Court Opinion

ID: 904157
Source: CourtListenerOpinion
Date Created: 2013-06-21 18:33:43.747288+00
Date Added: 2024-06-11T09:09:01.236858
License: Public Domain

Case: 12-60816       Document: 00512281959         Page: 1     Date Filed: 06/20/2013

           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                    Fifth Circuit

                                                                            FILED
                                                                           June 20, 2013

                                     No. 12-60816                          Lyle W. Cayce
                                   Summary Calendar                             Clerk

MEZA SIERRA ENTERPRISES, INCORPORATED,

                                                  Petitioner
v.

DEPARTMENT OF AGRICULTURE,

                                                  Respondent

                            Petition for Review of an Order
                           of the Department of Agriculture
                                       D-10-0250

Before REAVLEY, JOLLY, and DAVIS, Circuit Judges.
PER CURIAM:*
       Respondent Secretary of Agriculture (“the Secretary”) moved to revoke the
perishable commodities merchant license of Petitioner Meza Sierra Enterprises,
Inc. (“Meza Sierra”) for its willful, flagrant, and repeated failure to pay for
perishable agricultural commodities purchased in interstate commerce. The
Administrative Law Judge (“ALJ”) found that it possessed subject matter
jurisdiction to adjudicate the dispute and that it was proper for it to take official

       *
         Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
    Case: 12-60816      Document: 00512281959        Page: 2    Date Filed: 06/20/2013

                                     No. 12-60816

notice of the facts found in a parallel Texas state court proceeding, and
accordingly revoked Meza Sierra’s license. Finding no error, we DENY the
petition for review.
                                           I.
      This appeal stems from the alleged failure of Meza Sierra to pay Kingdom
Fresh Produce, Inc. (“Kingdom Fresh”) $215,385 for tomatoes it purchased and
received between November 2008 and January 2009.
      Meza Sierra is a Texas corporation licensed by the Department of
Agriculture to participate in the wholesale market for perishable agricultural
commodities under the Perishable Agricultural Commodities Act (“PACA”). 7
U.S.C. §§ 499a-499s. From November to December of 2008, Meza Sierra placed
a series of orders—twelve lots in total—for tomatoes from Kingdom Fresh, which
Kingdom Fresh successfully delivered in accordance with the terms of the orders.
Kingdom Fresh, however, alleged that Meza Sierra never paid for any of the
delivered lots and filed suit against Meza Sierra for breach of contract in Texas
state court. The Deputy Administrator,1 acting on behalf of the Secretary, also
filed an administrative complaint alleging that Meza Sierra failed to pay
Kingdom Fresh for the twelve lots of tomatoes in violation of 7 U.S.C. § 499b(4).2
Under the authority of 7 U.S.C. § 499h(a), the Deputy Administrator petitioned
the ALJ to permanently revoke Meza Sierra’s license for its flagrant and
repeated PACA violations.

      1
          Deputy Administrator, Fruit and Vegetable Programs, Agricultural Marketing
Service, United States Department of Agriculture
      2
       The Deputy Administrator also alleged Meza Sierra failed to pay a separate grower,
Grand Produce LTD Co. The ALJ ultimately dismissed the claim pertaining to Grand Produce
LTD Co. with prejudice.

                                           2
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                                        No. 12-60816

       In lieu of a hearing, the ALJ took official notice of records from the suit
between Meza Sierra and Kingdom Fresh in Texas state court.3 From these
records, the ALJ determined that (a) the tomatoes at issue in the Texas state
court proceeding were the same tomatoes at issue in the Deputy Administrator’s
complaint, (b) the Texas state court suit was fully litigated, and (c) Meza Sierra
had in fact failed to pay Kingdom Fresh the agreed purchase price of $215,385
for the twelve lots of tomatoes it received. The ALJ ruled that Meza Sierra’s
failure to pay Kingdom Fresh constituted repeated and flagrant violations of 7
U.S.C. § 499b(4) and ordered the permanent revocation of Meza Sierra’s PACA
license. Meza Sierra appealed this ruling to the Secretary. The Judicial Officer
(“JO”), acting on behalf of the Secretary, affirmed the ALJ’s order revoking Meza
Sierra’s license.4 The JO rejected Meza Sierra’s claims that the ALJ lacked
jurisdiction to adjudicate this case and that the ALJ improperly took official
notice of the proceedings in Texas state court. Meza Sierra now petitions this
court to review that judgment.
                                              II.
       Our review of the Department of Agriculture’s decision under PACA is
limited to the question of whether it was “arbitrary, capricious, or an abuse of
discretion.” Faour v. U.S. Dep’t of Agric., 985 F.2d 217, 219 (5th Cir. 1993)(citing
5 U.S.C. § 706(2)(A)). We will also uphold an agency’s interpretation of its own
regulations unless it is “plainly erroneous or inconsistent with the regulation.”
Auer v. Robbins, 519 U.S. 452, 461 (1997) (quoting Robertson v. Methow Valley
Citizens Council, 490 U.S. 332, 359 (1989)).
                                              III.

       3
           Cause No. C-1990-09A in the District Court, 92nd Judicial District, Hidalgo County.
       4
         The JO vacated the ALJ’s alternative sanction, which ordered the publication of the
events surrounding Meza Sierra’s PACA violation, because the Deputy Administrator did not
seek this sanction in its complaint.

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                                    No. 12-60816
                                         A.
        Meza Sierra first argues that the ALJ lacked jurisdiction to adjudicate this
case because the Department of Agriculture’s Rules of Practice Governing
Formal Adjudicatory Proceedings (“Rules of Practice”) were inapplicable to the
Deputy Administrator’s complaint. See 7 C.F.R. §§ 1.130-1.151.
        The Rules of Practice comprise the procedural rules governing an
adjudicative proceeding instituted by the Secretary and include the rules of
procedure before an ALJ. Id. According to § 1.131(a) of the Rules of Practice,
however, the rules only apply to a PACA adjudicatory proceeding if the Deputy
Administrator brings the proceeding under the following exclusive list of
statutes: 7 U.S.C. §§ 499a(b)(9), 499c(c), 499d(d), 499f(c), 499h(a), 499h(b),
499h(c), 499h(e), 499i, and 499m(a). Meza Sierra contends that because the only
provision of PACA which it allegedly violated, § 499b(4), is not listed in §
1.131(a) of the Rules of Practice, the Rules of Practice are inapplicable to this
case.
        This argument ignores the structure of PACA’s administrative
enforcement scheme. As the Deputy Administrator’s complaint makes clear, it
is moving to revoke Meza Sierra’s license “pursuant to section 8(a) of the PACA
(7 U.S.C. § 499h(a)),” a statute which § 1.131(a) of the Rules of Practice explicitly
enumerates and under which a violation of § 499b is an element. Section
499h(a) provides in pertinent part,
        Whenever . . . the Secretary determines, as provided in section 499f
        of this title, that any commission merchant, dealer, or broker has
        violated any of the provisions of section 499b of this title . . . the
        Secretary may . . . by order, revoke the license of the offender.
7 U.S.C. § 499h(a).
        A violation of § 499b is thus a prerequisite to license revocation under §
499h(a). However, if the ALJ were not empowered to adjudicate violations of §
499b, then it could never revoke a license under § 499h(a). We decline to adopt

                                          4
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                                       No. 12-60816
an interpretation of the Rules of Practice that would render one of its provisions
void.5 The Deputy Administrator’s complaint asserts that Meza Sierra violated
§ 499b(4) by failing to pay Kingdom Fresh for twelve lots of tomatoes,6 and
unambiguously petitions the ALJ to revoke Meza Sierra’s PACA license for its
violations pursuant to § 499h(a). Because § 1.131(a) of the Rules of Practice
identifies § 499h(a) in its list of applicable statutes, the Rules of Practice apply
to this case.
       Meza Sierra in turn submits that the Deputy Administrator’s reliance on
§499h(a) was premature. Specifically, Meza Sierra argues that § 499h(a) only
grants the ALJ the power to revoke a license after there has been a separate
administrative determination that a person has violated § 499b. Thus, Meza
Sierra contends that invoking § 499h(a) in the initial complaint effectively
presumed a § 499b determination which had not yet occurred.
       This argument, though artful, misconstrues the wording of the statute.
Section 499h(a) states only that “Whenever . . . the Secretary determines . . .
that any commission merchant, dealer, or broker has violated any of the
provisions of section 499b . . . , the Secretary may, by order, revoke the license
of the offender.” Nothing in this language supports a requirement that there
must be some separate ALJ or administrative determination of § 499b liability
before the Secretary can file a formal complaint to revoke a merchant’s PACA
license. While a finding of § 499b liability is a prerequisite to final revocation of

       5
         See Corley v. United States, 556 U.S. 303, 315 (2009) (finding that “one of the most
basic interpretive canons [is] that a statute should be construed so that effect is given to all
its provisions, so that no part will be inoperative or superfluous, void or insignificant.”
(internal quotation marks omitted)).
       6
          Section 499b(4) makes it illegal to “fail or refuse truly and correctly to account and
make full payment promptly in respect of any transaction in any such commodity to the person
with whom such transaction is had.” 7 U.S.C. § 499b(4). Under 7 C.F.R. §46.2(aa)(11), a buyer
fails to make “full payment promptly” if it has not paid the grower within the time indicated
by a written agreement between the parties.

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                                         No. 12-60816
a license under § 499h(a), it is not a prerequisite to the mere institution of
license revocation proceedings. The ALJ’s decision to revoke Meza Sierra’s
license under § 499h(a) was therefore proper.7
                                                B.
       Meza Sierra next argues that the ALJ improperly took official notice of
documents from the state court suit before the Texas District Court, 92nd
Judicial District, and the Court of Appeals, 13th District of Texas. Those
documents establish that Kingdom Fresh obtained a judgment for the purchase
price of $215,385 for tomatoes which Meza Sierra had purchased but failed to
pay Kingdom Fresh. Meza Sierra alleges, however, that there has not been a
final judgment in this suit and consequently it was improper for the ALJ to take
official notice of any documents stemming from the suit.8
       Meza Sierra’s contention hinges on what it alleges to be a post-judgment
order issued by the Texas state court vacating its judgment against Meza Sierra.

       7
          Meza Sierra also argues that the Secretary failed to make its determination in
accordance with § 499f, as required by § 499h(a), because Kingdom Fresh as the injured party
never filed a formal complaint. However, § 499f requires the injured third party to file a
complaint within nine months only if the injured party wants to initiate a reparation
proceeding, i.e., file a federal PACA claim to compel the delinquent party to pay for the
delivered agriculture goods. See 7 U.S.C. § 499f(a)(1) (“Any person complaining of any violation
of any provision of section 499b of this title . . . at any time within nine months after the cause
of action accrues [may petition the Secretary to file a complaint].”) (emphasis added); Finer
Foods Sales Co. v. Block, 708 F.2d 774, 780–81 (D.C. Cir. 1983) (concluding that 7 U.S.C. §499f
does not require the injured party to file a complaint unless it chooses to initiate reparation
proceedings). But this is not a reparation proceeding because Kingdom Fresh sought pecuniary
relief in state court and the Secretary seeks here only to revoke Meza Sierra’s PACA license.
See also Melvin Beene Produce Co. v. Agric. Mktg. Serv., 728 F.2d 347, 349 (6th Cir. 1984)(“We
find that the nine-month limit applies only to reparations actions . . . not disciplinary actions
by the Secretary.”).
       8
        An ALJ may take official notice of “such matters as are judicially noticed by the courts
of the United States and of any matter of technical, scientific, or commercial fact of established
character.” 7 C.F.R.§ 1.141(h)(6). Meza Sierra does not contest whether § 1.141(h)(6) provided
the ALJ with sufficient authority to take official notice of records from a state court
proceeding.

                                                6
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                                    No. 12-60816
Responding to Meza Sierra’s Motion to Reconsider the court’s summary
judgment in favor of Kingdom Fresh, the court issued an order on May 18, 2010,
which, due to handwritten alterations to the order, appeared to simultaneously
both grant and deny the Motion to Reconsider. Meza Sierra has interpreted this
conflicting order as an abatement of the summary judgment that rendered all
subsequent decisions in Texas state court a legal nullity.
          The full record belies this contention. On April 19, 2010, the 92nd Texas
Judicial District issued a Final Summary Judgment in favor of Kingdom Fresh.
Though the same court’s May 18, 2010 ruling on Meza Sierra’s Motion to
Reconsider the summary judgment was indeed ambiguous, a May 28, 2010 order
clarified the May 18 ruling by unequivocally denying reconsideration of the
summary judgment. Though Meza Sierra moved to vacate the May 28, 2010
order, the court denied the motion on September 15, 2010, ruling that the May
28, 2010 motion should remain in full effect. Meza Sierra appealed the summary
judgment, but the Texas court of appeals dismissed the appeal for untimely
filing.
          Both the May 28, 2010 order and the September 15, 2010 order confirm
that the ambiguous May 18, 2010 order denied, rather than granted, Meza
Sierra’s motion to reconsider the summary judgment. With the trial court’s
rulings unanimously in favor of Kingdom Fresh, the Texas appellate court’s
denial of Meza Sierra’s appeal means that the Texas state court suit of which the
ALJ took notice was fully litigated and therefore the ALJ’s official notice of facts
in those proceedings was proper.
                                         IV.
          For the reasons more fully set forth above, the petition for review is
DENIED.

                                          7