UNITED STATES COURT OxF APPEALS

For the Fifth Circuit

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No. 98-60187

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ALLRED'S PRODUCE,

Petitioner,

VERSUS

UNITED STATES DEPARTMENT OF AGRICULTURE,

Respondent.

___________________________________________________

Petition for Review from the

United States Department of Agriculture

 ___________________________________________________

July 1, 1999

Before POLITZ, HIGGINBOTHAM, and DAVIS, Circuit Judges.

W. EUGENE DAVIS, Circuit Judge:

Petitioner Allred's Produce ("Allred's") appeals a final order

of the Secretary of Agriculture revoking its license under the

Perishable Agricultural Commodities Act ("PACA"), 7 U.S.C. §§ 499a499s, for willful, repeated, and flagrant failure to make full

payment promptly to various sellers of perishable agricultural

commodities. Allred's contends that the Secretary's findings and

sanction were arbitrary and capricious, that Allred's was singled

out for selective enforcement, and that the Secretary failed to

observe various procedural requirements under the PACA. For reasons

that follow, the Secretary's order is affirmed.

I.

Before proceeding to the specific facts and issues of this
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case, it is useful to review the applicable statutory and

regulatory framework. Congress enacted the PACA in 1930 "for the

purpose of regulating the interstate business of shipping and

handling perishable agricultural commodities such as fresh fruit

and vegetables." George Steinberg and Son, Inc. v. Butz, 491 F.2d

988 (2nd Cir. 1974). It was designed "to provide a measure of

control over a branch of industry which is almost exclusively in

interstate commerce, is highly competitive, and presents many

opportunities for sharp practice and irresponsible business

conduct." Zwick v. Freeman, 373 F.2d 110, 116 (2nd Cir. 1967). To

that end, the PACA establishes a strict licensing system with often

severe sanctions for violations of its requirements.

Under the PACA, every dealer of perishable agricultural

commodities is required to be licensed by the Secretary of

Agriculture. 7 U.S.C. § 499c(a). These dealers are subject to a

number of statutory requirements, the most basic of which is that

they make "full payment promptly" for all purchases of perishable

agricultural commodities. 7 U.S.C. § 499b(4). The Secretary has

defined "full payment promptly" to mean "[p]ayment for produce

purchased by a buyer, within 10 days after the day on which the

produce is accepted." 7 C.F.R. § 46.2(aa)(5). Parties may agree to

a different time limit, provided that they reduce such an agreement

to writing before entering into the transaction and maintain a copy

of the agreement in their records. 7 C.F.R. § 46.2(aa)(11). The

party claiming the existence of such an agreement has the burden of

proof. Id.

The PACA authorizes stiff penalties for violation of the
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prompt payment requirement. Upon determining that any dealer has

violated any of the PACA's statutory requirements, the Secretary

may publish the facts and circumstances of the violation and

suspend the license of the offender for up to 90 days. 7 U.S.C. §

499h(a). Moreover, if the violation is flagrant or repeated, the

Secretary may revoke the license of the offender. Id.

Alternatively, under the 1995 amendments to the PACA, the Secretary

may impose a civil penalty not to exceed $2,000 per violation or

$2,000 each day a violation continues. 7 U.S.C. § 499h(e).

II.

Allred's is a partnership formed in 1966, composed of Raymond

M. Allred and his son, Ronald D. Allred. Its sole business is the

purchase and sale of produce. Allred's has been licensed under the

PACA continuously, without suspension or revocation, since 1977.

The PACA Branch of the United States Department of Agriculture

("PACA Branch") conducted three investigations of Allred's between

1994 and 1997. The first investigation was in 1994, and resulted in

no formal complaint against Allred's. The second investigation, a

compliance review, was in February 1996. It revealed that, during

the period from May 1993 through February 1996, Allred's failed to

make full payment promptly to 19 sellers for 86 lots of perishable

agricultural commodities in the total amount of $336,153.40. Based

on these findings, PACA Branch initiated a complaint against

Allred's in July 1996. The third investigation, an audit to

ascertain whether Allred's had brought its operation into

compliance with the PACA prior to hearing, was in May 1997. The

audit revealed that $149,329.66 of the original $336,153.40
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remained unpaid. The audit further found that the firm's total

interstate and foreign commerce past due debt had risen to

$463,328.61, owed to 25 sellers for 125 lots of perishable

agricultural commodities.

A hearing was conducted before an Administrative Law Judge

("ALJ") in June 1997. Additional testimony was taken during a

telephone hearing in August 1997. The ALJ issued his decision from

the bench at the close of the hearing. He found that Allred's

Produce had failed to make full payment promptly to 19 sellers for

86 lots of perishable agricultural commodities in the amount of

$336,153.40 during the period from May 1993 through February 1996.

He further found that these violations were willful, repeated, and

flagrant. Based on these findings, the ALJ revoked the firm's PACA

license.

Allred's filed an administrative appeal of the ALJ's decision

and order in September 1997. The Judicial Officer ("JO"), acting

for the Secretary, issued a final decision and order in December

1997 adopting the ALJ's decision and adding several more

conclusions. Allred's sought reconsideration, which the JO denied

in February 1998. The JO did, however, stay his order pending the

outcome of judicial review. This appeal followed.

III.

Judicial review of the decision of an administrative agency is

narrow. Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402

(1971). The decision will be upheld unless it is "arbitrary,

capricious, an abuse of discretion, or otherwise not in accordance

with the law . . . ." 5 U.S.C. § 706(2)(A). An appellate court may
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not substitute its own judgment for that of the Secretary. American

Fruit Purveyors, Inc. v. United States, 630 F.2d 370, 373 (5th Cir.

1980). The Secretary's decision may only be overturned if it is

unwarranted in law or without justification in fact. Butz v. Glover

Livestock Comm'n Co., 411 U.S. 182, 185-86 (1973). Likewise,

judicial review of a sanction imposed under the PACA is extremely

limited. Wayne Cusimano, Inc. v. Block, 692 F.2d 1025, 1030 (5th

Cir. 1982). "The choice of sanctions imposed by the Secretary of

Agriculture, through his Judicial Officer, may not be overturned in

the absence of a patent abuse of discretion." American Fruit

Purveyors, 630 F.2d at 374.

Allred's challenges the Secretary's final order on the

following six grounds: (1) the sanction awarded was arbitrary and

capricious; (2) the findings and conclusions of the Secretary were

arbitrary and capricious; (3) Allred's was singled out for

selective enforcement; (4) the allowance of the introduction of new

claims at the agency hearing was in excess of the agency's

authority and without observance of procedure; (5) the revocation

of Allred's license was without observance of procedure because the

Secretary failed to establish that a written notice of a violation

of the PACA had been received by the Secretary prior to

commencement of PACA Branch's investigation; and (6) the allowance

and consideration of certain questionable and unreliable evidence

and testimony at the hearing was without observance of procedure.

We find these arguments unpersuasive.

A.

Allred's first argues that the Secretary's decision to impose
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the sanction of license revocation was arbitrary and capricious

under the attendant circumstances of the case and under the custom

and practice of the industry. According to Allred's, no supplier of

perishable agricultural commodities realistically expects to be

paid according to terms, and it is not uncommon for suppliers to

extend payment terms during and after transacting business to

accommodate the buyer. Thus, Allred's states, the 10-day time limit

established by the regulations is outdated and does not reflect the

real world. Revocation of Allred's license would therefore have no

deterrent effect on other buyers of perishable agricultural

commodities. Allred's also describes as abusive the Secretary's

failure to consider outside factors militating against the

imposition of sanctions, such as Allred's efforts to pay its

suppliers and the fact that no supplier of Allred's desired

Allred's to be forced out of business, and the Secretary's failure

to consider imposition of monetary penalties as an alternative

sanction. Finally, Allred's contends that the Secretary abused his

discretion by failing to consider whether the purpose behind the

sanction--deterrence of violative conduct and reducing the risk of

loss to suppliers--would be accomplished through license

revocation.

These arguments are unavailing. As noted above, we will not

overturn the Secretary's choice of sanction absent a patent abuse

of discretion. American Fruit Purveyors, 630 F.2d at 374. Our only

consideration, therefore, is "whether, under the pertinent statute

and relevant facts, the Secretary made 'an allowable judgment in

[his] choice of remedy.'" Glover Livestock, 411 U.S. at 189
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(quoting Jacob Siegel Co. v. FTC, 327 U.S. 608, 612 (1946)). We

find that the Secretary's judgment in this case was both warranted

in law and justified in fact. Where a violation of the PACA is

"flagrant or repeated," the PACA by its own terms authorizes

revocation of the violator's license. 7 U.S.C. § 499h(a). Here, the

Secretary found that Allred's violations of the PACA were both

flagrant and repeated. For reasons discussed below, we agree. Thus,

the revocation of Allred's license was well within the Secretary's

authority. We will not embark on a legislative analysis of the

PACA's relevance to modern industry practice, nor will we reexamine

the aggravating and mitigating evidence to determine whether we

would have arrived at some lesser sanction. Those are not

appropriate functions for an appellate court sitting in review of

a final administrative order. It is enough that the sanction

imposed by the Secretary was allowable under the PACA and the facts

of this case.

B.

Allred's next challenges as arbitrary and capricious the

Secretary's finding that its failures to pay were willful,

repeated, and flagrant. Allred's points out that, at the time of

the hearing, it had paid over 50 percent of the past due accounts

that were the subject of the Secretary's complaint, and was in the

process of paying all outstanding accounts under terms acceptable

to its suppliers. According to Allred's, no suppliers were

complaining about mistreatment or past due payments, and many

suppliers were continuing to supply Allred's even though Allred's

owed them money. Under these circumstances, Allred's contends, it
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cannot be said that the failures to pay were willful, repeated, or

flagrant.

We disagree. Under the regulations, "full payment promptly"

means payment within 10 days of the date on which the produce is

accepted, or payment within the time specified in writing by prior

agreement of the parties. 7 C.F.R. § 46.2(aa). Allred's does not

deny that it failed on numerous occasions to make full payment

promptly under this definition. Nor does Allred's dispute that,

during a nearly three-year period from May 1993 through February

1996, it failed to make full payment promptly on 86 lots of

perishable agricultural commodities in the total amount of

$336,153.40. In light of these undisputed facts, we can find no

error, and certainly no abuse of discretion, in the Secretary's

finding that the violations were willful, repeated, and flagrant.

Violations are "repeated" under the PACA if they are not done

simultaneously. Reese Sales Company v. Hardin, 458 F.2d 183, 187

(9th Cir. 1972); Zwick v. Freeman, 373 F.2d 110, 115 (2nd Cir.

1967). Here, the 86 violations were spread out over a period of two

years and ten months. Violations are "willful" under the PACA "if

the prohibited act is done intentionally, irrespective of evil

intent, or done with careless disregard of statutory authority."

Finer Foods Sales Co., Inc. v. Block, 708 F.2d 774, 778 (D.C. Cir.

1983). Similarly, whether violations are "flagrant" under the PACA

is a function of the number of violations, the amount of money

involved, and the time period during which the violations occurred.

See Reese, 458 F.2d at 187; Zwick, 373 F.2d at 115. Here, Allred's

violated the PACA 86 times over nearly three years for an amount
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totaling over $300,000. To describe these violations as anything

other than "willful" and "flagrant" would be to render those terms

meaningless. The Second Circuit expressed this point best in Zwick:

"[I]t is inconceivable that petitioners were unaware of their

financial condition and unaware that every additional transaction

they entered into was likely to result in another violation of [the

PACA]. It would be hard to imagine clearer examples of 'flagrant'

violations of the statute than were exemplified by petitioners'

conduct." Zwick, 373 F.2d at 115.

C.

Allred's argues next that it was singled out for selective

enforcement under the PACA's disciplinary provisions. Allred's

asserts that most complaints and disciplinary actions under the

PACA are maintained against small to mid-sized buyers rather than

institutional buyers. Thus, Allred's asserts, the brunt of

enforcement falls on the shoulders of the small to mid-sized buyer.

This argument fails on its face. Even taking all of Allred's

allegations as true, we can find no legal rationale for vacating

the Secretary's order. "[T]he conscious exercise of some

selectivity in enforcement is not in itself a federal

constitutional violation." Oyler v. Boles, 368 U.S. 448, 456

(1962). Rather, it must be shown that the selective enforcement

"was deliberately based upon an unjustifiable standard such as

race, religion, or other arbitrary classification." Id. Allred's

cites no authority, and we can find none, for the proposition that

an otherwise culpable PACA violator is shielded from the

consequences of his actions simply because the PACA is applied
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unevenly to non-institutional buyers. We agree with the Secretary

that "[the] PACA does not need to be enforced everywhere to be

enforced somewhere; and agency officials have broad discretion in

deciding against whom to institute disciplinary proceedings."

D.

Allred's concludes with three challenges to the procedural

validity of the ALJ's hearing. Each of these challenges lacks

merit.

First, Allred's contends that the ALJ impermissibly allowed

the introduction of "new claims" at the hearing. The "new claims"

to which Allred's refers are the new violations uncovered by PACA

Branch in its May 1997 audit of Allred's. Allred's argues that the

admission of these new claims at the hearing without amendment of

the complaint forced Allred's to respond to allegations without due

process of law and substantially and irreparably injured its

ability to present evidence to respond to the new claims.

We disagree. The final order of the Secretary makes clear that

Allred's was sanctioned solely for the 86 violations alleged in the

Secretary's original complaint, not for the additional violations

uncovered in the May 1997 audit. The "new claims" evidence was

actually nothing more than evidence of the current indebtedness of

Allred's, which was relevant to the question of relief from license

revocation. Under Department of Agriculture policy, a dealer who

otherwise faces license revocation may escape that sanction if it

can show "(i) that it has made full payment of the transactions

alleged in the Complaint, and (ii) [that] such payment was not made

by 'robbing Peter to pay Paul." In re S W F Produce Co., 54 Agric.
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Dec. 693, 700 (1995) (citing In re The Caito Produce Co., 48 Agric.

Dec. 602, 629-42 (1989)). The May 1997 audit revealed that Allred's

did not qualify for such a mitigation of sanction, and the socalled "new claims" evidence was admitted solely on that issue.

Thus, the ALJ did not improperly admit evidence of new claims.

Rather, he properly considered relevant evidence that Allred's did

not qualify for relief from license revocation on the existing

claims. The sanction itself was based solely on the 86 violations

alleged in the original complaint.

Second, Allred's argues that the revocation of its license was

without observance of procedure as required by law because there

was no evidence that the Secretary's investigation of Allred's was

based on receipt by the Secretary of written notification of a

violation of the PACA. Allred's notes that 7 U.S.C. § 499f(b)

requires such written notification prior to commencement of an

official investigation, and asserts that the Secretary failed to

present evidence of such notification to justify the February 1996

compliance review that resulted in the complaint against Allred's.

This argument lacks basis both in law and in fact. The written

notification requirement was added as part of the 1995 amendments

to the PACA, more than a year after the initial investigation of

Allred's began in 1994. The Secretary found, based on substantial

record evidence, that the 1996 compliance review was a follow-up to

the original 1994 investigation. We agree. As such, since the

investigation began prior to the enactment of the written

notification requirement, the requirement could not act as a bar to

the Secretary's actions in this case. Moreover, the 1994
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investigation was triggered by trust notices and a reparation

complaint filed against Allred's. Thus, even if the written

notification requirement did apply, these written complaints were

sufficient to satisfy it.

Finally, Allred's challenges the ALJ's decision to admit the

testimony of Joan Colson, the Secretary's representative, to make

a sanction recommendation. Allred's contends that her testimony was

entirely unsupported, undocumented, unsubstantiated, and

unreliable, and that the admission of it was therefore without

observance of procedure as required by law. Once again, we

disagree. We note first that there is no reference to Ms. Colson's

testimony in the ALJ's order, and that there is no evidence that

either the ALJ or the Secretary relied on her testimony in imposing

the sanction of license revocation. Additionally, we agree with the

Secretary that Ms. Colson was a reliable witness with respect to

the sanction recommendation, and that the sanction recommended and

imposed was in accordance with the PACA. In sum, we find that the

ALJ and the Secretary likely did not rely on Ms. Colson's testimony

in imposing the sanction of license revocation, but even if they

did, that reliance was not erroneous, because the recommendation

was consistent with the PACA and the regulations.

IV.

We find that the Secretary's decision to revoke Allred's PACA

license was not arbitrary, capricious, an abuse of discretion, or

otherwise not in accordance with the law. Therefore, the

Secretary's Decision and Order is affirmed.

AFFIRMED.