United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued March 13, 2007 Decided August 14, 2007
No. 06-1283
KLEIMAN & HOCHBERG, INC., ET AL.,
PETITIONERS
v.
UNITED STATES DEPARTMENT OF AGRICULTURE,
RESPONDENT
On Petition for Review of an Order of the
Department of Agriculture
Mark C. H. Mandell argued the cause and filed the briefs
for petitioners.
Leslie K. Lagomarcino, Senior Counsel, U.S. Department
of Agriculture, argued the cause for respondent. With her on
the brief were James Michael Kelly, Deputy General Counsel,
and Margaret M. Breinholt, Assistant General Counsel.
Before: TATEL, GARLAND, and BROWN, Circuit Judges.
Opinion for the court filed by Circuit Judge GARLAND.
GARLAND, Circuit Judge: The petitioners in this case are
Kleiman & Hochberg, Inc., a wholesale produce merchant, and
2
its president, Michael Hirsch. The company’s vice president
pled guilty to bribing a federal produce inspector and later
admitted that he had been making similar payments for more
than a decade. After an administrative enforcement proceeding,
the Secretary of Agriculture revoked the company’s license to
do business under the Perishable Agricultural Commodities Act.
The same administrative decision triggered restrictions on
Hirsch’s ability to work in the produce industry. The petitioners
now seek review of that decision. For the reasons explained
below, we deny the petition for review.
I
Kleiman & Hochberg, Inc. (K&H) is a New York
corporation operated out of the Hunts Point Terminal Market in
the Bronx, New York. Since 1947, K&H has maintained a
license to buy and sell produce in interstate commerce under the
Perishable Agricultural Commodities Act (PACA), 7 U.S.C. §
499a et seq. During the period of time relevant to this case,
K&H had three principals: Michael Hirsch, its president; Barry
Hirsch, its treasurer and Michael’s brother; and John Thomas, its
vice president. Each man owned 31.6 percent of the
corporation’s outstanding stock.
Our recent opinion in Coosemans Specialties, Inc. v.
Department of Agriculture, 482 F.3d 560 (D.C. Cir. 2007),
which involved the bribery of the same federal inspector by a
different company, sets forth the relevant background
information regarding Hunts Point:
The perishable produce that arrives at Hunts Point
often travels some distance between the supplier and a
buyer, such as [K&H]. As a result, produce may arrive
in a condition worse than expected. If the buyer then
asks for a price reduction, the [supplier] is at a
3
disadvantage, because it has no way of knowing
whether to trust the buyer’s representations about the
condition of the produce. The [United States
Department of Agriculture’s (USDA’s)] inspection
process is intended to level the playing field by
providing the faraway [supplier] with an independent
evaluation of the produce’s condition so he can be
assured that the price he receives is fair. A buyer, upon
receipt of nonconforming goods, may request an
inspection. [A USDA] inspector reviews the produce
and issues an official certificate assessing its condition
that can help the producer and buyer renegotiate the
price. . . .
This inspection system has been subject to abuse.
For two decades, corrupt USDA inspectors and buyers
at Hunts Point participated in a scheme of illegal
payments. An inspector who received a bribe might
furnish a falsified certificate indicating that the
produce’s condition was worse than it actually was.
The buyer would use that certificate to negotiate a
lower price with the supplier. Once he paid the
supplier, the buyer could resell the produce for a price
that reflected the produce’s actual condition. In this
way, a buyer who bribed inspectors for this purpose
could increase his profit margin to the detriment of the
supplier. Additionally, some inspectors who had
accepted bribes permitted those companies to jump to
the front of the line for inspections, thereby delaying
the inspections of their competitors. Produce being
perishable, buyers who had to wait for inspections
were likely to receive lower prices when the goods
were eventually resold.
4
In 1999, one of the Hunts Point inspectors,
William Cashin, was caught taking bribes. After his
arrest, he agreed to cooperate with investigators. He
conducted inspections from April until August 1999
while wearing audio and/or video recording devices to
document the bribes he received.
Coosemans Specialties, 482 F.3d at 562-63. At the end of each
day of work, Inspector Cashin met with agents of the FBI and
the USDA’s Office of Inspector General to turn over bribe
money and describe the particulars of the bribes he received that
day.
Cashin later testified that he received bribes from K&H
Vice President John Thomas in conjunction with K&H produce
transactions on twelve separate occasions. In October 1999, a
grand jury indicted Thomas on seven counts of bribing a public
official, in violation of 18 U.S.C. § 201(b)(1)(A). A year later,
Thomas pled guilty to a one-count information stating that he
“made cash payments to [USDA] produce inspectors in order to
obtain expedited inspections.” J.A. 664.
On July 17, 2002, the USDA’s Agricultural Marketing
Service filed an administrative complaint charging K&H with
violating PACA by bribing a produce inspector. On February
12, 2003, the Service determined that both Michael and Barry
Hirsch were “responsibly connected” to K&H within the
meaning of PACA. (The significance of this determination is
discussed in Part II.) The Hirsches then filed petitions for
review of the “responsibly connected” determinations, and an
administrative law judge (ALJ) consolidated those proceedings
with the ongoing disciplinary proceeding against the company.
In 2004, the ALJ conducted an eight-day hearing. Cashin
testified that, beginning in the late 1980s or early 1990s, Thomas
5
paid him a fifty-dollar bribe for each inspection. In return,
Cashin said he “help[ed]” K&H by altering some aspects of its
inspection certificates, J.A. 29, although he could not recall
precisely how he changed the certificates.
When Thomas testified, he admitted paying bribes to USDA
produce inspectors. He said that he began this practice in the
“mid or late[] ’80s,” when he was visited by a produce inspector
named Danny Arcery. J.A. 196. Thomas said that Arcery
visited him after Thomas lodged several complaints with the
USDA about late inspections. According to Thomas, Arcery told
him:
In order to avoid late inspections, here’s what has to be
done, you will give a tip of $25.00 to an inspector to
come quicker rather than purposely later. . . . If you
follow these instructions, everything will be okay. No
more calls. No more calls. Don’t call Washington.
We’ve got people down there.
J.A. 197-98.1 Thomas testified that Arcery also told him that, if
he did not make the payments, “[then] don’t hold your breath for
an inspection . . . the shit will rot in the box until somebody
comes.” J.A. 198. Thomas explained that the purpose of the
bribes was always “to get a quicker inspection,” and he denied
ever asking Cashin or any other produce inspector to falsify an
inspection report. J.A. 205. He testified that no one else at
K&H, including the Hirsches, knew that he was bribing produce
inspectors throughout the 1980s and 1990s. When asked why he
never reported the corrupt inspectors to the authorities, Thomas
testified that he “was afraid.” J.A. 220. But when asked what
1
Thomas testified that the amount of the bribes increased to fifty
dollars per inspection in the 1990s.
6
he was afraid Arcery would do, Thomas replied, “I had no idea.”
J.A. 220.
The ALJ issued his decision and order on December 3,
2004. See Kleiman & Hochberg, Inc., PACA Docket Nos. D-
02-0021, APP-03-0005, APP-03-0006 (U.S.D.A. Dec. 3, 2004).
He found that there was “undisputed evidence that Thomas
bribed Cashin in connection with” twelve separate produce
inspections. Id. at 9. The ALJ concluded that K&H had
violated PACA and that the Hirsches were responsibly
connected to the company. Id. at 18-19. After considering the
circumstances of the case, however, he declined to revoke
K&H’s license, and instead assessed a penalty of $180,000. Id.
at 33.
All of the parties appealed to the USDA’s Judicial Officer,
to whom the Secretary has delegated authority for final
decisionmaking in adjudicatory proceedings. See 7 C.F.R. §
2.35(a). The Judicial Officer issued his decision and order on
April 5, 2006. See Kleiman & Hochberg, Inc., PACA Docket
Nos. D-02-0021, APP-03-0005, APP-03-0006 (U.S.D.A. Apr.
5, 2006) (Judicial Officer Decision). He disagreed with the ALJ
in only one respect, concluding that the appropriate sanction was
revocation of K&H’s PACA license. Id. at 31-35.
After the Judicial Officer denied their petition for
reconsideration, K&H and Michael Hirsch petitioned for review
in this court pursuant to 28 U.S.C. § 2342(2). Barry Hirsch also
petitioned, but he died on April 10, 2007, and thereafter the
petition was dismissed as to him. The Judicial Officer has
stayed his orders pending the outcome of our review.
The petitioners raise a series of challenges to the Judicial
Officer’s decision. In Part II, we review the regulatory regime
7
established by PACA and explain how it was applied in this
case. In Part III, we consider the petitioners’ challenges.
II
Congress enacted PACA “to facilitate interstate commerce
in fresh fruits and vegetables. 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.” Veg-Mix, Inc. v. USDA, 832
F.2d 601, 604 (D.C. Cir. 1987) (citation omitted). Because the
“industry [was] thought to be unusually prone to fraud and to
unfair practices,” Tri-County Wholesale Produce Co. v. USDA,
822 F.2d 162, 163 (D.C. Cir. 1987), PACA erected a strict
regulatory regime. The Act requires persons who buy or sell
specified quantities of perishable agricultural commodities at
wholesale in interstate commerce to have a license issued by the
Secretary of Agriculture, see 7 U.S.C. §§ 499a(b)(5)-(7),
499c(a), and makes it unlawful for a licensee to engage in
certain types of unfair conduct, see id. § 499b. The relevant
prohibition in this case, § 499b(4), makes it unlawful for a
licensee to “fail, without reasonable cause, to perform any
specification or duty, express or implied, arising out of any
undertaking in connection with” any transaction in interstate or
foreign commerce involving a perishable agricultural
commodity. Id. § 499b(4). PACA also includes a respondeat
superior provision, which deems the acts of a licensee’s agents
that fall within the scope of their employment to be the acts of
the licensee. Id. § 499p.
If the Secretary of Agriculture determines that a PACA
licensee has violated § 499b(4), the Secretary is authorized to
impose a range of sanctions. See id. § 499h. “[I]f the violation
is flagrant or repeated, the Secretary may, by order, revoke the
license of the offender.” Id. § 499h(a). A license revocation can
8
have serious repercussions for individuals who are associated
with the licensee. When an entity’s PACA license is revoked,
the Act prohibits any person who was “responsibly connected”
to the entity from working for any other licensee for at least one
year. Id. § 499h(b).
Prior to 1995, PACA defined “responsibly connected” as
(inter alia) “affiliated or connected with a commission merchant,
dealer, or broker as . . . [an] officer, director, or holder of more
than 10 per centum of the outstanding stock of a corporation or
association.” 7 U.S.C. § 499a(b)(9) (1994). Congress amended
that definition in 1995. See 7 U.S.C. § 499a(b)(9). Under the
amended statute, the Secretary “must first determine if an
individual” is an officer, director, or holder of more than ten
percent of the violating licensee’s stock. Norinsberg v. USDA,
162 F.3d 1194, 1197 (D.C. Cir. 1998). “If so, the burden shifts
to the individual to demonstrate that he was not actively
involved [in the violation] and that he was either only a nominal
officer or not an owner of a licensee within the meaning of the
statute.” Id.; see infra Part III.E.
The Judicial Officer applied the foregoing provisions of
PACA as follows. First, he concluded that Thomas’ payment of
bribes to USDA produce inspectors breached an implied duty
and thereby violated § 499b(4). Next, he determined that those
violations should be imputed to K&H under § 499p. He further
concluded that the violations were willful, flagrant, and
repeated, and imposed the maximum sanction of license
revocation, as authorized by § 499h(a). Finally, he determined
that Michael Hirsch was “responsibly connected” to K&H under
§ 499a(b)(9), a finding that triggered PACA’s employment
restrictions. The petitioners challenge all of these conclusions.
9
III
“We review final decisions in PACA cases under the
deferential standard of the Administrative Procedure Act, 5
U.S.C. § 706(2)(A), (E). Under that standard, we must ‘uphold
the Judicial Officer’s decision unless we find it to be arbitrary,
capricious, an abuse of discretion, not in accordance with law,
or unsupported by substantial evidence.’” Kirby Produce Co. v.
USDA, 256 F.3d 830, 833 (D.C. Cir. 2001) (quoting JSG
Trading Corp. v. USDA, 176 F.3d 536, 541 (D.C. Cir. 1999)
(“JSG Trading I”)). As we read their briefs, the petitioners
challenge five aspects of the Judicial Officer’s decision: (1) the
determination that Thomas’ payment of bribes to produce
inspectors violated the “implied duty” clause of § 499b(4); (2)
the treatment of Thomas’ actions as the actions of K&H under
§ 499p; (3) the decision to revoke K&H’s license under §
499h(a), rather than to impose a lesser sanction; (4) the
Secretary’s failure to provide petitioners with notice and an
opportunity to halt Thomas’ unlawful conduct before revoking
K&H’s license; and (5) the determination that Michael Hirsch
was “responsibly connected” to K&H under § 499a(b)(9). We
consider each objection in turn.
A
We begin with the petitioners’ challenge to the Judicial
Officer’s determination that Thomas’ bribes violated 7 U.S.C.
§ 499b(4), which makes it unlawful to “fail, without reasonable
cause, to perform any specification or duty, express or implied,
arising out of any undertaking in connection with” a produce
transaction. 7 U.S.C. § 499b(4). The Judicial Officer’s
application of this section proceeded in two stages. First, he
held that Thomas failed to perform an implied “duty to refrain
from making payments to [USDA] produce inspectors in
connection with the inspection of perishable agricultural
10
commodities.” Judicial Officer Decision at 27. Second, he held
that Thomas did not have “reasonable cause” for failing to
perform the duty. See id. at 44-46.
At oral argument before this court, the petitioners did not
dispute the Judicial Officer’s interpretation of § 499b(4) as
encompassing a duty to refrain from bribing government
produce inspectors. See Oral Arg. Recording at 3:15. This
turned out to be a prescient allocation of their legal ammunition,
because another panel subsequently affirmed an identical
interpretation of § 499b(4). In Coosemans Specialties, the court
explained that the USDA’s interpretation of PACA is entitled to
deference under the two-step framework of Chevron U.S.A. Inc.
v. NRDC, 467 U.S. 837 (1984). Coosemans Specialties, 482
F.3d at 564; see also Norinsberg, 162 F.3d at 1199. Under that
framework, if “the intent of Congress is clear, . . . [a court] must
give effect to the unambiguously expressed intent of Congress.”
Chevron, 467 U.S. at 842-43. But “if the statute is silent or
ambiguous with respect to the specific issue,” the court must
uphold the agency’s interpretation as long as it is reasonable. Id.
at 843. Applying that framework, Coosemans Specialties
concluded that the implied duty clause is ambiguous, and that
the Judicial Officer’s view that it “includes a duty not to bribe
USDA inspectors . . . is reasonable,” because “[i]t is consistent
with the purposes of the Act . . . to protect producers and other
merchants from dishonest and irresponsible conduct.” 482 F.3d
at 565-66.2
2
As we noted in Coosemans Specialties, we had previously
“upheld the Secretary’s construction of the implied duty clause as
including a prohibition on commercial bribery,” that is, the payment
of bribes by a seller to a buyer’s employee, without the knowledge of
the employer. 482 F.3d at 565 (citing, inter alia, JSG Trading Corp.
v. Dep’t of Agric., 235 F.3d 608, 610-11 (D.C. Cir. 2001) (“JSG
Trading II”); JSG Trading I, 176 F.3d at 543).
11
The Second Circuit reached the same result in G&T
Terminal Packaging Co. v. USDA, 468 F.3d 86 (2d Cir. 2006),
another case arising out of the corruption at Hunts Point. After
finding the “implied duty” language of § 499b(4) to be
ambiguous, it “affirm[ed] as reasonable the Secretary’s
conclusion that the PACA imposes an implied duty upon
licensees to refrain from making payments to USDA inspectors
in connection with produce inspections, irrespective of whether
those payments induce, or are intended to induce, the inspectors
to issue inaccurate inspection certificates.” Id. at 96. “Indeed,”
the court said, given PACA’s statutory scheme, “which assigns
government inspectors to protect the financial interests of distant
shippers by providing impartial assessments of the condition of
the produce upon arrival, we can hardly conceive of a duty more
clearly implicated than the obligation of recipients not to make
side-payments to these inspectors.” Id. at 96-97 (citations
omitted). We agree.
Rather than attack the Judicial Officer’s construction of
“implied duty,” K&H and Hirsch direct their fire at the second
part of the Officer’s analysis: his rejection of their argument
that Thomas had “reasonable cause” for bribing Cashin because
he was the victim of “extortion.” The Judicial Officer rejected
that argument for two reasons. He concluded that: (1) Thomas
was not the victim of “extortion,” Judicial Officer Decision at
45, and (2) even if he was, “[t]he extortion cited by [petitioners]
is not a ‘reasonable cause’ under . . . PACA,” id. at 46 (citation
omitted). We affirm both determinations.
The Judicial Officer’s rejection of the petitioners’ claim that
Thomas’ payments were the result of extortion is reasonable.
There is no evidence in the record that Cashin made threats of
any kind to induce Thomas to make the payments. Rather, the
only evidence that anyone ever threatened Thomas is Thomas’
testimony (recounted above) that a different produce inspector,
12
Arcery, did so a full decade prior to the bribes at issue here.
According to Thomas, Arcery told him in the mid- to late-1980s
that unless he paid bribes, K&H’s produce would “rot in the box
until somebody comes,” and warned him that he should not “call
Washington” because “[w]e’ve got people down there.” J.A.
198. These statements do not compel a conclusion that Thomas’
payments to Cashin a decade later were involuntary.
The Judicial Officer was also justified in concluding that,
even if Thomas’ payments were induced by extortion, the type
of “extortion cited by [the petitioners] is not a ‘reasonable cause’
under [PACA] for [K&H]’s failure to perform the implied duty
to refrain from [bribing] produce inspectors.” Judicial Officer
Decision at 46. First, under Chevron step one, PACA is
ambiguous as to whether extortion provides “reasonable cause”
for bribery. See G&T Terminal, 468 F.3d at 98. It could hardly
be otherwise, as there is nothing in the statute that defines
“reasonable cause” or mentions extortion or bribery. The
petitioners do not argue to the contrary.
Moving to Chevron step two, we find that the Judicial
Officer’s interpretation of the “reasonable cause” provision is
reasonable. Like the Second Circuit, “[w]e may presume that
there are species of coercion so extreme that they rob an
individual of any meaningful opportunity to resist.” Id. But
there was no such coercion in this case. The “threats” Arcery
allegedly made to Thomas were in any event “‘soft’ enough to
support the view that no reasonable cause existed for the
petitioners’ breach of duty.” Id.; see also id. (noting that the
inspectors at Hunts Point did not “physically threaten[]” the
bribe payer and did not threaten “the loss or destruction of his
business, harm to his family or employees, blackmail, or the
outright denial of produce inspections”). Like the bribe payer in
G&T Terminal, Thomas had “choices about how to respond to
13
[the inspector’s] demands for illegal payments -- hard choices,
perhaps, but meaningful ones all the same.” Id. at 99.
In sum, we affirm the Judicial Officer’s reasonable
determination that Thomas violated § 499b(4): his conduct
breached the implied duty not to bribe USDA inspectors, and he
had no “reasonable cause” for so doing.
B
The petitioners next challenge the Judicial Officer’s
determination that Thomas’ actions should be deemed the
actions of K&H under 7 U.S.C. § 499p, PACA’s respondeat
superior provision. Section 499p provides that “the act,
omission, or failure of any agent, officer, or other person acting
for or employed by any [licensee], within the scope of his
employment or office, shall in every case be deemed the act,
omission, or failure of such [licensee].” 7 U.S.C. § 499p. In
applying this provision, the Judicial Officer found that “Thomas
paid bribes to [USDA] produce inspectors at [K&H’s] place of
business, during regular working hours, and in connection with
the inspection of perishable agricultural commodities purchased,
received, and accepted by [K&H].” Judicial Officer Decision at
48. Further, “Thomas was authorized to apply for” produce
inspections by K&H, and the bribes he paid “were intended to
benefit” the company. Id. at 48-49. The Officer concluded that
“[t]he record clearly establishes that John Thomas was [acting]
within the scope of his employment” when he bribed Cashin.
Id. at 48. Accordingly, under § 499p, “the knowing and willful
bribes by John Thomas are deemed to be knowing and willful
bribes by” K&H. Id. at 25.
We find no fault in the Judicial Officer’s application of §
499p. In a similar case, we upheld the Secretary’s determination
that an employee’s payment of bribes to a USDA inspector for
14
the benefit of his company fell within the scope of his
employment. See Post & Taback, Inc. v. Dep’t of Agric., 123 F.
App’x 406, 408 (D.C. Cir. 2005). Other courts have reached the
same result. See, e.g., Koam Produce, Inc. v. DiMare
Homestead, Inc., 329 F.3d 123, 130 (2d Cir. 2003). Indeed, at
oral argument, counsel for the petitioners conceded that an
officer of a company generally acts “within the scope of his
employment” when he pays a bribe to a produce inspector. Oral
Arg. Recording at 7:44.
The petitioners offer two reasons why § 499p is nonetheless
inapplicable to this case. First, they contend that Thomas’
actions were “secret” and “undiscoverable,” Pet’rs Br. 35, and
that, as a consequence, K&H “had absolutely no . . . ability to
control what Thomas did with the inspectors,” id. at 34. As the
government correctly notes, this rhetoric overstates the situation.
Thomas was not, as the petitioners suggest, some third-party
actor beyond the company’s control; to the contrary, he was the
company’s one-third owner and treasurer and had worked for
the company for thirty years. More important, the petitioners’
argument contradicts the express language of the statute.
Section 499p provides that the act of an officer, within the scope
of his employment, “shall in every case be deemed the act” of
the licensee. 7 U.S.C. § 499p (emphasis added). As we held in
Post & Taback, “the plain language of the [section] provides no
escape hatch for merchants who allege ignorance of their
employees’ misconduct.” 123 F. App’x at 408 (internal
quotation marks and ellipsis omitted).
Second, the petitioners argue that Thomas’ bribes did not
have “any connection with or impact on the actual produce
transactions between Petitioners and their shippers and
suppliers,” and did not cause any “damage.” Pet’rs Br. 33. This
second argument has the same flaws as the first. It is factually
incorrect because, as we noted in Coosemans Specialties,
15
companies that paid bribes to expedite their inspections at Hunts
Point “jump[ed] to the front of the line for inspections, thereby
delaying the inspections of their competitors.” 482 F.3d at 563;
see id. at 567 (noting that this “conduct not only gave [the
company] a competitive advantage, but it also increased the
pressure on other merchants to engage in bribery to remain
competitive”); see also Judicial Officer Decision at 20 (finding
that Thomas pled guilty to making “cash payments to [USDA]
produce inspectors in order to obtain expedited inspections”).
Moreover, and again more important, the statute requires
imputation of wrongful conduct to the licensee “in every case,”
7 U.S.C. § 499p -- not simply in those cases in which damage
was done.
Finally, the petitioners contend that, if § 499p is interpreted
according to its express terms, it amounts to “an unconstitutional
irrebuttable presumption” because it “provide[s] that certain
facts (Thomas’ admitted payments) shall be conclusive evidence
of guilt of Petitioners,” thereby depriving them of “the right to
engage in . . . one of the common occupations of life.” Pet’rs
Br. 35-36. In fact, § 499p simply makes applicable to wholesale
produce merchants the principle of respondeat superior, a
substantive legal doctrine widely accepted at common law3 and
widely incorporated into federal regulatory statutes.4 Whether
3
See Oliver W. Holmes, Jr., Agency, 4 HARV. L. REV. 345, 356
(1891).
4
See, e.g., 7 U.S.C. § 63 (cotton standards); id. § 87d (grain
standards); id. § 223 (packers and stockyards); id. § 511l (tobacco
inspection); id. § 2139 (transportation of animals); id. § 8313(c)
(animal health protection); 15 U.S.C. § 431(f) (discrimination against
farmers’ cooperative associations by boards of trade); 21 U.S.C. § 63
(filled milk); id. § 461(a) (poultry and poultry products inspection); id.
§ 1041(d) (egg products inspection); 47 U.S.C. § 217 (regulation of
common carriers in wire or radio communication).
16
or not we call that doctrine an “irrebuttable presumption,”5 if
applying it “does not abridge a fundamental right or discriminate
against a suspect class, it [must be] upheld if it ‘bears a rational
relation to a legitimate legislative goal.’” Delong v. Dep’t of
Health & Human Servs., 264 F.3d 1334, 1341 (Fed. Cir. 2001)
(brackets and ellipsis omitted) (quoting Weinberger v. Salfi, 422
U.S. 749, 772 (1975)); see Hawkins v. Agric. Mktg. Serv., 10
F.3d 1125, 1133 (5th Cir. 1993); see generally Edison Elec. Inst.
v. EPA, 391 F.3d 1267, 1272 n.5 (D.C. Cir. 2004); sources cited
supra note 5.
The petitioners do not claim that there is a fundamental
right or suspect class at issue here, and there is no doubt that §
499p bears a rational relation to a legitimate legislative goal. By
imposing liability on licensees whose agents violate PACA, the
respondeat superior doctrine encourages produce companies to
“use [their] control over the employee to prevent” violations of
the Act. Sullivan v. Freeman, 944 F.2d 334, 336 (7th Cir. 1991)
(discussing the role of the doctrine in general). “While
admittedly the result Congress desired could be harsh in some
cases, we cannot say that [the statute] is not reasonably designed
to achieve the desired Congressional purpose.” Zwick v.
Freeman, 373 F.2d 110, 118 (2d Cir. 1967) (specifically
referring to § 499h(b), which restricts the employment of
“responsibly connected” persons).
5
Commentators have noted that the Supreme Court “has not
applied the irrebuttable presumption doctrine” since the early 1970s.
ERWIN CHEMERINSKY, CONSTITUTIONAL LAW § 9.4 n.65 (3d ed.
2006); see GERALD GUNTHER & KATHLEEN M. SULLIVAN,
CONSTITUTIONAL LAW 915 (13th ed. 1997) (stating that the
irrebuttable presumption doctrine was “abandoned by the Court” in
Weinberger v. Salfi, 422 U.S. 749 (1975)); see generally LAURENCE
H. TRIBE, AMERICAN CONSTITUTIONAL LAW 1621-24 (2d ed. 1988).
17
The petitioners disparage the Judicial Officer’s attribution
of Thomas’ misconduct to the company as a “rote application”
of § 499p. Pet’rs Br. 32. In our view, this is just another way of
saying that the Officer was faithful to the statutory text. And
that is his -- and our -- responsibility.
C
Third, the petitioners argue that the Judicial Officer’s
decision to revoke K&H’s PACA license is “unsupported by the
great weight of the evidence and is arbitrary and capricious.”
Pet’rs Br. 44. As we have repeatedly noted, “‘[w]e will not
lightly disturb the [USDA’s] choice of a remedy under a statute
committed to its enforcement, especially given the Department’s
superior knowledge of the industry PACA regulates.’”
Coosemans Specialties, 482 F.3d at 566-67 (quoting JSG
Trading II, 235 F.3d at 617).
If a licensee’s violation of PACA § 499b “is flagrant or
repeated, the Secretary may, by order, revoke the license of the
offender.” 7 U.S.C. § 499h(a). The Judicial Officer found that
K&H’s violations of § 499b(4) were both flagrant and repeated,
see Judicial Officer Decision at 30-31, and the petitioners do not
challenge those findings. The Officer was therefore authorized
to revoke K&H’s license, and his decision to do so was fully
consistent with precedent. In numerous cases arising out of the
government’s investigation at Hunts Point, revocation was the
sanction imposed for bribing produce inspectors. See, e.g.,
Coosemans Specialties, Inc., PACA Docket No. D-02-0024
(U.S.D.A. Apr. 20, 2006); In re M. Trombetta & Sons, Inc.,
PACA Docket No. D-02-0025 (U.S.D.A. Sept. 27, 2005); G&T
Terminal Packaging Co., PACA Docket No. D-03-0026
(U.S.D.A. Sept. 8, 2005).
18
The Judicial Officer was not required, of course, to impose
the sanction of revocation and could have opted for a lesser
punishment. He chose not to do so because of the “egregious”
nature of the bribes. Judicial Officer Decision at 34. The
petitioners protest that Thomas’ conduct was not egregious,
because his bribes “had no effect on K&H’s dealings with its
suppliers.” Pet’rs Br. 45. But the Judicial Officer relied on the
testimony of John Koller, an official at the USDA’s Agricultural
Marketing Service, who testified that bribery of produce
inspectors undermines the credibility of the entire PACA
inspection process and increases the likelihood that other
produce wholesalers will engage in similar illicit conduct.
Judicial Officer Decision at 33.6 License revocation was
necessary, Koller said, in order to “deter other members of the
industry from . . . making bribery payments.” Id. Under these
circumstances, we have no ground for finding the Judicial
Officer’s choice of sanctions unreasonable. See also Butz v.
Glover Livestock Comm’n Co., 411 U.S. 182, 188-89 (1973)
(“The fashioning of an appropriate and reasonable remedy is for
the Secretary, not the court.”).
D
The petitioners’ fourth argument is that the Secretary
violated the Administrative Procedure Act (APA) by instituting
proceedings to revoke K&H’s license without first providing the
company with notice of Thomas’ unlawful conduct and an
opportunity to curb it. Once again, the plain text of the statute
bars the petitioners’ argument. The relevant section of the APA
6
See also Post & Taback, Inc., 62 Agric. Dec. 802, 825 (2003)
(“[U]nlawful gratuities and bribes paid to [USDA] inspectors threaten
the integrity of the entire inspection system and undermine the
produce industry’s trust in the entire inspection system.”), petition for
review denied, 123 F. App’x 406 (D.C. Cir. 2005).
19
states: “Except in cases of willfulness[,] . . . revocation . . . of a
license is lawful only if, before the institution of agency
proceedings therefor, the licensee has been given -- (1) notice by
the agency in writing of the facts or conduct which may warrant
the action; and (2) opportunity to demonstrate or achieve
compliance with all lawful requirements.” 5 U.S.C. § 558(c)
(emphasis added). Here, the Judicial Officer found that K&H’s
violations of PACA were willful, see Judicial Officer Decision
at 28-31 & n.8, thus bringing the case within the exception to the
APA’s notice requirement.
In applying § 558(c) to PACA violations, we have held that
“‘an action is willful if a prohibited act is done intentionally,
irrespective of evil intent, or done with careless disregard of
statutory requirements.’” Coosemans Specialties, 482 F.3d at
567 (quoting Finer Foods Sales Co. v. Block, 708 F.2d 774, 778
(D.C. Cir. 1983)). Applying this standard, the Judicial Officer
found that Thomas, and therefore K&H, had willfully violated
PACA by paying unlawful bribes to Cashin. This finding is
supported by substantial evidence. Thomas pled guilty to an
information stating that he “unlawfully, wilfully, knowingly,
directly and indirectly, did corruptly give, offer and promise
things of value to public officials.” J.A. 664. And Thomas’
own description of his bribes during his testimony before the
ALJ shows that his conduct was intentional. See J.A. 201-06.
On virtually identical evidence, Coosemans Specialties held that
a PACA violation was willful and hence that the APA’s notice
provision was inapplicable. 482 F.3d at 567-68. We do so here
as well. Indeed, we could not do otherwise without requiring
the USDA to disclose an undercover law enforcement operation
as soon as it detects a criminal violation.7
7
Petitioners also suggest, obliquely, that Michael Hirsch was
individually entitled to notice under APA § 558(c). See Pet’rs Br. 25.
Section 558(c), however, applies only to “licensees.” It does not
20
E
Finally, petitioner Michael Hirsch challenges the Judicial
Officer’s determination that he was “responsibly connected” to
K&H during the period in which the company violated PACA.
Section 499h(b) provides that “any person who is or has been
responsibly connected with any [entity] whose license has been
revoked” may not be employed by any other PACA licensee for
at least one year. 7 U.S.C. § 499h(b). Because the Judicial
Officer revoked K&H’s license, the determination that Hirsch
was responsibly connected to K&H makes him subject to this
restriction.
PACA defines a “responsibly connected” person as one who
is “affiliated or connected with a [licensee] as . . . [an] officer,
director, or holder of more than 10 per centum of the
outstanding stock.” Id. § 499a(b)(9). There is no dispute that
Hirsch -- who was all three -- comes within this definition. As
noted above, however, a 1995 amendment qualified the
definition. It provided:
A person shall not be deemed to be responsibly
connected if the person demonstrates by a
preponderance of the evidence that the person was not
actively involved in the activities resulting in a
violation of [PACA] and that the person either was
only nominally . . . [an] officer, director, or shareholder
of a violating licensee . . . or was not an owner of a
violating licensee . . . which was the alter ego of its
owners.
require notice to the directors, officers, or owners of a licensee who
are not themselves licensed. In this case, K&H was the only party that
maintained a license, see J.A. 655-62, and that license is the only one
at issue in these proceedings.
21
Id. Under the amended statute, the Secretary “must first
determine if an individual” is an officer, director, or holder of
more than ten percent of the violating licensee’s stock.
Norinsberg, 162 F.3d at 1197. “If so, the burden shifts to the
individual to demonstrate [by a preponderance of the evidence]
that he was not actively involved [in the violation] and that he
was either only a nominal officer or not an owner of a licensee
within the meaning of the statute.” Id. (emphasis added).
Hirsch did demonstrate that he was not actively involved in
Thomas’ bribery, see Judicial Officer Decision at 37, thus
rendering this exception potentially available. However,
because he makes no claim that he was “not an owner of a
violating licensee . . . which was the alter ego of its owners,”8 he
must prove that he was “only nominally . . . [an] officer, director
[and] shareholder” of K&H to obtain the exception’s benefit.
Hirsch did not prove that he qualified for the “nominal”
exception, nor could he do so. As Hirsch concedes, he owned
31.6 percent of the corporation’s outstanding stock, was the
company’s President, and was “actively engaged in the day-to-
day operations, management, and control of K&H.” Pet’rs Br.
25 (emphasis added).
Nonetheless, Hirsch again notes that Thomas’ bribes were
undisclosed, and insists that a person cannot be responsibly
connected to a violating licensee unless he “either knew or
should have known about the violations and then failed to take
8
“[T]he ‘alter ego’ exception applie[s] to ‘cases in which the
violator, although formally a corporation, is essentially an alter ego of
its owners, so dominated as to negate its separate personality.’ A
petitioner who [is] not a true owner of such a corporation [will] be
spared the consequences of the responsibly connected determination.”
Coosemans Specialties, 482 F.3d at 568 (quoting Norinsberg, 162
F.3d at 1197).
22
action to counteract the actions of others constituting the
violations.” Id. at 27. But neither the statutory definition of
“responsibly connected” (an “officer, director, or holder of more
than 10 per centum of the outstanding stock,” 7 U.S.C. §
499a(b)(9)), nor the statutory “nominal” and “alter ego”
exceptions suggest such a knowledge requirement. And “the
inclusion of a specific exception for persons who make a certain
showing . . . militate[s] against judicially created exceptions.”
Coosemans Specialties, 482 F.3d at 569.9
IV
PACA “is admittedly and intentionally a tough law.” S.
REP. NO. 84-2507, at 3 (1956) (internal quotation marks
omitted). In this case, the USDA’s Judicial Officer chose the
toughest possible sanction, notwithstanding the active
involvement of the USDA’s own inspectors in the widespread
corruption at Hunts Point. See Coosemans Specialties, 482 F.3d
at 567. But whether or not we would have levied the same
penalty, we cannot say that the Officer’s decision in that regard
9
As they did with respect to PACA’s respondeat superior
provision, see supra Part III.B, the petitioners suggest that literal
enforcement of the “responsibly connected” provision violates
Hirsch’s due process rights. We rejected this argument in Siegel v.
Lyng, 851 F.2d 412, 416 n.12 (D.C. Cir. 1988), as have the other
circuits that have considered it, see Hawkins v. Agric. Mktg. Serv., 10
F.3d 1125, 1134 (5th Cir. 1993) (“We . . . cannot say that the
unambiguous language of § 499a(b)(9) . . . was irrationally conceived
or arbitrary in effecting a legitimate governmental objective, i.e., the
protection of producers of perishable agricultural products.”); Zwick,
373 F.2d at 118-19; Birkenfield v. United States, 369 F.2d 491, 494-95
(3d Cir. 1966).
23
-- or any other regard -- is arbitrary or unreasonable.
Accordingly, the petition for review is
Denied.