The opinion
United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 9, 2000 Decided August 3, 2001
No. 99-1505
Kirby Produce Company, Inc.,
Petitioner
v.
United States Department of Agriculture and
United States of America,
Respondents
On Petition for Review of an Order of the
United States Department of Agriculture
Paul T. Gentile argued the cause for petitioner. With him
on the briefs was Kevin P. Claffey.
Stephen M. Reilly, Attorney, U.S. Department of Agricul-
ture, argued the cause for respondents. With him on the
brief were James Michael Kelly, Associate General Counsel,
U.S. Department of Agriculture, and Margaret M. Breinholt,
Acting Assistant General Counsel.
Before: Williams and Garland, Circuit Judges, and
Silberman, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge Garland.
Garland, Circuit Judge: Kirby Produce Company, Inc.
petitions for review of an order of the Department of Agricul-
ture, which revoked its license as a merchant of perishable
agricultural products for not promptly paying for fruit and
vegetable shipments, in violation of the Perishable Agricultur-
al Commodities Act (PACA), 7 U.S.C. s 499a et seq. The
Agriculture Department revoked Kirby's license without a
hearing, concluding that there was no dispute of material fact
warranting a hearing. Because the grounds upon which the
Department made that conclusion were arbitrary and capri-
cious, we grant the petition and remand for further proceed-
ings.
I
PACA regulates "the shipment of perishable agricultural
commodities in interstate and foreign commerce through a
system of licensing and administrative supervision of the
conduct of licensees." Quinn v. Butz, 510 F.2d 743, 746 (D.C.
Cir. 1975). Every "commission merchant" of such commodi-
ties must be licensed by the Secretary of Agriculture. See 7
U.S.C. s 499c.1 PACA licensees are forbidden to engage in
specified unfair practices, including the failure to "make full
payment promptly in respect of any transaction" in a perisha-
ble agricultural commodity. 7 U.S.C. s 499b(4). "Full,
prompt payment" means payment within ten days after the
date the produce is accepted, unless otherwise agreed to in
writing before the time of sale. 7 C.F.R. s 46.2(aa)(5), (11).
If the Secretary determines that a licensee has violated the
prompt payment requirement, the Secretary may suspend the
offender's PACA license, and, if the violation was flagrant or
repeated, may revoke it. 7 U.S.C. s 499h(a).
__________
1 A "commission merchant" is "any person engaged in the
business of receiving in interstate or foreign commerce any perisha-
ble agricultural commodity for sale, on commission, or for or on
behalf of another." 7 U.S.C. s 499a(5).
Although the Secretary is statutorily authorized to revoke a
license for flagrant violations, Department of Agriculture
policy during the relevant time period permitted a licensee to
avoid revocation by making full payment prior to the date set
for a hearing on the violations. Such payment would convert
a "no-pay" case into a "slow-pay" case, and would result in
license suspension rather than revocation. See In re Kirby
Produce Co., 58 Agric. Dec. 1011 (1999) (citing In re Gilardi
Truck & Transp., 43 Agric. Dec. 118 (1984)).2
In March 1996, various creditors, including PACA credi-
tors, filed suit against Kirby in the United States District
Court for the Eastern District of Tennessee, seeking payment
for produce debts worth $2.3 million. In June 1996, the
district court issued an order, consented to by all parties, that
established a payment arrangement and claims procedure.
The order did not require payment by a date certain. See
Brown's Produce v. Kirby Produce Co., No. 3:96-cv-526
(E.D. Tenn. June 25, 1996).
On October 20, 1997, the Agriculture Department's Agricul-
tural Marketing Service (the "Service") filed an administra-
tive complaint, charging Kirby with violating PACA by failing
promptly to make full payment for approximately $1.6 million
in fruits and vegetables from August 1995 through July 1996.
The complaint sought revocation of Kirby's license for willful,
flagrant, and repeated violations. Kirby's amended answer
denied the complaint's material allegations, and the Service
requested a hearing. The Administrative Law Judge (ALJ)
scheduled one for January 13, 1999.
On November 10, 1998, Kirby's attorney filed a motion with
the ALJ, seeking an adjournment of the hearing until Kirby
paid its judgment creditors pursuant to the June 1996 order
in the Brown case. The motion advised the ALJ of the
Brown order and attached a copy. It also noted that "the
payment of all produce debt prior to the hearing substantially
__________
2 The Department has since changed its standard for no-pay
cases. For all complaints filed after January 25, 1999, a case is
deemed no-pay if the alleged debts remain unpaid by the earlier of:
(a) the hearing date, or (b) 120 days after the filing of the complaint.
See In re Scamcorp, Inc., 57 Agric. Dec. 527, 562 n.13 (1998).
reduces the potential sanction which may be imposed upon
the Respondent," and concluded that "[f]ailure to grant this
motion for adjournment will frustrate the order ... and
prejudice Respondent's position at the time of the hearing."
App. at 20.
Shortly thereafter, the Agricultural Marketing Service filed
a motion with the ALJ, seeking a decision on its complaint
without a hearing. The Service contended that Kirby's con-
sent to the Brown order constituted an admission of all
material facts in the complaint. It argued that this admis-
sion, coupled with Kirby's apparent inability to pay prior to
the hearing date, justified a decision without a hearing.
Kirby objected on the grounds that the Brown order was an
admission of nonpayment only as of June 1996, and that it
still had the right to demonstrate full payment before the
January 1999 hearing date.
On December 31, 1998, the ALJ canceled the hearing and
revoked Kirby's license, concluding that Kirby's motion and
attachments had admitted "all the material allegations of fact
contained in the complaint." On May 28, 1999, Kirby appeal-
ed to the Agriculture Department's Judicial Officer, to whom
the Secretary has delegated authority for final decisionmak-
ing in adjudicatory proceedings. See 7 C.F.R. s 2.35. Kirby
contended, inter alia, that it had in fact made full payment by
January 13, 1999, the date for which the hearing had been
scheduled. Notwithstanding that it had violated PACA by
failing to pay promptly, Kirby argued that its full payment by
the date of the hearing converted the case into a slow-pay
case for which revocation was unwarranted.
The Judicial Officer issued his decision on July 12, 1999.
He began by "agree[ing] with Respondent's contention that if
Respondent paid all of its produce sellers by the date of the
hearing, this case would be a 'slow-pay' case," and Kirby
would suffer suspension rather than revocation. In re Kirby
Produce Co., 58 Agric. Dec. at 1011. However, instead of
adjudicating whether Kirby had in fact paid by January 13,
1999, the Officer determined that Kirby's consent to the
Brown order constituted an admission that it had failed to
pay promptly, and that Kirby's motion for a continuance of
the hearing constituted an admission that the company would
not be able to pay by the hearing date. The Judicial Officer
concluded that these admissions eliminated any issue of mate-
rial fact and justified revocation of Kirby's license without a
hearing. Thereafter, Kirby sought reconsideration, which the
Judicial Officer denied. Kirby now petitions for review of the
order revoking its license. See 28 U.S.C. s 2342(2).
II
We review final decisions in PACA cases under the defer-
ential standard of the Administrative Procedure Act, 5 U.S.C.
s 706(2)(A), (E). Under that standard, we must "uphold the
Judicial Officer's decision unless we find it to be arbitrary,
capricious, an abuse of discretion, not in accordance with law,
or unsupported by substantial evidence." JSG Trading Corp.
v. USDA, 176 F.3d 536, 541 (D.C. Cir. 1999).
Kirby concedes that it failed promptly to pay creditors for
its PACA debts. But the company contends that it was able
to pay in full--and in fact did pay in full--by the January 13,
1999 scheduled hearing date, and it denies that its November
10, 1998 motion was an admission to the contrary. Accord-
ingly, Kirby argues that there was an issue of material fact as
to its qualification for slow-pay status, and that the Depart-
ment's decision to revoke its license without a hearing was
arbitrary and capricious.
PACA states that upon issuing a PACA complaint, the
Secretary shall "afford [the respondent] an opportunity for a
hearing thereon before a duly authorized examiner of the
Secretary." 7 U.S.C. s 499f(c)(2). Although a hearing is not
required if there is no genuine factual dispute, see Veg-Mix,
Inc. v. USDA, 832 F.2d 601, 607-08 (D.C. Cir. 1987), the
Agriculture Department's regulations require a hearing "[i]f
any material issue of fact is joined by the pleadings." 7
C.F.R. s 1.141(b). In its briefs and at oral argument, the
Department conceded that if there had been an issue of
material fact regarding Kirby's ability to pay by the sched-
uled hearing date, revocation without a hearing would have
been improper.
The Judicial Officer based his conclusion that there was no
material dispute on two grounds. The first was that Kirby's
consent to the Brown order constituted an admission that the
company had not promptly paid its PACA creditors. That
point is correct and undisputed, but it is also plainly insuffi-
cient to eliminate dispute as to whether Kirby could have
made full payment by January 13, 1999.
The Officer's second ground was that Kirby's November 10,
1998 motion for an indefinite adjournment constituted an
admission that the company would not be able to pay by
January 13 of the following year. The Judicial Officer did not
explain why it regarded Kirby's motion as an admission.
Indeed, the Judicial Officer reached that conclusion without
adjudicating Kirby's claim that it had in fact made full
payment by January 13, and despite acknowledging that if
Kirby actually had paid by that date, revocation could have
been avoided. See In re Kirby Produce Co., 58 Agric. Dec. at
1011.
Kirby's motion for adjournment stated: "[T]he payment of
all produce debt prior to the hearing substantially reduces the
potential sanction.... Failure to grant this motion for ad-
journment will ... prejudice Respondent's position at the
time of the hearing." App. at 20 (emphasis added). At oral
argument, the Agriculture Department asserted that the
term "prejudice" referred to Kirby's classification as a no-pay
violator and that, by using the verb "will" rather than "could,"
Kirby implicitly admitted that its PACA debts could not
possibly be paid by the time of the hearing. But under
Agriculture Department precedent, an implicit or equivocal
admission is insufficient to remove a fact from material
dispute. See In re H. Schnell & Co., 57 Agric. Dec. 1722
(1998) (holding that before a hearing may be dispensed with,
oral statements of a respondent's attorney "must clearly
constitute an admission of the material allegations of the
complaint") (emphasis added). That rule is especially apt in
this circumstance. Litigants that move to extend deadlines
often lament the harm likely to result if their motions are
denied. To construe such a statement as admitting default,
however, confuses prediction of risk with confession of impos-
sibility. Kirby clearly intended to emphasize the risk that its
payments could not be made before January 13, but it was
not reasonable to infer that Kirby intended to admit that non-
payment was certain.
The Judicial Officer's unadorned statement, that Kirby's
request for a continuance of the hearing "constitutes an
admission" that Kirby would not be able to make full payment
by the date of the hearing, did not represent analysis; it
merely expressed a conclusion. Such a conclusion was partic-
ularly unreasonable in light of Kirby's protestations that it
had intended no such admission. And it was doubly so in
light of the Judicial Officer's refusal to determine whether
Kirby had in fact paid by January 13, after the Officer
acknowledged that if Kirby had actually met that deadline,
revocation could have been avoided. See In re Kirby Produce
Co., 58 Agric. Dec. at 1011. Indeed, in his decision denying
reconsideration, the Judicial Officer only added to the arbi-
trariness of his reasoning. There, in the face of Kirby's
representation that full payment had been made prior to
January 13, 1999, and again without determining whether
that representation was correct, the Judicial Officer ruled
that Kirby's "admission" that it "would not be able to" pay
removed any issue of material fact as to whether it actually
did pay by that date. In re Kirby Produce Co., 58 Agric.
Dec. 1032 (1999).
At oral argument, the Department offered to provide this
court with an inspector's affidavit attesting that, as of October
31, 2000, Kirby still had not paid $1.1 million of its PACA
debt. After argument, Kirby submitted a declaration by its
chief executive officer, made under penalty of perjury, that
the company had in fact paid in full prior to January 13, 1999.
Although both statements obviously cannot be true, it is just
as clear that this court is not the proper authority to make
the necessary factual determination. That is a task for the
agency upon remand. See Veg-Mix, Inc., 832 F.2d at 609.
III
In revoking Kirby's license without a hearing, the Judicial
Officer relied upon his conclusion that the company had
admitted that it could not make payment by the date that had
been scheduled for that hearing. That conclusion was arbi-
trary and capricious. We therefore grant Kirby's petition for
review and remand the case for further proceedings consis-
tent with this opinion.