In Re: Magic Rest

Opinions of the United

2000 Decisions States Court of Appeals

for the Third Circuit

3-1-2000

In Re: Magic Rest

Precedential or Non-Precedential:

Docket 99-5113

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Filed March 1, 2000

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 99-5113

IN RE: MAGIC RESTAURANTS, INC.;

MAGIC AMERICAN CAFE, INC.,

Debtors

MAGIC RESTAURANTS, INC.;

MAGIC AMERICAN CAFE, INC.

v.

BOWIE PRODUCE CO., INC.,

Appellant

PATRICIA A. STAIANO,

Trustee.

On Appeal From the United States District Court

For the District of Delaware

(D.C. Civ. No. 97-300-JJF)

District Judge: Honorable Joseph J. Farnan, Jr.

Argued: December 8, 1999

Before: NYGAARD, RENDELL and ROSENN,

Circuit Judges.

(Filed: March 1, 2000)

Stephen P. McCarron, Esquire

(Argued)

McCarron & Associates

4910 Massachusetts Avenue, N.W.,

Suite 18

Washington, DC 20016

Mark Minuti, Esquire

Saul, Ewing, Remick & Saul

222 Delaware Avenue, Suite 1200

Wilmington, DE 19899

Counsel for Bowie Produce

Co., Inc.

Brendan Linehan Shannon, Esquire

(Argued)

Laura Davis Jones, Esquire

Young Conaway Stargatt &

Taylor, LLP

Rodney Square North, 11th Floor

Wilmington, DE 79899-0391

John A. Lee, Esquire

Andrews & Kurth, L.L.P.

4200 Chase Tower

Houston, TX 77002

Counsel for Magic Restaurants,

Inc. and Magic American Cafe,

Inc.

OPINION ANNOUNCING THE JUDGMENT

OF THE COURT

ROSENN, Circuit Judge.

The sole question presented by this appeal is whether

restaurants are "dealers" under the Perishable Agricultural

Commodities Act, 7 U.S.C. S 499a et seq. ("PACA"), and

therefore subject to its trust provision, 7 U.S.C.S 499e(c).

The United States Bankruptcy Court for the District of

Delaware held that they are, and subsequently granted

partial summary judgment in favor of the Appellant. The

United States District Court reversed. We hold that

restaurants are dealers under the plain language of PACA,

and we therefore reverse the order of the district court and

reinstate the order of the bankruptcy court.

2

I.

On April 6, 1995, Magic Restaurants, Inc. and Magic

American Cafe, Inc. (collectively "Magic")filed voluntary

bankruptcy petitions in the bankruptcy court for

reorganization under Chapter 11 of the Bankruptcy Code.

Magic, directly or through its subsidiaries, owned and

operated fifteen restaurants in the Washington, D.C. and

New York City metropolitan areas. These restaurants

generated $20 million in sales revenues in a six month

period in 1995-96. Magic purchased fresh fruits and

vegetables from Bowie Produce Co., Inc. ("Bowie"), which it

processed into food items, including salads or hamburger

trimmings, and sold to its restaurant customers. At the

time Magic filed for bankruptcy in April 1995, it owed

Bowie $98,983.74 for these produce purchases.

Bowie commenced an adversarial proceeding in the

bankruptcy court to recover full payment from Magic on the

ground that the proceeds from the produce Magic had

purchased were trust funds under Section 5(c) of PACA, 7

U.S.C. S 499e(c). Magic moved for summary judgment on

the ground that as a restaurant, it was not a "dealer," and

was therefore not subject to PACA's trust provision. By

memorandum opinion and order dated June 18, 1996, the

bankruptcy court denied Magic's motion and held that

Magic was a "dealer" under the plain language of PACA. On

January 15, 1997, the bankruptcy court granted partial

summary judgment for Bowie, awarding it $93,173.29 in

trust proceeds.

Magic appealed the bankruptcy court's ruling to the

district court pursuant to 28 U.S.C. S 158(a). The district

court reversed the bankruptcy court by memorandum

opinion and order dated January 6, 1999, holding that

Magic was not a "dealer" under PACA and therefore was not

subject to its trust provision. This timely appeal followed.

II.

A. Statutory Background.

Congress enacted PACA in 1930 "to promote fair trading

practices in the marketing of perishable agricultural

3

commodities, largely fruits and vegetables." Consumers

Produce Co., Inc. v. Volante Wholesale Produce, Inc. , 16 F.3d

1374, 1377-78 (3d Cir. 1994). PACA was " `designed

primarily for the protection of the producers of perishable

agricultural products -- most of whom must entrust their

products to a buyer or commission merchant who may be

thousands of miles away, and depend for their payment

upon his business acumen and fair dealing.' " In re

Kornblum & Co., Inc., 81 F.3d 280, 283 (2d Cir. 1996)

(quoting H.R. Rep. No. 1196, at 2 (1955), reprinted in 1956

U.S.C.C.A.N. 3699, 3701). Producers of perishable

agricultural goods are in large part dependent upon the

honesty and scrupulousness of the purchaser or consignee

who geographically may be far removed. To provide

producers with some protection, Congress fortified the

original PACA with two primary weapons. First, it

prohibited certain conduct by "commission merchants,"

"brokers," or "dealers." 7 U.S.C. S 499b. Failure to abide by

these prohibitions rendered the "commission merchant,

dealer, or broker . . . liable to the person or persons injured

thereby for the full amount of damages . . . sustained in

consequence of such violation." Id. SS 499e(a) & 499e(b).

Second, PACA established a mandatory licensing scheme,

under the supervision of the Secretary of Agriculture, for

any "person" carrying on "the business of a commission

merchant, dealer, or broker." Id. S 499c. The Secretary was

given the power to refuse, suspend, or terminate licenses

on numerous grounds, including conduct prohibited under

S 499b. See 7 U.S.C. SS 499c, 499d, 499h. Any person

doing business without the required license was subject to

monetary penalties. Id. S 499c(a).

PACA in its original form therefore protected produce

growers and producers, and worked to make "the marketing

of perishable agricultural commodities more orderly and

efficient." Hull Co. v. Hauser's Foods, Inc., 924 F.2d 777,

779 (8th Cir. 1991). Even with the passage of a half-century

after its initial enactment, Congress, in 1984, determined

that prevalent financing practices in the perishable

agricultural commodities industry were placing the industry

as a whole, including produce sellers, in jeopardy. It

responded by amending PACA, explaining:

4

It is hereby found that a burden on commerce in

perishable agricultural commodities is caused by

financing arrangements under which commission

merchants, dealers, or brokers, who have not made

payment for perishable agricultural commodities

purchased, contracted to be purchased, or otherwise

handled by them on behalf of another person,

encumber or give lenders a security interest in, such

commodities, or on inventories of food or other

products derived from such commodities, and any

receivables or proceeds from the sale of such

commodities or products, and that such arrangements

are contrary to the public interest. . . .

7 U.S.C. S 499e(c)(1).1

In order to "remedy such burden on commerce in

perishable agricultural commodities and to protect the

public interest," id., Congress "increase[d] the legal

protection for unpaid sellers and suppliers of perishable

agricultural commodities until full payment of sums due

_________________________________________________________________

1. The legislative history of the 1984 PACA amendments further explains

the problem Congress intended to address:

Sellers of agricultural commodities are often located thousands of

miles from their customers. Sales transactions must be made

quickly or they are not made at all . . . . Under such conditions,

it

is often difficult to make credit checks, conditional sales

agreements, and take other traditional safeguards.

* * *

Many [buyers], in the ordinary course of their business

transactions, operate on bank loans secured by [their] inventories,

proceeds or assigned receivables from sales of perishable

agricultural commodities, giving the lender a secured position in

the

case of insolvency. Under present law, sellers of fresh fruits and

vegetables are unsecured creditors and receive little protection in

any suit for recovery of damages where a buyer has failed to make

payment as required by the contract.

In recent years, produce sellers have been subjected to increased

instances of buyers failure to pay and slow payments.

H.R. Rep. No. 98-543, at 3 (1983), reprinted in 1984 U.S.C.C.A.N. 405,

406.

5

have been received by them," H.R. Rep. No. 98-543, at 3

(1983), reprinted in 1984 U.S.C.C.A.N. 405, 406 (emphasis

added), by enacting 7 U.S.C. S 499e(c). This provision

imposes a floating, non-segregated trust on produce buyers

for the benefit of unpaid produce suppliers.2 The corpus of

this trust is comprised of (1) the perishable agricultural

commodities purchased from these suppliers, (2) all

inventories of food or other products derived from the

perishable agricultural commodities, and (3) receivables or

proceeds from the sale of such commodities or products. 7

U.S.C. S 499e(c)(2). The statutory trustee is the delinquent

"commission merchant, dealer, or broker." Id. The unpaid

supplier loses the benefits of the trust unless written notice

of intent to preserve the trust is given to the trustee within

thirty calendar days after payment must be made. Id.

S 499e(c)(3). In essence, PACA's trust provision gives the

unpaid supplier an interest in the trust corpus superior to

the interest of any other lien or secured creditor. See

Consumers Produce, 16 F.3d at 1379; In re W.L. Bradley

Co., Inc., 75 B.R. 505, 509 (Bankr. E.D. Pa. 1987) (quoting

In re Prange Foods, Corp., 63 B.R. 211, 214 (Bankr. W.D.

Mich. 1986)).

B. The District Court's Decision.

Bowie's appeal hinges on its contention that Magic is a

"dealer" under PACA.3 If Bowie is correct, it has priority to

_________________________________________________________________

2. The trust provision states, in relevant part:

Perishable agricultural commodities received by a commission

merchant, dealer, or broker in all transactions, and all

inventories

of food or other products derived from perishable agricultural

commodities, and any receivables or proceeds from the sale of such

commodities or products, shall be held by such commission

merchant, dealer, or broker in trust for the benefit of all unpaid

suppliers or sellers of such commodities or agents involved in the

transaction, until full payment of the sums owing in connection

with

such transactions has been received by such unpaid suppliers,

sellers, or agents. . . .

7 U.S.C. S 499e(c)(2).

3. Bowie did not contend in the bankruptcy court or the district court

and does not contend now that Magic is a "commission merchant" or a

"broker."

6

certain of Magic's assets as the beneficiary of PACA's

statutorily imposed trust. PACA defines the term"dealer" as

"any person engaged in the business of buying or selling in

wholesale or jobbing quantities, as defined by the

Secretary, any perishable agricultural commodity in

interstate or foreign commerce . . . ." 7 U.S.C.S 499a(b)(6).

PACA also provides three exceptions to this definition:

(A) no producer shall be considered as a "deale r" in

respect to sales of any such commodity of his own

raising;

(B) no person buying any such commodity solely for

sale at retail shall be considered as a "dealer" until the

invoice cost of his purchases of perishable agricultural

commodities in any calendar year are in excess of

$230,000; and

(C) no person buying any commodity other than

potatoes for canning and/or processing within the

State where grown shall be considered a "dealer"

whether or not the canned or processed product is to

be shipped in interstate or foreign commerce, unless

such product is frozen or packed in ice, or consists of

cherries in brine . . . .

Id. Finally, this provision notes that "[a]ny person not

considered as a `dealer' under clauses (A), (B), and (C) may

elect to secure a license under the provisions of section

499c of this title, and in such case and while the license is

in effect such person shall be considered as a `dealer'."

Magic has never secured such a license, and contends that

no restaurant has done so.

The parties do not dispute that Magic purchases

"wholesale or jobbing quantities" of perishable agricultural

commodities in interstate commerce.4 Bowie therefore

contends that, based on the plain language of the statute,

Magic is a "dealer" and is subject to the trust. The

_________________________________________________________________

4. Regulations promulgated by the United States Department of

Agriculture ("USDA") define "wholesale or jobbing quantities" as

"aggregate quantities of all types of produce totaling one ton (2,000

pounds) or more in weight in any day shipped, received, or contracted to

be shipped or received." 7 C.F.R. S 46.2(x).

7

bankruptcy court agreed, but the district court reversed.

The court held that PACA "is silent on the issue of whether

restaurants qualify as `dealers,' " and therefore, "Congress

has not spoken directly to the issue of PACA's applicability

to restaurants." (A.7). Thus, the district court proceeded to

consider regulations promulgated by the USDA under its

authority to administer PACA. See 7 U.S.C.S 499o.

These USDA regulations define "dealer" as:

any person engaged in the business of buying or selling

in wholesale or jobbing quantities in commerce and

includes:

(1) Jobbers, distributors and other wholesaler s;

(2) Retailers, when the invoice cost of all pu rchases

of produce exceeds $230,000 during a calendar year.

In computing dollar volume, all purchases of fresh and

frozen fruits and vegetables are to be counted, without

regard to quantity involved in a transaction or whether

the transaction was intrastate, interstate or foreign

commerce;

(3) Growers who market produce grown by others.

7 C.F.R. S 46.2(m). The district court concluded that under

this regulation, in order to be a "dealer" an entity had to fall

into one of the categories enumerated in 7 C.F.R.

S 46.2(m)(1), (2), or (3). The court determined that the only

possible category a restaurant such as Magic could fall into

was that of "retailers" under 7 C.F.R. S 46.2(m)(2), but

concluded that restaurants such as Magic were consumers,

not retailers. Accordingly, the district court held that under

this USDA regulation, Magic was not a dealer.

The court found support for this conclusion in two

additional sources. First, in 1996, USDA amended its

regulatory definition of "fresh fruits and vegetables," 7

C.F.R. S 46.2(u), to include oil-blanched frozen fruits and

vegetables, thereby bringing such produce within PACA's

reach. In its statement accompanying publication of the

final rule, USDA described a comment it received from a

representative of a major restaurant chain voicing its

concern that the rule change "might bring restaurants

under the jurisdiction of the PACA." Final Rule,

8

"Regulations (Other Than Rules of Practice) Under the

Perishable Agricultural Commodities Act, 1930 (PACA)," 61

Fed. Reg. 13385, 13386 (Mar. 27, 1996). USDA responded:

Restaurants traditionally have not been considered

subject to the PACA by USDA or Congress unless the

buying arm of the restaurant is a separate legal entity,

and is buying for and/or reselling the product to

another entity. Since restaurants are not subject to the

PACA, this change in the regulation will not impact

restaurants.

Id.

Second, in 1995, Congress amended PACA. These

amendments had no bearing on who was and was not

covered by the statute.5 In the report of the House

Committee on Agriculture accompanying the 1995 PACA

Amendments Act, the Committee explained that:

Section 3 phases out license fees for retailers and

grocery wholesalers. It defines the term "retailer" as a

person who is a dealer engaged in the business of

selling any perishable commodity at retail.

Approximately 4,000 retailers are currently estimated

to be licensed under PACA. Those businesses such as

grocery stores and other like businesses that

predominantly serve those consumers purchasing food

for consumption at home or off the premises of the

retail establishment are considered to be included in

the definition of retailer. It is not the intent of the

Committee that the definition of retailer be construed

to include foodservice establishments such as

_________________________________________________________________

5. Essentially, the 1995 amendments phased retailers and grocery

wholesalers out of license fee payment, allowed USDA to adjust license

fees under its rulemaking authority, "require[d] USDA to receive a

written complaint before pursuing an investigation, require[d] additional

USDA investigation notification procedures, increase[d] . . .

administrative penalties, establishe[d] civil penalties, clarifie[d] the

status

of collateral fees and expenses, and clarifie[d] misbranding prohibitions

. . . ." H.R. Rep. No. 104-207, at 6 (1995), reprinted in 1995

U.S.C.C.A.N.

453, 453. Other than these changes, the House Committee on

Agriculture explained, the law remained unaffected. Id.

9

restaurants, or schools, hospitals and other

institutional cafeterias.

H.R. Rep. No. 104-207, at 7 (1995), reprinted in 1995

U.S.C.C.A.N. 453, 454.

Accordingly, based on this regulatory interpretation and

legislative history, the district court held that restaurants

such as Magic are not "dealers" and are therefore not

subject to PACA's trust provision.

III.

The question of whether a restaurant with extensive

operations such as Magic is a "dealer" under PACA is a

purely legal determination. Accordingly, this court exercises

plenary review over the judgment of the district court. In re

Reading Co., 115 F.3d 1111, 1124 (3d Cir. 1997).

A. The Statutory Language.

In resolving this issue, the first question we must ask is

whether the plain language of the statute is unambiguous.

Idahoan Fresh v. Advantage Produce, Inc., 157 F.3d 197,

202 (3d Cir. 1998). If it is, there is generally no need to look

to administrative interpretations or to legislative history.

Ratzlaf v. United States, 510 U.S. 135, 147-48 (1994);

Idahoan Fresh, 157 F.3d at 202; West v. Sullivan, 973 F.2d

179, 185 (3d Cir. 1992), cert. denied, 508 U.S. 962 (1993).

If the statute is "silent or ambiguous as to the specific

issue," and an administrative agency charged with

administering the statute has devised its own regulatory

interpretation of the statute, the court must then ask

"whether the agency's answer is based on a permissible

construction of the statute." West, 973 F.2d 179 at 185

(quoting Chevron, U.S.A., Inc. v. Natural Resources Def.

Council, Inc., 467 U.S. 837, 842-43 (1984)).

In the more than half-century since the initial enactment

of PACA, only three other courts have addressed whether

restaurants are "dealers" under it. We appear to be the only

United States Court of Appeals to consider the question.

Recently, two district courts in California concluded, like

the bankruptcy court in this case, that restaurants are

10

"dealers" under the plain language of PACA. See Royal

Foods Co. v. L.R. Holdings, Inc., No. C 99-01609, 1999 WL

1051978 (N.D. Cal. Nov. 10, 1999); JC Produce, Inc. v.

Paragon Steakhouse Restaurants, Inc., 70 F. Supp.2d 1119

(E.D. Cal. 1999). However, in In re Italian Oven, Inc., 207

B.R. 839 (Bankr. W.D. Pa. 1997), the bankruptcy court, like

the district court in this case, held that PACA's definition of

"dealer" is ambiguous, that the USDA regulation defining

"dealer" did so to the exclusion of anyone not expressly

described by the regulation, and that the restaurant debtor

in that case was not a retailer under this regulation and

therefore not subject to PACA's trust provision. The Italian

Oven court considered and expressly rejected the reasoning

of the bankruptcy court in this case. Id. at 842-43.6

As noted above, USDA, the agency charged with

administering PACA, has indicated its view that restaurants

are not "dealers" under that statute. Indeed, that agency's

consistent practice for seven decades since PACA's

enactment has been to deny that the statute gives it

jurisdiction over restaurants.7 Nevertheless, "a reviewing

_________________________________________________________________

6. It gave three reasons in support of its holding that PACA's definition

of "dealer" was ambiguous and resort to administrative materials was

appropriate. The first reason was that prior to the bankruptcy court's

decision in this case, there had been no reported decisions dealing with

whether PACA applies to restaurants, even though the statute had been

in existence since 1930. Id. at 843. The court's second reason is

confusing, but appears to have had something to do with PACA's silence

as to its applicability to restaurants. Id. The third reason was that PACA

empowered the USDA to administer the statute by enacting regulations.

Id. at 843-44. For the same reasons discussed herein, the Italian Oven

court's first two reasons for looking beyond the plain statutory

definition

of "dealer" are unconvincing to us. Additionally, its third reason is

irrelevant to an inquiry into the ambiguity of statutory text.

7. This practice is further evidenced by USDA's communications with

Magic. A July 6, 1995 letter to counsel for Magic from a USDA official

apparently responsible for license and program review in the PACA

Branch of USDA's Fruit and Vegetable Division explained that official's

view that "[r]estaurants are not considered`dealers,' `brokers,'

`commission merchants' or any other entity whose operations are subject

to the PACA," and that "[t]he PACA is not applicable to a restaurant that

does not act as a central distributor for subsidiary restaurants

irrespective of where it obtains it perishable commodities." (A.16).

11

court should not defer to an agency position which is

contrary to an intent of Congress expressed in

unambiguous terms." Estate of Cowart v. Nicklos Drilling

Co., 505 U.S. 469, 476 (1992).

Ultimately, this case turns on whether the statutory

definition of "dealer" found in PACA is unambiguous with

respect to its inclusion of restaurants such as Magic. As

discussed above, PACA states that subject to certain

exceptions, a dealer is "any person engaged in the business

of buying or selling in wholesale or jobbing quantities, as

defined by the Secretary, any perishable agricultural

commodity in interstate or foreign commerce . . . ." 7 U.S.C.

S 499a(b)(6). Because "the term `person' includes

individuals, partnerships, corporations, and associations,"

id. S 499a(b)(1), Magic is a "person" under PACA.

Furthermore, the parties do not dispute that Magic

purchased "wholesale or jobbing quantities" of produce,

which USDA regulations define as "aggregate quantities of

all types of produce totaling one ton (2,000 pounds) or more

in weight in any day shipped, received, or contracted to be

shipped or received." 7 C.F.R. S 46.2(x). Additionally, Magic

does not contend that it falls within any of the three

statutory exceptions to PACA's definition of "dealer." See 7

U.S.C. S 499a(b)(6)(A), (B), and (C).

At oral argument in this case, it was suggested that

Congress's employment of the words "engaged in the

business of " in defining the category of"dealers" rendered

this definition ambiguous, because this language could be

interpreted to restrict the meaning of "dealer" to include

only those engaged primarily in the business of buying or

selling perishable agricultural commodities. However,

nothing about the ordinary meaning of the words"engaged"

or "business" indicates that the statutory definition should

be understood to apply only to those engaged primarily in

this business. This "engaged in the business of " language

speaks to the type of business required to invoke

jurisdiction under PACA, not to the quantity thereof.

Congress spoke to quantity later in this definition, when it

12

restricted the category of "dealers" to those doing business

"in wholesale or jobbing quantities."8

There is therefore nothing ambiguous about the

application of this statutory definition to the facts of this

case. The district court's conclusion that the definition is

ambiguous because it does not explicitly state whether

restaurants are dealers is specious. Because Congress

chose to define the word "dealer" in broad terms, rather

than by specifically identifying each entity that falls into

this category, does not automatically render the definition

ambiguous.

B. The Statutory Purpose.

Even where the express language of a statute appears

unambiguous, a court must look beyond that plain

language where a literal interpretation of this language

would thwart the purpose of the overall statutory scheme,

United States v. Jersey Shore Bank, 781 F.2d 974, 977 (3d

Cir. 1986), aff 'd, 479 U.S. 442 (1987), would lead to an

absurd result, id., or would otherwise produce a result

"demonstrably at odds with the intentions of the drafters,"

_________________________________________________________________

8. The interpretation given to the definition of "dealer" in the Packers

and

Stockyards Act, 7 U.S.C. S 181 et seq. ("PSA"), lends additional support

to this conclusion. PACA's trust provision was modeled on that of the

PSA, and this court has previously observed that authority developed

under the PSA is persuasive in interpreting PACA's trust. See Consumers

Produce, 16 F.3d at 1382 n.5. Using language nearly identical to that

used in PACA, the PSA defines a "dealer" as"any person . . . engaged in

the business of buying or selling in commerce livestock at a stockyard

. . . ." Id. S 201(d). The only decision interpreting the PSA's "engaged

in

the business of " language of which we are aware confirms our

interpretation of PACA's identical language. See Kelley v. United States,

202 F.2d 838, 841 (10th Cir. 1953) ("engaged in the business of "

language cannot be read to mean engaged in the sole business of); see

also United States v. Perdue Farms, Inc., 680 F.2d 277, 285 (2d Cir.

1982) (interpreting PSA's nearly identical definition of "live poultry

dealer," 7 U.S.C. S 218b (repealed 1987), and concluding that "rather

than focusing upon the absolute amount of packing business or live

poultry business a firm engaged in, Congress chose to make the USDA's

jurisdiction dependent upon the activity of the business . . . , no matter

how small . . . .").

13

Demarest v. Manspeaker, 498 U.S. 184, 190 (1991) (quoting

Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 571

(1982)).

Nevertheless, it cannot be seriously contended that

holding that restaurants purchasing perishable agricultural

commodities in wholesale or jobbing quantities, as defined

by the Secretary, are "dealers" under PACA is contrary to

the statute's purpose, absurd, or "demonstrably at odds

with the intentions of the drafters." There is no clear

evidence of legislative intent regarding treatment of such

restaurants at the time the definition of "dealer" was

originally enacted in 1930. Indeed, the only such evidence

of legislative intent is the statement contained in the 1995

House Agriculture Committee report that the Committee did

not intend that restaurants be included within the

definition of "retailers" enacted in the 1995 PACA

Amendments Act. That statement, however, is confined to

the amendment. This committee report was issued more

than 30 years after the last time Congress modified the

definition of "dealer" in any substantial way,9 and dealt with

issues wholly different from this definition. See supra note

6. This report language is not something "upon which other

legislators might have relied in voting for or against" the

statutory definition of "dealer," and cannot constitute

evidence of the legislative intent behind that definition. See

Heintz v. Jenkins, 514 U.S. 291, 298 (1995). As the

Supreme Court has observed, "the views of a subsequent

Congress form a hazardous basis for inferring the intent of

an earlier one." United States v. Price, 361 U.S. 304, 313

(1960); see also Pennsylvania Med. Society v. Snider, 29

F.3d 886, 898 (3d Cir. 1994). We therefore disregard this

House committee report.

_________________________________________________________________

9. Pub L. No. 87-725, 1962 U.S.C.C.A.N. 2749, substituted "wholesale or

jobbing quantities" for "carloads." Amendments in 1969, 1978, and 1981

increase the monetary amount under current section 499a(b)(6)(B) from

$90,000 to $100,000, $100,000 to $200,000, and $200,000 to $230,000,

respectively. See Pub. L. No. 97-98, 1981 U.S.C.C.A.N. (95 Stat.) 1213,

1269; Pub. L. No. 95-562, 1978 U.S.C.C.A.N. (92 Stat.) 2381; Pub. L. No.

91-107, 1969 U.S.C.C.A.N. 1225. In addition, the 1978 amendment

inserted "other than potatoes" after "commodity" in current section

499a(b)(6)(C). See Pub L. No. 95-562, 1978 U.S.C.C.A.N. (92 Stat.) 2381.

14

Moreover, requiring restaurants that purchase large

quantities of produce to comply with PACA furthers the

goals of the statute as amended in 1984. Although the

original PACA was enacted to protect produce growers and

producers, the 1984 amendments, including the trust

provision, were enacted for the protection of all produce

sellers and suppliers. Holding restaurant-purchasers

responsible to produce sellers such as Bowie provides

protection of produce suppliers up through the distribution

chain and therefore furthers the purposes of the trust

provision.

Magic contends that if this court holds that restaurants

are "dealers," and therefore subject to PACA, the

repercussions would be "staggering" because"all of the

hundreds of thousands of restaurants in this country" that

have never applied for licenses under PACA "have been in

direct violation of federal law, for decades." (Appellee's Br.

at 18-19). To some extent, Magic may have a point. Under

PACA, any person failing to obtain a license through

inadvertence rather than wilfulness may "be permitted by

the Secretary . . . to settle his liability in the matter by the

payment of fees due for the period covered by such violation

and an additional sum, not in excess of $250, to befixed by

the Secretary . . . ." 7 U.S.C. 499c(b). Should the Secretary

choose to pursue such violations, these licensing fees could

add up to substantial amounts over the 70-year period in

which PACA has been in force.

It is not clear how many restaurants actually purchase

produce in "wholesale or jobbing quantities," and are

therefore subject to PACA's licensing requirement. The

parties have offered no evidence on this point. We suspect,

however, that the number of restaurants that do so is far

smaller than Magic contends. In addition, we would be very

surprised if the Secretary chose to pursue enforcement of

such violations retroactively. Even if the Secretary does

attempt to enforce PACA's penalty provisions against these

"violating" restaurants, the long history of non-enforcement

against restaurants in this case may be sufficiently

extraordinary as to permit restaurants to successfully argue

the application of equitable estoppel or laches.

15

We recognize that the USDA has refused to exercise

jurisdiction over restaurants pursuant to PACA for

approximately seven decades. It is this benign neglect that

is responsible for much of the confusion in this area.

Nevertheless, we are constrained by PACA's unambiguous

statutory language to hold that a restaurant such as Magic,

which purchases produce in wholesale or jobbing quantities

(and in excess of $230,000 per year), is a "dealer" under 7

U.S.C. S 499a(b)(6), and administrative interpretations

contrary to this plain language are therefore not persuasive.

IV.

For the foregoing reasons, the January 6, 1999 order of

the district court will be reversed, and the case remanded

to the district court with instructions to reinstate the

January 15, 1997 order of the bankruptcy court granting

partial summary judgment in favor of Bowie. Each side to

bear its own costs.

16

RENDELL, Circuit Judge, dissenting:

I respectfully dissent because I find the phrase"engaged

in the business of buying or selling . . ." to be susceptible

of a different meaning from that given it by the majority.

Restaurants are engaged in the business of preparing

and selling meals to customers. Not only is buying or

selling perishables in large quantities not their primary

business, it is not their business at all. 10 Admittedly, in the

course of their business, they do buy perishables in great

quantities. If PACA was intended to include them, Congress

should have said, "any business that buys or sells . . ."; it

did not. As I read the statute, it confines the concept of

"dealer" to those who do this as their bread and butter, so

to speak. The majority reading would make most prisons

"dealers," yet prisons are not engaged in the perishable

commodity-buying business.

The reading I have proffered, together with the majority's

rejection of it, leads me to conclude that the statutory

language is ambiguous. Once we have found an ambiguity

in the statutory language, our resort to legislative history

would confirm that PACA is not intended to cover

restaurants and food service institutions. In discussing the

definition of "retailer" (which relies in part on the definition

of dealer), the House Report made clear that food service

establishments such as restaurants or schools, hospitals,

_________________________________________________________________

10. The majority relies by analogy upon the Kelley case, which found

that the Packers and Stockyards Act did not require a dealer to be

engaged solely in the business of selling livestock. See Kelley v. United

States, 202 F.2d 838 (10th Cir. 1953). This analogy is inapposite. In

Kelley, the livestock dealer was clearly engaged in the business of

selling

livestock. Kelley was a proprietor of a stockyard that, because it was

private, was not itself subject to the Packers and Stockyards Act. See id.

at 839. The Tenth Circuit Court of Appeals found that, by buying

livestock from stockyards that were subject to the Act, Kelley became a

"dealer" subject to the registration and bond requirements of the Act. See

id. at 841. That is, the issue in Kelley was whether the livestock dealer

had to be registered when his dealing in livestock subject to the Act was

not his sole business due to the fact that his sales of other livestock

might predominate. There is no question that the core of Kelley's

business was dealing livestock, and this clearly distinguishes his case

from the instant case where Magic's business is not dealing in produce.

17

and other institutional cafeterias are not required to be

licensed. The agency's construction of PACA is consistent

with this position.11 In short, dealers and brokers are those

whose business is in dealing in, or brokering, these items.

They should be licensed and are subject to the Act. Magic

is engaged in a very different business, and is not in my

view subject to regulation as a "dealer" under PACA.

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

_________________________________________________________________

11. The majority notes that we "should not defer to an agency position

which is contrary to an intent of Congress expressed in unambiguous

terms." Ante at 12 (quoting Estate of Cowart v. Nicklos Drilling Co., 505

U.S. 469, 476 (1992)). Here, however, the only unambiguous statement

of Congressional intent appears in the House Report. The agency's

position is consistent with the intent expressed in the legislative

history.

See In re The Italian Oven, Inc., 207 B.R. 839, 843-44 (Bankr. W.D. Pa.

1997) (describing agency position on, and legislative history of, the

"dealer" provision of PACA).

18