Opinion ID: 476814
Heading Depth: 1
Heading Rank: 4

Heading: responsible connection

Text: 11 Petitioners would extract from our earlier decisions a right to challenge broadly the statutory conclusion that a ten-percent or larger stockholder is responsibly connected. Our holdings, on the contrary, offer only a narrow opportunity, which petitioners have already been afforded, to contest the operation of the statute in this respect. 12 The standard applicable was enunciated a decade ago in our decision in Quinn v. Butz. 32 Quinn was an employee of Devita Fruit Company for eight years of its existence as a sole proprietorship, and at his employer's request upon eventual incorporation of the company became its vice-president nominally in order that it might meet a requirement of state law. 33 Later, the company was found to have repeatedly and flagrantly violated the Act. The Secretary, denying Quinn a hearing and refusing to consider his proffer of evidence that the company was a corporation only fictionally and that he was vice-president only nominally, found him to be responsibly connected. 34 We held that the Act's provisions on responsible connection established, not an incontrovertible rule, but rather a rebuttable presumption subject to override by evidence. 35 We accordingly remanded the case to the Secretary with instructions to afford Quinn the opportunity to show that Devita Fruit Company was not a corporation within the meaning of the Act and that he was not an officer in any real sense of the word. 36 We expressly acknowledged, however, that had Quinn been a genuine rather than purely nominal officer of a true rather than a fictional corporation, he would have been responsibly connected. 37 13 Similarly, Minotto v. Department of Agriculture 38 concerned a clerical employee who, like Quinn, was made a nominal director at her corporate employer's request and for its convenience. 39 While Minotto had been afforded the hearing denied in Quinn, we rejected an administrative holding that she was responsibly connected, noting that [t]he finding that an individual was 'responsibly connected' must be based upon evidence of an actual, significant nexus with the violating company. 40 Like Quinn, Minotto emphasized that its conclusion depended upon the determination that Minotto's status as a director was only nominal. 41 14 We face a vastly different situation here. Unlike Quinn and Minotto, both petitioners clearly have an actual, significant nexus with the violating company, 42 and thus fall within one of the statutory categories of responsibly connected persons. Both hold 22.2 percent of the stock of Tomatoes, Inc.; unlike Quinn and Minotto, neither was enticed or coerced by an employer into the position that renders him responsibly connected. 43 Absent inveiglement of that sort, 15 [s]urely[ ] the relationships of director, officer or substantial shareholder form a sufficient nexus for the arbitrary conclusion of responsible connection. Moreover, the formation of such relationships with the sanctioned company is a voluntary act. The fact that an individual has not exercised real authority in the sanctioned company is not controlling: certainly the individual could have resigned as an officer and director and disposed of his stock. It was his free choice not to do so. Having made that choice, the appellant[s] assumed the burdens imposed by the Act. 44 16 And each petitioner has had the opportunity--denied in Quinn --to demonstrate that somehow he does not belong in any of the statutory categories of responsible connection, 45 and neither has done so. Since petitioners have properly been found to be bona fide holders of more than ten percent of the stock of Tomatoes, Inc., the conclusion that they were reasonably connected with that corporation must stand. 46 17 The orders finding petitioners to be responsibly connected with Tomatoes, Inc., and therefore subject to the sanctions of the Act, are accordingly 18 Affirmed.