IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 92-5147
_____________________
DAVID L. HAWKINS,
Petitioner,
v.
AGRICULTURAL MARKETING SERVICE,
DEPARTMENT OF AGRICULTURE, U.S.A.,
Respondent.
_________________________________________________________________
On Petition for Review of a Final Order
of the Secretary of Agriculture
_________________________________________________________________
(December 21, 1993)
Before REYNALDO G. GARZA, KING and DeMOSS, Circuit Judges.
KING, Circuit Judge:
David L. Hawkins seeks review, pursuant to 28 U.S.C. § 2342,
of a final order of the administrator of the Agricultural
Marketing Service of the United States Department of Agriculture.
The administrator affirmed the presiding officer's decision,
which found that Hawkins was "responsibly connected" with Fruit
Jobbers, Inc., during a time when Fruit Jobbers committed
"repeated and flagrant" violations of the Perishable Agricultural
Commodities Act, 7 U.S.C. § 499a et seq. We deny the petition
for review and affirm the order.
I. BACKGROUND
Fruit Jobbers was incorporated in Mississippi and licensed
as a dealer of perishable agricultural commodities by the United
States Department of Agriculture (USDA), pursuant to the
Perishable Agricultural Commodities Act (PACA), 7 U.S.C. § 499 et
seq. Its office was in Jackson, Mississippi. David L. Hawkins
(Hawkins) began working at Fruit Jobbers in 1950. He became a
shareholder in 1960, at which time he also became vice-president
of the corporation. Eventually, Hawkins was a member of the
board of directors. From the time he became a shareholder until
August 1988, Hawkins received a salary and monthly stock
dividends from Fruit Jobbers.
In August 1988, members of the Harrison family purchased
approximately 78 percent of Fruit Jobbers' stock. At that time,
Harrison held approximately 22 percent of the stock. Following
their purchase of the stock, the Harrison family removed Hawkins
as an officer and a member of the board of directors. They also
offered to purchase Hawkins' shares for the same price as they
had purchased shares from other shareholders if Hawkins would
sign a non-competition agreement, effective for five years and
within a 150-mile radius of Jackson, Mississippi. Hawkins
refused to sell his stock on those terms and resigned all
positions and offices that he held with Fruit Jobbers on August
3, 1988. He received no salary or stock dividends from Fruit
Jobbers after that date. He did, however, maintain his stock
holdings. Hawkins subsequently went to work at D&D Produce,
2
Hawkins' own produce business licensed under the PACA, and at
Capitol City Produce as a buyer.
On July 7, 1989, Hawkins filed suit in the Chancery Court of
Hinds County, Mississippi, against Fruit Jobbers and the Harrison
family to force them to provide documentation of Fruit Jobbers'
financial affairs. In the alternative, Hawkins petitioned the
court to compel the Harrison family to buy his stock, or for the
court to close the business and distribute the assets.
On February 1, 1990, before the chancery court litigation
was completed, Fruit Jobbers filed a bankruptcy petition in
federal district court seeking relief pursuant to Chapter 11 of
the Bankruptcy Code. The bankruptcy petition did not list
Hawkins as a shareholder, even though he still owned
approximately 22 percent of Fruit Jobbers' stock.
The Director of the Fruit and Vegetable Division of the
Agricultural Marketing Service (AMS) of the USDA filed an
administrative complaint against Fruit Jobbers on August 31,
1990, alleging that during the period from July 1989 through
February 1990, Fruit Jobbers purchased, received, and accepted--
in interstate commerce--117 lots of perishable agricultural
commodities but failed to make full payment promptly of the
agreed purchase prices, which totaled $324,246.87. Thus, Fruit
Jobbers was alleged to have violated 7 U.S.C. § 499b(4).1
1
Section 499b(4) states in pertinent part that it is
unlawful
[f]or any commission merchant, dealer, or broker to
make, for a fraudulent purpose, any false or misleading
statement in connection with any transaction involving
3
Shortly thereafter, the AMS notified Hawkins that because he
owned approximately 22 percent of Fruit Jobbers' stock when the
corporation allegedly violated PACA provisions, he was determined
to be "responsibly connected" with the corporation pursuant to 7
U.S.C. § 499a(b)(9). Hawkins then filed a petition for review of
the AMS decision. On December 20, 1990, the AMS referred
Hawkins' petition to the presiding officer.
An administrative law judge issued a default order against
Fruit Jobbers on January 11, 1991, finding that Fruit Jobbers had
committed willful, flagrant, and repeated violations of 7 U.S.C.
§ 499b and that therefore Fruit Jobbers' license would be revoked
pursuant to 7 U.S.C. § 499h. That order became final on February
27, 1991.
A hearing concerning Hawkins' "responsible connection" to
Fruit Jobbers was held in Jackson, Mississippi, on July 16, 1991,
before the presiding officer. The presiding officer issued his
decision on May 11, 1992, in which he found Hawkins "responsibly
connected" with Fruit Jobbers when Fruit Jobbers committed PACA
violations because Hawkins was a holder of more than ten percent
any perishable agricultural commodity which is received
in interstate or foreign commerce by such commission
merchant, or bought or sold, or contracted to be
bought, sold, or consigned, in such commerce by such
dealer, or the purchase or sale of which in such
commerce is negotiated by such broker; or to fail or
refuse truly and correctly to account and make full
payment promptly in respect of any transaction in any
such commodity to the person with whom such transaction
is had; or to fail, without reasonable cause, to
perform any specification or duty, express or implied,
arising out of any undertaking in connection with any
such transaction . . . .
4
of Fruit Jobbers' stock during that time. Hawkins thus became
subject to the PACA's employment restrictions,2 which mandate
that Hawkins is barred from employment by any PACA licensee for a
minimum period of one year. The administrator of the AMS
affirmed the presiding officer's decision on November 9, 1992.
Hawkins now seeks review of the administrator's final order.
II. STANDARD OF REVIEW
This court upholds an agency's decision unless we determine
it to be arbitrary, capricious, or an abuse of discretion. 5
U.S.C. § 706(2)(A). We uphold an agency's factual findings if
they are supported by substantial evidence. Faour v. United
States Dep't of Agric., 985 F.2d 217 (5th Cir. 1993) (citing
Federal Trade Comm'n v. Indiana Fed'n of Dentists, 476 U.S. 447,
454 (1986)). The substantial evidence standard requires only
2
Section 499h(b) states in pertinent part:
[N]o licensee shall employ any person, or any person
who is or has been responsibly connected with any
person--
(1) whose license has been revoked or is currently
suspended by order of the Secretary;
(2) who has been found after notice and opportunity
for hearing to have committed any flagrant or
repeated violation of section 499b of this title
. . . .
The Secretary may approve such employment at any time
following nonpayment of a reparation award, or after
one year following the revocation of finding of
flagrant or repeated violation of section 499b of this
title, if the licensee furnishes and maintains surety
bond in form and amount satisfactory to the Secretary
as assurance that such licensee's business will be
conducted in accordance with this chapter. . . . The
Secretary may approve employment without a surety bond
after the expiration of two years from the effective
date of the applicable disciplinary order.
5
that an agency decision be supported by "'such relevant evidence
as a reasonable mind might accept as adequate to support a
conclusion.'" Universal Camera Corp. v. NLRB, 340 U.S. 474, 477
(1951) (quoting Consolidated Edison Co. v. NLRB, 305 U.S. 197,
229 (1938)).
Legal issues, however, are "'for the courts to resolve,
although even in considering such issues the courts are to give
some deference to the [agency's] informed judgment.'" Faour, 985
F.2d at 219 (quoting Federal Trade Comm'n, 476 U.S. at 454). Our
review of an agency's construction of a statute must give effect
to the unambiguously expressed intent of Congress. Chevron
U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S.
837, 842-43 (1984).
III. DISCUSSION
Hawkins first asserts that the presiding officer erred in
applying a per se standard in determining whether Hawkins was
"responsibly connected" with Fruit Jobbers and not considering
evidence which demonstrated that Hawkins was not in fact
responsible for any of Fruit Jobbers' PACA violations. Hawkins
further asserts that the per se analysis used by the presiding
officer violates Hawkins' right to equal protection under the
law, as guaranteed by the Fifth Amendment, and that any
employment sanctions imposed upon him as a result of the
presiding officer's decision violate his Fifth Amendment due
process rights. He also contends that the presiding officer's
6
decision reflecting Fruit Jobbers' flagrant or repeated PACA
violations is not supported in the record by substantial
evidence. We address each of Hawkins' contentions in turn.
A. "Responsibly Connected"
Hawkins first contends that the presiding officer erred in
applying a per se analysis to § 499a(b)(9), which defines
"responsibly connected." Instead, according to Hawkins, the
presiding officer should have construed the language of
§ 499a(b)(9) as a "rebuttable presumption" to afford a person
falling within one of the categories delineated therein to
demonstrate that he was not actually responsibly connected to the
offending corporate licensee.
Hawkins argues, in essence, for an interpretation under
which a person would be presumed "responsibly connected" if he
fits into any of the three categories listed in § 499a(b)(9), but
would be allowed to rebut this presumption by proving that his
position was a nominal one. Thus, Hawkins argues that because he
was a minority shareholder and had resigned all of his positions
with Fruit Jobbers before the alleged violations occurred,
receiving no economic benefit from Fruit Jobbers and taking no
effective part whatsoever in the control of the corporation, he
was not "responsibly connected" to Fruit Jobbers.
Section 499a(b)(9) defines "responsibly connected" as
affiliated or connected with a commission merchant,
dealer, or broker as (A) partner in a partnership, or
(B) officer, director, or holder of more than 10 per
centum of the outstanding stock of a corporation or
association.
7
In Faour, 985 F.2d at 219-21, a panel of this court was presented
with the precise issue Hawkins now raises. In determining
whether § 499a(b)(9) fostered an interpretation which reads a
"rebuttable presumption" into the statute, this Court stated:
We find the plain meaning of this statute
unambiguous. If a person is an officer or director of,
or holds over ten percent of the outstanding stock of,
a corporation that has been found to have committed any
flagrant or repeated violation of section 499b, that
person is considered "responsibly connected" and
subject to sanctions under PACA. The statute is
explicit: If a person falls within one of the three
enumerated categories, he is responsibly connected.
The statute does not contemplate a defense that allows
a person to show that even though he fits into one of
the three categories, he never had enough actual
authority to be considered truly responsibly connected.
Faour, 985 F.2d at 220 (emphasis added). We thus disagreed with
the District of Columbia Circuit's interpretation of § 499a(b)(9)
as reading a rebuttable presumption into the statute, and instead
we joined other Circuits that had adopted the per se rule, which
we determined the plain language of § 499a(b)(9) commands. Id.
at 220-21; see Pupillo v. United States, 755 F.2d 638, 643 (8th
Cir. 1985); Birkenfield v. United States, 369 F.2d 491, 494 (3d
Cir. 1966); see also Zwick v. Freeman, 373 F.2d 110, 119 (2d
Cir.) (citing with approval the per se standard enunciated in
Birkenfield), cert. denied, 389 U.S. 835 (1967). We saw no
reason to look beyond the unambiguous language of the statute,
for we determined that this language shows that Congress intended
for any person who falls into one of the designated categories to
be deemed "responsibly connected." Faour, 985 F.2d at 221.
8
Hawkins contends, however, that his situation is different
from that of the petitioner in Faour. Gary K. Faour was the
manager for institutional sales, a director, and an officer of
the Magnolia Fruit & Vegetable Company at the time it violated
the PACA--from August through December of 1987. Id. at 218.
Although at one time he had owned 27.27 percent of the company's
stock, in 1986 he owned only 10.5 percent, which he had pledged
as collateral for a loan for the company. Id. Whether Faour
owned more than 10 percent of the stock at the time of the
alleged violations was not a factor in this court's determination
that Faour was "responsibly connected" because we found that
Faour was a vice-president and director of the company when it
violated the PACA. Id. at 221-22. Hawkins therefore argues that
in Faour we did not apply the per se rule in a case involving
only a minority stockholder and that Faour is thus
distinguishable from the instant case.
To strengthen his position, Hawkins points out that he tried
to sell his stock to the Harrison family but that they refused to
buy it unless he would sign a non-competition agreement,
effective for five years within a 150-mile radius of Jackson,
Mississippi. He also notes that his stock was "valueless"
because he was barred by the Harrison family, who controlled the
corporation, from ascertaining the value of his stock. He
further maintains that because he was unable to readily determine
his stock's value, his stock did not represent a bona fide stake
in the corporation but instead had been rendered useless.
9
Additionally, he explains that his refusal to sell his stock for
the price offered by the Harrison family was not unreasonable
because the non-competition agreement that was part of the
proposed sale would have essentially forced him to give up "his
ability to enjoy a livelihood in a field in which he had decades
of unblemished experience."
We are unconvinced by Hawkins' arguments. First, our
decision in Faour primarily focused not on Faour's status as a
corporate officer, but on the unambiguous language of
§ 499a(b)(9) and our recognition that in drafting the statute,
Congress intended to provide a clear definition of "responsibly
connected."3 Faour, 985 F.2d at 221. Hawkins' attempt to
distinguish Faour on grounds that Hawkins is a stockholder
instead of a corporate officer is thus misplaced.
Second, the PACA was enacted in 1930 and significantly
amended in 1956 and 1962. Any dealer, merchant, broker, or
investor in perishable commodities must recognize that the PACA
is, as it has been for years, a "tough law." As Congress
explained,
3
In a 1962 amendment to the PACA, Congress defined the term
"responsibly connected" in order to "[i]mprove and clarify
provisions dealing with the eligibility for license, or for
employment by licensees, of persons guilty of specified acts and
persons affiliated with them." H. Rep. No. 1546, 87th Cong., 2d
Sess. (1962), reprinted in 1962 U.S.C.C.A.N. 2749, 2750. The
House Report states that Congress believed this definition would
"give [the term 'responsibly connected'] specific meaning, thus
avoiding possible confusion as to interpretations." Id. at 2751.
The Report also made it clear that "responsible connection" could
be established under the amendment without showing that the
person "was responsible in whole or in part" for the conduct that
violated the statute. Id. at 2753.
10
[t]he [PACA] . . . was enacted in 1930 for the purpose
of providing a measure of control and regulation over a
branch of industry which is engaged almost exclusively
in interstate commerce, which is highly competitive,
and in which the opportunities for sharp practices,
irresponsible business conduct, and unfair methods are
numerous. The law was designed primarily for the
protection of producers of perishable agricultural
products--most of whom must entrust their products to a
buyer or commission merchant who may be thousands of
miles away, and depend for their payment upon his
business acumen and fair dealing--and for the
protection of consumers who frequently have no more
than the oral representation of the dealer that the
product they buy is of the grade and quality they are
paying for.
The law has fostered an admirable degree of
dependability and fairness in this industry chiefly
through the method of requiring the [licensing] of all
those who carry on an interstate business in perishable
agricultural commodities and denying this [license] to
those whose business tactics disqualify them.
H.R. Rep. No. 1196, 84th Cong., 1st Sess. (1956), reprinted in
1956 U.S.C.C.A.N. 3699, 3701. Thus, any investor in a perishable
commodities corporation should know at the beginning of his
association with such a corporation that he is "buying into" a
corporation which is strictly regulated by the federal government
through the PACA. That Hawkins was not given the opportunity to
sell his stock to the corporation on more favorable terms is
unfortunate, but as a veteran of the perishable commodities
business for more than thirty years, Hawkins was aware of the
"toughness" of the PACA and the risk he took when he became a
shareholder in Fruit Jobbers.
Hawkins admits that he owned approximately 22 percent of the
stock in Fruit Jobbers at the time the PACA violations occurred.
Our decision in Faour will thus be dispositive of Hawkins' claim
concerning the application of the per se rule to the
11
interpretation of § 499a(b)(9) unless we determine that such an
interpretation violates Hawkins' equal protection rights or that
employment restrictions imposed upon him pursuant to § 499h as a
result of his being deemed "responsibly connected" violate his
due process rights, as Hawkins contends. It is to those issues,
which were not raised in Faour, that we now turn.
B. Equal Protection and Due Process
Hawkins first contends that because the District of Columbia
Circuit has determined that § 499a(b)(9) should be read to permit
a rebuttable presumption, any other interpretation--i.e., the
application of the per se rule--would treat him differently than
others similarly situated and thus violate his right to equal
protection under the law. Hawkins also contends that the per se
standard renders the statute constitutionally infirm as applied
because it violates his right to due process. In support of this
contention, Hawkins asserts that the hearing afforded him was
"not meaningful," i.e., he was not given a fair opportunity to
"rebut" the statutory presumption. Hawkins also asserts that the
statute sweeps so broadly that it includes within its ambit
presumptions "not necessarily or universally true in fact" and
that reasonable alternative means exist by which the government
can make critical determinations of which persons were
"responsibly connected" to a corporation which violates the PACA.
We address each of his arguments in turn.
12
1. Equal Protection
The basis of Hawkins' equal protection claim is that the
presiding officer's and this court's rejection of the "rebuttable
presumption" approach in interpreting § 499a(b)(9), an approach
which was taken by the District of Columbia Circuit, in favor of
the per se rule which we see as commanded by the plain language
of the statute, violates his right to equal protection under the
law. Thus, Hawkins suggests that a difference of opinion among
the circuits or a circuit split violates such a right. Although
we find Hawkins' argument a novel one, we disagree. A
disagreement between circuits on the interpretation of a statute
is a matter which either the Supreme Court or Congress should
resolve; it does not violate the equal protection rights of the
person subjected to the "more burdensome interpretation." United
States v. Palacio, 4 F.3d 150, 154 (2d Cir. 1993). We thus find
Hawkins' equal protection argument to be without merit.
2. Due Process
a. Arbitrary Governmental Interference
Hawkins also argues that the application of the per se rule
to § 499a(b)(9) violates his Fifth Amendment due process rights
because it unreasonably subjects him to the employment
restriction provisions of § 499h and thus arbitrarily interferes
with his right to engage in his chosen profession. He cites
specifically to Cleveland Bd. of Educ. v. LaFleur, 414 U.S. 632
(1974), and to cases cited within Cleveland for the proposition
that "permanent irrebuttable presumptions have long been
13
disfavored under the Due Process Clause of the Fifth Amendment
and Fourteenth Amendments" because the Due Process Clause
requires "a more individualized determination." Id. at 645-46
(internal quotations and citations omitted).
In Cleveland, the Supreme Court held that mandatory
maternity leave provisions set forth by the Cleveland Board of
Education violated pregnant teachers' due process rights because
they created "irrebuttable presumptions" that every teacher who
was four months pregnant was physically incapable of continuing
her duties. Id. at 643-48. These provisions required a pregnant
teacher to take maternity leave without pay, beginning five
months before the expected birth of her child. Id. at 634. The
Court explained that a pregnant teacher's ability to continue
teaching past a fixed pregnancy period was an individual matter
and that the presumption embodied in the challenged provisions--
which did foster administrative convenience--were not
"universally true in fact" and that thus the provisions swept too
broadly. Id. at 646-68. After recognizing that freedom of
personal choice in matters of marriage and family life had been
long recognized as being one of the fundamental liberties
protected by the Due Process Clause, id. at 639, the Court
concluded that "neither the necessity for continuity of
instruction nor the [governmental] interest in keeping physically
unfit teachers out of the classroom can justify the sweeping
mandatory leave regulations that the . . . School Board[] ha[s]
adopted," id. at 647-48. The Court therefore invalidated the
14
challenged provisions because "they employ irrebuttable
presumptions that unduly penalize a female teacher for deciding
to bear a child." Id. at 648.
We find Hawkins' reliance on Cleveland and cases cited
within Cleveland as misplaced for several reasons. First,
Cleveland was the last of a line of cases in which the Supreme
Court "ventured into 'irrebuttable presumptions' analysis,
purportedly an aspect of procedural due process but in substance
similar to very intensive scrutiny of legislative
generalizations." GERALD GUNTHER, CONSTITUTIONAL LAW 876 (12th ed.
1991). Shortly after its decision in Cleveland, the Court made
it clear that a type of heightened scrutiny of a statute or
regulation could not be triggered by merely asserting a claim
that the challenged statute or regulation contained an
"irrebuttable presumption." See Weinberger v. Salfi, 422 U.S.
749, 777 (1975). In Salfi, which involved a challenge to a
duration-of-relationship requirement for Social Security
eligibility for surviving wives and stepchildren of deceased wage
earners, the Court explained that
the question . . . is not whether a statutory provision
precisely filters out those, and only those, who are in
the factual position which generated the congressional
concern reflected in the statute. . . . Nor is the
question whether the provision filters out a
substantial part of the class which caused
congressional concern, or whether it filters out more
members of the class than nonmembers. The question is
whether Congress, its concern having been reasonably
aroused by the possibility of an abuse which it
legitimately desired to avoid, could rationally have
concluded both that a particular limitation or
qualification would protect against its occurrence, and
that the expense and other difficulties of individual
15
determinations justified the inherent imprecision of a
prophylactic rule.
Salfi, 422 U.S. at 777 (emphasis added). The Court then
distinguished Cleveland and other cases in the "irrebuttable
presumption" line--e.g., Vlandis v. Kline, 412 U.S. 441 (1973),
in which a residency requirement for in-state tuition was being
challenged and which arguably involved a student's right to
engage in interstate travel, and Bell v. Burson, 402 U.S. 535
(1971), in which the Court found the state's making a driver's
liability for an auto accident an important factor for denying
his driver's license incompatible with the application of the
challenged statute, which required a driver to post bond to cover
damages allegedly arising from an auto accident or face
suspension of his driver's license, without an opportunity to
rebut his alleged liability. Id. at 772. The Court saw this
line of cases as either involving interests which had
"constitutionally protected status," id. at 771-72, or involving
an only purported governmental interest in the statute or
regulation at issue, id. at 772.
Most commentators view the Salfi decision as definitively
having repudiated the "irrebuttable presumption" analysis as a
generally acceptable mode of analysis in a constitutional
challenge to a statute or regulation. See, e.g., GUNTHER, at 877
(noting that the Salfi decision was a "death blow" to the
"irrebuttable presumption" line of cases); LAURENCE H. TRIBE,
CONSTITUTIONAL LAW § 16-34, at 1622-24 (2d ed. 1988) (discussing
that with Salfi the Court severely limited the situations in
16
which the irrebuttable presumption analysis might apply to those
in which "intermediate or strict scrutiny was independently
warranted either by the involvement of a sensitive classification
or by the presence of an important liberty or benefit"); D.
Michael Risinger, "Substance" and "Procedure" Revisited with Some
Afterthoughts on the Constitutional Problems of "Irrebuttable
Presumptions", 30 UCLA L. REV. 189, 215 (1982) (explaining that
the Salfi decision expressly returned the standard of review to
"rational basis"). Thus, Hawkins' promotion of an "irrebuttable
presumption" analysis as the type of analysis necessary in the
instant case is misguided.
Second, we emphasize that the Constitution does not
guarantee an unrestricted privilege to engage in a particular
profession or a privilege to conduct a business as one pleases.
Nebbia v. People of State of New York, 291 U.S. 502, 527-28
(1934). Moreover, the perishable commodities industry, as an
instrument of interstate commerce, is certainly an industry which
for more than fifty years has been subject to reasonable
congressional regulation. Courts have thus reviewed the
constitutionality of various sections of the PACA using a
"rational basis" analysis.
For example, in Zwick v. Freeman, 373 F.2d 110 (2d Cir.),
cert. denied, 389 U.S. 835 (1967), the court reviewed a
petitioner's claim that the harsh employment restrictions
embodied in § 499h for those persons deemed "responsibly
connected" under § 499a(b)(9) violated his due process rights "to
17
earn a livelihood in the common occupations of the community."
Id. at 118. After citing the Supreme Court's decision in Nebbia
for the proposition that the petitioner did not have a
constitutional guarantee for an unrestricted privilege to engage
in his chosen occupation, the court determined that the
employment restrictions of § 499h, although harsh in some cases,
were "reasonably designed to achieve the desired Congressional
purpose." Id. The court thus upheld these harsh employment
restrictions against the petitioner's due process challenge. Id.
at 119; see also George Steinberg & Son, Inc. v. Butz, 491 F.2d
988, 994 (2d Cir.) (agreeing with the Zwick court's determination
that PACA's harsh restriction upon the employment of any person
"responsibly connected" to a licensee found to have violated the
PACA did not violate the Due Process Clause of the Fifth
Amendment), cert. denied, 419 U.S. 830 (1974).
Likewise, the Third Circuit used a rational basis analysis
in Birkenfield v. United States, 369 F.2d 491, 494-95 (3d Cir.
1966), to determine that the per se standard which Congress
adopted in its 1962 amendment of § 499a(b)(9) was constitutional
and not violative of the petitioner's right to due process. The
court first looked at the object of the PACA as being to suppress
unfair and fraudulent practices in the industry and thus protect
producers of perishable commodities. Id. at 494. After
examining the 1962 amendments to the PACA and Congress' reason
for defining "responsibly connected" as it had in amending the
statute, i.e., the previous difficulty in ascertaining the true
18
nature of an employee's relationship with the licensee
corporation, the court explained that
[t]he automatic exclusion of "responsibly connected"
persons is not irrational or arbitrary under the
circumstances. Surely, the relationships of director,
officer or substantial shareholder form a sufficient
nexus for the arbitrary conclusion of responsible
connection. Moreover, the formation of such
relationships with the sanctioned company is a
voluntary act. The fact that an individual has not
exercised "real" authority in the sanctioned company is
not controlling: certainly the individual could have
resigned as an officer and director [or] disposed of
his stock. It was his free choice not to do so.
Having made that choice, the appellant assumed the
burdens imposed by the Act.
Id. at 494-95. The court then upheld the per se exclusionary
standard of § 499a(b)(9) as constitutional. Id. at 495.
We therefore cannot say that the unambiguous language of
§ 499a(b)(9), which in Faour we determined commands the
application of the per se rule, was irrationally conceived or
arbitrary in effecting a legitimate governmental objective, i.e.,
the protection of producers of perishable agricultural products.
We also agree that the status of being a director, officer, or
substantial shareholder in a perishable commodities corporation
forms a "sufficient nexus" to the corporation so that a person of
such status can be deemed "responsibly connected" and thus held
to the strict provisions of the PACA, including employment
sanctions.4 See Faour, 985 F.2d at 220 (citing Birkenfield, 369
4
Additionally, as we noted earlier, the attainment of such
a status with a perishable commodities corporation is a
completely voluntary act. We thus agree with the Birkenfield
court that once an individual chooses to attain such a status, he
assumes not only the benefits of that status but also the burdens
of the PACA.
19
F.2d at 494). We thus cannot see how the per se rule of
§ 499a(b)(9), which can subject to employment restrictions under
§ 499h those persons "responsibly connected" to a corporation
which has flagrantly or repeatedly violated the PACA,
unconstitutionally encroaches upon Hawkins' due process rights by
arbitrarily interfering with his chosen profession.
b. Scope of Hearing
Hawkins also maintains that his due process rights were
violated because he was deprived of a "meaningful hearing" in
which to rebut the presumption of fault which § 499a(b)(9)
imposes upon him by making him subject to the employment
restrictions of § 499h if he falls into one of the delineated
categories of § 499a(b)(9). In light of our above discussion,
see Part III.B.1 supra, we find that Hawkins was not entitled to
a hearing so that he might rebut the "responsibly connected"
presumption embodied in § 499a(b)(9). He was entitled, however,
to an opportunity to show that at the time Fruit Jobbers
allegedly violated the PACA, he did not fall into one of the
three categories delineated in § 499a(b)(9). Because he was
afforded such an opportunity, his due process rights were not
violated. His argument with respect to being denied a meaningful
hearing is thus without merit.
C. Substantial Evidence
Hawkins finally contends that the presiding officer's
decision reflecting Fruit Jobbers' flagrant or repeated PACA
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violations is not supported in the record by substantial
evidence. We disagree.
In making his determination, the presiding officer relied on
an administrative law judge's default order finding Fruit Jobbers
to have committed willful, repeated, and flagrant violations of
the PACA by failing to make full payment promptly of $324,246.87
to 50 sellers for 117 lots of fruits and vegetables. See In re
Fruit Jobbers, 50 Agric. Dec. 1100 (1991). Although served with
a complaint issued by the Department of Agriculture, Fruit
Jobbers never responded to deny the allegations. Id. After the
time for filing an answer had expired and upon the motion of the
Department of Agriculture, the judge issued a default order
pursuant to 7 C.F.R. § 1.139, finding that Fruit Jobbers had
committed willful, flagrant, and repeated violations of PACA.
Id. Regulations governing PACA proceedings provide that
"[f]ailure to file an answer within the time prescribed shall
constitute a waiver of hearing and an admission of the facts
alleged in the complaint." 7 C.F.R. § 47.8(c). The default
order became final on February 27, 1991--before Hawkins' hearing
before the presiding officer. Thus, the presiding officer's
reliance on the administrative law judge's findings fully
supports his conclusion that Fruit Jobbers violated the PACA.
Hawkins' claim concerning the lack of substantial evidence is
without merit.
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IV. CONCLUSION
For the foregoing reasons, we DENY the petition for review
and AFFIRM the administrator's order.
DeMOSS, Circuit Judge, specially concurring.
I concur in the reasoning and result of Judge King's well-
crafted opinion. We have simply said that the law is what
Congress says is the law. However, on rare occasions, in the
words of Mr. Bumble in Charles Dickens' Oliver Twist, "...the law
is a[n] ass," and this is one of those occasions. To say that a
person is "responsibly connected" to an action of a corporation
simply by reason of being a minority shareholder of that
corporation, flies in the face of both logic and reality. I
always thought it was hornbook law that a shareholder, even a
majority shareholder, was not responsible for the debts or torts
or criminal conduct of a corporation, simply by reason of being
such shareholder. If the public policy behind PACA (as indicated
by the quotation from the House Report in Judge King's opinion)
is to require licensing for those who carry on a business in
perishable agricultural commodities, and to deny such licenses
"to those whose business tactics disqualify them," should not the
law focus on the perpetrators of the unacceptable business
tactics? If not, the innocent investor/shareholder is branded
with guilt purely on the basis of association, a circumstance
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which I thought was clearly not acceptable as a basis for fixing
responsibility. Consequently, I write this special concurrence
with the hope that somewhere in the Department of Agriculture
there is an administrator of this Act with the courage to suggest
to Congress that the definition of "responsibly connected" should
be amended by deleting the words "holder of more than 10 percent
of the outstanding stock of a corporation."
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