491 F.2d 988, 990 (2d Cir.), cert. denied, 419 U.S. 830, 95 S.Ct. 53, 42 L.Ed.2d 55 (1974).

The statute specifies the records that must be maintained by licensees under the Act. They include such "as fully and correctly disclose all transactions involved in this [regulated] business." Section 9 of the Act, 7 U.S.C. Sec. 499i. The administrative regulations issued pursuant to the Act's authorization describe with more particularity and detail the records required to be kept and maintained for two years with regard to transactions in the regulated business. 7 C.F.R. Secs. 46.14-.16.

The Act further provides that the administrative agency shall have the right to inspect the records of any licensee in the investigation of complaints under the statute or to ascertain whether the licensee is maintaining the records of transactions, etc. statutorily required. Section 13(a) of the Act, 7 U.S.C. Sec. 499m(a). The administrative regulations require a licensee to permit a representative of the regulatory agency to inspect during ordinary business hours the regulation-required records for the five specified inspection purposes provided by the Act itself. 7 C.F.R. Sec. 46.17.

Thus, unlike the reprobated Congressional provision in Marshall v. Barlow's, Inc., supra--which, in authorizing administrative searches, devolved "almost unbridled discretion upon executive and administrative officers, particularly those in the field, as to when to search and whom to search", Id., 436 U.S. at 328, 98 S.Ct. at 1826--the present administrative searches authorized by statute are restricted to specified purposes. Further, the warrantless administrative examinations of the Act-specified records are reasonably related to, and required to effectuate, the statutory...

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