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Parties Involved:
Frank Tambone, Inc.
Petitioner
United States Department of Agriculture
Respondent
United States of America
Respondent

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 24, 1995 Decided March 31, 1995

No. 94-1291

FRANK TAMBONE, INC.,

PETITIONER 

v.

UNITED STATES DEPARTMENT OF AGRICULTURE AND

UNITED STATES OF AMERICA,

RESPONDENTS

Petition for Review of an Order of the

United States Department of Agriculture

Stephen P. McCarron argued the cause and filed the briefs for petitioner.

M. Bradley Flynn, Attorney, United States Department of Agriculture, argued the cause for

respondents. With him on the brief was James M. Kelly, Associate General Counsel, United States

Department of Agriculture. Raymond W. Fullerton entered an appearance for respondents.

Before: WALD, RANDOLPH, and ROGERS, Circuit Judges.

Opinion for the court filed by Circuit Judge RANDOLPH.

RANDOLPH, Circuit Judge: This is a petition for review of final action of the United States

Department of Agriculture against Frank Tambone, Inc., pursuant to the Perishable Agricultural

Commodities Act, 1930, as amended, 7 U.S.C. §§ 499a-499s (1988 & Supp. IV 1992).

Born in 1925, Frank Tambone has been in the produce business all of his working life. He

began selling mushrooms from a van, added tomatoes, and eventually expanded into a full-scale

wholesale produce business, servicing customers in the Philadelphia-Delaware Valley-New Jersey

area. His two sons joined him in the business. He incorporated his company as Frank Tambone, Inc.,

of which he was the president and sole shareholder. With a dealer's license from the Agriculture

Department (7 U.S.C. §§ 499a(b)(6), 499d), the company purchased perishable agricultural

commodities from suppliers, warehoused the produce, and resold it to long-term customers such as

universities, hotels, nightclubs and restaurants. Tambone personally received numerous awards from

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restaurant associations and other groups. Until this case, the Department of Agriculture had never

filed any disciplinary proceedings against Tambone or his company.

On October 27, 1991, a fire destroyed Tambone's business. Lost in the fire were $125,000

worth of produce; incoming payments totalling between $30,000 and $40,000; a warehouse; eleven

trucks; forklifts; computers; and the company's business records. Tambone, Inc. ceased operations

and began the task of reconstructing its accounts receivable and accounts payable. When informed

of the fire, the Secretary-Treasurer of the Philadelphia Produce Credit Bureau advised all merchants

in the Philadelphia produce market to file "trust notices" pursuant to 7 U.S.C. § 499e(c). Under this

section, the dealer holds in trust for the benefit of all unpaid suppliers the perishable agricultural

commodities it receives from them and the proceeds of the sales of these products. 7 U.S.C. §

499e(c).

During the period August 16, 1991, through November 18, 1991, Tambone, Inc. owed its

suppliers $204,596.54, the total amount due to twelve firms for 158 shipments of perishable

agricultural commodities. Of this total, $150,000 had been due and owing for forty days or less; the

balance had been outstanding for forty to sixty days. The Act requires "full payment promptly" (7

U.S.C. § 499b(4)). The Secretary's regulations define prompt payment to mean within ten days of

the date the purchaser acceptsthe produce, unlessthe partiesto the transaction have agreed inwriting

to a longer period. 7 C.F.R. § 46.2(aa)(5) & (11). Tambone, Inc. apparently had such agreements

with its suppliers but the agreements were not in writing.

After the fire, Tambone, Inc. deposited receiptsfrom its customersin a separate account and

distributed these funds to its trust creditors. The company also filed a claim with Nationwide

Insurance Company under its fire insurance policy. When Nationwide denied the claim, Tambone,

Inc. brought suit in federal district court. In July 1993, the court entered judgment for Tambone,

Inc., and the company distributed the net proceeds of its recovery to its produce suppliers.

In the meantime, in May 1992, the Director of the Department of Agriculture's Fruit and

Vegetable Division, Agricultural Marketing Service, issued a complaint against Tambone, Inc. for

violating § 499b(4), the prompt payment provision of the Act. By the date of the hearing, in May

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1993, Tambone, Inc. had paid more than $130,000 to its creditor-suppliers, withwhomit had reached

a settlement. The Administrative Law Judge and, on agency review, the Judicial Officer, found that

"[p]rior to the date of the fire, [Tambone, Inc.] and its president, Frank Tambone, asits predecessor,

in more than forty yearsin the industry, had never had any trust notices or reparation complaintsfiled

against it." Nevertheless, the Judicial Officer, adopting the ALJ's findings and conclusions,

determined that Tambone, Inc. had committed "flagrant and repeated violations of the Act." Even

if the fire had caused part of the problem for Tambone, Inc., the company's repeated failures to pay

its suppliers within ten days violated the Act. The Act authorizes the Secretary to suspend a dealer's

license for not more than ninety days whenever the dealer has violated § 499b, or to revoke the

license if the violation is "flagrant or repeated," "and/or" to "publish the facts and circumstances of

such violation," 7 U.S.C. § 499h(a). In this case, there was no license to suspend or revoke. Rather

than incur the annual renewal fee, Tambone, Inc. allowed its license to expire in January 1993.

On February 2, 1994, the Judicial Officer therefore ordered, as a sanction, publication of his

findings, effective thirty days after service of the order on Tambone, Inc. At oral argument, the

partiesstated that the order had not yet become effective because of the pendency of this petition for

review. Publication, a "clearly authorized" agency action (Farley & Calfee, Inc. v. Department of

Agriculture, 941 F.2d 964, 967 (9th Cir. 1991)), will have the following consequences. If Tambone,

Inc. or any persons "responsibly connected" with the company, such as Frank Tambone, apply for a

license within two years of the order's effective date, 7 U.S.C. § 499d(b)(B) requires the Secretary

to denythe application. In addition, after publication of the findings, persons "responsibly connected"

to Tambone, Inc. need the Secretary's approval in order to work for other dealers, brokers or

commission merchants holding licenses under the Act. 7 U.S.C. § 499h(b). The Secretary may give

such approval one year after the order's effective date, but only on condition that the employer posts

a surety bond; the "Secretary may approve employment without a surety bond after the expiration

of two years from the effective date of the applicable disciplinary order." Id.

Tambone, Inc. does not contest the Judicial Officer's decision that its paying suppliers more

than ten days after they delivered produce, without written agreements allowing these terms,

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constituted flagrant or repeated violations ofthe Act's prompt payment provision and the regulations

thereunder. The company does dispute the Judicial Officer's determination that its violations were

willful. Tambone, Inc. may be right that the fire, and the delay in recovering on the fire insurance

policy, made it impossible for the company to satisfy its debts in full. But there is still the matter of

timeliness. Suppose these events had not occurred. Tambone, Inc. would have continued violating

the regulations by failing to pay its suppliers within ten days. And neither the fire of October 27,

1991, nor the later insurance collection problem explain why Tambone, Inc. had delayed making

payments due and owing for more than ten days before the fire occurred. A violation is willful, the

Judicial Officer said, if a "person intentionally does an act prohibited by a statute or if a person

carelessly disregardsthe requirements of a statute." Butsee Ratzlaf v. United States, 114 S. Ct. 655,

659-62 (1994). Given the Judicial Officer's unchallenged definition, substantial evidence supported

his finding that Tambone, Inc. willfully failed to pay its suppliers "promptly," as the Act required.

The matter of the sanction presents a different question. The ALJ's opinion, adopted by the

Judicial Officer, described publication in this case as an "admittedly harsh sanction," but one that "has

consistently been upheld by the Federal Circuit Courts." The ALJ followed this statement with

citations to eight opinions of the courts of appeals, including our opinion in Finer Foods Sales Co.

v. Block, 708 F.2d 774 (D.C. Cir. 1983). All of the cases dealt with orders of the Secretary issued

before 1991, when the Secretary's policy was that "mitigating circumstances are irrelevant." Finer

Foods, 708 F.2d at 782. While mitigating circumstances may still be irrelevant in determining

whether a person violated the Act, which is all that Finer Foods actually decided, mitigating

circumstances are no longer irrelevant with respect to the choice ofsanctions. In 1991 the Secretary

adopted a new policy on this subject:

It is appropriate to state expressly the practice that has been followed by the

Judicial Officer in recent cases, viz., that reliance will no longer be placed on the

"severe" sanction policyset forth inmany prior decisions, e.g. In re Spencer Livestock

Comm'n Co., 46 Agric. Dec. 268, 435-62 (1987), aff'd on other grounds, 841 F.2d

1451 (9th Cir. 1988). Rather, the sanction in each case will be determined by

examining the nature of the violations in relation to the remedial purposes of the

regulatory statute involved, along with all the relevant circumstances, always giving

appropriate weight to the recommendations of the administrative officials charged

with the responsibility for achieving the congressional purpose.

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In re S.S. Farms Linn County, Inc., 50 Agric. Dec. 476, 497 (1991).

Given this administrative shift, we were "puzzled" in Norinsberg Corp. v. Department of

Agriculture, No. 93-1842,slip op. at 5 (D.C. Cir. Mar. 3, 1995), when the Department invoked Finer

Foods to support the sanction there, and we are no less mystified by the Department's brief in this

case, which again relies on Finer Foods without mentioning S.S. Farms. The ALJ and the Judicial

Officer were more attentive. The ALJ quoted S.S. Farms, and the Judicial Officer, in a statement

appended to the ALJ's opinion, did the same, adding: "However, for the reasons set forth by the ALJ,

the sanction of publishing the finding that Respondent has committed willful, flagrant and repeated

violations of the Act, which is the only sanction authorized by the Act, is appropriate here."

In the administrative proceedings, Tambone, Inc. pointed to its record of forty years in the

business without a single disciplinary charge having been lodged against it or its predecessor;

Tambone, Inc.'s history of always paying itssuppliersin full; the disastrous consequences of the fire;

and the problems caused by the insurance company's refusal to honor its policy with the company.

The ALJ answered that none of these factorsrendered it inappropriate to issue some sort ofsanction

and that publication therefore must be ordered because, as the Judicial Officer also observed,

publication is "the only sanction available for a violating entity which is no longer licensed...."

We agree with the Department that the Act authorized the sanction of publication in this case

and that the Secretary has wide latitude in fashioning an appropriate remedy. See Butz v. Glover

Livestock Comm'n Co., 411 U.S. 182, 189 (1973). And we agree with Tambone, Inc. that the

Judicial Officer was bound to comply with the Department's newly-announced policy of considering

mitigating circumstances in determining what sanction to impose. See ABL Produce, Inc. v.

Department of Agriculture, 25 F.3d 641, 646 (8th Cir. 1994). In the administrative proceedings the

ALJ, the Judicial Officer and Tambone, Inc. treated the matter of remedy as an all-or-nothing

proposition. Either there would be the sanction of publication, or there would be no sanction

whatsoever against the company. The assumption was that mitigating circumstances bore not on the

severity ofthe sanction, but onwhether the only possible sanctionpublicationwould be imposed.

Before us the parties continue to entertain the same assumption. Whether they are correct is

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The Judicial Officer rendered his decision on February 2, 1994. By that time Tambone, Inc.

already had been without a license for more than a year. The order has not yet become effective; 

publication will result in a prospective bar under § 499d(b)(B), preventing the company from

obtaining a license for two years. The bar will run from the effective date of this publication

order, which will occur after we render our decision here. Why the bar necessarily should be

entirely prospectivewhy, in other words, the effective date cannot be made retroactiveis a

matter the Judicial Officer did not address, doubtless because no one raised the point. Even

before S.S. Farms, at least one ALJ made the effective date of a publication order retroactive. 

See Farley & Calfee, 941 F.2d at 966. But, as we have said, the point was not raised in the

administrative proceedings and it has not been argued here. 

therefore a subject about which we express no view.

Asto the validity of the sanction ordered here, the Judicial Officer's decision conformed with

S.S. Farms. Tambone, Inc.'s repeated failure to make prompt payments to its suppliers constituted

serious breaches of the Act. Many of the violations occurred even before the fire. There was some

evidence that Tambone, Inc. was experiencing financial difficulties before October 27, 1991.

Publication makes the industry aware that the Secretary is intent on enforcing § 499b(4) so that, in

the words of the ALJ, "only financially responsible persons are in the industry." While Tambone,

Inc.'s good record over a long period of time and its difficulties with the insurance company militated

in its favor, the reasons expressed by the Judicial Officer adequately explained why these

considerations were insufficient to exonerate the company or to render the imposition of anysanction

inappropriate. Repeated and flagrant violations demand some sort of response even when the

offender no longer possesses a license, or so the ALJ and the Judicial Officer believed. When it

comes to the choice of a remedy, the Judicial Officer's judgment must be sustained so long as he has

complied with the statute and the regulations, adhered to the Department's announced policy on

sanctions, and, to the extent his judgment rests on findings of fact, has substantial evidence to back

it up. Butz v. Glover Livestock Comm'n Co., 411 U.S. at 189. The Judicial Officer in this case acted

in conformity with those requirements.

The petition for review is denied.

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