Opinion ID: 184858
Heading Depth: 2
Heading Rank: 3

Heading: The Commercial Bribery Standard Applied in This Case

Text: 39 JSG argues that the agency in the instant case departed from the precedent established in Goodman and Tipco by applying a per se test for commercial bribery. The agency concedes that the Judicial Officer applied a per se test, which deems illegal any payment above a de minimis level from a produce dealer to a purchasing agent, regardless of whether there is any secrecy or intent to induce. Indeed, agency counsel stated at oral argument that [t]here is no way of characterizing [the test employed by the Judicial Officer] any other way. Tr. of Oral Argument at 18. Agency counsel also conceded that, because he was employing a per se test, the Judicial Officer did not make explicit findings with respect to secrecy or intent to induce. See id. at 18, 19, 36. In fact, the Judicial Officer specifically found that Mr. Gentile's employer was aware of at least one of Mr. Goodman's gifts. See, e.g., Judicial Officer Decision at 33, reprinted in J.A. 95 (finding that Mr. Beni was aware that Mr. Goodman had given Mr. Gentile a good deal on the boat). The agency argues, however, that the Judicial Officer's use of the per se test was permissible under prior agency precedent. We disagree. It is clear here that the Judicial Officer adhered to a new definition of commercial bribery that finds no support in the case law; it is also clear that he offered no justification whatsoever either for his re-definition of commercial bribery or for the necessity of a per se test in this or any other case. 40 The Judicial Officer did purport to follow Goodman and Tipco. See, e.g., Judicial Officer Decision at 90, reprinted in J.A. 155 ([T]he legal standard for bribery, in violation of section 2(4) of the PACA ... is established by Goodman and Tipco....). Nevertheless, the Judicial Officer never once, in his entire 96-page opinion, cited the actual definition of commercial bribery that was quoted in Goodman and employed by the agency in both Goodman and Tipco. Instead, the Judicial Officer cited the following dicta from the Judicial Officer's opinion in Tipco: 41 Included within [the obligations of a PACA licensee] is the positive duty to refrain from corrupting an employee of a person with whom [the licensee] is dealing, e.g., each PACA licensee is obligated to avoid offering a payment to a customer's employee to encourage the employee to purchase produce from it on behalf of his employer. On the other hand, if the employee seeks a payment from the licensee, the licensee is affirmatively obligated to report that request to its customer, could only make payments with the customer's permission, and, even then, would risk violating PACA with anything more than a de minimis payment (e.g., more than a pen, calendar or lighter). 42 Judicial Officer Decision at 28, reprinted in J.A. 90 (quoting Tipco, 50 Agric. Dec. at 882-83, 1991 WL 295153, at  9). On the basis of that dicta--which, at most, establishes a risk of a PACA violation--the Judicial Officer reached the following conclusion with respect to the record in the instant case: 43 As in Goodman and Tipco, JSG was obligated to refrain from making payments to Mr. Gentile and Mr. Lomoriello since such payments would encourage Mr. Gentile and Mr. Lomoriello to purchase tomatoes from JSG. JSG could only make such payments with its customers' permission. Even if it received permission, JSG should not have made more than de minimis payments to Mr. Gentile and Mr. Lomoriello. The payments [made by JSG to Messrs. Gentile and Lomoriello] were more than de minimis. Therefore, these payments constitute commercial bribery, in violation of section 2(4) of the PACA. 44 Id. at 28-29, reprinted in J.A. 90-91 (brackets in original). This conclusion blatantly ignores the legal test of commercial bribery established and applied in Goodman and Tipco, applying instead a per se rule that was never even contemplated in the prior cases. 45 Under the Judicial Officer's per se test, produce dealers are guilty of commercial bribery when they transfer items of value to purchasing agents, even if the agents' employers are fully aware of the gifts, and even if the dealers have no intent to induce the agents to buy from them. For example, Mr. Goodman claimed that he gave the Rolex watch to Mr. Gentile essentially as a gesture of friendship, and to celebrate Mr. Gentile's recovery from cancer. The Judicial Officer held that [a]lthough Mr. Goodman said he was motivated by his friendship with Mr. Gentile, the [act of] bestowing such an expensive present upon Mr. Gentile at the time that JSG was selling large quantities of tomatoes to L&P ... was unlawful. Id. at 35, reprinted in J.A. 97 (brackets in original); see also Reconsideration Order at 17, reprinted in J.A. 174 (Mr. Goodman's alleged personal relationship with Mr. Gentile does not obviate the requirement that JSG refrain from making gifts of substantial value to Mr. Gentile[,] who was working for one of JSG's customers.). Under this theory, as agency counsel conceded at oral argument, see Tr. of Oral Argument at 27-31, it would have been illegal for Mr. Goodman to give the owner of L&P a Rolex watch, or even for Mr. Goodman to take the owner of L&P out to lunch. These are far-fetched notions of commercial bribery, at least under established law. We have been unable to find any precedent, in any context, that defines commercial bribery as here suggested, and agency counsel cited none. 46 Putting aside for the moment the question whether the Judicial Officer adequately justified his creation of this rather novel theory of commercial bribery, it is quite clear that this per se test deviates dramatically from the standard test for commercial bribery that was actually employed in Goodman and Tipco. For example, under the test cited in Goodman, the gift of the watch would not have been illegal unless there had been specific findings that Mr. Gentile's employer was not aware of the gift, and that Mr. Goodman intended to induce Mr. Gentile to purchase from JSG. Likewise, Mr. Goodman would hardly be guilty of commercial bribery under the traditional definition if he had taken the owner of L&P out to lunch, even if the purpose of the lunch was for Mr. Goodman to extoll the virtues of his product. 47 Although the agency was not strictly bound to follow the test for commercial bribery applied in prior cases, it was obligated to articulate a principled rationale for departing from that test. See Gilbert v. NLRB, 56 F.3d 1438, 1445 (D.C.Cir.1995) (It is, of course, elementary that an agency must conform to its prior decisions or explain the reason for its departure from such precedent.); Greater Boston Television Corp. v. FCC, 444 F.2d 841, 852 (D.C.Cir.1970) ([A]n agency changing its course must supply a reasoned analysis indicating that prior policies and standards are being deliberately changed, not casually ignored, and if an agency glosses over or swerves from prior precedents without discussion it may cross the line from the tolerably terse to the intolerably mute.) (footnote omitted). We find that the agency manifestly failed to explain its abrupt departure from prior precedent. We therefore are constrained to remand this case to the agency. 48 The agency may be able to provide a justification for applying a different and lesser standard for commercial bribery under § 2(4) than that cited in Goodman. Given the broad language of § 2(4), the agency is not necessarily bound by traditional statutory definitions of commercial bribery. Nonetheless, some justification for a lesser standard is necessary, for there is certainly no immediately apparent, or intuitive, rationale for a per se rule that does not require a finding of secrecy or intent to induce. Indeed, traditionally it is precisely the secrecy and intent to induce elements that are thought to transform otherwise innocent gifts into pernicious bribes that destroy marketplace competition. See 2 Rudolph Callman, THE LAW OF UNFAIR COMPETITION TRADEMARKS AND MONOPOLIES § 12.01, at 1 n.0.50 (4th ed.1996 & Supp.1999) (When the fact that the seller is paying a commission to the buyer's purchasing agent is revealed to the buyer, there is no commercial bribery.); id. § 12.01, at 8-9 (The consideration paid by the briber may involve such pecuniary benefits as cash payments, commissions and loans, or such nonpecuniary pleasures as dinner and entertainment (e.g., theatre tickets), and trips. In any case, the true test is the intent or purpose of the offeror: Is the consideration given to influence the agent and cause him to subordinate his bargaining function and judgment?) (footnote omitted); Franklin A. Gevurtz, Commercial Bribery and the Sherman Act: The Case for Per Se Illegality, 42 U. MIAMI L.REV. 365, 370-71 (1987) (Businesses may (and usually do) provide gratuities, entertainment, campaign contributions, and the like in the hope of disposing the recipient favorably toward them. There must be more than this, however, to constitute a bribe. An agreement must exist between the payor and the recipient that there will be a quid pro quo.). Even the PACA official who testified on behalf of the agency at the hearing conceded that a gift exchanged between old friends who happened to be in a seller-buyer relationship was unlikely to run afoul of PACA. See J.A. 249-50 (testimony of Bruce Summers, Senior Market Specialist in the Trade Practices Section of the USDA's PACA Branch). 49 Even assuming that Mr. Goodman's gifts to Mr. Gentile were made not out of pure friendship, but rather in an effort to curry favor with Mr. Gentile, it is not immediately obvious how the marketplace is disturbed--or how Mr. Goodman is violating any implied duty under PACA--if Mr. Gentile's employer is aware of the gifts, and there is no specific quid pro quo agreement between Mr. Goodman and Mr. Gentile. Cf. United States v. Sun-Diamond Growers of California, --- U.S. ----, ----, 119 S.Ct. 1402, 1406, --- L.Ed.2d ----, ---- (1999) (explaining that the intent to influence element of the federal bribery of public officials statute, 18 U.S.C. § 201(b)(1), (2), means that for bribery there must be a quid pro quo--a specific intent to give or receive something of value in exchange for an official act). In other words, without a finding of secrecy and intent to induce, there appears to be nothing to distinguish an illegal bribe from a simple promotional gift. Cf. id. at 1407 (criticizing as peculiar a reading of the federal gratuity statute, 18 U.S.C. § 201(c)(1)(A), (B), that would criminalize, for example, token gifts to the President ... such as the replica jerseys given by championship sports teams each year during ceremonial White House visits [or] ... a high school principal's gift of a school baseball cap to the Secretary of Education ... on the occasion of the latter's visit to the school) (citation omitted). At oral argument, agency counsel acknowledged that it is, of course, not illegal for a seller to reduce his or her prices in an effort to induce purchases. But agency counsel admitted that, under the agency's per se standard, it would be illegal for the seller, rather than lowering prices, to instead take the owner of a purchasing entity out to dinner in an effort to promote his or her product. See Tr. of Oral Argument at 29, 31. There is no basis in the record or in the explanations offered by the agency for treating the latter transaction as illegal if the former is legal. 50 Indeed, Congress appeared to recognize the legality of promotional efforts when it passed the 1995 amendment to PACA, which allows the good faith ... payment ... of collateral fees and expenses, which are defined as any promotional allowances, rebates, service or materials fees paid or provided, directly or indirectly, in connection with the distribution or marketing of any perishable agricultural commodity. 7 U.S.C. §§ 499a(b)(13), 499b(4). Several of the gifts given to Mr. Gentile by Mr. Goodman arguably could be considered promotional allowances made in good faith (i.e., not in secret), and in connection with the marketing of JSG's product. The Judicial Officer summarily dismissed this suggestion, asserting in a conclusory manner that the payments were not promotional devices. See Judicial Officer Decision at 76, reprinted in J.A. 138. But no reasoning is offered to support this conclusion. Agency counsel suggested at oral argument that the amendment was intended only to cover trivial promotional devices, such as sales banners provided by wholesale dealers to retail outlets. See Tr. of Oral Argument at 33. Counsel was unable, however, to cite to any legislative history to support that interpretation, and the agency has never proffered it in any previous adjudication. Such a limited interpretation of the 1995 amendment may be entitled to deference under Chevron, but the agency has yet to advance a coherent theory to support it. 51 On remand, the agency must explain its justification, if it has one, for employing a per se test for commercial bribery, and it must do so in conjunction with the 1995 amendment to PACA. The agency is free, of course, to abandon the per se approach, and apply the traditional commercial bribery test employed in Goodman and Tipco. In any event, the agency must make factual findings that are precisely connected to the standard employed. Although the Judicial Officer alluded to record evidence that might support findings of both secrecy and intent to induce--particularly with respect to the payments to Mr. Lomoriello, see, e.g., Judicial Officer Decision at 54-61, reprinted in J.A. 116-23--even agency counsel concedes that the Judicial Officer did not follow a traditional commercial bribery test and made no explicit findings that were tied to such a test. 52 This court, of course, cannot sift through the record evidence to find support for the result reached by the agency, see Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 50, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983) (It is well established that an agency's action must be upheld, if at all, on the basis articulated by the agency itself.), nor can we affirm an agency's final order on the assumption that the agency might reach the same result upon remand, see FEC v. Akins, 524 U.S. 11, 118 S.Ct. 1777, 1786, 141 L.Ed.2d 10 (1998) (If a reviewing court agrees that the agency misinterpreted the law, it will set aside the agency's action and remand the case--even though the agency (like a new jury after a mistrial) might later, in the exercise of its lawful discretion, reach the same result for a different reason.). Accordingly, we offer no view on the appropriate disposition of this case; the matters at issue here must be addressed by the agency in the first instance on remand of this case. Appropriate findings and conclusions by the agency may be made on the existing record or on a supplemented version of the existing record, as is deemed appropriate.