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Mandell, Spector, Rudolph Co. v. United States

decided: August 24, 1966.


McLaughlin, Hastie and Ganey, Circuit Judges.

Author: Ganey


GANEY, Circuit Judge.

This is an appeal under the Judicial Review Act of 1950,*fn1 seeking a review of an order issued by the Judicial Officer of the Department of Agriculture, pursuant to authority delegated to him by the Secretary of Agriculture. The order was issued pursuant to the Perishable Agricultural Commodities Act, wherein the petitioner was suspended for 90 days from operating in interstate commerce as a commission merchant, dealer and broker in fresh fruits and vegetables. The execution of this order has been stayed by the Judicial Officer pending the outcome of this appeal.

The Perishable Agricultural Commodities Act requires of all persons transacting business in fresh fruits and vegetables in interstate and foreign commerce as commission merchants, brokers or dealers, to be licensed under the Act. 7 U.S.C. § 499c. The Act makes it unlawful for persons to engage in "unfair conduct" as defined in 7 U.S.C. § 499b. The relevant subsection (4) makes it unlawful --

For any commission merchant, dealer, or broker * * * 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; * * *.

The statute provides for the filing of a complaint with the Secretary of Agriculture of anyone complaining of a violation and whenever the Secretary deems it warranted, a copy of the complaint made will be forwarded by the Secretary to the commission merchant, dealer or broker, who will be called upon to answer. 7 U.S.C. § 499f(a). Additionally, 7 U.S.C. § 499f(b) provides as follows:

Any officer or agency of any State or Territory having jurisdiction over commission merchants, dealers, or brokers in such State or Territory and any employee of the United States Department of Agriculture or any interested person may file, in accordance with rules and regulations of the Secretary,*fn2 a complaint of any violation of any provision of this chapter by any commission merchant, dealer, or broker and may request an investigation of such complaint by the Secretary.

If, in the opinion of the Secretary, the facts so warrant, he may have the complaint served on the person concerned and afford him an opportunity for a hearing before a hearing examiner and, in accordance with the provisions of 7 U.S.C. § 499b, if the violation is proven, he may suspend the license of the offender for a period not to exceed 90 days.

In addition, licensed brokers are required to assign a lot number to each load of the products received and to be sold for the account of another and enter the assigned lot number on the receiving record in connection with the respective loads and on sales tickets identifying sales from such lots and such lot numbers shall be placed on the sales tickets at the time of the sale. Additionally, these records and documents must be kept in file for a period of 2 years.

In early 1961, Hicks Produce, Inc., filed with the Department of Agriculture a complaint concerning 57 shipments of tomatoes consigned to the petitioner for its account. These shipments comprised 98,692 cartons of tomatoes. Upon investigation by the Department, the books of the petitioner were examined for the period through May, 1961, during which the above shipments had been handled by the petitioner. The investigators were unable to secure the accounts receivable records for this period for the reason, as averred in the petition for review, certain business records were unavailable since it was alleged they had disappeared in an accident which had occurred in a storage place of petitioner's business. However, the investigators compared invoices reflecting the sale of Hicks' tomatoes with prices actually paid by the buyers and a comparison of the prices actually paid revealed a number of discrepancies and, as a result of their examination, the investigators were able to identify sales of 83,313 containers and they reconstructed an account sales which showed net proceeds of $106,221.77 in connection therewith. Comparison of the figures reported by the petitioner to Hicks showed net proceeds of $104,545.57; there thus was an underpayment by the petitioner to Hicks of $1,676.20.

Accordingly, on April 17, 1962, after the investigation of Hicks was completed, representatives of the Department of Agriculture met with the officers of the petitioner and their attorney and went over their findings. While there was a denial of any underpayment or discrepancies by the petitioner, in order to close the matter out the petitioner tendered a check for $1,676.20, payable to Hicks.

On the next day, April 18, 1962, the chief investigator for the Department of Agriculture, Koenigsburg, informed the officers of the petitioner that, in conformity with the Department's procedure, its records would be spot-checked to determine whether the Hicks case was an "isolated case" or whether it was a regular practice. The record discloses that at that time an informal disciplinary complaint was served by Investigator Koenigsburg upon the respondent, but, on motion of the petitioner, when listed for argument in this court, any reference to this informal complaint was stricken by the court since the complaint itself was not introduced in evidence and made a part of the record in the case.

The main thrust of the petitioner's contention is that prior to the commencement of this second of the two investigations on April 18, 1962, one day after the completion of the Hicks investigation, which uncovered wrongdoing, there had not been filed by the Secretary of Agriculture ...

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