United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 20, 2007 Decided April 6, 2007

No. 06-1199

COOSEMANS SPECIALTIES, INC., ET AL.,

PETITIONERS

v.

DEPARTMENT OF AGRICULTURE AND

UNITED STATES OF AMERICA,

RESPONDENTS

On Petition for Review of an Order of the

Department of Agriculture

Stephen P. McCarron argued the cause and filed the briefs

for petitioners Coosemans Specialties, Inc. and Eddy C. Creces.

Martin Schulman argued the cause for petitioner Daniel F.

Coosemans.

Stephen M. Reilly, Attorney, U.S. Department of

Agriculture, argued the cause for respondents. With him on the

briefs were James Michael Kelly, Deputy General Counsel, and

Margaret M. Breinholt, Assistant General Counsel.

Before: SENTELLE, RANDOLPH and BROWN, Circuit Judges.
2

Opinion for the Court filed by Circuit Judge SENTELLE.

SENTELLE, Circuit Judge: Wholesale produce merchant

Coosemans Specialties, Inc., petitions for review of a decision

by the Secretary of the Department of Agriculture to revoke the

company’s license for violations of the Perishable Agricultural

Commodities Act. The Secretary concluded that the company

violated the Act’s prohibition on unfair conduct when one of its

employees bribed a Department of Agriculture inspector. In

addition to revoking the company’s license, the Secretary also

barred two principals of the company from employment in the

industry. The company and the individuals seek review of the

Secretary’s decision, contending that bribery does not violate the

Act, and that the employment restrictions were unlawful.

Because we conclude that the agency’s actions were proper, we

deny the petitions for review.

I.

The Perishable Agricultural Commodities Act, 7 U.S.C. §§

499a - 499s (“PACA” or the “Act”), was enacted in 1930 to

regulate interstate and foreign commerce in fresh fruits and

vegetables. The Act authorizes the agency to create a system for

inspecting produce. Id. § 499n(a). It requires merchants to

obtain licenses from the Secretary of the Department of

Agriculture (“USDA” or “Secretary”), and subjects licensees to

a number of requirements. Id. §§ 499b, 499c(a), 499e, 499i.

Licensees who violate the Act may find their licenses suspended

or revoked, and individuals affiliated with violators may be

excluded from industry employment. Id. § 499h. 

Petitioner Coosemans Specialties, Inc. (“CSI” or the

“Company”), is a New York produce wholesaler whose PACA

license was originally issued in 1986. The Company operates

out of Hunts Point Terminal, a wholesale produce market in the
3

Bronx, New York. At all times relevant to this matter, CSI had

three principals, all of whom were part owners: Daniel F.

Coosemans, president and founder; Eddy C. Creces, secretary,

treasurer, and general manager; and Joe Faraci, vice president.

The perishable produce that arrives at Hunts Point often

travels some distance between the supplier and a buyer, such as

CSI. As a result, produce may arrive in a condition worse than

expected. If the buyer then asks for a price reduction, the

producer is at a disadvantage, because it has no way of knowing

whether to trust the buyer’s representations about the condition

of the produce. The USDA’s inspection process is intended to

level the playing field by providing the faraway producer with

an independent evaluation of the produce’s condition so he can

be assured that the price he receives is fair. A buyer, upon

receipt of nonconforming goods, may request an inspection. An

agency inspector reviews the produce and issues an official

certificate assessing its condition that can help the producer and

buyer renegotiate the price. After their transaction is complete,

however, the inspection certificate is of little use in subsequent

transactions. If the initial buyer is a wholesaler like CSI, it sells

the produce to another buyer who is typically able to personally

inspect the produce at Hunts Point. 

This inspection system has been subject to abuse. For two

decades, corrupt USDA inspectors and buyers at Hunts Point

participated in a scheme of illegal payments. An inspector who

received a bribe might furnish a falsified certificate indicating

that the produce’s condition was worse than it actually was. The

buyer would use that certificate to negotiate a lower price with

the supplier. Once he paid the supplier, the buyer could resell

the produce for a price that reflected the produce’s actual

condition. In this way, a buyer who bribed inspectors for this

purpose could increase his profit margin to the detriment of the

supplier. Additionally, some inspectors who had accepted
4

bribes permitted those companies to jump to the front of the line

for inspections, thereby delaying the inspections of their

competitors. Produce being perishable, buyers who had to wait

for inspections were likely to receive lower prices when the

goods were eventually resold. 

In 1999, one of the Hunts Point inspectors, William Cashin,

was caught taking bribes. After his arrest, he agreed to

cooperate with investigators. He conducted inspections from

April until August 1999 while wearing audio and/or video

recording devices to document the bribes he received. During

this period, he reported that he received fourteen bribes from Joe

Faraci – CSI’s vice president – both to hasten inspections and to

falsify the resulting certificates in CSI’s favor. Faraci was

charged with eight counts of bribery of a public official,

subsequently pled guilty to one count, and was imprisoned and

fined. In light of these events, the Secretary filed a complaint

against CSI on August 16, 2002, alleging that the Company,

through Faraci’s actions, had violated the implied duty clause of

PACA’s unfair practices provision. The Secretary also filed

complaints against Eddy Creces and Daniel Coosemans

individually, alleging that they were responsibly connected to

CSI at the time the violations occurred. 

The Company and both individuals denied the allegations

and sought agency review. The cases were consolidated and

heard in late 2003 before an Administrative Law Judge, who

concluded that the Company’s license should be revoked and

that Creces and Coosemans, as “responsibly connected” persons,

should be subject to the employment restrictions. The parties

appealed to the Judicial Officer (“JO”), to whom the Secretary

has delegated final authority in adjudicative proceedings. See 7

C.F.R. § 2.35. The JO affirmed the ALJ’s initial decision in a

decision and order issued April 20, 2006, finding in particular

that in exchange for Faraci’s bribes, Cashin would “falsify”
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USDA inspection certificates by, inter alia, “increasing the

percentage of defects” and “changing the temperatures of the

load.” In re Coosemans Specialties, Inc., Dkt. No. D-02-0024,

2006 WL 1135512 (USDA). On June 13, 2006, CSI and the

individual petitioners filed petitions before this Court seeking

review of the Secretary’s decision. CSI disputes the Secretary’s

interpretation of PACA’s “implied duty” clause as

encompassing a duty not to pay bribes. The individual

petitioners challenge the Secretary’s determination that they

were subject to the employment restrictions as persons

“responsibly connected” to CSI. The decision and order of the

JO was stayed pending our ruling. 

II.

A.

When reviewing an interpretation of a statute by an agency

charged with the administration of that statute, we apply the

two-step Chevron framework. Chevron U.S.A. Inc. v. Natural

Resources Defense Council, Inc., 467 U.S. 837 (1984). If the

meaning of the statute is unambiguous, we must give effect to

the clear congressional intent. Id. at 842-43. If, however, the

statutory language is ambiguous, we will uphold the agency’s

interpretation as long as it is not “arbitrary, capricious, or

manifestly contrary to the statute.” Id. at 844. The USDA is

entrusted to administer PACA, and therefore its interpretations

are entitled to deference under Chevron. See id.

The Secretary’s basis for revoking CSI’s license is that the

Company, through Faraci, violated the implied duty clause of

PACA. That provision reads, in relevant part: 

It shall be unlawful in or in connection with any

transaction in interstate or foreign commerce . . . [f]or
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any commission merchant, dealer, or broker to make, for

a fraudulent purpose, any false or misleading statement

in connection with any transaction . . . or to fail or

refuse truly and correctly to account and make full

payment promptly in respect of any transaction . . . 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; or to fail to maintain the trust as required

under section 499e(c) of this title. . . . 

7 U.S.C. § 499b(4) (emphasis added). 

CSI argues that the implied duty clause cannot fairly be

read to include a duty not to bribe USDA inspectors. To do so

runs contrary to a number of principles of statutory

interpretation. We disagree. Initially, we note that Congress’s

language in this subsection is extremely broad. The word “any”

appears no fewer than three times in the specific clause at issue,

modifying the words “undertaking,” “transaction” and “duty.”

Id. The breadth and ambiguity of the key phrase as well – “any

specification or duty, express or implied” – contemplates a wide

range of behavior. See G&T Terminal Packaging Co. v. Dep’t

of Agric., 468 F.3d 86, 96 (2d Cir. 2006) (“G&T”); cf. Duties of

Licensees, 7 C.F.R. § 46.26 (noting that, because it is

“impracticable to specify in detail all of the duties,” conduct

specified in the regulations is not exhaustive). Implied duties,

by their nature, would not be spelled out in a contract or

otherwise; they are given meaning by agency gap-filling. See

JSG Trading Corp. v. Dep’t of Agric., 235 F.3d 608, 614 n.8

(D.C. Cir. 2001) (“JSG Trading II”) (“Given the substantial

ambiguity in § 499b(4), it is the Department’s function, not ours,

to define offenses under that provision.”), quoted in G&T, 468

F.3d at 96 (noting that, since the “statutory language plainly

leaves undelineated what implied duties and specifications a
7

PACA licensee might be required to bear,” it is the “province of

the Secretary . . . to fill in these gaps”). This is especially true

if the term may be better fleshed out through application of the

law to specific cases and their facts, rather than by drafting an

exhaustive list of all hypothetical conduct that would constitute

a violation. See INS v. Aguirre-Aguirre, 526 U.S. 415, 425

(1999) (noting that an agency should be accorded Chevron

deference “as it gives ambiguous statutory terms concrete

meaning through a process of case-by-case adjudication”

(internal quotation omitted)); cf. G&T, 468 F.3d at 97 (noting

that “the expansiveness” of the implied duty clause “suggests

that Congress intended to grant the Secretary broad leeway to

address the infinite variety of facts and circumstances that might

surround a PACA violation”). In light of these considerations,

we conclude that the implied duty clause is ambiguous.

We turn next to step two of Chevron, in which we consider

whether the agency’s construction is unreasonable. See

Chevron, 467 U.S. at 842-45; 5 U.S.C. § 706(2)(A). The section

in which the implied duty clause appears is labeled “unfair

conduct,” and begins with the language “It shall be unlawful in

or in connection with any transaction in interstate or foreign

commerce . . . .” 7 U.S.C. § 499b. The section goes on to

address specific types of dishonest or irresponsible conduct,

such as failing to fulfill contract terms or misrepresenting

material facts to another party. Id. § 499b(1)-(3), (5)-(7). The

paragraph containing the implied duty clause also prohibits

misrepresentations, late payments and failures to comply with

other provisions of the Act designed to ensure financial

responsibility of licensees. Id. § 499b(4). Petitioners argue that,

since the paragraph and section deal with conduct between two

parties to a particular transaction, the implied duty clause does

not reach conduct relating to a third party, such as an inspector.

Therefore, they argue, CSI’s conduct toward an inspector – not

another merchant – cannot form the basis for a violation of the
8

implied duty clause or any other part of the unfair practices

provision. 

We and other circuits have upheld the Secretary’s

construction of the implied duty clause as including a

prohibition on commercial bribery. In those cases, one party to

a transaction violates a duty to the other party when it secretly

bribes the latter’s agents. Commonly, a seller bribes employees

of a buyer in order to ensure that the buyer remains a customer

of the seller. See, e.g., JSG Trading II, 235 F.3d at 610-11

(affirming the Secretary’s description of “a duty of produce

sellers not to corrupt agents and employees of their buyers”);

JSG Trading Corp. v. Dep’t of Agric., 176 F.3d 536, 543 (D.C.

Cir. 1999) (“JSG Trading I”) (affirming a construction of the

implied duty clause to include commercial bribery); Sid

Goodman & Co. v. Dep’t of Agric., 945 F.2d 398 (4th Cir. 1991)

(per curiam) (unpublished table decision), available in 1991 WL

193489, at *3 (accepting as reasonable the Secretary’s

construction of the clause as imposing an “implied duty to deal

fairly with other members in the industry,” and that such duty is

violated by commercial bribery); cf. G&T, 468 F.3d at 97

(noting that, in light of the statutory purposes, “we can hardly

conceive of a duty more clearly implicated than the obligation

of recipients not to make side-payments to these inspectors”).

Although these cases arise under statutory law rather than

the common law of contracts, the principle of contract law that

requires parties to engage in honest dealing appears to have

influenced how the statute was interpreted. For example, in JSG

Trading I, we emphasized the JO’s finding in Goodman that the

payments were made without the knowledge of the employers,

echoing a key factor in the mistake of fact doctrine. 176 F.3d at

542. In Goodman itself, the Fourth Circuit stated that the duty

extended to one’s competitors, even though they were not

involved in the transactions at issue. 1991 WL 193489, at *4.
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The bribes were a violation of the Act because each licensee has

“an implied duty to deal fairly with its competitors and by

paying kickbacks, Goodman’s competitors were held at an

unfair advantage.” Id.; see also JSG Trading I, 176 F.3d at 545

(discussing, in the context of the implied duty clause, whether

the “marketplace is disturbed”); In re Tipco, Inc., 953 F.2d 639

(4th Cir. 1992) (per curiam) (unpublished table decision),

available in 1992 WL 14586, at *2 (describing the duty

breached by commercial bribery as, in the JO’s words, a “duty

of fair dealing”). 

The principle of honest dealing is also apparent in cases

arising under the common law of contracts. For example, in

Koam Produce, Inc. v. DiMare Homestead, Inc., 329 F.3d 123,

127 (2d Cir. 2003), the court reviewed the Secretary’s reparation

award to a party who was overcharged as a result of falsified

inspection certificates that the other party had obtained by

bribery. The court affirmed the award on the basis of the

doctrine of mistake, holding that the seller’s reliance on the

integrity of USDA inspections constituted a mistake of fact that

adversely affected it. It noted that the mistake resulted from the

informational advantage the buyer enjoyed over the seller, and

that the buyer was at fault for not informing the seller of that

information. Id. at 128; cf. Produce Place v. Dep’t of Agric., 91

F.3d 173, 177 (D.C. Cir. 1996) (holding that the false or

misleading statement clause in § 499b(4) was violated when the

buyer knowingly misrepresented the condition of the produce to

the seller). These cases are consistent with the commercial

bribery cases in concluding that one party breaches its duty of

honest dealing when it seeks to benefit from concealing its

illegal conduct that affected the contract price.

We similarly conclude that the Secretary’s decision to

construe the “implied duty” clause as imposing a duty to engage

in honest dealing – which includes a duty not to bribe USDA
10

inspectors – is reasonable. It is consistent with the purposes of

the Act as understood by many courts over the years: to protect

producers and other merchants from dishonest and irresponsible

conduct. See, e.g., JSG Trading I, 176 F.3d at 538; G&T, 468

F.3d at 97; Chidsey v. Geurin, 443 F.2d 584, 587 (6th Cir.

1971); Rankin Sales Co. v. Morrie H. Morgan Co., 296 F.2d

113, 116-17 (9th Cir. 1961). The Company’s attempt to obtain

speedier and more favorable inspections gave it an advantage

over its sellers, who were improperly led to believe the

inspections reflected accurate, independent analyses. We see no

reason why merchants’ duties under § 499b(4) should be limited

to cases in which the unlawful conduct is visited directly upon

the other party, rather than upon a third party who has some

ability to affect the transaction. The statutory language does not

limit the applicability of § 499b(4) to conduct in a transaction;

rather, it extends to conduct “in connection with” a transaction.

We hold that the agency’s interpretation of the “implied duty”

clause is reasonable. 

B.

As a result of its conclusion that CSI violated PACA, the

Secretary revoked the Company’s license. Petitioners advance

a number of arguments why this sanction was unlawful.

Generally speaking, this Court will not overturn an agency’s

choice of sanction unless it is “unwarranted in law” or “without

justification in fact.” See Norinsberg Corp. v. Dep’t of Agric.,

47 F.3d 1224, 1227-28 (D.C. Cir. 1995) (citing Butz v. Glover

Livestock Comm’n Co., 411 U.S. 182, 185-86 (1973)). As this

Court recently noted, “[w]e will not lightly disturb the

Department’s choice of remedy under a statute committed to its

enforcement, especially given the Department’s superior

knowledge of the industry PACA regulates.” JSG Trading II,

235 F.3d at 617. 
11

When the Secretary determines that a licensee “has violated

any of the provisions of section 499b,” “the Secretary may . . .

by order, suspend the license of such offender for a period not

to exceed ninety days, except that, if the violation is flagrant or

repeated, the Secretary may, by order, revoke the license of the

offender.” 7 U.S.C. § 499h(a). If, as here, the violative conduct

can be sanctioned in a number of different ways under the

statute, the USDA may choose the appropriate sanction by

“examining the nature of the violations in relation to the

remedial purposes of the regulatory statute involved, along with

all relevant circumstances, always giving appropriate weight to

the recommendations of the administrative officials charged

with the responsibility for achieving the congressional purpose.”

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

(1991). 

In reviewing these factors, the USDA noted that bribery

undermines PACA’s remedial purpose of, inter alia, ensuring

responsible and honest dealing by merchants. CSI argues that

the agency failed to consider the mitigating circumstance of

widespread extortion by USDA agents that existed for many

years. The agency did acknowledge, however, that the

corruption at Hunts Point was a serious problem that the agency

had been battling unsuccessfully for some time. Nonetheless, it

concluded that bribery was such an egregious violation of the

Act that severe penalties were warranted in order to deter such

conduct. CSI’s conduct not only gave it a competitive

advantage, but it also increased the pressure on other merchants

to engage in bribery to remain competitive. Even though the

agency did not expressly describe the effect of the mitigating

circumstances on its decision, its discussion of the

circumstances that did impact its decision was sufficient to

explain why the corruption among its inspectors did not warrant

a lesser sanction. Cf. Frank Tambone, Inc. v. Dep’t of Agric., 50

F.3d 52, 56 (D.C. Cir. 1995) (upholding a sanction based on a
12

decision and order that did not expressly mention the mitigating

factors because the JO “adequately explained why [those

factors] were insufficient to exonerate the company or to render

the imposition of any sanction inappropriate”). The Secretary’s

decision thus rested on a reasonable construction of the statute

and was consistent with its sanction policy. We have no basis

on which to disturb its choice of sanction.

C.

CSI argues that, even if revocation were appropriate, the

Secretary was required to give notice before imposing the

sanction. The Administrative Procedure Act, 5 U.S.C. § 558(c)

(“APA”), provides that, “[e]xcept in cases of willfulness,” a

license may not be revoked unless the licensee has been given

written notice and an “opportunity to demonstrate or achieve

compliance.” Id. In this context, “an action is willful if a

prohibited act is done intentionally, irrespective of evil intent, or

done with careless disregard of statutory requirements.” Finer

Foods Sales Co. v. Block, 708 F.2d 774, 778 (D.C. Cir. 1983).

The Secretary concluded that the willfulness exception applied

because Faraci’s conduct constituted a willful violation of

PACA. We agree. Even though Faraci pled guilty to one count,

the record indicates that he repeatedly made these payments

over several months. The indictment to which he pled guilty

states that he “willfully” and “knowingly” committed the act

“with intent to influence official acts.” Faraci admitted that

when he made the payments he knew it was unlawful to do so.

We have already held that the unlawful acts constituted a

violation of PACA, and prior cases put CSI on notice of that

fact. Cf. JSG Trading II, 235 F.3d at 617 (concluding that the

Secretary’s revocation of a PACA license in commercial bribery

cases provided “ample notice that commercial bribes may result

in revocation”). We thus hold that the Secretary’s conclusion

that the willfulness exception applied was supported by
13

substantial evidence that Faraci acted with at least careless

disregard of the implied duty clause. APA notice, therefore, was

not necessary. 

D.

The individual petitioners challenge the Secretary’s

determination that they were “responsibly connected” to CSI at

the time of the violations. This determination means that

Coosemans and Creces cannot, for a period of time, affiliate in

any way “with the business operations of a licensee, with or

without compensation, including ownership or selfemployment” without first obtaining permission from the

Secretary. 7 U.S.C. §§ 499a(10), 499h(b). “Responsibly

connected” persons include those who are “affiliated or

connected with a commission merchant, dealer, or broker as . . .

officer, director, or holder of more than 10 per centum of the

outstanding stock of a corporation.” Id. § 499a(9). Here, both

Coosemans and Creces were 33.3% owners at the beginning of

the period relevant to this matter, and became 45.5% owners in

July 1999. Each is also an officer, Coosemans as president and

Creces as secretary and treasurer. 

Although Coosemans and Creces meet the definition of

“responsibly connected” persons, a 1995 amendment to the

statute permits an individual who is found to be responsibly

connected to demonstrate that he is “not responsible for the

specific violation.” H.R. REP. NO. 104-207, at 11 (1995), as

reprinted in 1995 U.S.C.C.A.N. 453, 458. That amendment

qualified the definition of “responsibly connected” by stating

that:

A person shall not be deemed to be responsibly connected

if the person demonstrates by a preponderance of the

evidence that the person was not actively involved in the
14

activities resulting in a violation of this chapter and that the

person either was only nominally a partner, officer, director,

or shareholder of a violating licensee or entity subject to

license or was not an owner of a violating licensee or entity

subject to license which was the alter ego of its owners.

7 U.S.C. § 499a(b)(9).

Even before Congress added this provision to the statute,

this Court recognized an alter ego exception to the “responsibly

connected” determination that is identical to PACA’s current

provision. See Norinsberg v. Dep’t of Agric., 162 F.3d 1194,

1199 (D.C. Cir. 1998). We held that the “alter ego” exception

applied to “cases in which the violator, although formally a

corporation, is essentially an alter ego of its owners, so

dominated as to negate its separate personality.” Id. at 1197

(internal quotation omitted). A petitioner who was not a true

owner of such a corporation would be spared the consequences

of the responsibly connected determination. The amendment

enacted as section 499a(b)(9) codifies this exception. This

provision is plainly not applicable here because there is no claim

that CSI is an alter ego rather than a formal corporation.

Petitioners are required to “demonstrate[] by a preponderance of

the evidence” that they fit within the nominal or alter ego

exceptions. 7 U.S.C. § 499a(b)(9). As the Secretary reasonably

concluded, petitioners have failed to meet this burden. We

therefore affirm the Secretary’s determination that Coosemans

and Creces were responsibly connected to CSI and subject to the

employment restrictions. 

Despite petitioners’ arguments to the contrary, we can find

no other reason why subjecting petitioners to the employment

restrictions is contrary to congressional intent. The use of

absolute language in § 499h(b) describing the scope of the

employment restrictions, the broad definition of employment to
15

include “any affiliation,” and the inclusion of a specific

exception for persons who make a certain showing – all militate

against judicially created exceptions. Id. § 499a(b)(10)

(emphasis added); cf. Siegel v. Lyng, 851 F.2d 412, 415-16 (D.C.

Cir. 1988) (relying on the first two factors, before the provision

was amended in 1995, in declining to create an exception for

non-PACA job descriptions).

III. Conclusion

We conclude that the agency’s interpretation of the

“implied duty” clause as prohibiting bribery of a USDA

inspector is reasonable, and that the “responsibly connected”

determination is not arbitrary, capricious or contrary to law. We

thus deny the petitions for review.

So ordered.