Kleiman & Hochberg, Inc. v. United States Department of Agriculture

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 13, 2007 Decided August 14, 2007

No. 06-1283

KLEIMAN & HOCHBERG, INC., ET AL.,

PETITIONERS

v.

UNITED STATES DEPARTMENT OF AGRICULTURE,

RESPONDENT

On Petition for Review of an Order of the

Department of Agriculture

Mark C. H. Mandell argued the cause and filed the briefs

for petitioners.

Leslie K. Lagomarcino, Senior Counsel, U.S. Department

of Agriculture, argued the cause for respondent. With her on

the brief were James Michael Kelly, Deputy General Counsel,

and Margaret M. Breinholt, Assistant General Counsel.

Before: TATEL, GARLAND, and BROWN, Circuit Judges.

Opinion for the court filed by Circuit Judge GARLAND.

GARLAND, Circuit Judge: The petitioners in this case are

Kleiman & Hochberg, Inc., a wholesale produce merchant, and

2

its president, Michael Hirsch. The company’s vice president

pled guilty to bribing a federal produce inspector and later

admitted that he had been making similar payments for more

than a decade. After an administrative enforcement proceeding,

the Secretary of Agriculture revoked the company’s license to

do business under the Perishable Agricultural Commodities Act.

The same administrative decision triggered restrictions on

Hirsch’s ability to work in the produce industry. The petitioners

now seek review of that decision. For the reasons explained

below, we deny the petition for review.

I

Kleiman & Hochberg, Inc. (K&H) is a New York

corporation operated out of the Hunts Point Terminal Market in

the Bronx, New York. Since 1947, K&H has maintained a

license to buy and sell produce in interstate commerce under the

Perishable Agricultural Commodities Act (PACA), 7 U.S.C. §

499a et seq. During the period of time relevant to this case,

K&H had three principals: Michael Hirsch, its president; Barry

Hirsch, its treasurer and Michael’s brother; and John Thomas, its

vice president. Each man owned 31.6 percent of the

corporation’s outstanding stock.

Our recent opinion in Coosemans Specialties, Inc. v.

Department of Agriculture, 482 F.3d 560 (D.C. Cir. 2007),

which involved the bribery of the same federal inspector by a

different company, sets forth the relevant background

information regarding Hunts Point:

The perishable produce that arrives at Hunts Point

often travels some distance between the supplier and a

buyer, such as [K&H]. As a result, produce may arrive

in a condition worse than expected. If the buyer then

asks for a price reduction, the [supplier] is at a

3

disadvantage, because it has no way of knowing

whether to trust the buyer’s representations about the

condition of the produce. The [United States

Department of Agriculture’s (USDA’s)] inspection

process is intended to level the playing field by

providing the faraway [supplier] with an independent

evaluation of the produce’s condition so he can be

assured that the price he receives is fair. A buyer, upon

receipt of nonconforming goods, may request an

inspection. [A USDA] inspector reviews the produce

and issues an official certificate assessing its condition

that can help the producer and buyer renegotiate the

price. . . .

This inspection system has been subject to abuse.

For two decades, corrupt USDA inspectors and buyers

at Hunts Point participated in a scheme of illegal

payments. An inspector who received a bribe might

furnish a falsified certificate indicating that the

produce’s condition was worse than it actually was.

The buyer would use that certificate to negotiate a

lower price with the supplier. Once he paid the

supplier, the buyer could resell the produce for a price

that reflected the produce’s actual condition. In this

way, a buyer who bribed inspectors for this purpose

could increase his profit margin to the detriment of the

supplier. Additionally, some inspectors who had

accepted bribes permitted those companies to jump to

the front of the line for inspections, thereby delaying

the inspections of their competitors. Produce being

perishable, buyers who had to wait for inspections

were likely to receive lower prices when the goods

were eventually resold.

4

In 1999, one of the Hunts Point inspectors,

William Cashin, was caught taking bribes. After his

arrest, he agreed to cooperate with investigators. He

conducted inspections from April until August 1999

while wearing audio and/or video recording devices to

document the bribes he received.

Coosemans Specialties, 482 F.3d at 562-63. At the end of each

day of work, Inspector Cashin met with agents of the FBI and

the USDA’s Office of Inspector General to turn over bribe

money and describe the particulars of the bribes he received that

day.

Cashin later testified that he received bribes from K&H

Vice President John Thomas in conjunction with K&H produce

transactions on twelve separate occasions. In October 1999, a

grand jury indicted Thomas on seven counts of bribing a public

official, in violation of 18 U.S.C. § 201(b)(1)(A). A year later,

Thomas pled guilty to a one-count information stating that he

“made cash payments to [USDA] produce inspectors in order to

obtain expedited inspections.” J.A. 664.

On July 17, 2002, the USDA’s Agricultural Marketing

Service filed an administrative complaint charging K&H with

violating PACA by bribing a produce inspector. On February

12, 2003, the Service determined that both Michael and Barry

Hirsch were “responsibly connected” to K&H within the

meaning of PACA. (The significance of this determination is

discussed in Part II.) The Hirsches then filed petitions for

review of the “responsibly connected” determinations, and an

administrative law judge (ALJ) consolidated those proceedings

with the ongoing disciplinary proceeding against the company.

In 2004, the ALJ conducted an eight-day hearing. Cashin

testified that, beginning in the late 1980s or early 1990s, Thomas

5

paid him a fifty-dollar bribe for each inspection. In return,

Cashin said he “help[ed]” K&H by altering some aspects of its

inspection certificates, J.A. 29, although he could not recall

precisely how he changed the certificates.

When Thomas testified, he admitted paying bribes to USDA

produce inspectors. He said that he began this practice in the

“mid or late[] ’80s,” when he was visited by a produce inspector

named Danny Arcery. J.A. 196. Thomas said that Arcery

visited him after Thomas lodged several complaints with the

USDA about late inspections. According to Thomas, Arcery told

him:

In order to avoid late inspections, here’s what has to be

done, you will give a tip of $25.00 to an inspector to

come quicker rather than purposely later. . . . If you

follow these instructions, everything will be okay. No

more calls. No more calls. Don’t call Washington.

We’ve got people down there.

J.A. 197-98.1 Thomas testified that Arcery also told him that, if

he did not make the payments, “[then] don’t hold your breath for

an inspection . . . the shit will rot in the box until somebody

comes.” J.A. 198. Thomas explained that the purpose of the

bribes was always “to get a quicker inspection,” and he denied

ever asking Cashin or any other produce inspector to falsify an

inspection report. J.A. 205. He testified that no one else at

K&H, including the Hirsches, knew that he was bribing produce

inspectors throughout the 1980s and 1990s. When asked why he

never reported the corrupt inspectors to the authorities, Thomas

testified that he “was afraid.” J.A. 220. But when asked what

1

Thomas testified that the amount of the bribes increased to fifty

dollars per inspection in the 1990s.

6

he was afraid Arcery would do, Thomas replied, “I had no idea.”

J.A. 220.

The ALJ issued his decision and order on December 3,

2004. See Kleiman & Hochberg, Inc., PACA Docket Nos. D-

02-0021, APP-03-0005, APP-03-0006 (U.S.D.A. Dec. 3, 2004).

He found that there was “undisputed evidence that Thomas

bribed Cashin in connection with” twelve separate produce

inspections. Id. at 9. The ALJ concluded that K&H had

violated PACA and that the Hirsches were responsibly

connected to the company. Id. at 18-19. After considering the

circumstances of the case, however, he declined to revoke

K&H’s license, and instead assessed a penalty of $180,000. Id.

at 33.

All of the parties appealed to the USDA’s Judicial Officer,

to whom the Secretary has delegated authority for final

decisionmaking in adjudicatory proceedings. See 7 C.F.R. §

2.35(a). The Judicial Officer issued his decision and order on

April 5, 2006. See Kleiman & Hochberg, Inc., PACA Docket

Nos. D-02-0021, APP-03-0005, APP-03-0006 (U.S.D.A. Apr.

5, 2006) (Judicial Officer Decision). He disagreed with the ALJ

in only one respect, concluding that the appropriate sanction was

revocation of K&H’s PACA license. Id. at 31-35.

After the Judicial Officer denied their petition for

reconsideration, K&H and Michael Hirsch petitioned for review

in this court pursuant to 28 U.S.C. § 2342(2). Barry Hirsch also

petitioned, but he died on April 10, 2007, and thereafter the

petition was dismissed as to him. The Judicial Officer has

stayed his orders pending the outcome of our review.

The petitioners raise a series of challenges to the Judicial

Officer’s decision. In Part II, we review the regulatory regime

7

established by PACA and explain how it was applied in this

case. In Part III, we consider the petitioners’ challenges.

II

Congress enacted PACA “to facilitate interstate commerce

in fresh fruits and vegetables. To help instill confidence in

parties dealing with each other on short notice, across state lines

and at long distances, it provides special sanctions against

dishonest or unreliable dealing.” Veg-Mix, Inc. v. USDA, 832

F.2d 601, 604 (D.C. Cir. 1987) (citation omitted). Because the

“industry [was] thought to be unusually prone to fraud and to

unfair practices,” Tri-County Wholesale Produce Co. v. USDA,

822 F.2d 162, 163 (D.C. Cir. 1987), PACA erected a strict

regulatory regime. The Act requires persons who buy or sell

specified quantities of perishable agricultural commodities at

wholesale in interstate commerce to have a license issued by the

Secretary of Agriculture, see 7 U.S.C. §§ 499a(b)(5)-(7),

499c(a), and makes it unlawful for a licensee to engage in

certain types of unfair conduct, see id. § 499b. The relevant

prohibition in this case, § 499b(4), makes it unlawful for a

licensee to “fail, without reasonable cause, to perform any

specification or duty, express or implied, arising out of any

undertaking in connection with” any transaction in interstate or

foreign commerce involving a perishable agricultural

commodity. Id. § 499b(4). PACA also includes a respondeat

superior provision, which deems the acts of a licensee’s agents

that fall within the scope of their employment to be the acts of

the licensee. Id. § 499p.

If the Secretary of Agriculture determines that a PACA

licensee has violated § 499b(4), the Secretary is authorized to

impose a range of sanctions. See id. § 499h. “[I]f the violation

is flagrant or repeated, the Secretary may, by order, revoke the

license of the offender.” Id. § 499h(a). A license revocation can

8

have serious repercussions for individuals who are associated

with the licensee. When an entity’s PACA license is revoked,

the Act prohibits any person who was “responsibly connected”

to the entity from working for any other licensee for at least one

year. Id. § 499h(b).

Prior to 1995, PACA defined “responsibly connected” as

(inter alia) “affiliated or connected with a commission merchant,

dealer, or broker as . . . [an] officer, director, or holder of more

than 10 per centum of the outstanding stock of a corporation or

association.” 7 U.S.C. § 499a(b)(9) (1994). Congress amended

that definition in 1995. See 7 U.S.C. § 499a(b)(9). Under the

amended statute, the Secretary “must first determine if an

individual” is an officer, director, or holder of more than ten

percent of the violating licensee’s stock. Norinsberg v. USDA,

162 F.3d 1194, 1197 (D.C. Cir. 1998). “If so, the burden shifts

to the individual to demonstrate that he was not actively

involved [in the violation] and that he was either only a nominal

officer or not an owner of a licensee within the meaning of the

statute.” Id.; see infra Part III.E.

The Judicial Officer applied the foregoing provisions of

PACA as follows. First, he concluded that Thomas’ payment of

bribes to USDA produce inspectors breached an implied duty

and thereby violated § 499b(4). Next, he determined that those

violations should be imputed to K&H under § 499p. He further

concluded that the violations were willful, flagrant, and

repeated, and imposed the maximum sanction of license

revocation, as authorized by § 499h(a). Finally, he determined

that Michael Hirsch was “responsibly connected” to K&H under

§ 499a(b)(9), a finding that triggered PACA’s employment

restrictions. The petitioners challenge all of these conclusions.

9

III

“We review final decisions in PACA cases under the

deferential standard of the Administrative Procedure Act, 5

U.S.C. § 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.’” Kirby Produce Co. v.

USDA, 256 F.3d 830, 833 (D.C. Cir. 2001) (quoting JSG

Trading Corp. v. USDA, 176 F.3d 536, 541 (D.C. Cir. 1999)

(“JSG Trading I”)). As we read their briefs, the petitioners

challenge five aspects of the Judicial Officer’s decision: (1) the

determination that Thomas’ payment of bribes to produce

inspectors violated the “implied duty” clause of § 499b(4); (2)

the treatment of Thomas’ actions as the actions of K&H under

§ 499p; (3) the decision to revoke K&H’s license under §

499h(a), rather than to impose a lesser sanction; (4) the

Secretary’s failure to provide petitioners with notice and an

opportunity to halt Thomas’ unlawful conduct before revoking

K&H’s license; and (5) the determination that Michael Hirsch

was “responsibly connected” to K&H under § 499a(b)(9). We

consider each objection in turn.

A

We begin with the petitioners’ challenge to the Judicial

Officer’s determination that Thomas’ bribes violated 7 U.S.C.

§ 499b(4), which makes it unlawful to “fail, without reasonable

cause, to perform any specification or duty, express or implied,

arising out of any undertaking in connection with” a produce

transaction. 7 U.S.C. § 499b(4). The Judicial Officer’s

application of this section proceeded in two stages. First, he

held that Thomas failed to perform an implied “duty to refrain

from making payments to [USDA] produce inspectors in

connection with the inspection of perishable agricultural

10

commodities.” Judicial Officer Decision at 27. Second, he held

that Thomas did not have “reasonable cause” for failing to

perform the duty. See id. at 44-46.

At oral argument before this court, the petitioners did not

dispute the Judicial Officer’s interpretation of § 499b(4) as

encompassing a duty to refrain from bribing government

produce inspectors. See Oral Arg. Recording at 3:15. This

turned out to be a prescient allocation of their legal ammunition,

because another panel subsequently affirmed an identical

interpretation of § 499b(4). In Coosemans Specialties, the court

explained that the USDA’s interpretation of PACA is entitled to

deference under the two-step framework of Chevron U.S.A. Inc.

v. NRDC, 467 U.S. 837 (1984). Coosemans Specialties, 482

F.3d at 564; see also Norinsberg, 162 F.3d at 1199. Under that

framework, if “the intent of Congress is clear, . . . [a court] must

give effect to the unambiguously expressed intent of Congress.”

Chevron, 467 U.S. at 842-43. But “if the statute is silent or

ambiguous with respect to the specific issue,” the court must

uphold the agency’s interpretation as long as it is reasonable. Id.

at 843. Applying that framework, Coosemans Specialties

concluded that the implied duty clause is ambiguous, and that

the Judicial Officer’s view that it “includes a duty not to bribe

USDA inspectors . . . is reasonable,” because “[i]t is consistent

with the purposes of the Act . . . to protect producers and other

merchants from dishonest and irresponsible conduct.” 482 F.3d

at 565-66.2

2

As we noted in Coosemans Specialties, we had previously

“upheld the Secretary’s construction of the implied duty clause as

including a prohibition on commercial bribery,” that is, the payment

of bribes by a seller to a buyer’s employee, without the knowledge of

the employer. 482 F.3d at 565 (citing, inter alia, JSG Trading Corp.

v. Dep’t of Agric., 235 F.3d 608, 610-11 (D.C. Cir. 2001) (“JSG

Trading II”); JSG Trading I, 176 F.3d at 543).

11

The Second Circuit reached the same result in G&T

Terminal Packaging Co. v. USDA, 468 F.3d 86 (2d Cir. 2006),

another case arising out of the corruption at Hunts Point. After

finding the “implied duty” language of § 499b(4) to be

ambiguous, it “affirm[ed] as reasonable the Secretary’s

conclusion that the PACA imposes an implied duty upon

licensees to refrain from making payments to USDA inspectors

in connection with produce inspections, irrespective of whether

those payments induce, or are intended to induce, the inspectors

to issue inaccurate inspection certificates.” Id. at 96. “Indeed,”

the court said, given PACA’s statutory scheme, “which assigns

government inspectors to protect the financial interests of distant

shippers by providing impartial assessments of the condition of

the produce upon arrival, we can hardly conceive of a duty more

clearly implicated than the obligation of recipients not to make

side-payments to these inspectors.” Id. at 96-97 (citations

omitted). We agree.

Rather than attack the Judicial Officer’s construction of

“implied duty,” K&H and Hirsch direct their fire at the second

part of the Officer’s analysis: his rejection of their argument

that Thomas had “reasonable cause” for bribing Cashin because

he was the victim of “extortion.” The Judicial Officer rejected

that argument for two reasons. He concluded that: (1) Thomas

was not the victim of “extortion,” Judicial Officer Decision at

45, and (2) even if he was, “[t]he extortion cited by [petitioners]

is not a ‘reasonable cause’ under . . . PACA,” id. at 46 (citation

omitted). We affirm both determinations.

The Judicial Officer’s rejection of the petitioners’ claim that

Thomas’ payments were the result of extortion is reasonable.

There is no evidence in the record that Cashin made threats of

any kind to induce Thomas to make the payments. Rather, the

only evidence that anyone ever threatened Thomas is Thomas’

testimony (recounted above) that a different produce inspector,

12

Arcery, did so a full decade prior to the bribes at issue here.

According to Thomas, Arcery told him in the mid- to late-1980s

that unless he paid bribes, K&H’s produce would “rot in the box

until somebody comes,” and warned him that he should not “call

Washington” because “[w]e’ve got people down there.” J.A.

198. These statements do not compel a conclusion that Thomas’

payments to Cashin a decade later were involuntary.

The Judicial Officer was also justified in concluding that,

even if Thomas’ payments were induced by extortion, the type

of “extortion cited by [the petitioners] is not a ‘reasonable cause’

under [PACA] for [K&H]’s failure to perform the implied duty

to refrain from [bribing] produce inspectors.” Judicial Officer

Decision at 46. First, under Chevron step one, PACA is

ambiguous as to whether extortion provides “reasonable cause”

for bribery. See G&T Terminal, 468 F.3d at 98. It could hardly

be otherwise, as there is nothing in the statute that defines

“reasonable cause” or mentions extortion or bribery. The

petitioners do not argue to the contrary.

Moving to Chevron step two, we find that the Judicial

Officer’s interpretation of the “reasonable cause” provision is

reasonable. Like the Second Circuit, “[w]e may presume that

there are species of coercion so extreme that they rob an

individual of any meaningful opportunity to resist.” Id. But

there was no such coercion in this case. The “threats” Arcery

allegedly made to Thomas were in any event “‘soft’ enough to

support the view that no reasonable cause existed for the

petitioners’ breach of duty.” Id.; see also id. (noting that the

inspectors at Hunts Point did not “physically threaten[]” the

bribe payer and did not threaten “the loss or destruction of his

business, harm to his family or employees, blackmail, or the

outright denial of produce inspections”). Like the bribe payer in

G&T Terminal, Thomas had “choices about how to respond to

13

[the inspector’s] demands for illegal payments -- hard choices,

perhaps, but meaningful ones all the same.” Id. at 99.

In sum, we affirm the Judicial Officer’s reasonable

determination that Thomas violated § 499b(4): his conduct

breached the implied duty not to bribe USDA inspectors, and he

had no “reasonable cause” for so doing.

B

The petitioners next challenge the Judicial Officer’s

determination that Thomas’ actions should be deemed the

actions of K&H under 7 U.S.C. § 499p, PACA’s respondeat

superior provision. Section 499p provides that “the act,

omission, or failure of any agent, officer, or other person acting

for or employed by any [licensee], within the scope of his

employment or office, shall in every case be deemed the act,

omission, or failure of such [licensee].” 7 U.S.C. § 499p. In

applying this provision, the Judicial Officer found that “Thomas

paid bribes to [USDA] produce inspectors at [K&H’s] place of

business, during regular working hours, and in connection with

the inspection of perishable agricultural commodities purchased,

received, and accepted by [K&H].” Judicial Officer Decision at

48. Further, “Thomas was authorized to apply for” produce

inspections by K&H, and the bribes he paid “were intended to

benefit” the company. Id. at 48-49. The Officer concluded that

“[t]he record clearly establishes that John Thomas was [acting]

within the scope of his employment” when he bribed Cashin.

Id. at 48. Accordingly, under § 499p, “the knowing and willful

bribes by John Thomas are deemed to be knowing and willful

bribes by” K&H. Id. at 25.

We find no fault in the Judicial Officer’s application of §

499p. In a similar case, we upheld the Secretary’s determination

that an employee’s payment of bribes to a USDA inspector for

14

the benefit of his company fell within the scope of his

employment. See Post & Taback, Inc. v. Dep’t of Agric., 123 F.

App’x 406, 408 (D.C. Cir. 2005). Other courts have reached the

same result. See, e.g., Koam Produce, Inc. v. DiMare

Homestead, Inc., 329 F.3d 123, 130 (2d Cir. 2003). Indeed, at

oral argument, counsel for the petitioners conceded that an

officer of a company generally acts “within the scope of his

employment” when he pays a bribe to a produce inspector. Oral

Arg. Recording at 7:44.

The petitioners offer two reasons why § 499p is nonetheless

inapplicable to this case. First, they contend that Thomas’

actions were “secret” and “undiscoverable,” Pet’rs Br. 35, and

that, as a consequence, K&H “had absolutely no . . . ability to

control what Thomas did with the inspectors,” id. at 34. As the

government correctly notes, this rhetoric overstates the situation.

Thomas was not, as the petitioners suggest, some third-party

actor beyond the company’s control; to the contrary, he was the

company’s one-third owner and treasurer and had worked for

the company for thirty years. More important, the petitioners’

argument contradicts the express language of the statute.

Section 499p provides that the act of an officer, within the scope

of his employment, “shall in every case be deemed the act” of

the licensee. 7 U.S.C. § 499p (emphasis added). As we held in

Post & Taback, “the plain language of the [section] provides no

escape hatch for merchants who allege ignorance of their

employees’ misconduct.” 123 F. App’x at 408 (internal

quotation marks and ellipsis omitted).

Second, the petitioners argue that Thomas’ bribes did not

have “any connection with or impact on the actual produce

transactions between Petitioners and their shippers and

suppliers,” and did not cause any “damage.” Pet’rs Br. 33. This

second argument has the same flaws as the first. It is factually

incorrect because, as we noted in Coosemans Specialties,

15

companies that paid bribes to expedite their inspections at Hunts

Point “jump[ed] to the front of the line for inspections, thereby

delaying the inspections of their competitors.” 482 F.3d at 563;

see id. at 567 (noting that this “conduct not only gave [the

company] a competitive advantage, but it also increased the

pressure on other merchants to engage in bribery to remain

competitive”); see also Judicial Officer Decision at 20 (finding

that Thomas pled guilty to making “cash payments to [USDA]

produce inspectors in order to obtain expedited inspections”).

Moreover, and again more important, the statute requires

imputation of wrongful conduct to the licensee “in every case,”

7 U.S.C. § 499p -- not simply in those cases in which damage

was done.

Finally, the petitioners contend that, if § 499p is interpreted

according to its express terms, it amounts to “an unconstitutional

irrebuttable presumption” because it “provide[s] that certain

facts (Thomas’ admitted payments) shall be conclusive evidence

of guilt of Petitioners,” thereby depriving them of “the right to

engage in . . . one of the common occupations of life.” Pet’rs

Br. 35-36. In fact, § 499p simply makes applicable to wholesale

produce merchants the principle of respondeat superior, a

substantive legal doctrine widely accepted at common law3 and

widely incorporated into federal regulatory statutes.4 Whether

3

See Oliver W. Holmes, Jr., Agency, 4 HARV. L. REV. 345, 356

(1891).

4

See, e.g., 7 U.S.C. § 63 (cotton standards); id. § 87d (grain

standards); id. § 223 (packers and stockyards); id. § 511l (tobacco

inspection); id. § 2139 (transportation of animals); id. § 8313(c)

(animal health protection); 15 U.S.C. § 431(f) (discrimination against

farmers’ cooperative associations by boards of trade); 21 U.S.C. § 63

(filled milk); id. § 461(a) (poultry and poultry products inspection); id.

§ 1041(d) (egg products inspection); 47 U.S.C. § 217 (regulation of

common carriers in wire or radio communication).

16

or not we call that doctrine an “irrebuttable presumption,”5 if

applying it “does not abridge a fundamental right or discriminate

against a suspect class, it [must be] upheld if it ‘bears a rational

relation to a legitimate legislative goal.’” Delong v. Dep’t of

Health & Human Servs., 264 F.3d 1334, 1341 (Fed. Cir. 2001)

(brackets and ellipsis omitted) (quoting Weinberger v. Salfi, 422

U.S. 749, 772 (1975)); see Hawkins v. Agric. Mktg. Serv., 10

F.3d 1125, 1133 (5th Cir. 1993); see generally Edison Elec. Inst.

v. EPA, 391 F.3d 1267, 1272 n.5 (D.C. Cir. 2004); sources cited

supra note 5.

The petitioners do not claim that there is a fundamental

right or suspect class at issue here, and there is no doubt that §

499p bears a rational relation to a legitimate legislative goal. By

imposing liability on licensees whose agents violate PACA, the

respondeat superior doctrine encourages produce companies to

“use [their] control over the employee to prevent” violations of

the Act. Sullivan v. Freeman, 944 F.2d 334, 336 (7th Cir. 1991)

(discussing the role of the doctrine in general). “While

admittedly the result Congress desired could be harsh in some

cases, we cannot say that [the statute] is not reasonably designed

to achieve the desired Congressional purpose.” Zwick v.

Freeman, 373 F.2d 110, 118 (2d Cir. 1967) (specifically

referring to § 499h(b), which restricts the employment of

“responsibly connected” persons).

5

Commentators have noted that the Supreme Court “has not

applied the irrebuttable presumption doctrine” since the early 1970s.

ERWIN CHEMERINSKY, CONSTITUTIONAL LAW § 9.4 n.65 (3d ed.

2006); see GERALD GUNTHER & KATHLEEN M. SULLIVAN,

CONSTITUTIONAL LAW 915 (13th ed. 1997) (stating that the

irrebuttable presumption doctrine was “abandoned by the Court” in

Weinberger v. Salfi, 422 U.S. 749 (1975)); see generally LAURENCE

H. TRIBE, AMERICAN CONSTITUTIONAL LAW 1621-24 (2d ed. 1988).

17

The petitioners disparage the Judicial Officer’s attribution

of Thomas’ misconduct to the company as a “rote application”

of § 499p. Pet’rs Br. 32. In our view, this is just another way of

saying that the Officer was faithful to the statutory text. And

that is his -- and our -- responsibility.

C

Third, the petitioners argue that the Judicial Officer’s

decision to revoke K&H’s PACA license is “unsupported by the

great weight of the evidence and is arbitrary and capricious.”

Pet’rs Br. 44. As we have repeatedly noted, “‘[w]e will not

lightly disturb the [USDA’s] choice of a remedy under a statute

committed to its enforcement, especially given the Department’s

superior knowledge of the industry PACA regulates.’”

Coosemans Specialties, 482 F.3d at 566-67 (quoting JSG

Trading II, 235 F.3d at 617).

If a licensee’s violation of PACA § 499b “is flagrant or

repeated, the Secretary may, by order, revoke the license of the

offender.” 7 U.S.C. § 499h(a). The Judicial Officer found that

K&H’s violations of § 499b(4) were both flagrant and repeated,

see Judicial Officer Decision at 30-31, and the petitioners do not

challenge those findings. The Officer was therefore authorized

to revoke K&H’s license, and his decision to do so was fully

consistent with precedent. In numerous cases arising out of the

government’s investigation at Hunts Point, revocation was the

sanction imposed for bribing produce inspectors. See, e.g.,

Coosemans Specialties, Inc., PACA Docket No. D-02-0024

(U.S.D.A. Apr. 20, 2006); In re M. Trombetta & Sons, Inc.,

PACA Docket No. D-02-0025 (U.S.D.A. Sept. 27, 2005); G&T

Terminal Packaging Co., PACA Docket No. D-03-0026

(U.S.D.A. Sept. 8, 2005).

18

The Judicial Officer was not required, of course, to impose

the sanction of revocation and could have opted for a lesser

punishment. He chose not to do so because of the “egregious”

nature of the bribes. Judicial Officer Decision at 34. The

petitioners protest that Thomas’ conduct was not egregious,

because his bribes “had no effect on K&H’s dealings with its

suppliers.” Pet’rs Br. 45. But the Judicial Officer relied on the

testimony of John Koller, an official at the USDA’s Agricultural

Marketing Service, who testified that bribery of produce

inspectors undermines the credibility of the entire PACA

inspection process and increases the likelihood that other

produce wholesalers will engage in similar illicit conduct.

Judicial Officer Decision at 33.6 License revocation was

necessary, Koller said, in order to “deter other members of the

industry from . . . making bribery payments.” Id. Under these

circumstances, we have no ground for finding the Judicial

Officer’s choice of sanctions unreasonable. See also Butz v.

Glover Livestock Comm’n Co., 411 U.S. 182, 188-89 (1973)

(“The fashioning of an appropriate and reasonable remedy is for

the Secretary, not the court.”).

D

The petitioners’ fourth argument is that the Secretary

violated the Administrative Procedure Act (APA) by instituting

proceedings to revoke K&H’s license without first providing the

company with notice of Thomas’ unlawful conduct and an

opportunity to curb it. Once again, the plain text of the statute

bars the petitioners’ argument. The relevant section of the APA

6

See also Post & Taback, Inc., 62 Agric. Dec. 802, 825 (2003)

(“[U]nlawful gratuities and bribes paid to [USDA] inspectors threaten

the integrity of the entire inspection system and undermine the

produce industry’s trust in the entire inspection system.”), petition for

review denied, 123 F. App’x 406 (D.C. Cir. 2005).

19

states: “Except in cases of willfulness[,] . . . revocation . . . of a

license is lawful only if, before the institution of agency

proceedings therefor, the licensee has been given -- (1) notice by

the agency in writing of the facts or conduct which may warrant

the action; and (2) opportunity to demonstrate or achieve

compliance with all lawful requirements.” 5 U.S.C. § 558(c)

(emphasis added). Here, the Judicial Officer found that K&H’s

violations of PACA were willful, see Judicial Officer Decision

at 28-31 & n.8, thus bringing the case within the exception to the

APA’s notice requirement.

In applying § 558(c) to PACA violations, we have held that

“‘an action is willful if a prohibited act is done intentionally,

irrespective of evil intent, or done with careless disregard of

statutory requirements.’” Coosemans Specialties, 482 F.3d at

567 (quoting Finer Foods Sales Co. v. Block, 708 F.2d 774, 778

(D.C. Cir. 1983)). Applying this standard, the Judicial Officer

found that Thomas, and therefore K&H, had willfully violated

PACA by paying unlawful bribes to Cashin. This finding is

supported by substantial evidence. Thomas pled guilty to an

information stating that he “unlawfully, wilfully, knowingly,

directly and indirectly, did corruptly give, offer and promise

things of value to public officials.” J.A. 664. And Thomas’

own description of his bribes during his testimony before the

ALJ shows that his conduct was intentional. See J.A. 201-06.

On virtually identical evidence, Coosemans Specialties held that

a PACA violation was willful and hence that the APA’s notice

provision was inapplicable. 482 F.3d at 567-68. We do so here

as well. Indeed, we could not do otherwise without requiring

the USDA to disclose an undercover law enforcement operation

as soon as it detects a criminal violation.7

7

Petitioners also suggest, obliquely, that Michael Hirsch was

individually entitled to notice under APA § 558(c). See Pet’rs Br. 25.

Section 558(c), however, applies only to “licensees.” It does not

20

E

Finally, petitioner Michael Hirsch challenges the Judicial

Officer’s determination that he was “responsibly connected” to

K&H during the period in which the company violated PACA.

Section 499h(b) provides that “any person who is or has been

responsibly connected with any [entity] whose license has been

revoked” may not be employed by any other PACA licensee for

at least one year. 7 U.S.C. § 499h(b). Because the Judicial

Officer revoked K&H’s license, the determination that Hirsch

was responsibly connected to K&H makes him subject to this

restriction.

PACA defines a “responsibly connected” person as one who

is “affiliated or connected with a [licensee] as . . . [an] officer,

director, or holder of more than 10 per centum of the

outstanding stock.” Id. § 499a(b)(9). There is no dispute that

Hirsch -- who was all three -- comes within this definition. As

noted above, however, a 1995 amendment qualified the

definition. It provided:

A person shall not be deemed to be responsibly

connected if the person demonstrates by a

preponderance of the evidence that the person was not

actively involved in the activities resulting in a

violation of [PACA] and that the person either was

only nominally . . . [an] officer, director, or shareholder

of a violating licensee . . . or was not an owner of a

violating licensee . . . which was the alter ego of its

owners.

require notice to the directors, officers, or owners of a licensee who

are not themselves licensed. In this case, K&H was the only party that

maintained a license, see J.A. 655-62, and that license is the only one

at issue in these proceedings.

21

Id. Under the amended statute, the Secretary “must first

determine if an individual” is an officer, director, or holder of

more than ten percent of the violating licensee’s stock.

Norinsberg, 162 F.3d at 1197. “If so, the burden shifts to the

individual to demonstrate [by a preponderance of the evidence]

that he was not actively involved [in the violation] and that he

was either only a nominal officer or not an owner of a licensee

within the meaning of the statute.” Id. (emphasis added).

Hirsch did demonstrate that he was not actively involved in

Thomas’ bribery, see Judicial Officer Decision at 37, thus

rendering this exception potentially available. However,

because he makes no claim that he was “not an owner of a

violating licensee . . . which was the alter ego of its owners,”8 he

must prove that he was “only nominally . . . [an] officer, director

[and] shareholder” of K&H to obtain the exception’s benefit.

Hirsch did not prove that he qualified for the “nominal”

exception, nor could he do so. As Hirsch concedes, he owned

31.6 percent of the corporation’s outstanding stock, was the

company’s President, and was “actively engaged in the day-to-

day operations, management, and control of K&H.” Pet’rs Br.

25 (emphasis added).

Nonetheless, Hirsch again notes that Thomas’ bribes were

undisclosed, and insists that a person cannot be responsibly

connected to a violating licensee unless he “either knew or

should have known about the violations and then failed to take

8

“[T]he ‘alter ego’ exception applie[s] to ‘cases in which the

violator, although formally a corporation, is essentially an alter ego of

its owners, so dominated as to negate its separate personality.’ A

petitioner who [is] not a true owner of such a corporation [will] be

spared the consequences of the responsibly connected determination.”

Coosemans Specialties, 482 F.3d at 568 (quoting Norinsberg, 162

F.3d at 1197).

22

action to counteract the actions of others constituting the

violations.” Id. at 27. But neither the statutory definition of

“responsibly connected” (an “officer, director, or holder of more

than 10 per centum of the outstanding stock,” 7 U.S.C. §

499a(b)(9)), nor the statutory “nominal” and “alter ego”

exceptions suggest such a knowledge requirement. And “the

inclusion of a specific exception for persons who make a certain

showing . . . militate[s] against judicially created exceptions.”

Coosemans Specialties, 482 F.3d at 569.9

IV

PACA “is admittedly and intentionally a tough law.” S.

REP. NO. 84-2507, at 3 (1956) (internal quotation marks

omitted). In this case, the USDA’s Judicial Officer chose the

toughest possible sanction, notwithstanding the active

involvement of the USDA’s own inspectors in the widespread

corruption at Hunts Point. See Coosemans Specialties, 482 F.3d

at 567. But whether or not we would have levied the same

penalty, we cannot say that the Officer’s decision in that regard

9

As they did with respect to PACA’s respondeat superior

provision, see supra Part III.B, the petitioners suggest that literal

enforcement of the “responsibly connected” provision violates

Hirsch’s due process rights. We rejected this argument in Siegel v.

Lyng, 851 F.2d 412, 416 n.12 (D.C. Cir. 1988), as have the other

circuits that have considered it, see Hawkins v. Agric. Mktg. Serv., 10

F.3d 1125, 1134 (5th Cir. 1993) (“We . . . cannot say that the

unambiguous language of § 499a(b)(9) . . . was irrationally conceived

or arbitrary in effecting a legitimate governmental objective, i.e., the

protection of producers of perishable agricultural products.”); Zwick,

373 F.2d at 118-19; Birkenfield v. United States, 369 F.2d 491, 494-95

(3d Cir. 1966).

23

-- or any other regard -- is arbitrary or unreasonable.

Accordingly, the petition for review is

Denied.