The Honorable Howard F. Sachs, United States District *

Judge for the Western District of Missouri, sitting by

designation.

 

No. 95-3552

 

Midland Banana & Tomato *

Company, Inc.; Robert S. *

Heimann; Susan Heimann, *

 *

 Petitioners, *

 *

 * On Petition for Review

 * of a Decision of the

v. * United States Department

 * of Agriculture

 *

United States Department *

of Agriculture, *

 *

 Respondent. *

 

Submitted: November 22, 1996

 Filed: January 7, 1997

 

Before RICHARD S. ARNOLD, Chief Judge, MAGILL, Circuit Judge, and SACHS,*

District Judge.

 

SACHS, District Judge

This petition for review stems from consolidated Department of

Agriculture disciplinary proceedings under the Perishable Agricultural

Commodities Act, 7 U.S.C. § 499a et seq. (PACA), as amended, in which

petitioner Robert Heimann was found to have committed repeated violations

of the Act by failing to make full and prompt
2

payment for purchases of agricultural commodities and by making false and

misleading statements on a PACA application. Heimann asserts that he was

deprived of due process because the Department procedures were tainted by

irrelevant, prejudicial evidence which biased the decisionmakers and

because there was blanket adoption of adverse claims, unsupported by

evidence. We conclude that Heimann's contentions are lacking in support,

and we affirm.

I. 

The Perishable Agricultural Commodities Act was enacted to regulate

the marketing of fresh and frozen fruits and vegetables in interstate

commerce. See H.R. Rep. No. 87-1546 (1962), reprinted in 1962 U.S.C.C.A.N.

2749. Under the Act, all commission merchants, dealers and brokers in the

perishable commodities industry are required to be licensed by the

Department. 7 U.S.C. § 499c. All are subject to the Act, which declares

certain conduct by commission merchants, dealers and brokers to be

unlawful.

On August 25, 1993, the Director of the Fruit and Vegetable Division

of the Agricultural Marketing Service, an agency within the Department of

Agriculture, commenced a disciplinary proceeding against Royal Fruit Co.,

Inc. ("Royal") for alleged willful, repeated and flagrant violations of

Section 2(4) of the Act, 7 U.S.C. § 499b(4), which makes it unlawful for

any commission merchant, dealer or broker licensed under the Act to fail

to make full and prompt payment in connection with any transaction in

interstate commerce involving perishable agricultural commodities. On the

same day, the Director commenced a disciplinary proceeding against Midland

Banana & Tomato Co., Inc. ("Midland"), alleging that Midland violated

Section 8(c) of the Act, 7 U.S.C. § 499h(c), which makes it unlawful for

a PACA license applicant to make any false or misleading statements in a

license application. The complaints against both companies alleged that

both entities were "alter egos" of Robert Heimann, making Heimann

individually responsible for the alleged violations.
 The Secretary has delegated final administrative authority 1

to the Judicial Officer to decide cases subject to 5 U.S.C. §§

556 and 557. 7 C.F.R. § 2.35.

 Cali's role at Royal is referred to in related litigation. 2

Conforti v. United States, 74 F.3d 838, 840-1 (8th Cir. 1996).

3

The Royal and Midland cases were consolidated and on July 26, 1994,

following a hearing, an administrative law judge (ALJ) found that Royal

committed willful, flagrant, and repeated violations of the Act by failing

to make full and prompt payment of over $500,000; that Royal was the alter

ego of Heimann; that Midland had violated the Act by making false and

misleading statements in its application for a PACA license; and that

Midland was Heimann's alter ego.

Heimann (the only party now before us) appealed to the Department's

Judicial Officer, challenging the alter ego determinations in both cases. 1

On August 16, 1995, in a lengthy and thorough opinion, Judicial Officer

Donald A. Campbell adopted, with modifications, the ALJ's decision. This

appeal followed.

II.

In 1988, Robert Heimann purchased Royal, then a sole proprietorship,

in an agreement that provided for Jeffrey Heimann, Robert's son, and Joseph

Cali to manage the business. Robert Heimann and his wife Beverly signed 2

the contract for Royal's sale as purchasers. There is no evidence Robert

Heimann ever gave or sold the business to Jeffrey Heimann or Joseph Cali.

Royal was licensed by PACA, however, as a partnership whose partners

were identified as Joseph Cali, Jeffrey Heimann and Beverly Heimann. On

November 21, 1988, Royal was incorporated and issued a new PACA license

reflecting its corporate status. The listed directors, officers and

shareholders were Cali, Jeffrey Heimann and Beverly Heimann. The license

was terminated on
4

December 1, 1992, due to Royal's failure to pay the required annual renewal

fee.

In May 1989, Robert Heimann became a consultant for Royal. Heimann's

$10,000 per month fee was paid to Continental Oil & Gas Corp. ("Continental"), a non-operating entity Robert Heimann owned. After Robert Heimann

formally joined the firm, Royal's business increased substantially. In

December 1989, Royal purchased a new, larger location. The funds for this

purchase and for improvements to the property were provided through a Small

Business Administration loan secured by a mortgage on Robert and Beverly

Heimann's personal residence. The lenders took Robert Heimann's management

experience into account when deciding to approve the loan.

Robert Heimann was actively involved in Royal's management. He

negotiated the purchase and sale of produce and arranged for its transportation. He appeared, to individuals dealing with the company, to be the

person in charge of Royal's operations. Royal carried a "key man" life

insurance policy on Robert Heimann and not on any other Royal employees.

When Royal began experiencing financial difficulties at the end of

1991, Robert Heimann allowed Royal to reduce his consulting fee to help

keep the business solvent. During the first few months of 1992, Robert

Heimann, through checks from Continental, provided Royal with a number of

short-term, interest-free loans to cover Royal's checking account when

Royal needed to pay suppliers quickly.

Between July 1992 and November 1992, Royal failed to make prompt

payment to 21 sellers for produce purchased in the amount of $500,370.54.

Royal ceased operations on November 17, 1992. That same day, Midland was

incorporated. Midland's PACA license application identified Susan Heimann,

Robert's daughter, an inexperienced college student, as its sole officer,

director and
5

shareholder. The funds used for Midland's initial capitalization came

primarily from two of Robert Heimann's friends. Susan Heimann invested

$500 in the firm. Robert Heimann served as general manager and was

essentially responsible for all aspects of the operation.

Midland and Royal had almost identical operations. Midland had the

same address, telephone and facsimile numbers as Royal. It used Royal's

office and warehouse equipment. It had the same customers as Royal and

retained approximately one-third of Royal's employees.

Midland's PACA application asserted that Midland was not a successor

to another firm. The Judicial Officer found, however, that Midland had

succeeded Royal. He further found that Midland, in its application, had

falsely denied that any employee had been the owner of a firm whose license

is under suspension. The Judicial Officer found that the license of

Gilbert Brokerage Co., a company Robert Heimann had owned and operated in

the 1970s, was under "ongoing suspension." He additionally found the

Midland application to be misleading because it concealed the identity of

the true principal of the firm, Robert Heimann.

In concluding that Royal and Midland were alter egos of Robert

Heimann, the Judicial Officer considered the witnesses' credibility to be

critical. He found that the testimony of Robert, his family members, and

Joseph Cali, was not credible. In so finding, he pointed to the fact that

each of these individuals had misled authorities during the Department's

investigation of the case. He concluded that Robert Heimann had the least

credibility. To support this determination, he noted that Heimann had

walked away from Gilbert Brokerage's disciplinary proceedings without

producing required documents, had signed a number of fraudulent "State of

Kansas Inspection Forms" while associated with another produce company,

United KC, in the 1980s, and had structured a number of
 The contention is unsound. For example, there was a rejec- 3

tion of contention that Jeffrey B. Heimann was the alter ego of

Midland and that the payment of bills through Continental

amounted to check-kiting.

6

transactions in a misleading manner, apparently in order to avoid financial

responsibility. The Judicial Officer also found that Heimann's malfeasance

prior to his involvement with Royal and Midland was relevant to the

proceedings because it provided a motive for Heimann to disguise his true

role in Royal's and Midland's operations.

Heimann asserts that consideration of these misdeeds was improper and

tainted the opinions so that the ALJ and Judicial Officer were no longer

neutral, unbiased decisionmakers. In support of this claim, Heimann

contends the Judicial Officer uniformly credited the Agricultural Marketing

Service position, even where the Department's findings were, he alleges,

unsupported by or inconsistent with the evidence. As a result, Heimann

3

argues, he was not afforded the fundamental due process to which he is

entitled.

III.

We review federal constitutional questions de novo. United States

v. Bates, 77 F.3d 1101, 1104 (8th Cir. 1996). Our determination is limited

to whether introduction of the allegedly irrelevant evidence so prejudiced

the Secretary that Heimann was denied the fundamental fairness required in

administrative hearings by the due process clause of the Fifth Amendment.

See Beef Nebraska, Inc. v. United States, 807 F.2d 712, 719 (8th Cir.

1986), quoting Silverman v. Commodity Futures Trading Commission, 549 F.2d

28, 33 (7th Cir. 1977).

This court has recognized the right to "a fair, unbiased, and

impartial" administrative hearing. Local No. 3, United Packinghouse

Workers v. NLRB, 210 F.2d 325, 330 (8th Cir. 1954), cert.
 Occasional wording in the 122-page opinion that suggests 4

irritation was fairly induced by the evidence.

7

denied, 348 U.S. 822 (1954). Heimann considerably overplays his hand

by suggesting that any uniform adoption of one party's proposed findings

signifies "bias" and supports a conclusion that there has been a due

process violation. Heimann's argument relies on NLRB v. Miami Coca-Cola 4

Bottling Co., 222 F.2d 341, 345 (5th Cir. 1955), in which the court stated

that such a practice by a trial judge or hearing examiner "deprives his

credibility findings of the weight usually afforded them." We agree that

signs of superficial analysis invite closer scrutiny of the proceedings

below; but this does not routinely or usually result in a reversal, much

less a conclusion that there has been a violation of constitutionally

mandated procedures.

There are occasions when the correct result is so obvious that a

trial judge or hearing examiner may be less than completely thorough in

express analysis. As we have observed, this did not occur here.

We are not compelled by petitioner's briefing to address whether the

challenged evidence was properly admitted. Heimann simply assumes, without

citation, that the evidence was inadmissible. Additionally, because

Heimann's sole argument on appeal is that he was denied due process, we

need not analyze the Secretary's findings under the "substantial evidence"

test. We note, however, that we are satisfied the Secretary's decision was

well supported by substantial evidence and believe the challenged evidence

was admissible, at least to show motivation. Fed. R. Evid. 404(b).

While it is thus not necessary to determine whether the proceedings

before the Department were error-free, we note that the Department

successfully responds to two claims of error that are emphasized before us.

With respect to whether Heimann was still
8

under a cloud because of the Gilbert Brokerage affair in the 1970s, he

contends there was a two-year limit on the suspension because of the

failure to pay suppliers. The Department contends, however, that there was

an "ongoing suspension" pursuant to 7 U.S.C. § 499m(b) (last sentence)

because Heimann never produced that company's records, and that such a

suspension remains until and unless the records are produced. As the

Judicial Officer concluded, Heimann had "good reason to worry" that the

Gilbert Brokerage experience would prejudice a new application in his own

name.

With respect to his personal falsification of inspection certificates

during the United KC activities, proof of such conduct was made in this

case and Heimann simply declined to meet the issue, although he could have

done so without waiving his claim of irrelevance.

Nothing has been presented that would approach a denial of Heimann's

right to due process.

Accordingly, we affirm the decision of the Secretary.

Affirmed.

A true copy.

 Attest:

 CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.