Source: https://law.justia.com/cases/federal/appellate-courts/F3/211/93/582583/
Timestamp: 2018-09-24 19:03:41
Document Index: 585672200

Matched Legal Cases: ['§ 723', '§ 1314', '§ 1314', '§ 6912', '§ 11', '§ 11', '§ 11', '§ 723', '§ 1314', '§ 1314', '§ 1314', '§ 1314']

Gold Dollar Warehouse, Incorporated; Growers Tobacco Warehouse, Incorporated; Big Brick Tobacco Warehouse, Incorporated, Plaintiffs-appellants, v. Daniel Glickman, in His Official Capacity As Secretary, United States Department of Agriculture; Samuel J. Coley, in His Official Capacity As North Carolina State Executive Director of Farm Service Agency, Defendants-appellees.gold Dollar Warehouse, Incorporated; Growers Tobacco Warehouse, Incorporated; Big Brick Tobacco Warehouse, Incorporated, Plaintiffs-appellees, v. Daniel Glickman, in His Official Capacity As Secretary, United States Department of Agriculture; Samuel J. Coley, in His Official Capacity As North Carolina State Executive Director of Farm Service Agency, Defendants-appellants, 211 F.3d 93 (4th Cir. 2000) :: Justia
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Gold Dollar Warehouse, Incorporated; Growers Tobacco Warehouse, Incorporated; Big Brick Tobacco Warehouse, Incorporated, Plaintiffs-appellants, v. Daniel Glickman, in His Official Capacity As Secretary, United States Department of Agriculture; Samuel J. Coley, in His Official Capacity As North Carolina State Executive Director of Farm Service Agency, Defendants-appellees.gold Dollar Warehouse, Incorporated; Growers Tobacco Warehouse, Incorporated; Big Brick Tobacco Warehouse, Incorporated, Plaintiffs-appellees, v. Daniel Glickman, in His Official Capacity As Secretary, United States Department of Agriculture; Samuel J. Coley, in His Official Capacity As North Carolina State Executive Director of Farm Service Agency, Defendants-appellants, 211 F.3d 93 (4th Cir. 2000)
US Court of Appeals for the Fourth Circuit - 211 F.3d 93 (4th Cir. 2000)
Argued: November 30, 1999. Decided: April 13, 2000
There are three primary players in the sale of tobacco -producers, dealers, and warehouses. Producers can auction their"producer tobacco" to dealers through auction on warehouse floors or through non-auction sales to dealers, and all of their sales are required by the USDA to be recorded on producer "cards," which indicate the amount of the producer's quota that has been sold. Once the producer tobacco has been sold by some means to a dealer, it becomes"resale tobacco" and can either be sold from dealer to dealer or through auction on a warehouse floor. Dealers also maintain dealer cards to record their purchases and sales so that the USDA can verify that they have not sold more than they recorded that they purchased. By 1992, the USDA extended liability for unpaid TMQ penalties to" [a] dealer or warehouse operator who permits [a person who owes TMQ penalties] to use such dealer's or warehouse operator's identification card to market tobacco." 7 C.F.R. § 723.311(d) (2).
The warehouses frame the issues before the court, in terms that bespeak the quintessential as applied challenge to agency regulations, as whether the USDA exceeded its authority by promulgating regulations that impose penalties on warehouses "even though (a) the warehouses properly complied with all of their regulatory obligations and went above and beyond their duties to avoid selling excess tobacco; [and] (b) the USDA's own negligent supervision of the tobacco market contributed to the loss of the funds the USDA now seeks to recover . . . ." Appellants' Br. at 1 ("Statement of Issues"). Although they so frame the issues presented for review, the warehouses proceed to spend the lion's share of their brief arguing, as apparently they did before the district court, that the relevant USDA regulations exceed the scope of the agency's authority under 7 U.S.C.§ 1314 because they permit the USDA to assess penalties against warehouses for their sale of excess resale tobacco from dealers, whereas, they contend, section 1314 permits the assessment of penalties against the warehouses only for the purchase of excess tobacco directly from the producers. See, e.g., id. at 3-22 (arguing that the warehouses' challenge to the regulations depends on the "fact" that penalties were assessed for the warehouses' sale of resale tobacco from the dealer); see also J.A. 234 (district court op.) (observing that "plaintiffs contend Congress intended that [TMQ] penalties be assessed against warehouses only when warehouses purchased tobacco from producers"). So seemingly evident is it from this portion of their brief that this is the warehouses' principal argument -even though it was advanced in the warehouses' "Statement of the Facts" and "Statement of Regulatory Background" -that the United States responds almost exclusively to this argument in its Brief in Response. In the "Argument" section of their brief, however, the warehouses argue instead (and only) that the regulations exceed the scope of section 1314 not because they permit the imposition of penalties for the sale of resale tobacco, but, rather, because they impose direct and personal liability for TMQ penalties upon warehouses, whereas, the warehouses contend, the statute provides only that the warehouses shall collect the TMQ penalties from those persons who owe them. See, e.g., Appellants' Br. at 25 ("By adding regulations . . . that expanded the warehouses' liability for the TMQ penalties beyond mere collection responsibility, the government seeks to collect money from warehouses that it otherwise cannot under 7 U.S.C. § 1314(a)."); id. at 27 (" [The statute] does not put personal liability for the TMQ Penalty, beyond mere collection responsibility, on the warehouse . . . .").
The confusion sown by the warehouses' submissions was only compounded by their oral argument before the court. Before us, the warehouses led with the argument that the USDA could not impose personal liability on them, but, rather, was limited to enforcement of the warehouses' statutory obligation to collect the TMQ penalties from those persons responsible for their payment-the argument that they had devoted comparatively little time briefing. In midstream, however, they shifted to the argument that the USDA could not penalize the warehouses for tobacco bought from dealers (i.e., resale tobacco), counsel for the warehouses declaring at one point, for example, that " [t]his is all resale tobacco. The case is not about anything else but resale tobacco." At other times, the warehouses appeared to combine the two arguments. Thus, when asked whether the statute ever permits the USDA to assess penalties against warehouses, counsel responded that " [i]f they are the people who are marketing the tobacco for the producer, then it is their duty to collect the marketing penalty." And, as the argument progressed, the warehouses even appeared on occasion to contradict their own arguments. When asked by the court, for example, whether they were contending that the USDA was without any authority to levy a penalty against warehouses, counsel for the warehouses replied " [n]o, we are not contending that," a disclaimer that would seem to represent an abandonment of their collection argument. And, in rebuttal, in response to yet other questions, counsel stated that " [they were] not saying that the regulations do not reach resale tobacco," a statement that would seem to represent an abandonment of their argument that the regulations exceed the scope of the statute because they permit imposition of a penalty for the sale of resale tobacco.
7 U.S.C. § 6912(e) (emphasis added). USDA regulations in turn define when the agency's administrative appeal procedures are available. The regulations permit program participants to contest "adverse decisions" made by the USDA within the National Appeals Division of the agency. 7 C.F.R. § 11.3(a). However, the regulations make clear, " [t]he procedures . . . may not be used to seek review of statutes or USDA regulations issued under Federal Law." 7 C.F.R. § 11.3(b).
The district court held that, because the warehouses were challenging "the department's authority to issue the regulations," the warehouses could not avail themselves of the agency appeal procedures under 7 C.F.R. § 11.3(b). Therefore, the court rejected the government's claim that the warehouses were required to exhaust administrative remedies. J.A. 228-31 (district court op.). Although the district court separately identified the two claims that we have ascribed to the warehouses when it addressed the merits of the warehouses' claims, see id. at 231-32 ("Plaintiffs seek a declaratory judgment that the USDA has no statutory authority to assess marketing penalties against them because [the statute] provides that only tobacco producers, and not warehouse operators, are liable for such penalties."); id. at 234 (" [P]laintiffs contend Congress intended that such penalties be assessed against warehouses only when warehouses purchased tobacco from producers."), the district court did not distinguish between these two claims for purposes of its exhaustion analysis. In failing to consider separately whether each of these individual claims required exhaustion, we believe that the district court erred. Upon consideration of these claims separately, we conclude that one requires exhaustion and one does not.
The challenged regulations do not distinguish resale tobacco from producer tobacco. See 7 C.F.R. § 723.311(d) (2) ("A dealer or warehouse operator who permits an indebted person [, one who owes TMQ penalties on excess tobacco,] to use such dealer's or warehouse operator's identification card to market tobacco shall be liable for the amounts due by the indebted person to the United States under this part up to the amount of the value of the tobacco so. . . ."). However, the warehouses' regulatory challenge contests the reach of the regulations to resale tobacco. As part of that challenge, the warehouses necessarily contend that they were engaged only in the sale of excess resale tobacco. The USDA, in contrast, contends that the warehouses were assessed penalties for engaging in the sale of excess producer tobacco. See J.A. 35-37, 49-51 (" [The warehouses' scheme] effectively amounted to a first marketing of the producer tobacco on the floor of the warehouse . . . ."); Appellees' Br. at 11-12 ("Agriculture could prove in the administrative proceedings that the knowing warehousemen stepped into the shoes of those persons liable for the TMQ penalties . . . or that the tobacco was truly marketed through the warehouse . . . ."); see also id. at 26 ("If the warehouse is used as the conduit for the sale at auction of what is in reality"producer" or first-sale excess tobacco, the warehouse can and must be held responsible . . . .").
The warehouses' claim that they are facially challenging the USDA regulations and not the agency's adverse regulatory application of the regulations, see Appellants' Reply Br. at 3, is, upon close examination, belied by the warehouses' own briefs and arguments. First, the warehouses devote the opening twenty-two pages of their initial brief to establishing their version of the "facts," namely, that, contrary to the assertions of the USDA, the warehouses were not in collusion to sell producer tobacco, but rather went to great lengths to verify that they were transacting business with legitimate dealers. See Appellants' Br. at 3-22; id. at 5 ("Plaintiff warehouses properly followed all the tobacco regulations, . . . and did not knowingly sell any excess tobacco."). They maintain that, in fact, they were dealing in resale tobacco and therefore could not even have been expected to know that the tobacco was excess tobacco. See id. at 7 ("The USDA's allegations focus only on the auction sale and Producer Tobacco, and ignore both the non-auction sale and Resale Tobacco. These omissions give the incorrect impression that the issues in this case revolve around auction sales of Producer Tobacco and the alleged failure of the warehouses to abide by the auction-sale regulations. The crucial issues here concern dealers' non-auction purchases of Producer Tobacco and their subsequent resales of the tobacco." (emphasis added)); id. at 22 (" [T]he TMQ penalties at issue in the USDA's actions against plaintiffs result from dealer resales of excess tobacco at auction." (emphasis added)). And, the warehouses allege that there were no safeguards put in place by the agency to enable them to know that they were reselling excess tobacco, and that if anyone is to blame, it is the agency itself because of its laxity in tracking excess tobacco. See id. at 10 ("In this case, the USDA failed to properly monitor . . . non auction entrance [into the market], and this failure, along with its failure to monitor non-auction resales . . . contributed to the lost TMQ penalties it now seeks to improperly recover from the warehouses."); id. at 14 ("By failing to examine the records in a timely manner, the USDA is largely responsible for the lost TMQ penalties that it now seeks to recover from plaintiff warehouses."). These "facts" are necessary for the warehouses' argument that the USDA exceeded its authority when it extended liability for TMQ penalties to innocent warehouses for the sale of resale tobacco.
Indeed, in contesting the district court's dismissal, the warehouses even acknowledge that there are genuine issues of material fact, or disputed facts, in this case. See, e.g., Appellants' Br. at 34 (" [Our] affidavits show that there are genuine issues of material fact in dispute . . . ."); id. (" [The warehouses] state that each inspected all required paperwork and never conspired with anyone else to sell excess tobacco -contrary to the unsupported assertions of the USDA."); id. ("The facts that could determine whether plaintiffs are liable for the TMQ Penalties are therefore in dispute."). Given the indisputable evidence of the warehouses' underlying factual challenge to the adverse decision by the USDA to enforce penalties against them, we are persuaded that the warehouses' appeal within the agency must be completed before the federal courts can address any residual challenge that the USDA regulations are invalid to the extent that they permit the imposition of penalties on warehouses for the sale of resale tobacco.
As observed above, the warehouses are anything but clear in their articulation of their collection claim. Although the warehouses do not even attempt to anchor their argument in any particular statutory language, presumably they believe that the provision in the statute for what, in effect, is almost a right of indemnification -" [the warehouseman] may deduct an amount equivalent to the penalty from the price paid to the producer," 7 U.S.C. § 1314(a) -negates the personal liability that otherwise is provided for on the face of the statute -"such penalty shall be paid by such warehouseman," id. (emphasis added).
As it did in its exhaustion discussion, the district court addressed the warehouses' claims on the merits together in a single undifferentiated discussion, treating the claims as one challenge to the USDA's regulatory authority. Therefore, it is difficult for us to discern on which bases the district court rejected the warehouses' resale claim and on which it rejected the collection claim (assuming that the two were not rejected on the same bases). For example, the district court held that the regulations were "reasonably related" to 7 U.S.C. § 1314, and that the USDA's only means of collecting the unpaid TMQ penalties at this point is to collect the penalties from the warehouses. J.A. 234-36 (citing Mourning v. Family Publications Servs., 411 U.S. 356, 369 (1973) (" [T]he validity of a regulation promulgated [under enabling legislation] will be sustained so long as it is `reasonably related to the purpose of the enabling legislation.'" (citation omitted))). This reasoning could be the basis for rejection of either of the warehouse' claims -that regulations that both reach resale tobacco and impose personal liability on the warehouses are reasonably related to the statute and are necessary for the USDA to collect the unpaid penalties.
Although this "reasonably related" analysis may provide a reason for why the USDA can impose personal liability on warehouses for unpaid TMQ penalties, we believe the warehouses' collection claim can be rejected for a much simpler reason -the statute on its face requires warehouses to pay the penalties, at least when the tobacco is marketed by the producer through a warehouse.4 See 7 U.S.C. § 1314(a) (" [I]f the tobacco is marketed by the producer through a warehouseman . . ., such penalty shall be paid by such warehouseman . . . ." (emphasis added)). Given the novelty of this collection theory -that the privilege of indemnification essentially operates to negate altogether the personal liability expressly imposed in the statute -we are not surprised that the warehouses cite no authority in support of this theory. We are satisfied by a reading of plain language of the statute that Congress did not intend for us to read the statute's optional deduction language ("may deduct"), which follows the mandatory liability language ("shall be paid"), even as a condition precedent to the warehouses' obligation to pay the penalties, much less as a complete elimination of the mandatory payment obligation that appears on the face of the statute.
In yet another proffered argument under the collection theory, the warehouses contend that the presence of a statutory provision permitting the USDA to fine warehouses for filing false reports necessarily precludes the USDA from assessing penalties against warehouses for the unreported sale of excess tobacco. See id. at 30-32. This argument, in addition to lacking logical coherence on its face, also ignores the statutory language that makes express the reach of TMQ penalties to warehouses. See 7 U.S.C. § 1314(a) (" [The TMQ] penalty shall be paid by such warehouseman . . . .").