Petition — West v. Bergland

19-1599

FILED

Suthe Supreme Court of the Hx

OcToBeR TERM, 1979

APR 11 1980

eBoax, JR., CLERN

“Bupreme Court, UR”

FRANK R. WEST,

Petitioner,

VERSUS

BOB BERGLAND, SECRETARY OF THE DEPARTMENT

OF AGRICULTURE, ET AL.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

JAMES P. LINN

B. J. ROTHBAUM, Jr.

of

LINN, HELMs, KirK & BURKETT

Suite 410, Fidelity Plaza

Oklahoma City, Oklahoma 173102

and

LATHROP, ALBRACHT & SWENSON

460 Continental Building

Omaha, Nebraska 68102

Attorneys for Petitioner,

Frank R. West

April, 1980

rw nrwrrw wer ere

UTTERBACK TYPESETTING CO. — PHONE 235-0030 — 3740 S. HOLLIDAY AVE.— OKLA. CITY, OKLA. 73115

TABLE OF CONTENTS

Introduction

Opinions Below

Jurisdiction

Questions Presented

Statutes and Regulations Involved

Statement

Reasons for Granting the Writ

Conclusion

Certificate of Service follows Petition

Appendix A:

Opinion of the Court of Appeals

Opinion of the District Court

Appendix B:

Text of the Agricultural Marketing Act of 1946 __

Appendix C:

Text of 7 C.F.R. 52.13(a) [redesignated as 7 C.F.R.

§2853.11 (a) ]

Appendix D:

Order of the Court of Appeals Denying Petition for

Rehearing

11

23

A-1

A-27

B-1

C-1

D-1

were

TABLE OF AUTHORITIES

Cases PAGE

Adamo Wrecking Co. v. United States, 434 U.S. 275

(1978) 10, 16, 18, 19

Addison v. Holly Hill Fruit Products, 322 U.S. 607

(1944) 14,19

Atchison, T. & S.F. Ry. Co. v. Wichita Board of Trade,

412 U.S. 800 (1973) 21, 22

Brannon v. Stark, 342 U.S. 451 17

Burlington Truck Lines v. United States, 371 U.S. 156

(1962) 21, 22

Chandler v. Roudebush, 425 U.S. 840 (1976) _._.___.14, 15

Detroit Edison Company v. National Labor Relations

Board, __.. U.S. ___, 99 S.Ct. 1123 (1979) __ 15

Federal Energy Administration v. Algonquin SNG,

Inc., 426 U.S. 548 (1976) 13-14, 15, 16, 18

Federal Maritime Commission v. Seatrain Lines, Inc.,

411 U.S. 726 (1973) 16, 20

Federal Power Commission v. Texaco, Inc., 417 U.S.

380 (1974) 21, 22

International Brotherhood of Teamsters v. Daniel, __

U.S. __, 99 S.Ct. 790 (1979) 17

Lewis v. United States, __. U.S. ___, 48 U.S.L.W. 4205

(1980) 12, 13, 14, 15

Mourning v. Family Publications Service, Inc., 411

U.S. 356 (1973) 17

National Labor Relations Board v. Brown, 380 U.S.

278 (1964) 18

National Labor Relations Board v. Clark, 468 F.2d 459

(5th Cir. 1962) 21

_ National Woodwork Mfgs. Assn. v. National Labor

Relations Board, 386 U.S. 612 (1967) . 18

Schwegmann Bros. v. Calvert Distillers Corporation,

341 U.S. 384 (1951) 14

oe ae

Securities and Exchange Commission v. Cherney Cor-

poration, 318 U.S. 80 (1942) 10, 20, 21, 22

Securities and Exchange Commission v. Sloan, 436

U.S. 103 (1978) 10, 13, 15, 16, 17, 19

Secretary of Agriculture v. Interstate Commerce Com-

mission, 551 F.2d 1329 (D.C. Cir. 1977) 21

Simpson v. United States, 435 U.S. 6 (1978) __.__.12, 13, 14

Southeastern Community College v. Davis, __. U.S.

_..-, 99 S.Ct. 2361 (1979) 17

Standard Oil Co. v. United States, 337 U.S. 293 (1949) 16

Tennessee Valley Authority v. Hill, 437 U.S. 153

(1978) 13, 15, 15-16, 17, 19

Trailways of New England v. Civil Aeronautics Board,

412 F.2d 926 (1st Cir. 1969) 21

West v. Bergland, 611 F.2d 710 (8th Cir.

1979) 2, 8,9, 19, 21

Zenith Radio Corp. v. United States, 437 U.S. 443

(1978) 17

Zuber v. Allen, 396 U.S. 168 (1969) 17

Statutes

7 U.S.C, §1 17

7 U.S.C. §201 17

7 U.S.C. §241 17

7 U.S.C. §499 8

7 U.S.C. §499 (h) 17

7 U.S.C. §1100 17

7 U.S.C. §1622 (h) 2, 3, 4, 8,9, 14

7 U.S.C. §1624(b) 2,9

7 U.S.C. §1641 18

7 U.S.C, §2011 18

7 U.S.C. §2131 18

92 Stat. 876, Public Law 95-405, 7 U.S.C. §22(1) _.... 18

21 U.S.C. §151 18

21 U.S.C. §451 18

21 U.S.C. §601 18

28 U.S.C. §1254(1) 2

—jy—

AUTHORITIES CONTINUED

Regulations

PAGE

7 C.F.R. 52.13 (a) 3,5, 9, 10, 19, 21, 22

Legislative History, Treatises and Miscellaneous

92 Congressional Record, Pt. 8, 79th Cong., 2nd Sess.,

p. 10,370 (July 29, 1946) (Sen. Russell)

101 Congressional Record, Pt. 7, 84th Cong., 1st Sess.,

pp. 8631-8632 (June 17, 1955) (Sen. Johnston) —_

H. Rep. No. 1463, Report of the Committee on Agricul-

ture (July 27, 1955) reprinted in 1955 U.S. Code

and Administrative News, pp. 2727, et seq. ____-__

101 Congressional Record, Pt. 10, 84th Cong., 1st Sess.,

pp. 12577-12578 (August 17, 1955) (Sen. Ellender)..

H. Friendly Benchmarks, Mr. Justice Frankfurter and

the Reading of the Statutes, p. 215-216 (1st Ed. 1967)

Report of the [Senate] Committee on Agriculture and

Forestry, No. S.1843 (July 26, 1946), reprinted in

1946 U.S. Code Congressional Service, p. 1584 et seq.

(1946)

5, 12

13

In the

Supreme Court of the United States

OcToBEerR TERM, 1979

FRANK R. WEST,

Petitioner,

VERSUS

BOB BERGLAND, SECRETARY OF THE DEPARTMENT

OF AGRICULTURE, ET AL.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

INTRODUCTION

Petitioner, Frank R. West, respectfully prays that a

writ of certiorari issue to review the judgment and opinion

of the Court of Appeals for the Eighth Circuit entered in

this proceeding on December 19, 1979. The opinion decides

a very important question of federal law which the Court

of Appeals itself stated “presents a question of first im-

pression” and which the Court of Appeals agreed is “not

easily rejected.” The question clearly warrants plenary re-

view by this Court.

i,

OPINIONS BELOW

The opinion of the Court of Appeals, reported as West

v. Bergland, 611 F.2d 710 (8th Cir. 1979), and the unre-

ported opinion of the District Court, appear as Appendix

“A” hereto.

JURISDICTION

The judgment of the Court of Appeals was entered on

December 19, 1979. A timely petition for rehearing, and

suggestion of rehearing en banc, was denied on January

14, 1980 (App. D, p. 1), and this petition for certiorari was

filed within ninety (90) days of that date. This Court’s

jurisdiction is invoked under 28 U.S.C. §1254(1).

QUESTIONS PRESENTED

1. Whether the Secretary of Agriculture has the im-

plied power to sanction a private citizen by withdrawing

from him — for an indefinite period — the meat grading and

inspection services which the Secretary is commanded by

the Agricultural Marketing Act of 1946 to make available

to the public because of alleged “misconduct” by the indi-

vidual, in the absence of any express statutory authority

to impose such a sanction?

2. Whether an administrative proceeding seeking to

impose a withdrawal of meat grading services initiated

solely under §203 of the Agricultural Marketing Act of

1946 (7 U.S.C. §1622(h)) can be justified in court by post

hoc reliance on §205 of the Agricultural Marketing Act,

7 U.S.C. §1624(b) when §205 was not relied upon by the

Secretary prior to the institution of litigation challenging

his authority under §203?

fee

‘STATUTES AND REGULATIONS

INVOLVED

The full text of the Agricultural Marketing Act of 1946,

7 U.S.C. §§ 1621-1630, is set forth as Appendix “B” to this

Petition. ‘

The critical provision is subsection (h) of section 203,

7 U.S.C. §1622(h). It reads, in pertinent part:

“The Secretary of Agriculture is directed and au-

thorized . . . to inspect, certify, and identify the class,

quality, quantity, and condition of agricultural products

under such rules and regulations as the Secretary of

Agriculture may prescribe, . . . to the end that agri-

cultural products may be marketed to the best advan-

tage .. . except that no person shall be required to use

this service ... Whoever knowingly shall [violate any

provision of this subsection] shall be fined not more

than $1,000 or imprisoned not more than one year or

both.” :

The full text of 7 C.F.R. 52.13(a) [newly redesignated

as 7 C.F.R. §2853.11(a)] is set forth in full as Appendix

“C” to this Petition.

In relevant part it provides: “Denal or Withdrawal of

Service. (a) For misconduct — (1) Bases for denial or

withdrawal.” The regulation then goes on to enumerate

a multitude of categories of “misconduct” which are the

“bases” for denial or withdrawal of the meat grading and

inspection services Congress established, and adds a “catch-

all” clause providing for denial or withdrawal when the

Secretary of Agriculture believes a person “has in any

ymanner not specified in this paragraph violated subsection

2U3(h) of the Act.” All of the categories of “misconduct”

er a

would be subject to the express judicial punishment Con-

gress wrote into the subsection. Petitioner, Frank R. West,

is a user of the meat grading and acceptance service whom

the Secretary proposed to “sanction” by withdrawal of

services for alleged “misconduct.”

STATEMENT

In 1946 Congress passed the Agricultural Marketing

Act. The Act is essentially a voluntary program designed

to facilitate cooperation in research and development of

agricultural products, to fund research, study and experi-

mentation in agriculture and to improve the diet of Ameri-

cans. The Congressional declaration of purpose shows, and

the legislative history of the Act confirms, the view that

Congress’ only concern in enacting the statute was a qualm

sounding in federalism: Congress wished to assist agricul-

tural research without interfering with State and local func-

tions having the same purpose. See, Report of the [Senate]

Committee on Agriculture and Forestry, No. S.1843 (July

26, 1946) reprinted in, 1946 U.S. Code Cong. Service, p. 1584

et seq. (1946). Section 203(h) of the Act, 7 U.S.C. §1622 (h)

provides, as part of a litany of other directions to the Sec-

retary of Agriculture, that the Secretary shall establish a

service for grading, inspection and certification of agricul-

tural products which are shipped in interstate commerce.

This is the principal statutory genesis of the familiar sym-

bol “U.S.D.A.”, followed by a specific “grade” of beef. This

section contains a specific penalty provision. If anyone

knowingly violates the statute by forging or altering a

mark or grade, by false statements, or otherwise, he shall

lilies

be imprisoned for a maximum period of one year and fined

a maximum amount of $1,000, or both, for each offense.

While Congress has, thus, chosen the judicial sanction

of fine and imprisonment if a United States District Court

and jury determines there has been a violation of its stat-

ute, the Secretary contends that he has the implied power

to impose the additional administrative sanction of with-

drawal of meat grading or acceptance services, for an un-

limited period of time, and wholly uncontrolled by any

statutory criteria (since there are none), if he determines

there has been a violation of §203(h). The Secretary claims

that he has such power though Congress has not expressly

granted such power to him, and though the Senate Floor

Manager for the Agricultural Marketing Act emphatically

assured the Senate that the Bill did not “in any way ex-

tend the power of the Department of Agriculture” and was

“strictly a research Bill.” 92 Cong. Rec., part 8, 79th Cong.

2d Sess., p. 10,370 (July 29, 1946); (Sen. Russell).

The Secretary’s regulations for withdrawal of services

are lengthy, detailed, and possess the tone of a penal act.

7 C.F.R. §53.13(a). The tone is understandable since the

regulation expressly states its sanction is invoked for alleged

“misconduct” by a private citizen. This, Petitioner con-

tends, has been done in defiance of the Act, not in con-

formity with it. Indeed, in 1955 Congress expressly refused

to enact an amendment to the Act which would have given

1 7 CER. §53.13(a) was redesignated during the pendency of this liti-

gation and now appears as 7 C.F.R. §2853.11(a). For the sake of

clarity, we shall continue to refer to the regulation as it existed at the

time this litigation was initiated.

#%

a

the Secretary the power to promulgate “substantive” regu-

lations and would have made violation of such regulations

a crime. The proposed amendment to the Act was intro-

duced by Senator Lyndon B. Johnson as S. 1757 (June 17,

1955). It would have “cover[ed] violations of regulations

... [of the Secretary].” 101 Cong. Rec., part 7, 84th Cong.,

Ist Sess., pp. 8631-8632 (June 17, 1955) (Sen. Johnston).

The House of Representatives emphatically rejected

the proposed amendment. See H. Rep. No. 1463, Report of

the Committee on Agriculture (July 27, 1955) reprinted in

1955 U.S. Code Cong. and Adm. News, pp. 2727, et seq.

The Senate yielded to the House position to, inter alia,

“strike the provisions of the Bill imposing penalties for vio-

lations of regulations of the Secretary... .” 101 Cong. Rec.,

part 10, pp. 12577-12578, 84th Cong., Ist Sess. (August 17,

1955) (Senator Ellender). (emphasis added)

Petitioner is a resident of Omaha, Nebraska. He is en-

gaged in the business of buying and selling beef and pork

individually and through direct and indirect ownership in-

terests in companies conducting such operations. From 1965

until January of 1976, Mr. West was President and Chair-

man of the Board of American Beef Packers, Inc. (“ABP”).

ABP was, at that time, the second largest beef packing

house, and 216th largest corporation, in the United States.

In 1976, ABP sought reorganization under Chapter XI

of the Bankruptcy Act. Mr. West continued to remain a

contractual advisor to ABP pursuant to a contract approved

by the reorganization court.

= me

In January 1977, Mr. West pled guilty to a misde-

meanor information filed in the District Court for the Dis-

trict of Nebraska. At the hearing on the misdemeanor

information, Mr. West stated that during his tenure as

President and Chairman of ABP, employees of ABP had

given gratuities to federal meat inspectors; that he was

aware of the practice; and that he did not attempt to end

it. The District Court accepted the misdemeanor plea and

fined Mr. West the sum of $1,000.

Some seven (7) months later, an administrative officer

bearing the title of Administrator of the Food, Safety and

Quality Service of the Department of Agriculture filed an

instrument. which he designated a “complaint” against Mr.

West before an administrative law judge of the Department

of Agriculture. This instrument states that the Adminis-

trator proposed to withdraw beef grading and acceptance

services from Mr. West for an unlimited period of time,

which could, presumably, be the rest of Mr. West’s life,

unless Mr. West could prove to the satisfaction of the Ad-

ministrator that Mr. West should be allowed to participate

in the use of the meat grading and acceptance services

which the Secretary is commanded by §203 of the Agricul-

tural Markdifng Act to make available, on a voluntary basis.

The administrative complaint stated that it was brought

solely “pursunt to §203(h) of the [Agricultural Marketing]

Act, 7 U.S.C. §1622(h)).” It states that the reason for its

filing is the plea of guilty which Mr. West entered to the

misdemeanor information filed in the District Court for the

District of Nebraska in January, 1977.

Mr. West would be allowed a hearing before sanctions

are imposed for alleged “misconduct.” Since no statute au-

7%

ala

thorizes the hearing, it is, presumably, a matter of adminis-

trative grace.?

There is no duration on the length of the “sanction” of

withdrawal of services which may be impos, nor are there

any statutory criteria specifying the nature of the proof nor

the nature of the defenses which may be asserted. This

is so for the simple reason that Congress did not provide

in the statute for any administrative sanctions and, natur-

ally, did not specify criteria for a power it did not expressly

grant. Compare, e.g., the detailed provisions for withdrawal

of services under the Perishable Commodities Act, 7 U.S.C.

$499 et seq.

Petitioner initiated this suit in the District Court for

the District of Nebraska contending that 7 C.F.R. §53.13(a)

was void because it was both unauthorized by, and con-

trary to, the statute under which it purported to be issued,

§203(h) of the Agricultural Marketing Act, 7 U.S.C. §1622

(h). Petitioner’s showing that an administrative sanction-

ing hearing was imminent was uncontradicted.

After initially granting temporary restraining relief

(continued by agreement), the district court held for the

Respondents in a brief memorandum opinion.

On Petitioner’s appeal, the Court of Appeals, although

conceding that the question presented was one of “first im-

2 The Court of Appeals assumed that “sanctions” for alleged “misconduct”

would be imposed only after a hearing of some sort. It expressly de-

clined to intimate any opinion on the question of whether such “sanc-

tions” could be imposed without a hearing, although it noted the Sec-

retary purported to claim such power. West v. Bergland, 611 F.2d 710

722 n.16 (8th Cir. 1979).

wr

pression” and that Petitioner’s contention that 7 C.F.R.

§53.13(a) was void was “not easily rejected”, nevertheless,

affirmed the district court’s denial of injunctive relief for

reasons substantially different from those advanced by the

district court. Judge Ross, specially concurring, argued that

the challenged regulation should, at least, contain criteria

as to the length of time that the penalties which it imposed

must be endured. West v. Bergland, supra, 611 F.2d at

725-726.

The Court of Appeals relied in substantial part upon

§205 of the Act (7 U.S.C. §1624(b)), in upholding the im-

plied power of the Secretary to impose “misconduct sanc-

tions” under §203 (7 U.S.C. §1622(h)).

The court rejected as “speculative” Petitioner’s con-

tention that the legislative history of the Agricultural Mar-

keting Act, and particularly the statements made by its

Senate Floor Manager, Senator Richard B. Russell, clearly

..egated the grant of an implied sanctioning power such as

the Secretary is here claiming.

Despite the penal tone of the regulation, and the flat

statement of the Secretary that such sanctions are imposed

only “for misconduct”, 7 C.F.R. §53.13(a), the Court of Ap-

peals held that the regulation was not punitive on its face.

West v. Bergland, supra, 611 F.2d at 722, n.14.2 Both the

% The Court of Appeals did agree that the Secretary could not use this

implied sanctioning power for “penal” purposes, or to “stigmatize” an

individual. The Court of Appeals held, however, that a judicial chal-

lenge based on such grounds, must await judicial review of an actual

“sanction” imposed by the Secretary. West v. Bergland, 611 F.2d 710,

722 0.14 (8th Cir. 1979).

e*

mltinis

District Court and the Court of Appeals appear to have

agreed that if the sanction was punitive in nature, the regu-

lation would be a nullity because it has been issued without

any express authority from Congress. Compare, Adamo

Wrecking Co. v. United States, 434 U.S. 275 (1978); Securi-

ties and Exchange Commission v. Sloan, 436 U.S. 103 (1978).

Petitioner filed a petition for rehearing and suggestion

of rehearing en banc, contending that:

(1) the Secretary’s own use of 7 C.F.R. §53.13(a)

against Petitioner demonstrated that it was unquestionably

being used for a penal purpose and, therefore, its use should

be enjoined, and

(2) Under this Court’s holding in Securities and Ex-

change Commission v. Cherney Corporation, 318 U.S. 80

(1942), and its unbroken line of progeny, a discretionary

order or regulation, such as 7 C.F.R. §53.13, must be upheld

by the court, if at all, on the same basis which the ad-

ministrator had himself invoked.

Since the Secretary had relied solely upon §203 of the

Act to sustain the regulation, and since both the regulation

and the “complaint” filed against Petitioner rely solely upon

§203, Petitioner contended the Secretary could not fall back

on another provision of the Act, §205 in an effort at post

hoc rationalization of authority for the regulation.

On January 14, 1980, the Court of Appeals denied re-

hearing and rehearing en banc.

poe. eee

REASONS FOR GRANTING THE WRIT

(1) The questions presented here are of very substan-

tial importance in federal administrative law. The “implied

power” concept accepted by the courts below is bot in-

consistent with decisions of this Court and, in the context

of implied “sanctions”, dangerous. Congress regularly en-

acts statutes directed at research and development of de-

sirable goals, and frequently enacts such statutes as part of

an interrelated state-federal plan. Congress did so here.

Because such statutes are usually technical and innocuous

in language and beneficent in purpose, statutes such as

these frequently pass the Congress, as did this one, with

little discussion, and without objection, if the author, spon-

sor or floor leader in charge of the legislation assures his

colleagues that the proposed Bill is purely a research and

development Bill containing no grant of substantive power

to a federal agency. That is what happened here.

In response to a pointed, and carefully-worded, in-

quiry from Senator Robert A. Taft, a principal Republican

leader in the Senate in 1946, Senator Richard B. Russell,

the Senate Floor Manager for the Bill which became the

Agricultural Marketing Act, assurred and reassurred Sen-

ator Taft, and his colleagues, that the Bill which he was

managing “does not in any wise extend the power of the

Department of Agriculture”; that “it does not to the slight-

est degree make any such provision”; and that “it is strictly

a research Bill.” 92 Cong. Rec., Part 8, 79th Cong., 2d Sess.

anliiins

at 10,370, et seq. (emphasis added). The colloquy is set

forth in full in the footnote below.‘

It is obvious that, upon the express representations of

Senator Russell to his colleagues, the Agricultural Market-

ing Act was passed “without objection.” Id. Cf., Simpson

v. United States, 435 U.S. 6, 13-14 (1978); Lewis v. United

States, __. U.S. ___, 48 U.S.L.W. 4205, 4207 (1980).

An administrator’s claim of vast implied power to im-

pose grave sanctions, such as an indefinite withdrawal of

the statutory services Congress established, should, plainly,

be viewed with great skepticism under such circumstances.

No one suggest. ‘hat Senator Russell openly lied to his col-

leagues. The Court of Appeals suggested, in substance, that

Senator Russell did not understand the Bill he was manag-

Taft. Mr. President, will the Senator yield?

Russell. I yield.

Taft. Does this Bill sn amy way extend the power of the De-

partment of Agriculture * * * or is it strictly confined to re-

search?

Russell. It dees not in any wise extend the power of the De-

partment of Agriculture or any of its subdivisions.

Taft. Either to buy or sell or regulate production?

Russell. It does not to the slightest degree make any such pro-

vision. It provides wholly for research.

. Taft. There are a couple of very general statements contained

in the Bill which I had not read with care, so 1 could not judge

whether the language was sufficiently broad to cover other ac-

tivities.

Mr. Russell. It is strictly a research Bill.”

92 Cong. Rec., Part 8, 79th Cong., 2d Sess. at 10,370, et seq. (July

29, 1946) (Emphasis added).

REE

PF RE &

ee

ing and that, despite his representations, great power was

secreted within the interstices of this “pure[] research

Bill.”

This theory contains a serious and important error

which warrants plenary review here; it is gravely flawed

both in principle and in practical effect; and it cannot be

reconciled with a host of decisions of this Court of which

Securities and Exchange Commission v. Sloan, supra, and

Tennessee Valley Authority v. Hill, 437 U.S. 153, 187-192

(1978), are sufficient examples. In words this Court has

very recently reemphasized,

“[{i]nasmuch as Senator [Russell] was the sponsor and

floor manager of the bill, his statements are entitled

to weight.” Lewis v. United States, Mes sects , 48

U.S.L.W. 4205, 4207 (1980).

Judge Friendly has put the proper perspective on the

question here presented with felicity.

“... It is unrealistic to suppose that all the legis-

lators and the chief executive have made a meticulous

study of the text of such complex measures as the In-

ternal Revenue Code or the Immigration and National-

ity Act; very likely most of them know only of the

general purpose, relied for the details on members who

sat on the committees particularly concerned, and were

quite willing to adopt these committees’ will on sub-

ordinate points as their own.”

For this reason, “a court does pretty well to read the

statute to mean what the few legislators having the great-

est concern with it said it meant to them.” H. Friendly

Benchmarks, Mr. Justice Frankfurtller and the Reading of

Statutes, p. 215-216 (1st Ed. 1967). (emphasis added).

nsitistnn

Judge Friendly’s perceptive appreciation of the reali-

ties of the legislative process is surely applicable to a re-

search and development Bill such as the Agricultural Mar-

keting Act of 1946.

This Court has often expressed the same awareness of

the realities of the federal legislative process, and the im-

portance of statements of sponsors of technical or appar-

ently non-controversial legislation. See, e.g., Simpson v.

United States, supra; Federal Energy Administration v. Al-

gonquin SNG, Inc., 426 U.S. 548, 564 (1976); Schwegmann

Bros. v. Calvert Distillers Corporation, 341 U.S. 384, 391,

392, 395 (1951); Addison v. Holly Hill Fruit Products, 322

U.S. 607, 616 (1944).

(2) The foregoing rule is an indispensable tool of ju-

dicial construction for twentieth century legislation at the

federal level. It is simply not physically possible for all

Members of Congress, or even a majority of them, to read

and study in detail every Bill upon which they are re-

quired to vote during a Session. Thus, in the absence of

some particular interest which an individual Member of

Congress may have, and in the absence of a Bill which is

obviously controversial, or plainly deals with a matter of

large public importance, the categorical representation of

a respected senior Senator — in response to a very-carefully

phrased inquiry by one of his senior colleagues — that the

particular Bill he is managing contains no grant of power

whatsoever; that it “provides wholly for research”; and that

it is “strictly a research Bill” must be held to preclude an

administrative agency from transforming “strictly a re-

search Bill” into a statute which grants to the adminis-

trator the discretionary power to impose severe “sanctions”

a

for alleged “misconduct.” Especially is this true when the

statute itself contains a specific penalty provision to be im-

posed by the United States District Courts. That is pre-

cisely the case with regard to 7 U.S.C. §1622(h). Cf., Lewis,

supra; Simpson, supra; Chandler v. Roudebush, 425 U.S.

840, 851-852, 863-864 (1976). | 3

It is also the situation which exists in regard to a

plenitude of Bills which are enacted during every Session

of Congress “without objection”, on the sponsor’s represen-

tation that the Biil is simply a Bill dealing with matters of

research and of state-federal coordination toward desirable

goals. Allowing a grant of great and grave “implied” power,

which may be exercised in the form of harsh sanctions

against private citizens, to be derived solely from the inter-

stices of a piece of research legislation, such as the Agricul-

tural Marketing Act of 1946, is inconsistent with the neces-

Sary premises of modern government at the federal level.

That is why this Court has said “it is the sponsors” whom

the Court will “look to when the meaning of the s atute is

in doubt”, especially when the sponsors speak “without con-

tradiction.” Algonquin, supra, 426 U.S. 564. In two major

decisions within the past two Terms, this Court has refused

to indulge a presumption of “implied” administrative power

even when it unquestionably appeared from the record that

the Committees of Congress having jurisdiction over the

agency approved of the implied power which the agency

had been exercising, in one case for more than thirty years.

Securities and Exchange Commission v. Sloan, 436 U.S. 103

(1978); see also, Tennessee Valley Authority v. Hill, 437

U.S. 153, 187-192 (1978)).

—16—

We submit that such cases as Sloan, Hill and Lewis

control a fortiori here. If they do not, Congress, the bar,

and a citizen facing severe sanctions surely should be made

aware of the reason for the distinction by plenary review

from this Court. Cf, Detroit Edison Company v. National

Labor Relations Board, .. U.S. _., 99 S.Ct. 1123, 1131-

1133 (1979). Administrative power to regulate, and even

to sanction, is, of course, essential to modern government.

But it is axiomatic that such power does not come into

being by Congressional acquiescence (Tennessee Valley Au-

thority v. Hill, supra), nor by mere desire of an adminis-

trator to have it (Securities and Exchange Commission v.

Sloan, supra), not by a notion of existence coming from

mere unchallenged use for a period of time (Federal Mari-

time Commission v. Seatrain Lines, Inc., 411 U.S. 726, 745-

746 (1973); Sloan, supra).

The decision below is wholly inconsistent with the

principles, purposes and policies announced in those de-

cisions. Moreover, the rationale of the Court of Appeals

below is irreconcilable with the fundamental premise that,

especially when dealing with penalties and sanctions, both

citizens and the attorneys from whom they seek advice, are

entitled to assume a statute means no more than what it

says (Adamo Wrecking Co. v. United States, 434 U.S. 275

(1978) ), particularly when the “uncontradicted” statements

of the principal sponsor and floor manager for the legisla-

tion are in accord with the natural reading of the statutory

language, Algonquin, supra, 426 U.S. at 564, and, even more

especially, when the sponsors “were at pains” to deny to

their colleagues that any grant of power or change in the

law was secreted within proposed legislation. Standard Oil

Co. v. United States, 337 U.S. 293, 312 (1949).

oe

The holding below that the Secretary possesses “im-

plied” power to impose harsh sanctions upon a private

citizen for alleged “misconduct” in addition to the specific

Sanction of fine and imprisonment legislated by Congress

in a research Bill is, thus, both wrong in principle and

dangerous as precedent.

It presents a very substantial question of federal law

which should be given plenary review. Adamo, supra;

Sloan, supra; Hill, supra; Brannon v. Stark, 342 U.S. 451 :

Zuber v. Allen, 396 U.S. 168 (1969).5

(3) The claim to an “implied” administrative power

to sanction for misconduct is especially weak here, and its

Sustention would be in particular tension with prior de-

cisions of this Court, in light of the fact that, when Con-

gress has intended the Secretary of Agriculture to possess

the power to suspend services, Congress has always granted

such power by explicit statutory provisions. These statutes

abound throughout Title 7 and Title 21. A number of such

Statutes are set forth in the margin.® Such provisions are

® It should be noted that this is wot a case involving consistent agency

definition of a “term of art”, such as Zenith Radio Corp. v. United

States, 437 US. 443 (1978), mor an express, conscious decision by

Congress to delegate broad power, such as Mourning v. Family Publica-

tions Service, Inc. 411 U.S. 356 (1973). Compare, Zenith and Mourn-

ing with, International Brotherhood of Teamsters v. Daniel, ... US.

pane » 99 S.Ct. 790, 799-800 and nn. 20-22 (1979) and, Southeastern

Community College v. Davis, ..... US. ...., 99 S.Ct. 2361, 2369-2370

(1979).

6 1, The Packers and Stockyards Aci, 7 U.S.C. §201 et seq. (See espe-

cially, the express suspension power in 7 U.S.C. §204).

2. The Warehouse Act of 1916, 7 U.S.C. §241 et seg. (same; see,

7 USC. §247.

=

conspicuous by their absence in the Agricultural Marketing

Act. This, of itself, is significant evidence that Congress

did not intend to grant the claimed power as part of an

enactment described by its sponsor as “strictly a research

Bill.” See, Adamo Wrecking Co., supra, 434 U.S. 275, 287-

288 and n.5; Algonquin, supra, 426 U.S. at 564; National

Woodwork Mfgs. Assn, v. National Labor Relations Board,

386 U.S. 612, 640 (1967); National Labor Relations Board

v. Brown, 380 U.S. 278, 290-291 (1964).

Indeed, in view of the array of statutes set forth in

the margin, embracing a period of three-quarters of a cen-

6 (Continued)

3. The Perishable Commodities Act of 1934, 17 U.S.C. §499 e# seq.

(same; see especially, 7 US.C. §499(h) ).

4. The Commodity Exchange Act of 1922, as amended by the Com-

modities Futures Trading Act of 1974, 7 U.S.C. §1, e¢ seq. (same; see,

7 US.C. §6(n)).

5. The Sugar Act of 1958, 7 U.S.C. §1100 e¢ seq. (same; forfeiture

provision, see, 7 U.S.C. §1155).

6. The International Wheat Agreement of 1949, 7 U.S.C. §1641 e

seq. (same; forfeiture power, see, 7 U.S.C. §1642(d) ).

7. The Food Stamp Act, 7 U.S.C. §2011 e¢ seq. (same; see espe-

cially, the detailed administrative proceeding for disqualification to par-

ticipate).

8. The Laboratory Animal Welfare Act, 7 U.S.C. §2131. (same; see,

7 US.C. §2134).

9. The Toxic Substances Act, 21 U.S.C. §151. (same; see especially,

the specific provision for suspension, 21 U.S.C. §156).

; 10. The Poultry Products Inspection Act, 21 U.S.C. §451. (same;

see especially, 21 US.C. §467).

11. The Wholesome Meat Act, 21 U.S.C. §601 e¢ seq. (same; see

especially, 21 US.C. §671).

12. The Agricultural Commodities Futures Trading Act, 92 Stat. 876,

Public Law 95-405 (enacted September 30, 1978 to be codified as, 7

US.C. §22(1). (same).

melas

tury, it would be remarkable, indeed, if the Secretary has

the extraordinary harsh sanctioning power which he here

claims, by mere implication. It would be even more extra-

ordinary if such implied power could be invoked as a “sanc-

tion” for alleged “misconduct” merely because the Secre-

tary believes he should have a “panacea for every type of

problem which [he] believes may beset the marketplace.”

Securities and Exchange Commission v. Sloan, supra, 436

U.S. at 112.7 This Court said in Addison v. Holly Hill Fruit

Products, 322 U.S. 607, 618 (1944), “The idea which is now

sought to be read into the grant by Congress . . . beyond the

plain .. . implication of [its words] is not so complicated

nor is English speech so poor that words were not easily

available to express the idea or at least to suggest it.” In

this case, as the Secretary frankly conceded in his brief

in the Court of Appeals, “Congress did not expressly say

in the Agricultural Marketing Act of 1946 . . .”, West v.

Bergland, No. 79-1711, Brief for Appellees, p. 35 (emphasis

7 The court below held Sloan inapplicable on the theory that Sloan was

essentially a “due process” case, and that this Court's principal concern

was the summary nature of the suspension power there claimed. West

V. Bergland, supra, 611 F.2d 710, 722. The summary nature of the sus-

pension power claimed by the Securities and Exchange Commission in

Sloan may have exacerbated the infirmity of its practice, but it is clear

that this Court’s holding focused on the power to suspend, an “awe-

some power with a potentially devastating impact”, 436 US. et 110.

It was the mature of the power, not merely the manner of its exercise,

which this Court found required a “clear mandate from Congress.” Id.

Cf, Adamo Wrecking Co. Vv. United States, 434 US. 275, 287-288 and

n.5 (1978). We submit ic is clear that the result in Sloan would have

clearly been the same had the Commission gone through the motions

of a “notice and hearing” procedure before suspending. The asserted

“distinction” simply cannot be reconciled with this Court's language,

or its holding.

—20—

added), that the Secretary was to have the discretionary

power to impose sanctions against a private citizen by sus-

pending services from him for alleged “misconduct”, let

alone suspending vital services from a citizen for a period

of unlimited duration.

‘Since this is conceded, the decision below should be

reviewed and reversed. Securities and Exchange Commis-

sion v. Sloan, supra; Tennessee Valley Authority v. Hill,

supra; Federal Maritime Comm. v. Seatrain Lines, supra.

(4) Even if it be assumed the Secretary might have

the implied suspension power which he claims, the decision

below should be given plenary review since it proceeds

upon a misapprehension of a principle of administrative

law which has been both familiar and fundamental in this

Court since Securities and Exchange Commission v. Cher-

ney Corporation, 318 U.S. 80, was decided in 1942: the

principle that a discretionary decision by an administrator

may be upheld on judicial review, if at all, only on the

same basis as was articulated by the administrative agency

itself, and not by post-hoc rationalizations offered by gov-

ernment counsel during litigation.

In sustaining the Secretary’s claims of implied power

to suspend indefinitely a private citizen from using the

meat grading and inspection services Congress has com-

manded the Secretary to make available to all, both the

district court and the court of appeals accepted the sug-

gestion of litigation counsel for the Secretary, and relied

in large part upon §205 of the Agricultural Marketing Act.

Since the’ Secretary himself had never claimed “sanc-

tioning” power under any section except §203(h), and since

idle

both 7 C.F.R. §53.13(a) and the administrative “complaint”

filed against Petitioner state the authority for their validity

to be solely §203(h), it is apparent that reliance upon §205

is foreclosed. With reliance upon §205 gone, it is plain the

challenged regulation cannot stand. Appellate counsel for

the Secretary cannot justify a discretionary regulation by

post-hoc reference to a statutory provision which was not

invoked by the Secretary when he promulgated the regula-

tion. That has been an unvarying rule of administrative

law for almost forty years. Securities and Exchange Com-

mission v. Chenery Corporation, 318 U.S. 80, 87 (1942);

Burlington Truck Lines, Inc. v. United States, 371 U.S. 156,

168-169 (1962); Federal Power Commission v. Texaco, Inc.,

417 U.S. 380, 396-397 (1974). |

Prior to the decision of the Court of Appeals below,

this rule had been followed by every Court of Appeals with

invariant fidelity. See, e.g., National Labor Relations Board

v. Clark, 468 F.2d 459, 467 (5th Cir. 1962) (Wisdom, J.);

Trailways of New England, Inc. v. Civil Aeronautics Board,

412 F.2d 926, 931 (1st Cir. 1969) (Aldrich, C J.).

The Secretary is surely familiar with this “simple but

fundamental rule of administrative law” (Burlington, 371

U.S. at 168, quoting, Cherney, 332 U.S. at 194), since the

Secretary has himself successfully invoked this bedrock

principle at least twice (once in this Court) to set aside

the order of a sister administrative agency: the Inter-

state Commerce Commission. Atchison T. and S.F. Ry. Co.

v. Wichita Board of Trade, 412 U.S. 800, 807 (1973); Sec-

retary of Agriculture v. Interstate Commerce Commission,

951 F.2d 1329, 1331 (D.C. Cir. 1977). Despite the heretofore

unvarying application of this principle, appellate counsel

eins

for the Secretary invoked §205 of the Act, and the Court

of Appeals below relied heavily indeed upon §205. Indeed,

§205 is the core of both the initial and concluding para-

graphs of the Court of Appeals which deal with the merits.

7 C.F.R. §53.13(a) was, thus, sustained almost entirely by

invocation of §205. West v. Bergland, supra, 611 F.2d 710,

720-721, 725.

But, since the Secretary relied only upon §203(h) in

claiming the authority to issue the “misconduct” sanctions

of 7 C.F.R. §53.13(a) and in initiating the administrative

“complaint” against Petitioner, it is plain that this case

must, at the least, be remanded to the Court of Appeals for

reconsideration of the question whether 7 C.F.R. $53.13 (a)

can stand under §203(h) of the Act, 7 U.S.C. $1622 (h)

alone. Texaco, supra, 417 U.S. at 396-397; Wichita Board,

supra, 412 U.S. at 808; Burlington, supra, 371 U.S. 168-169;

Chenery, supra, 318 U.S. 87-88.

=,

CONCLUSION

For the foregoing reasons, the writ of certiorari should

be granted.

Respectfully submitted,

JAMES P. LINN

B. J. ROTHBAUM, Jr.

of

LINN, HeELMs, Kirk & BURKETT

Suite 410, Fidelity Plaza

Oklahoma City, Oklahoma 73102

(405) 239-6781

and

LATHROP, ALBRACHT & SWENSON

460 Continental Building

Omaha, Nebraska 68102

(402) 348-1811

Attorneys for Petitioner,

Frank R. West

April, 1980

CERTIFICATE OF SERVICE

This is to certify that the undersigned has this ____

day of April, 1980, mailed three true and correct copies

of the above and foregoing Petition for Writ of Certiorari

to the Honorable Wade H. McCree, Solicitor General, Of-

fice of the Solicitor General, U.S. Department of Justice,

Washington, D.C. 20530 and two true and correct copies to

Messrs. Raymond W. Fullerton, Esq. and Marshal Marcus,

Esq., Office of General Counsel, Department of Agriculture,

Washington, D.C. 20250.

BJ . Rothbaum, Jr.

APPENDICES

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

Quality Service of the Department

of Agriculture,

Apellees.

No. 79-1711

Frank R. West, °

Appellant, °

v. “1

* Appeal from the

Bob Bergland, Secretary of the * United States

Department of Agriculture, and * District Court

Donald Houston, Acting Adminis- * for the District

trator of the Food Safety and * of Nebraska

Sd

*

te

Submitted: October 11, 1979

Filed: December 19, 1979

Before BRIGHT, ROSS and STEPHENSON, Circuit Judges.

STEPHENSON, Circuit Judge.

The appellant, Frank R. West, sought to have the dis-

trict court? enjoin the Secretary of Agriculture from hold-

ing an administrative hearing to determine whether the

Secretary’s meat grading and acceptance services should be

withdrawn for misconduct. West challenged the regulation

under which the Secretary was proceeding as invalid. This

appeal is from the district court’s denial of injunctive re-

1The Honorable Robert V. Denney, District Court Judge for the Dis-

trict of Nebraska.

A-2

LAPPENDIX}

lief. The issues are (1) whether West must exhaust his

administrative remedies before bringing judicial challenge

to the regulation, and (2) if not, whether the regulation is

authorized by statute. We affirm the district court’s decision

to reach the question of the regulation’s validity and to up-

hold it as impliedly authorized by statute.

I. Factual Background.

Appellant West is engaged in the business of buying

and selling livestock. In this capacity he receives meat

grading and acceptance services from the Department of

Agriculture pursuant to section 203(h) of the Agricultural

Marketing Act of 1946.2 On January 14, 1977, West was

convicted, after his plea of guilty, of conspiring to violate

21 U.S.C. §§ 610(c) and 676 in causing meat to be mis-

branded, in violation of 18 U.S.C. § 371. A charge relating

to West’s plea was that he had caused employees to make

gifts to a federal meat grader.

On August 9, 1977, the Administrator of the Food

Safety and Quality Service filed an administrative com-

plaint against West in a proceeding before the Secretary

of Agriculture. The complaint alleged that West had

knowingly authorized the bribing of a federal meat grader.

The complaint proposed, under the authority of 7 C.F.R.

#7 US.C. § 1622(h). For a brief history of federal beef grading, see

Independent Meat Packers Ass’n V. Butz, 526 F.2d 228, 232-33 (8th Cir.

1975), cert. denied, 424 US. 966 (1976).

"According to West, he is consultant to two meat packing companies,

American Beef Packers, Inc. and Union Beef Packing Company, both Io-

cated in Omaha, Nebraska. In 1973-74 West wus president of American

Beef Packers. West and the companies for which he works also receive

federal meat inspection services, which are not involved in this case.

8The complaint also named America Beef Packers, which is not a

party to this action. To simplify, we will refer to the parties as “West” '

and “the Secretary of Agriculture” (or “the Secretary” ).

A-3

[APPENDIX]

§53.13(a) (1977),* to withdraw grading and acceptance

services from West “for a period of time necessary to insure

the integrity of the Meat Grading and Acceptance Service,

and such additional time as may be required until [West]

can prove to the Service that necessary safeguards have

been provided to assure [he] will not in the future violate

the Agricultural Marketing Act of 1946 or the regulations

issued under it].” Withdrawal will not become effective

in this case, however, until a final agency order adverse to

West. In the meantime West may continue to receive grad-

ing and acceptance services.

On February 13, 1979, West filed a complaint in federal

district court to prevent the initiation of the administrative

hearing and secured a temporary order that restrained the

Secretary from proceeding any further.> After briefs and

oral arguments, however, the district court dissolved the

temporary restraining order and denied West’s application

for permanent injunctive relief.

4This regulation has been redesignated during the pendency of this

action and now appears at 7 C.F.R. § 2853.11(a) (1979). For purposes

of convenience, we will continue to refer to it as section 53.13(a). Its

relevant portion reads:

Denial or withdrawal of service.

(a) For misconduct—(1) Bases for denial or withdrawal. * * *

{T]he benefits of the service may be {withdrawn} * * * from

any person who * * * (ii) has given or attempted to give, as

a loan or for any other purpose, any money, favor, or other

thing of value, to any employee of the Department authorized

to perform any function under the regulations * * *.

withdrawal normally occurs pursuant to an administrative hearing. See

7 CER. § 2853.11(a) (2), citing 7 CF.R. Part 2850.

5Between the filing of the administrative complaint in November 1977

and West's suit for injunctive relief in February 1979, West had twice

sought to have the Secretary’s proceedings enjoined on grounds unrelated

to this action. West filed his answer to the administrative complaint on

November 9, 1978. During oral argument we were advised that no hear-

ing has yet been held.

A-4

(APPENDIX)

II. Whether Administrative Remedies Must Be Exhausted.

West makes no claim that regulation 53.13(a) runs

counter to any express statutory limit to the Secretary’s

authority. Rather, he argues that the nature of the regula-

tion is such that it must be expressly authorized, and that

it is not. Alternatively, he argues that any implied author-

ization is negated by legislative history, the tone of the

statute, and congressional practice with respect to related

statutes. The Secretary responds that a court should not

even consider West’s contentions except upon appeal from

a final agency decision. West rejoins that because the regu-

lation is void there are no valid administrative remedies

to exhaust. The district court did not expressly address

these contentions but implicitly held that exhaustion was

not reguired.* We agree.

Normally, a litigant is not entitled to a judicial hearing

_ on the merits of his claim until he has exhausted available

administrative remedies. E.g., Myers v. Bethlehem Corp.,

303 U.S. 41, 50-51 (1938). This is not a rule to be applied

®Because the administrative hearing is still at the pre-hearing stage,

West has exhausted no adminisrative remedy. The briefs of both parties

reflect the misapprehension that the district court required exhaustion of

administrative remedies on the question of agency jurisdiction. In fact,

the district court reached this question in upholding the regulation, and

in doing so implicitly held exhaustion was not required as to this ques-

tion. Had the court wanted to require exhaustion, it would have declined

to consider the question of agency jurisdiction until administrative reme-

dies on that question were exhausted. See, ¢.g., Bolger v. Marshall, 193

F.2d 37, 39 (D.C. Cir. 1951) (resolution of exhaustion issue a prerequi-

site to entertaining the merits). The court did conclude that West “{shall

be required] to exhaust his administrative remedies.” The opinion as a

whole, however, reveals that the court was requiring West to exhaust ad-

ministrative remedies on the remaining questions, including the question

whether withdrawal of meat grading and acceptance services would be

appropriate in his particular case. It may be that the court pretermitted

the exhaustion issue with respect to agency jurisdiction because it thought

it was inadequately presented in the record and thought the merits clearly

against the plaintiff. See Adams v. Vance, 570 F.2d 950, 954 n.7 (D.C.

Cir. 1978) and cases cited therein.

A-5

(APPENDIX)

woodenly, however. Except in those cases where exhaus-

tion of administrative remedies is specifically required by

Statute, see, e.g., Weinberger v. Salfi, 422 U.S. 749, 766

1975), administrative remedies need not be pursued if the

litigant’s interests in immediate judicial review outweigh

the government’s interests in the efficiency or administra-

tive autonomy that the exhaustion doctrine is designed to

further. This is the general test our court adopted in United

States v. Newman, 478 F.2d 829, 831 (8th Cir. 1973).

A. Governmental Interests in Requiring Exhaustion.

We begin by considering the government interests in

requiring West to exhaust his remedies on the question

of agency jurisdiction, mindful whether “allowing all simi-

larly situated [individuals] to bypass [the administrative

avenue in question] would seriously impair the [agency’s]

ability to perform its functions.” McGee v. United States,

402 U.S. 479, 484 (1971). First among these governmental

interests is that of allowing the agency to “perform func-

tions within its special competence.” Parisi v. Davidson,

405 U.S. 34, 37 (1972). These functions include specialized

fact-finding, e.g., Lone Star Cement Co. v. FTC, 339 F.2d

505, 512 (9th Cir. 1964), interpretation of disputed techni-

cal subject matter, e.g., Weinberger v. Bentex Pharmaceu-

ticals, 412 U.S. 645, 653-54 (1973), and resolving disputes

concerning the meaning of its own regulations, e.g., City

of New York v. New York Telephone Co., 468 F.2d 1401,

1403 (Temp. Emer. Ct. App. 1972). Despite the Secretary’s

contentions to the contrary, we do not think the judicial

policy of deferring decision until an administrative agency

has excercised one or more of these functions is strongly

implicated in this case. First, the relevant facts appear on

the face of the pleadings, and they are not of such a nature

that the agency is best equipped to interpret them.7? Sec-

?The Secretary points out that the administrative pleadings suggest

three arguably specialized factual questions that bear on the jurisdictional

issue presented: (1) whether West bribed a federal meat grader; (2)

A-6

{APPENDIX}

ond, there is no question that the regulation, if valid,

authorizes the Secretary to withdraw the services provided

‘under the Act. The only question on which West seeks

| fo avoid exhaustion is not one requiring application of

specialized agency understanding, then. It is one well

within judicial competence: whether the regulation is

authorized by the statute. |

A second government interest in requiring exhaustion

is discouraging “frequent and deliberate flouting of the ad-

ministrative process.” United States v. Newman, supra.

This interest is strongest where a grant of judicial review

would induce individuals to frustrate agency process by

challenging agency action only after the opportunity for

agency decision has passed. E.g., McGee v. United States,

supra, 402 U.S. at 491 (selective service registrant con-

victed of failing to submit to induction twice sidestepped

administrative review of his draft classification in order

to “take a chance” in court on his defense of erroneous

classification). This interest is not particulaly prominent

here, for a grant of judicial review under the present cir-

cumstances would not encourage individuals in West’s gen-

7 (Continued)

whether bribing a federal meat grader would justify withdrawal of meat

grading services under 7 U.S.C. §1622(h) and regulation 7 CER. §

53.13(a); and (3) whether meat grading services facilitate the market-

ing of meat and livestock.

None of these disputes is germane to agency jurisdiction. The first

two disputes concern whether West has committed an instance of mis-

conduct that might justify application of regulation 53.13; they are ir-

relevant to the threshhold question whether 53.13 validly grants the Sec-

retary any authority at all. The third dispute, although presumably well-

suited for initial agency determination, is also irrelevant to the jurisdic-

tional question. That question does not turn on whether the regulation

will actually promote the statute’s purposes, one of which is the marketing

of meat and livestock, but, according to the standard the Secretary him-

self would urge, whether the regulation is “reasonably related” to the stat-

ute’s purposes. Mowrning v. Family Publications Service, Inc., 411 US.

356, 369 (1973).

A-7

(APPENDIX)

eral situation to sidestep agency process. This is not a case

where remedies lie unused in the past. West brings this

challenge ahead of agency action, not after the opportunity

for application of agency expertise is gone. Nor would a

grant of immediate judicial review in this case encourage

individuals in West’s position to seek early review on in-

substantial questions in order to gain delay. We recognize

that an exhaustion decision requires attention to the par-

ticular administrative scheme involved, and that the Sec-

retary’s ability to administer grading services for a large

variety of products may be at stake.* But West’s claim

is out of the ordinary. It requires no application of special

agency competence and, while not manifestly compelling

on its merits, is not frivolous, either. It presents a question

of first impression and is not easily rejected. We doubt,

then, that early review of questions of this sort will induce

litigious interruption of the agency’s enforcement program.

Courts are well equipped to deal with such tactics should

they arise. “Insubstantial claims can usually be weeded

out with dispatch.” Oestereich v. Selective Service System,

393 U.S. 233, 242 (Harlan, J" concurring). See also Abbott

Laboratories v. Gardner, 387 U.S. 136, 154-55 (1967).

Although these first two interests in administrative

autonomy and efficiency thus do not loom large in this case,

the exhaustion doctrine requires us to consider two other

interests. The first is that in allowing the agency to have

the first opportunity to develop the facts and apply the law

it was designed to administer. As the Supreme Court ex-

plained in McKart v. United States:

The agency, like a trial court, is created for the pur-

pose of applying a statute in the first instance. Ac-

cordingly, it is normally desirable to let the agency

8See note 9 infra, Of course, that there is an important general ques-

tion involved may be a factor indicating the appropriateness of early ju-

dicial review. See L. Jaffe, Judicial Control of Administrative Action 435

(1965).

A-8

(APPENDIX)

develop the necessary factual background upon which

decisions should be based. * * * And of course it is

generally more efficient for the administrative process

to go forward without interruption than it is to permit

the parties to seek aid from the courts at various inter-

mediate stages. The very same reasons lie behind ju-

dicial rules sharply limiting interlocutory appeals.

395 U.S. at 193-94. Cf. McLish v. Roff, 141 U.S. 661, 665-66

(1891). Permitting the agency to perform its “trial court”

function not only serves interests in administrative au-

tonomy and efficiency but also generally assists ultimate

judicial review, if any should be necessary.

A second interests in administrative autonomy, which

parallels an interest in judicial efficiency, is that of allowing

agencies to correct their own errors, and in so doing moot

controversies and obviate judicial review. Parisi v. David-

son, supra. We think this interest is but weakly implicated

here. Although we see nothing in the record or the briefs

to indicate that the jurisdictional challenges West mounts

have ever been presented to the Secretary for his formal

decision, Secretary’s counsel remind us that “for more than

[forty] years, the Secretary has ruled that he was em-

powered to impose administrative sanctions * * * to assure

that his grading services are upright.” Appellee’s Brief at

37. In any event, we think it improbable that the agency,

having brought its complaint on the strength of regulation

53.13(a), will suddenly agree with West that it is void.

A further reason to expect no vacillation on the part of the

Secretary is that the regulation, in place now for some

twenty years, is representative of a host of similar regula-

tions relating to other agricultural products.® While the

®*The Secretary informs us that federal grading services are provided,

subject to removal for misconduct, for a vast variety of fresh and canned

produce, including asparagus, white potatoes, rabbits, and watermelons.

See, ¢.g., 7 C.F.R. § 2859.160 (1979) (permitting administrator to with-

draw egg inspection services from persons convicted within prior ten years

A-9

(APPENDIX)

mere probability of an adverse agency decision does not

eliminate the interest in agency self-correction, see Lone

Star Cement Corp. v. FTC, supra; see generally Spanish

Int'l Broadcasting Co. v. FCC, 385 F.2d 615, 626 & n.50

(D.C. Cir. 1967), we cannot accord it much weight where,

as here, the outcome is all but certain. See, e.g., Diapulse

Corp. of America v. FDA, 500 F.2d 75, 78 (2d Cir. 1974).

Of course, there are other unresolved questions here,

which if resolved in West’s favor would obviate judicial

review. For example, if West were to convince the Secre-

tary that a withdrawal of meat grading and acceptance

services would be unjustified, or unnecessary, under the

circumstances, the controversy would be at an end. We

note this factor, but cannot give it dispositive weight since

it is a factor implicated in virtually any exhaustion case.

E.g., Touche Ross & Co. v. SEC, No. 78-6095 (2d Cir. May

10, 1979) (judicial review of agency jurisdiction permitted

ahead of agency determination whether suspension of privi-

lege justified under the circumstances).

Our identification of the governmental interests in this

case presupposes that there are, at least arguably, valid

administrative remedies to pursue. West contends that

there is no governmental interest here because “there is

no properly authorized administraitve procedure for [him]

to exhaust and * * * the administrative authorities who

seek to determine [his] case have no lawful right to do

so.” Allen v. Grand Central Aircraft Co., 347 U.S. 535, 540

(1954); cf. Skinner & Eddy Corp. v. United States, 249

U.S. 557, 562 (1919). We must reject this contention in

its broadly based form, for to accept it would reduce the

® (Continued)

of felony for mislabelling food). Invalidation of regulation 53.13(a) by

the Secretary thus seems unlikely in that it would logically require in-

validation of a large number of regulations permitting withdrawal of grad-

ing services for misconduct, with a presumably dramatic effect on the

Secretary's grading program.

A-10

(APPENDIX)

exhaustion doctrine to a nullity. See K. Davis, Administra-

tive Law § 20.02 at 65, § 20.04 at 79 (1958). A person cannot

evade agency process simply by claiming the agency is

operating ultra vires.

This claim has justified early judicial review, however,

in those cases in which agencies have transgressed clearly

marked boundaries to their jurisdiction. West relies on two

of these cases, Oestereich v. Selective Service System,

supra; Leedom v. Kyne, 358 U.S. 184 (1958). Both cases

admitted an individual to a judicial forum before the com-

pletion of prescribed procedures. In Oestereich, a theology

student who had received the draft exemption he was stat-

utorily entitled to was reclassified I-A after he had turned

in his draft card in protest. The sole basis of the reclassi-

fication was a Selective Service regulation that plainly per-

mitted the Service to reclassify those who had been “de-

linquent” in failing to retain their draft cards. The student,

prior to induction, sought to enjoin the reclassification on

the basis that| the regulation was contrary to statute. The

Court characterized the Selective Service Board’s action

as a “clear departure * * * from its statutory mandate.

To hold that a person deprived of his statutory exemption

in such a blatantly lawless manner must either be inducted

and raise his protest through habeas corpus or defy in-

duction and defend his refusal in a criminal prosecution

is to construe the Act with unnecessary harshness.” 393

U.S. at 238. In Leedom, the National Labor Relations Board

included professional employees in a collective bargaining

unit without permitting them to vote whether to belong

to that unit. Although there had been no final agency

action, the employees were permitted to challenge the in-

clusion, in light of a specific statutory provision that pro-

scribed inclusion of professional employees in a collective

bargaining unit without their approval by majority vote.

“Plainly, [the Board’s inclusion] was an attempted exercise

of power that had been specfically withheld. It deprived the

professional employees of a ‘right’ assured to them by Con-

A-11

[APPEND!IX}

gress. Surely, in these circumstances, a Federal District

Court has jurisdiction of an original suit to prevent de-

privation of a right so given.” 358 U.S. at 189.

Here, by contrast, West can point to no statutory right

that the Secretary is abridging, no specific statutory pro-

vision that the Secretary’s proposed withdrawal of service

would contravene. The Secretary is directed to provide

grading services, but not unconditionally. His decision to

provide these services only to those recipients who refrain

from engaging in conduct detrimental to the service is by

no means a “clear departure” from his statutory mandate

or an abridgment of West’s “statutory right.”

B. West’s Interests in Securing Immediate Judicial Review.

Having examined the government interests in this case,

we turn to an examination of the individual’s interests in an

immediate judicial resolution, before considering whether

the balance of interests favors requiring exhaustion of ad-

ministrative remedies. To justify judicial interference with

agency process that is not clearly ultra vires, an individual

must, generally speaking, show some “exceptional circum-

stance.” See United States v. Newman, supra. Courts have

traditionally required the individual to make a cogent

Showing that denial of judicial review will subject them

either to “irreparable injury” or an “inadequate remedy.”

See, e.g., Bannercraft Clothing Co. v. Renegotiation Board,

466 F.2d 345-355-56 (D.C. Cir. 1972), rev’d on other grounds,

415 U.S. 1 (1974). Public Utilities Comm. v. United Fuel

Gas Co., 317 U.S. 456, 469 (1943); continued subjection to

a challenged regulation due to unreasonable administrative

delay in responding to the challenge, e.g., Smith v. Illinois

Bell Telephone Co., 270 U.S. 587, 591 (1926); loss of first

amendment freedoms, Wolff v. Selective Service Loal Board

No. 16, 372 F.2d 817, 825 (2d Cir. 1967); and the immediate

destruction or loss of the very substantive right that the

individual seeks to protect, e.g., McKart v. United States,

supra, 395 U.S. at 203 (criminal defendant’s complete de-

A-12

(APPENDIX)

fense of erroneous draft classification would be wholly lost,

absent judicial review); Utah Fuel Co. v. National Bitumi-

nous Coal Comm., 306 U.S. 56, 59-60 (1939) asserted right

of confidentiality would be destroyed by agency publica-

tion, absent immediate judicial review). West’s claim of

irreparable injury fall within none of these categories.

First, he claims that “the proceeding’ itself vunstitutes ir-

reparable injury” because he cannot recover its costs should

the Secretary prove to be without jurisdiction. The unre-

coupable expense of litigation, however, is not the irre-

parable injury contemplated as a prerequisite to equitable

relief. Renegotiation Board v. Bannercraft Clothing Co.,

415 U.S. 1, 24 (1974). Second, West claims that he is ir-

reparably injured in that deprivation of meat grading serv-

ices constitutes irreparable injury. He will not be so de-

prived, however, if he is deprived at all, until the conclusion

of agency proceedings, or, if a stay is granted, until judicial

review.'® See, e.g., Arrow Meat Co. v. Freeman, 261 F.

Supp. 622, 624 (D. Ore. 1966) (thirty days’ suspension of

meat grading services stayed until judicial review). Any

deprivation that will occur, then, is that which inevitably

accompanies an agency proceeding of this sort.

Nor does West clearly demonstrate that his remedy is

otherwise inadequate.11_ West cannot rely on Skinner &

10On oral argument, West's counsel conceded, and the Secretary's coun-

sel assured us, that West would Continue to receive meat grading services

until final agency action.

110f course, the concepts of irréparable injury and inadequate remedy

are not wholly distinct. The instances cited above as examples of irrep-

arable harm could also be characterized as examples of inadequate remedy;

the remedy was inadequate to prevent irreparable harm. Generally, how-

ever, the litigant faces irreparable injury if judicial nonintervention re-

sults in harm of an extraordinary nature, and the litigant faces an inade-

quate remedy, even if his harm is not out of the ordinary, if the agency's

limited power to grant relief or the agency's hostile attitude makes it im-

possible or highly improbable that the litigant will obtain the relief he

seeks. See K. Davis, Administrative Law Treatise § 20.07 (1958).

A-13

[APPENDIX]

Eddy Corp v. United States, supra, in which the party

challenging an agency’s statutory authority to approve a

rate hike without a prior hearing could attack the rate

before the agency only as “unreasonably high or discrimi-

natory.” See Jewel Co. v. FTC, 432 F.2d 1155, 1158 (7th

Cir. 1970); L. Jaffe, Judicial Control of Administrative Ac-

tion 428 (1965). Here, West may challenge the statutory

authority for the agency’s action before the agency itself.

See generally, e.g., California v. FTC 549 F.2d 1321, 1324

(9th Cir. 1977) (as a general rule, an agency should ini-

tially determine its own jurisdiction). And West can in

any event obtain ultimate judicial review of the agency

decision. Compare Texaco, Inc. v. FTC, 301 F.2d 662, 663

(5th Cir. 1962).

West can, however, point to the probability of ad-

verse agency decision on the question whether regulation

53.13 (a) is valid and argue that his administrative remedy

is “inadequate” because futile. ‘See L. Jaffe, supra, at 449.

But see Lone Star Cement Corp. v. FTC, supra. The Second

Circuit, in a recent case that also involved a pre-hearing

challenge to the validity of an agency’s enforcement regu-

lation, declined to require exhaustion because, among other

reasons, it was not likely that the agency would declare

that its own long-standing regulation was statutorily un-

authorized. Touche Ross & Co. v. SEC, No. 78-6095, slip op.

at 2574 (2d Cir. May 10, 1979).

The Touche Ross court indicated that the harm that

would be sustained by litigant if he is required to exhaust

his administrative remedies is a relevant factor to consider,

but not controlling. The court opined that the Supreme

Court has not made irreparable injury an inflexible pre-

requisite to avoiding exhaustion. While we do not neces-

sarily share the Second Circuit’s certainty concerning the

A-14

(APPENDIX)

attitude of the Supreme Court,!2 we continue to believe

that the proper approach toward exhaustion is the bal-

ancing of individual and governmental interests that was

Suggested by the Supreme Court in McKart v. United

States, supra, and adopted by our court in United States

v. Newman, supra, which we have elaborated upon here.

Classic irreparable harm or. inadequate injury may be re-

quired, of course, to outweigh governmental interests where

they are strongly implicated. Where they are not, however,

factors of litigation expense or loss of reputation may be-

come significant. See Touche Ross & Co. v. SEC, supra,

slip op. at 2563-74 (declining to require exhaustion on

ground of inadequate government interest, without requir-

ing clear showing of irreparable injury); Finnerty v.

Cowen, 508 F.2d 979, 982-83 (2d Cir. 1974) (same); Dia-

pulse Corp. of America v. FDA, supra, 500 F.2d at 77-78

(same); Consumers Union v. Cost of Living Council, 491

F.2d 1396, 1399-1400 (Temp. Emer. Ct. App.), cert. denied,

416 U.S. 984 (1974) (same); Pan American World Airways,

Inc. v. Boyd, 207 F. Supp. 152, 160 (D.D.C. 1962) (alterna-

tive holding) (same).

12The Second Circuit appeared to use irreparable injury to include both

irreparable injury and inadequate remedy as we have used those terms.

Recent opinions of the Supreme Court might be read to indicate that ir-

reparable injury is absolutely required if exhaustion is to be avoided. E.g.,

Renegotiation Bd. v. Bannercraft Clothing Co., 415 US. 1, 23-26 (1974);

see Moore V. East Cleveland, 431 U.S. 494, 522-29 (1977) (Burger, C.J.,

dissenting). We suspect that the Supreme Court would take a flexible

approach, however, if squarely confronted with the issue, in light of its

opinions in McKart and McGee.

We must ask, then, whether there is in this case a governmental in-

terest compelling enough to outweigh the severe burden placed on

{the individual}. Even if there is no such compelling interest when

{this individual’s}] case is viewed in isolation, we must also ask

whether allowing all similarly situated {individuals} to by-pass ad-

ministrative * * * procedures would seriously impair the [agency's]

ability to perform its functions.

McKart v. United States, supra, 395 US. at 197 (1969).

A-15

[APPEND!IX}

C. Balancing of Interests.

Reviewing the foregoing, we perceive an arguable

claim that the basis of the Secretary’s power to proceed is

facially invalid. The question of validity involves no dis-

pute of fact that is necessary to a decision, no specialized

understanding that an agency would be likely to contribute.

Instead, the issue is one of statutory construction and can

be decided on the pleadings. Although the litigant does not

clearly satisfy the classic requirements of equitable relief,

requiring him to resort first to the administrative process

will subject him to unrecoverable loss in the form of liti-

gation expense. This cost, although “part of the social

burden of living under government,” Petroleum Explora-

tion, Inc. v. Public Service Commission, 304 U.S. 209, 222

(1938), is not a burden we should impose too blithely.

Here, given that the agency is bringing a proceeding on the

basis of the very regulation in question, and given that the

regulation has been followed regularly and is representa-

tive of a family of similar regulations, we believe the agen-

cy’s view of the regulation’s validity is virtually immutable,

and that expenses incurred to challenge the regulation

within the agency will be expended in vain, without any

compensating clarification of the issue. Although the ques-

tion is close, we conclude that the district court acted within

its discretion in declining to require exhaustion. We now

turn to the merits.

III. Whether Regulation 53.13(a) is Authorized by Statute.

As with any matter of statutory construction, we begin

with the language of the statute. Southeastern Community

College v. Davis, 47 U.S.L.W. 4689, 4691 (1979). Section

203(h) of the Agricultural Marketing Act of 1946 (the Act)

directs and authorizes the Secretary of Agriculture to cer-

tify the grade of agricultural products, “except that no.

person shall be required to use the service authorized by

this subsection.” 7 U.S.C. § 1622(h). (hereinafter referred

A-16

(APPENDIX)

to as section 1622 (h)). Section 205(b) of the Act further

provides that the Secretary “shall promulgate such orders,

rules, and regulations as he deems necessary to carry out

the provisions of this chapter.” 7 U.S.C. § 1624(b).

Within two years of the Act’s passage the Secretary

issued 7 C.F.R. § 53.12 (1949), which permitted him to

suspend grading services, after a hearing, for “interference

with or obstruction of any employee of the Department

in the performance of his duties under the regulations, by

intimidation, threats, assaults, or any other improper

means.” 13 Fed. Reg. 1275, 1278 (Mar. 10, 1948) (emphasis

added). In 1959, the Secretary issued the current regula-

tion, 7 C.F.R. §53.13(a) (1977), whose similar but more

specific language is set out above. See note 4 supra.

The substance of the current regulation and its prede-

cessor, then, was adopted soon after the passage of the Act

and has been in effect for about thirty years.13 Absent

“compelling indications” that the Secretary is wrong, his

long-standing interpretation as to the regulation’s validity

is entitled to great deference. See, e.g., Zenith Radio Corp.

v. United States, 437 U.S. 443, 450-51 (1978).

Further, because Congress has expressly authorized the

Secretary to promulgate such rules as may be necessary

to carry out the provisions of the Act, West’s burden in

attacking regulation 53.13(a) is especially great if the

regulation is “reasonably related” to the purpose of en-

abling legislation. Mourning v. Family Publications Serv-

ice, Inc., 411 U.S. 356, 369 (1973); Graham v. National

Transportation Safety Board, 530 F.2d 317, 319 (8th Cir.

18To our knowledge, this is the first challenge to its validity. The Sec-

retary Claims that judicial decisions upholding agency withdrawal of grad-

ing services have necessarily held that the Secretary is authorized to with-

draw them. The Secretary cites but one example, however, Arrow Meat

Co. v. Freeman, 261 F.Supp. 622 (D.Ore. 1966). Agency jurisdiction was

not challenged in Arrow, and we are not aware of the other judicial de-

cisions to which the Secretary alludes.

A-17

[APPENDIX]

1976). The declared intent of the Act is “to provide for

* * * an integrated administration of all laws enacted by

Congress to aid the distribution of agricultural products

through research, market aids and services, and regulatory

activities, to the end that marketing methods and facilities

may be improved * * *.” 7 U.S.C. § 1621. More specifically,

the grading activities authorized by section 1622 are de-

signed to ensure “that consumers may be able to obtain the

quality product which they desire.” Applying the test

stated in Mourning and adopted in Graham, the district

court reasoned:

The integrity of the federal grading program rests on

its ability to provide the consuming public with ac-

curate and honest grading of meat and meat products.

Such actions as bribery of inspectors directly impair

the program’s ability to achieve such a goal. In pro-

muigating § 53.13, the Secretary has, through the es-

tablishment of certain conditions under which federal

meat grading services will be provided or denied, acted

to protect the program from the adverse impact of such

activities. This action is rationally related to the pur-

pose of the enabling Act.

West contends that this reasoning is flawed because

the Act is voluntary in nature. He argues that the exclu-

sive sanction for abusing the grading service is the criminal

penalty Congress authorized in a 1955 amendment to sec-

tion 1622(h). That amendment provides for a fine of up to

$1,000 and imprisonment up to one year for the knowing

falsification of inspection or grading certificates. Thus,

West argues that the Act authorizes only “housekeeping”

regulations and that regulation 53.13(a) is void because

out of harmony with the Act. See, e.g., Manhatten General

Equipment Co. v. Commissioner, 297 U.S. 129, 134-35

(1936).

These arguments do not rebut the force of the district

court’s reasoning. The voluntary nature of the Act does not

prevent the Secretary from imposing reasonable require-

A-18

(APPENDIX)

ments upon the recipients of the service. We specifically

so held in Independent Meat Packers Ass’n v. Butz, 526

F.2d 228, 237 (8th Cir. 1975), in which we upheld the Sec-

retary’s decision to require recipients of beef grading serv-

ices to accept yield grading as a condition of receiving

quality grading. The imposition of mandatory yield grading

was reasonable in that it advanced the Act’s goals, which

included the goal of making available quality products to

consumers. Regulation 53.13, designed to ensure that meat

grading procedures remain honest, is, if anything, more

closely connected with this statutory purpose. The inclu-

sion of a penal sanction by Congress in 1955 for falsification

of official certificates does not vitiate the agency’s power

to correct other abuses that threaten the integrity of the

meat grading scheme. See Jacquet v. Westerfield, 569 F.2d

1339, 1345 (5th Cir. 1978). The fact that Congress has ad-

dressed a specific class of activities does not foreclose an

agency, expressly empowered to make necessary rules,

from addressing others. See Mourning v. Family Publica-

tions Service, Inc., supra, 411 U.S. at 372-73.

West argues, however, thatthe regulation in question

goes far beyond that in Butz, that it asserts the “awesome

power to suspend,” which can be granted by Congress only

by express language.'* West relies heavily on SEC v.

14Running parallel to this argument is West's contention that with-

drawal of services for misconduct is a penal sanction, and as such can

be authorized only by specific statutory language. Accepting that in this

case the Secretary has no punitive authority, we nevertheless conclude

that the sanction in question is not penal but remedial. Whether an ad-

ministrative denial of benefits is penal turns on its purpose. See gen-

erally, e.g., Clark, Civil and Criminal Penalties and Forfeitures: A Frame-

work of Conststutional Analysis, 60 Minn. L. Rev. 379, 406-07, 485-86

(1976). The evident purpose of regulation 53.13(a) is not to stigmatize

or punish wrongdoers; it is to prevent misconduct that would jeopardize

the integrity of and public confidence in the federal product grading sys-

tem. Of course, if in a particular case the sanction of withdrawal is not

reasonably related to the regulation’s authorized remedial purpose, that

A-19

(APPENDIX)

Sloane, 436 U.S. 103 (1978), but an analysis of Sloane

demonstrates the infirmity of his position. Sloane held that

the Securities Exchange Commission (SEC) was not auth-

orized by the 1934 Securities Exchange Act to issue a series

of ten-day orders that suspended trading in a corporation’s

stock. One reason for the Court’s decision was that it would

not find conferred, absent an “unmistakable mandate,” the

“awesome power” to suspend sumarily, without notice,

hearing, or even a statement of findings.'5 Here, of course,

the Secretary is asserting only the power to withdraw

services some time after a full agency hearing.1¢

14 (Continued)

particular application of the regulation may be struck down as punitive

on review from an agency order. See, ¢.g., Beck v. SEC, 430 F.2d 673

(6th Cir. 1970). West cannot plausibly contend, however, that the regu-

lation is punitive on its face.

15Two additional reasons for the Court’s invalidation of the SEC's prac-

tice of indefinitely concatenating suspension orders were (1) the express

language of the statute, which authorizes suspensions “for a period not

exceeding ten days,” 436 US. at 110-12, and (2) the inconsistency of the

SEC's interpretation with other provisions in the statute, which authorize

suspensions, after a hearing, for only limited periods of time: Id. at 112-

14.

The first reason explains three of the cases on which West princi-

pally relies, Zuber v. Allen, 396 US. 168 (1969); Lehigh Valley Coop

Vv. United States, 370 US. 76 (1962); Brannan v. Stark, 342 US. 451

(1952). All three cases involved administrative adjustment to minimum

milk prices that ran counter to an express directive of the Agricultural

Marketing Agreement Act of 1937. Here, by contrast, there is no show-

ing that the challenged regulation is inconsistent with any express stat-

utory mandate. The second reason, inconsistency of the challenged regu-

lation with the statutory scheme, explains another set of cases relied upon

by West. E.g., Conway City Farmers Ass'n V. United States, 588 F.2d 592,

598-99 (8th Cir. 1978); Midwest Video Corp. v. FCC, 571 F.2d 1025

1040-42 (8th Cir. 1978), aff'd, 99 S.Ct. 1435 (1979).

16We intimate no view on the Secretary's authority to withdraw grad-

ing services summarily. We note that 7 CF.R. § 2850.40 purports to

grant him that authority.

A-20

(APPENDIX)

West next argues that any implied authorization for

withdrawal of grading services is negated by the congres-

sional practice of authorizing the Secretary to suspend or

withdraw services with express language, and with specific

limits on the duration of the sanction.'7 West places special

reliance on language this Court cited in State Highway

Commission v. Volpe, 479 F.2d 1099, 1114 (8th Cir. 1973):

“‘[w]here Congress has consistently made express its dele-

gation of a particular power, its silence is strong evidence

that it did not intend to grant the power.’ ”

This argument would be relevant if the service here

in question were akin to those whose withdrawal is ex-

pressly authorized. But it is not. The other services are

available to persons who must be licensed by the Secretary.

Without a license they are legally forbidden to deal with

third parties. With respect to meat grading services, how-

ever, “no person shall be required to use [them].” 7 U.S.C.

§ 1622(h). By withdrawing meat grading services the Sec-

retary does not suspend a person’s right to deal with third

parties. Rather, the Secretary is acting to determine the

persons with whom he will deal.'® See, e.g., Gonzalez v.

17West refers to several statutes, e.g., 7 U.S.C. §§ 203, 204 ( relating

to Packers and Stockyards Act of 1921) (market agencies and stockyard

dealers must register, registrant may be suspended, after hearing, for “rea-

sonable specified time”); 7 U.S.C. § 246 (Warehouse Act of 1916) (sus-

pension or revocation, after hearing, of warehouseman’s license); 7 U.S.C.

§ 449h(a) (Perishable Commodities Act) (up to ninety days suspension,

after hearing, of license of commissioner merchant, dealer, or broker, or

revocation of license, after hearing, if violation “flagrant or repeated”).

As the parentheticals indicate, West misreads the statutes in claiming that

each congressional grant of the power to suspend contains “specific cri-

teria” as to the “length and duration of sanction.”

18We concede that, as a practical matter, withdrawal of meat grading

services may impair one’s ability to do business. We reiterate, however,

that the Secretary in this case is asserting the power to withdraw only

after a hearing to determine whether a suspension of meat grading serv-

ices is necessary to ensure the integrity of the service.

A-21

C[APPEND!IX}

Freeman, 334 F.2d 570 (D.C. Cir. 1964) (debarment of con-

tractors by Secretary, after hearing, impliedly authorized,

despite potential adverse economic impact on the individual

involved).

Moreover, contrary to West’s assertion, the Secretary’s

power to suspend is not unbounded. Instead, it is a power

to impose sanctions, subject to judicial review, that are

reasonably related to their remedial purpose. Although

the Secretary’s findings and choice of sanctions are entitled

to due deference, they may be challenged on review as

being unreasonable under the circumstances.

Our conclusion is reinforced by the closely analogous

result in the recent case of Touche Ross & Co. v. SEC,

supra, which upheld an SEC rule that permitted that

agency to disbar from practice, either temporarily or per-

manently, any person found, after hearing, to lack the

character or integrity to represent others before the SEC.

Although the rule lacked express statutory authorization,

it was juistified as “an attempt by the SEC essentially to

protect the integrity of its own processes.” Id. at 2581, We

think much the same can be said of the Department of

Agriculture here. Although West terms Touche Ross & Co.

“wildly inapposite” because it involved licensed profes-

sionals, we think that the presence of a license in that case

makes the result here follow a fortiori: if express authori-

zation is not required to revoke or suspend a license to

represent third parties before an agency, neither is it re-

quired to suspend an agency’s provision of a service which

is, unlike a license, not a legal prerequisite to dealing with

third parties.

It may be, as the Secretary suggests, that a fair assess-

ment of the statutory language precludes an excursion into

legislative history: “when a statute on its face clearly cov-

ers certain activity, as in the instant case, we believe a

court should accept the statute as written and avoid plung-

ing into the murky waters of legislative history in an at-

A-22

[APPENDIX]

tempt to fathom whether Congress really intended to reach

what the language of its statute does reach.” United States

v. LeFaivre, 507 F.2d 1288, 1295 (4th Cir. 1974), cert. de-

nied, 420 U.S. 1004 (1975).1® Because we consider here a

question of implied authority, however, it may be approp-

riate to examine the legislative history for what guidance

it may give. To negate the implied authority that thus

far appears, however, we would require strong evidence

in the legislative history of a contrary congressional intent.

The evidence that West supplies, by contrast, is incon-

clusive at best. It consists of two basic items. The first

is a colloquy between Senator Richard B. Russell, the floor

manager of the Senate Bill that became the Agricultural

Marketing Act of 1946, and Senator Robert A. Taft, the

Republican leader in the Senate. We have set out the

colloquy below.?°

From this exchange West would have us conclude that

the Act contemplates no withdrawal of grading service.

19The district court ignored the legislative history, presumably because

it found the statutory language sufficiently plain. See TVA v. Hill, 437

US. 153, 184 2.29 (1978).

20Mr. Taft. Mr. President, will the Senator yield?

Mr. Russell. I yield.

Mr. Taft. Does this Bill in any way extend the power of the De-

partment of Agriculture * ® ® or is it strictly confined to research?

Mr. Russell. It does mot in any wise extend the power of the De-

partment of Agriculture or any of its subdivisions.

Mr. Taft. Either to buy or sell or regulate production?

Mr. Russell. It does not to the slightest degree make any such pro-

vision. It provides wholly for research.

Mr. Taft. There are a couple of very general statements contained

in the Bill which 1 had not read with care, so 1 could not judge whether

the language was sufficiently broad to cover other activities.

Mr. Russell. It és strictly a research Bill.

92 Congressional Record, part 8, 79th Cong., 2d Sess. at 10,370 et seq.

(July 29, 1946). We have retained the emphases supplied by West.

A-23

[APPEND!IX}

While as a logical matter the inference West urges is a

permissible one, it is but one of several permissible in-

ferences, and is by no means inevitable. We are mindful

that “[t]he plain words and meaning of a statute cannot be

overcome by a legislative history which, through strained

processes of deduction from events of wholly ambiguous

significance, may furnish dubious bases for inference in

every direction.” Gemsco, Inc. v. Walling, 324 U.S. 244,

260 (1945). Senator Russell’s assurance that the Act would

not “extend the power” of the Department of Agriculture

and that it was “strictly a research bill” must be read

against the plain language of section 1622(h), which ex-

pressly authorizes the Secretary to certify the grade of

agricultural products. Perhaps Senator Russell thought the

Secretary already had this power, since federal grading

services had been available continuously since the 1920’s.

See 7 U.S.C.S. § 414 (repealed by 1955 amendment to sec-

tion 1622 (h)) and appropriation acts cited therein. Sena-

tor Russell’s assurance that the Act would not “regulate

production” may have meant simply that the Act would

not regulate production directly, as it does, for example,

the Agricultural’ Marketing Agreement Act of 1937. Or

perhaps Senator Russell was alluding to the voluntary

nature of the Act; an act that provides a service only to

those who want it is ordinarily not considered regulatory

in nature. Of course, these speculations cannot be the basis

for judicial holding. But neither can we rely on the specu-

lations of West, when the language of the statute indicates

a contrary result. We find the colloquy inconclusive.

The remainder of the 1946 legislative history only re-

inforces the Secretary’s view. At hearings before the House

, Committee on Agriculture, which was considering the bill

that would become the Act, the Secretary’s administrators

in the Production and Marketing Administration attested

to the important consumer interest in “disinterested inspec-

tion and grade certification.” Hearings on H.R. 6548 and

H.R. 6692 Before The Committee on Agriculture of the

A-24

[APPEND!X]

House of Representatives, 79th Cong., 2d Sess. 145, 146,

185 (1946). Moreover, at the time of the Act, the Secretary

had issued regulations that permitted him to refuse the

grading service, authorized by appropriations acts, to per-

sons whose misconduct jeopardized the integrity of the

service. 1 Fed. Reg. 2126, 2127 (1936). Although congres-

sional acquiesence by silence is not to be lightly presumed,

e.g., TVA v. Hill, supra; SEC v. Sloane, supra, we think it

sufficient in this case to remove any last vestige of doubt

concerning the scope of the Act’s grant of power.

West’s second argument from legislative history fo-

cuses on the background to the 1955 amendment to section

1622(h), which provided criminal sanctions for falsifying

official Department of Agricultural grading inspection cer-

tificates. West’s argument is that the Secretary cannot be

said to have power to withdraw services because Congress,

in passing the 1955 amendment, specifically rejected a pro-

posal that would have imposed criminal penalties for vio-

lations of the Secretary’s regulations.

We reject this argument for three reasons. First, the

proposed bill to which West refers would have criminally

proscribed the violation of only those regulations that

goverried the possession or use of inspection certificates.?1

A bill that rejects criminal penalties for violations of regu-

lations that govern a narrow class of activities does not

impliedly reject administrative efforts to address other ac-

tivities. Second, even had Congress rejected a broad pro-

posal to impose criminal sanctions on violations of any of

the Secretary’s regulations under the Act, the rejection of

judicially imposed sanctions does not mean that Congress

*1The bill would have imposed penal sanctions on any person who

violated “any provision of any regulation promulgated by the Secretary

of Agriculture to govern the possession or use of certificates, memoran-

dums, marks, or other identifications with respect to inspection, class,

grade, quality, size, quantity or condition or devices for making such

marks or identifications, issued or authorized under this Act.”

A-25

[APPENDIX)}

rejected the agency’s power to correct abuses with less

stringent means.

Finally, even had West been able to demonstrate some

ambiguity as to the meaning of the statute, we would find

considerable strength in the Secretary’s argument that the

legislative history of the 1955 amendment, far from negat-

ing the Secretary’s power to ensure the integrity of meat

grading through justified withdrawals, actually indicates

that Congress approved of the practice. In 1955 the Secre-

tafy’s regulation 53.12, which authorized withdrawal of

grading services for misconduct, had been in place for

about eight years. The Deputy Administractor for Market-

ing Services, who explained to the House Committee on

Agriculture the purpose for the proposed criminal sanctic 2,

gave the Committee

a specific illustration. It is happening frequently with

respect to the grading of meat. Federal meat grading

has become an extremely important industry of mer-

chandising, with the result that we are finding too

frequently people or firms who are developing fic-

titious rollers and rolling that meat, implying that it

has been officially graded. If we were servicing a firm

under the Inspection Service and found them doing

that, we could naturally withdraw any privileges of

further use of this Service to them.

In that respect we can take care of that but we find

too many instances where this type of activity is grow-

ing on the part of people who do not use the Service

and our hands are tied with respect to imposing any

penalties upon them.

Hearings on S. 1757 before the Committee on Agriculture

of the House of Representatives, 84th Cong., Ist Sess. at

47-48 (1955). Although this statement could not be ac-

corded much significance if the Secretary’s withdrawal

power were at odds with the statutory language or the

general pattern of the statute, SEC v. Sloane, supra, 436

U.S. at 121, such is not the case here. In the present case,

A-26

(APPENDIX)

we think that the prior existence of the regulation and

the Department of Agriculture’s assertion of the validity

of that regulation in a congressional hearing on a related

amendment triggers the presumption that Congress was

generally aware of the Secretary’s asserted withdrawal

power. See cases cited id. at 120.

In summary, we uphold regulation 53.13(a), which

permits the Secretary to withdraw grading services for

misconduct in order to ensure the integrity of the grading

service. The Secretary’s interpretation of his power to

enforce the substance of 53.13(a) has been followed, un-

challenged, for at least thirty years. Moreover, the regu-

lation was issued pursuant to express rule making authority

and is reasonably designed to preserve the integrity and

reliability of the grading system the Secretary is directed

and authorized to administer. Thus, although not expressly

authorized, the regulation enjoys an especially strong pre-

sumption of validity which West has not rebutted. The

regulation is not inconsistent either with an express stat-

utory provision or with the agriculture laws taken as a

whole. Finally, the legislative history tends to support

rather than strongly oppose the view that the regulations

are authorized by Congress.

We therefore affirm the district court in its denial of

injunctive relief.

ROSS, Circuit Judge, concurring.

I concur in the opinion of Judge Stephenson. However,

in my opinion the regulations should provide that a limit

be placed upon the length of time that the penaliies will

be enforced, or at least set forth some guidelines which

would give the Secretary authority to refuse to impose a

time limit under specified conditions.

A true copy.

Attest:

CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.

A-27

[APPENDIX}

[Filed August 2, 1979]

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEBRASKA

FRANK R. WEST, ) CIVIL

Plaintiff, No. 79-0-60

vs

BOB BERGLAND, SECRETARY MEMORANDUM

)

)

OF AGRICULTURE OF THE )

UNITED STATES OF AMERICA, )

and DONALD HOUSTON, ACTING _ )

ADMINISTRATOR OF THE FOOD )

SAFETY AND QUALITY SERVICE )

OF THE UNITED STATES DE- | )

PARTMENT OF AGRICULTURE, )

Defendants. )

‘APPEARANCES: For Plaintiff — James P. Linn and

7 | B. J. Rothbaum, Jr.,

. Oklahoma City,. Okla.

David S. Lathrop,

_ Omaha, Nebraska

For Defendants — Marshall M. Marcus

and Helen C. Harris,

Washington, D.C.

Thomas D. Thalken,

Asst. U.S. Attorney

District of Nebraska

DENNEY, District Judge

On February 13, 1979, Frank R. West filed a complaint

in this Court to prevent the initiation of an administrative

hearing to determine whether the benefits of meat grading

and acceptances services should be withdrawn from him.

A temporary restraining order was executed by this Court

A-28

[APPENDIX]

on that same day. Exhaustive briefs were submitted and

oral argument was heard on the issue of whether a perma-

nent injunction against administrative action by the De-

partment of Agriculture should issue. After reviewing the

statutes, regulations and legislative history, the Court be-

lieves that the application for permanent equitable relief

should be denied, and that the temporary restraining order

should be dissolved. The following findings of fact and con-

clusions of law demonstrate the propriety of this holding.

The Agricultural Marketing Act of 1946 [the Act] was

enacted by Congress to provide for ongoing research into

basic laws and principles relating to agriculture and to

improve and facilitate the marketing and distribution of

agricultural products. 7 U.S.C.A. § 1621 et seq. (1973). The

Act specifically directs the Secretary of Agriculture to

engage in the following tasks:

To inspect, certify, and identify the class, quality,

quantity, and condition of agricultural products when

shipped or received in interstate commerce, under such

rules and regulations as the Secretary of Agriculture

may prescribe, including assessment and collection of

such fees as will be reasonable and as nearly as may

be to cover the cost of the service rendered, to the end

that agricultural products may be marketed to the best

advantage, that trading may be facilitated, and that

consumers may be able to obtain the quality product

which they desire, except that no person shall be re-

quired to use the service authorized by this subsection.

7 U.S.C.A. § 1622(h) (1973):

Further authority for the enactment of regulations for

the purpose of achieving the purposes of the Act can be

found in 7 U.S.C.A. § 1624(b) (1973):

The Secretary of Agriculture shall promulgate such

orders, rules, and regulations as he deems necessary

to carry out the provisions of this chapter.

A-29

[APPENDIX}

The Court believes that Congress, in its passage of

these two statutes, delegated broad authority to U.S.D.A. to

devise rational methods to achieve the statutory purposes.

The plaintiff contends that 7 C.F.R. §53.13 (1979)

was promulgated without statutory authorization and is

void as a result. The regulation at issue provides for the

denial or withdrawal of voluntary grading and acceptance

services under the Act for misconduct by individuals re-

ceiving such services.

Where, as here, there is a broad,: general grant of

rule-making authority, the standard of review for ascer-

taining whether a particular regulation is valid is well

settled. As the Supreme Court stated in Mourning v.

Family Publications Service, Inc., 411 U.S. 356, 369 (1973):

The standard to be applied in determining whether the

Board exceeded the authority delegated to it under

the Truth in Lending Act is well established under our

prior cases. Where the empowering provision of a

Statute states simply that the agency may “make...

such rules and regulations as may be necessary to carry

out the provisions of this Act,” we have held that the

validity of a regulation promulgated thereunder will

be sustained so long as it is “reasonably related to the

purposes of the enabling legislation.” Thorpe v. Hous-

. ing Authority of City of Durham, 393 U.S. 268, 280-281

(1969). See also American Trucking Assns. v. United

States, 344 U.S. 298 (1953).

This standard has been adopted in the Eighth Circuit.

Graham v. National Transportation Safety Board, 530 F.2d

317 (8th Cir. 1976); Dealer’s Transport Co. v. Werner

Transportation Co., 203 F.2d 549 (8th Cir. 1953).

The Court believes that 7 C.F.R. §53.13 (1979) is

reasonably related to the purposes of the Act. The integ-

rity of the federal grading program rests on its ability to

provide the consuming public with accurate and honest

grading of meat and meat products. Such actions as brib-

A-30

[APPENDIX]

ery of inspectors directly impair the program’s ability to

achieve such a goal. In promulgating § 53.13, the Secretary

has, through the establishment of certain conditions under

which federal meat grading services will be provided or

denied, acted to protect the program from the adverse im-

pact of such activities. This action is rationally related to

the purposes of the enabling Act.

The lack of express authorization from Congress pro-

viding for the denial or withdrawal of meat grading serv-

ices does not alter this conclusion. As the Supreme Court

stated in American Trucking Associations, Inc. v. United

States, 344 U.S. 298, 309-10 (1953) with regard to I.C.C.

‘regulation of equipment leasing practices:

Here, appellants have framed their position as a broad-

side attack on the Commission’s asserted power. All

urge upon us the fact that nowhere in the Act is there

an expressed delegation of power to control, regulate,

or affect leasing practices, and it is further insisted

that in each separate provision of the Act granting

regulatory authority there is no direct implication of

such power. Our function, however, does not stop with

a section-by-section search for the phrase “regulation

of leasing practices” among the literal words of the

statutory provisions. As a matter of principle, we

might agree with appellants’ contentions if we thought

it a reasonable canon of interpretation that the drafts-

men of acts delegating agency powers, as a practical

and realistic matter, can or do include specific con-

sideration of every evil sought to be corrected. But

no great acquaintance with practical affairs is required

to know that such prescience, either in fact or in the

minds of Congress does not exist. (Citations omitted).

Its very absence, moreover, is precisely one of the

reasons why regulatory agencies such as the Commis-

sion are created, for it is the fond hope of their authors

that they bring to their work the expert’s familiarity

with industry conditions which members of the dele-

gating legislatures cannot be expected to possess.

A-31

[APPENDIX)

Nor does the Court agree that a regulation denying or

withdrawing meat grading services is “punitive” or “quasi-

penal”, and therefore requires express authorization. Ad-

ministrative sanctions of the nature involved here are re-

medial rather than penal in nature. Helvering v. Mitchell,

303 U.S. 391 (1938). The denial or withdrawal of meat

grading services are actions that could be taken to protect

the integrity of the grading process. They act as “deter-

rence rather than retribution.” Schwenk, The Administra-

tive Crime, Its Creation and Punishment by Administrative

Agencies, 42 MICH.L.REV. 58, 85 (1943). It is a necessary

incident of regulation that agencies have the ability to take

action to deter others from violating laws that they ad-

minister.’ See Beck v. S.E.C., 430 F.2d 673 (6th Cir. 1970).

The inclusion of a penal sanction in 7 U.S.C.A.

§ 1622(h) (1973) by Congress in 1955 does not change the

character of the regulatory scheme. The fact that Congress

has taken action to render a narrow range of activities

crimine’ does not cut off an agency’s power to impose re-

quirements on other ranges of activity. Mourning v. Family

Publications Service, Inc., supra, 41) U.S. at 372-73.

Relevant to this issue is the rule that an agency’s in-

terpretation of the statutes it administers is entitled to

deference, and may not be overturned unless the inter-

pretation flouts a clear statutory command or is otherwise

utterly unreasonable. There must be “compelling indica-

tions” that the agency is wrong. Zenith Radio Corp. v.

United States, 46 U.S.L.W.. 4752, 4754 (June 21, 1978);

Udall v. Tallman, 380 U.S. 1, 16 (1965). The agency’s in-

terpretation is entitled to particular deference where, as

here, it is longstanding and has been consistently followed

since the enactment of the statute. Kennth v. Schmoll, 482

F.2d 90, 95 (10th Cir. 1973).

Nor does West have any absolute statutory right to

avail himself of federal meat grading and acceptance serv-

ices. Illustrative is the holding in Gonzalez vy. Freeman,

334 F.2d 570 (D.C. Cir. 1964), a case involving debarment

A-32

(APPENDIX)

procedures by the U.S.D.A.’s Commodity Credit Corpora-

tion where the enabling statute did not specifically author-

ize debarment. The Gonzalez court held as follows:

Congress had made no explicit provision for debarring

contractors doing business with Commodity Credit. The

question presented is whether Commodity Credit is

powerless to terminate business relations with irre-

sponsible defaulting or dishonest contractors. Notwith-

standing its severe impact upon a contractor, debar-

ment is not intended to punish but is a necessary

“means for accomplishing the congressional purpose”

of Commodity Credit to “aid in the development of

foreign markets for agricultural commodities.” With-

out such power to deal with irresponsible bidders and

contractors, the efficiency of Commodity Credit’s oper-

ations would be severely impaired. We conclude that

such a power is inherent and necessarily incidental

to the effective administration of the statutory scheme.

(Citations omitted). Gonzalez vy. Freeman, supra, 334

F.2d at 576-77.

The Court believes that an analogy may be appropri-

ately drawn between debarment and withdrawal of meat

grading services. The power to establish a certain entitle-

ment necessarily contemplates the existence of the power

to discipline in the face of certain conduct. It is an im-

plied power which exists as a corollary to the general grant

of authority.

Moreover, West’s due process rights are not offended

by the requirement of facing a trial-type hearing before

an Administrative Law Judge. He will have every oppor-

tunity to defend himself in an administrative setting. The

right to appeal the U.S.D.A.’s ultimate decision, if adverse,

is available to the plaintiff. The Court shall require West

to exhaust his administrative remedies.

An order has been filed contemporaneously herewith

in accordance with this Memorandum Opinion.

Dated this Ist day of August, 1979.

A-33

[APPENDIX)

[Filed February 14, 1979]

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEBRASKA

FRANK R. WEST, ) CIVIL

Plaintiff, ) NO. 79-0-60

vs )

) ORDER

BOB BERGLAND, Secretary of )

Agriculture of the United States )

of America, et al., )

Defendants. )

This matter comes before the Court upon the plaintiff's

motion for a temporary restraining order.

After considering the arguments of counsel and re-

(viewing the applicable law, the Court believes that a suf-

ficient showing has been made to warrant the issuance of

a temporary restraining order.

IT IS HEREBY ORDERED that the defendants, their

agents and employees, shall be enjoined from further prose-

cution of the administrative proceedings before the Depart-

ment of Agriculture regarding the withdrawal of federal

meat inspection and grading services from the plaintiff, and

all entities with which he is connected, until 9:30 A.M., on

the 23rd day of February, 1979. No bond shall be required.

IT IS FURTHER ORDERED that a hearing upon the

#@pplication for a preliminary injunction shall commence at

9:30 A.M., on February 23, 1979, in Court Room No. 2,

United States Post Office & Court House, Omaha, Nebraska.

Dated this 14th day of February, 1979, at 10:30 a.m.

BY THE COURT

(s) Robert V. Denney

Robert V. Denney

United States District Judge

APPENDIX B

——

AGRICULTURAL MARKETING ACT OF 1946

7 U.S.C. § 1621. Congressional declaration of purpose; use

of existing facilities; cooperation with :

States

The Congress declares that a sound, efficient, and priv-

ately operated system for distributing and marketing agri-

cultural products is essential to a prosperous agriculture

and is indispensable to the maintenance of full employment

and to the welfare, prosperity, and health of the Nation.

It is further declared to be the policy of Congress to pro-

mote through research, study, experimentation, and through

cooperation among Federal and State agencies, farm organ-

izations, and private industry a scientific approach to the

problems of marketing, transportation, and distribution of

agricultural products similar to the scientific methods which

have been utilized so successfully during the past eighty-

four years in connection with the production of agricultural

products so that such products capable of being produced

in abundance may be marketed in an orderly manner and

efficiently distributed. In order to attain these objectives,

it is the intent of Congress to provide for (1) continuous re-

search to improve the marketing, handling, storage, proces-

sing, transportation, and distribution of agricultural prod-

ucts; (2) cooperation among Federal and State agencies,

producers, industry organizations, and others in the devel-

opment and effectuation of research and marketing pro-

grams to improve the distribution processes; (3) an inte-

grated administration of all laws enacted by Congress to

aid the distribution of agricultural products through re-

search, market aids and services, and regulatory activities,

to the end that marketing methods and facilities may be

improved, that distribution costs may be reduced and the

price spread between the producer and consumer may be

narrowed, that dietary and nutritional standards may be

B-2

[APPENDIX]

improved, that new and wider markets for American agri-

cultural products may be developed, both in the United

States and in other countries, with a view to making it

pessible for the full production of American farms to be

disposed of usefully, economically, profitably, and in an or-

derly manner. In effectuating the purposes of this chapter,

maximum use shall be made of existing research facilities

owned or controlled by the Federal Government or by State

agricultural experiment stations and of the facilities of the

Federal and State extension services. To the maximum ex-

tent practicable marketing research work done under this

chapter in cooperation with the States shall be done in co-

operation with the State agricultural experiment stations;

marketing educational and demonstrational work done un-

der this chapter in cooperation with the States shall be

done in cooperation with the State agricultural extension

service; market information, inspection, regulatory work

and other marketing service done under this chapter in

cooperation with the State agencies shall be done in co-

operation with the State departments of agriculture, and

State bureaus and departments of markets.

7 U.S.C. § 1622. Duties of Secretary relating to agricul-

tural products

The Secretary of Agriculture is directed and author-

ized:

Determination of methods of processing, packaging,

marketing, etc.; publication of results

(a) to conduct, assist, and foster research, investiga-

tion, and experimentation to determine the best methods

of processing, preparation for market, packaging, handling,

transporting, storing, distributing, and marketing agricul-

tural products: Provided, That the results of such research

shall be made available to the public for the purpose of ex-

panding the use of American agricultural products in such

manner as the Secretary of Agriculture may determine.

B-3

(APPENDIX)

Determination of costs

(b) to determine costs of marketing agricultural prod-

ucts in their various forms and through the various chan-

nels and to foster and assist in the development and estab-

lishment of more efficient marketing methods (including

analyses of methods and proposed methods), practices, and

facilities, for the purpose of bringing about more efficient

and orderly marketing, and reducing the price spread be-

tween the producer and the consumer.

Improvement of standards of quality, condition, etc.;

standard of quality for ice cream

(c) To develop and improve standards of quality, con-

dition, quantity, grade, and packaging, and recommend and

demonstrate such standards in order to encourage uniform-

ity and consistency in commercial practices. Within thirty

days after September 29, 1977, the Secretary shall by regu-

lation adopt a standard of quality for ice cream which shall

provide that ice cream shall contain at least 1.6 pounds of

total solids to the gallon, weigh not less than 4.5 pounds to

the gallon and contain not less than 20 percent total milk

solids, constituted of not less than 10 percent milkfat. In

no case shall the content of milk solids not fat be less than

6 percent. Whey shall not, by weight, be more than 25 per-

cent of the milk solids not fat. Only those products which

meet the standard issued by the Secretary may bear a sym-

bol thereon indicating that they meet the Department of

Agriculture standard for “ice cream.”

Elimination of artificial barriers to free movement

(d) To conduct, assist, foster, and direct studies and

informational programs, designed to eliminate artificial bar-

riers to the free movement of agricultural products.

Development of new markets

(e) To foster and assist in the development of new

or expanded markets (domestic and foreign) and new and

expanded uses and in the moving of larger quanties of ag-

B-4

[APPENDIX]

ricultural products through the private marketing system

to consumers in the United States and abroad.

Increasing consumer edumation

(f) To conduct and cooperate in consumer education

for the more effective utilization and greater consumption

of agricultural products: Provided, That no money appro-

priated under the authority of this chapter shall be used

to pay for newspaper or periodical advertising space or

radio time in carrying out the purposes of this section and

subsection (e) of this section.

Collection and dissemination of marketing information

(g) To collect and disseminate marketing information,

including adequate outlook information on a market-area

basis, for the purpose of anticipating and meeting consumer

requirements, aiding in the maintenance of farm income,

and bringing about a balance between production and utili-

zation of agricultural products.

Inspection and certification of products in interstate

commerce; certificates as evidence; penalties

(h) To inspect, certify, and identify the class, quality,

quantity, and condition of agricultural products when ship-

ped or received in interstate commerce, under such rules

and regulations as the Secretary of Agriculture may pre-

scribe, including assessment and collection of such fees as

will be reasonable and as nearly as may be to cover the

cost of the service rendered, to the end that agricultural

products may be marketed to the best advantage, that trad-

ing may be facilitated, and that consumers may be able

to obtain the quality product which they desire, except that

no person shall be required to use the service authorized

by this subsection. Any official certificate issued under the

authority of this subsection shall be received by all officers

and all courts of the United States as prima facie evidence

of the truth of the statements therein contained. Whoever

knowingly shall falsely make, issue, alter, forge, or counter-

B-5

[APPENDIX)

feit any official certificate, memorandum, mark, or other

identification, or device for making such mark or identifi-

cation, with respect to inspection, class, grade, quality, size,

quantity, or condition, issued or authorized under this sec-

tion or knowingly cause or procure, or aid, assist in, or be

a party to, such false making, issuing, altering, forging, or

counterfeiting, or whoever knowingly shall possess, with-

out promptly notifying the Secretary of Agriculture or his

representative, utter, publish, or use as true, or cause to be

uttered, published, or used as true, any such falsely made,

altered, forged, or counterfeited official certificate, memo-

randum, mark, identification, or device, or whoever know-

ingly represents that an agricultural product has been of-

ficially inspected or graded (by an authorized inspector or

grader) under the authority of this section when such com-

modity has in fact not been so graded or inspected shall be

fined not more than $1,000 or imprisoned not more than

one year, or both.

Development of facilities for assembling,

Processing, transporting, etc.

(i) To determine the needs and develop or assist in the

development of plans for efficient facilities and methods of

operating such facilities for the proper assembly, process-

ing, transportation, storage, distribution, and handling of

agricultural products.

Improvement of transportation facilities and rates

(j) To assist in improving transportation services and

facilities and in obtaining equitable and reasonable trans-

portation rates and services and adequate transportation

facilities for agricultural products and farm supplies by

making complaint or petition to the Interstate Commerce

Commission, the Maritime Commission, the Civil Aeronaut-

ics Board, or other Federal or State transportation regula-

tory body with respect to rates, charges, tariffs, practices,

and services, or by working directly with individual car-

riers or groups of carriers.

B-6

tAPPENDIX]

Collection and dissemination of marketing statistics

(k) To collect, tabulate, and disseminate statistics on

marketing agricultural products, including, but not restric-

ted to statistics on market supplies, storage stocks, quantity,

quality, and condition of such products in various positions

in the marketing channel, utilization of such products, and

shipments and unloads thereof.

Development of procurement standards and specifications

(1) To develop and promulgate, for the use and at the

request of any Federal agency or State, procurement stan-

dards and specifications for agricultural products, and sub-

mit such standards and specifications to such agency or

State for use or adoption for procurement purposes.

Promotion of research for handling, storing, preserving, etc.

(m) To conduct, assist, encourage, and promote re-

search, investigation, and experimentation to determine the

most efficient and practical means, methods, and processes

for the handling, storing, preserving, protecting, proces-

sing, and distributing of agricultural commodities to the

end that such commodities may be marketed in an orderly

manner and to the best interest of the producers thereof.

General research, services, and activities

(n) To conduct such other research and services and

to perform such other activities ‘as will facilitate the mar-

keting, distribution, processing, and utilization of agricul-

tural products through commercial channels.

7 U.S.C. § 1623. Appropriations; allotments to States

(a) In order to conduct research and service work in

connection with the preparation for market, processing,

packaging, handling, storing, transportation, distributing,

and marketing of agricultural products as authorized by

B-7

[APPENDIX)

this chapter, there is hereby authorized to be appropriated

the following sums:

(1) $2,500,000 for the fiscal year ending June 30,

1947, and each subsequent fiscal year.

(2) An additional $2,500,000 for the fiscal year end-

ing June 30, 1948, and each subsequent fiscal year.

(3) An additional $5,000,000 for the fiscal year end-

ing June 30, 1949, and each subsequent fiscal year.

(4) An additional $5,000,000 for the fiscal year end-

ing June 30, 1950, and each subsequent fiscal year.

(5) An additional $5,000,000 for the fiscal year end-

ing June 30, 1951, and each subsequent fiscal year.

(6) In addition to the foregoing, such additional

funds beginning with the fiscal year ending June 30,

1952, and thereafter, as the Congress may deem neces-

sary.

Such sums appropriated in pursuance of this chapter shall

be in addition to, and not in substitution for, sums appro-

priated or otherwise made available to the Department of

Agriculture.

(b) The Secretary of Agriculture is authorized to make

available from such funds such sums as he may deem ap-

propriate for allotment to State departments of agriculture,

State bureaus and departments of markets, State agricul-

tural experiment stations, and other appropriate State agen-

cies for cooperative projects in marketing service and in

marketing research to effectuate the purposes of this chap-

ter: Provided, That no such allotment and no payment

under any such allotment shall be made for any fiscal year

to any State agency in excess of the amount which such

State agency makes available out of its own funds for such

research. The funds which State agencies are required to

make available in order to qualify for such an allotment

shall be in addition to any funds now avaiable to such

B-8

[APPENDIX]

agencies for marketing services and for marketing research.

The allotments authorized under this section shall be made

to the agency or agencies best equipped and qualified to

conduct the specific project to be undertaken. Such allot-

ments shall be covered by cooperative agreements between

the Secretary of Agriculture and the cooperating agency

and shall include appropriate provisions for preventing dup-

lication or overlapping of work within the State or States

cooperating. Should duplication or overlapping occur sub-

sequent to approval of a cooperative project or allotment

of funds, the Secretary of Agriculture is authorized and

directed to withhold unexpended balances on such projects

notwithstanding the prior approval thereof.

7 U.S.C. § 1623a. Minimum sum for contracting

Not less than $1,500,000 of the appropriations of the

Department for research and service work authorized by

this chapter and sections 427 and 427i(e) of this title, and

sections 1891 to 1893 of Title 42, shall be available for con-

tracting in accordance with this chapter and sections 427

and 427i(e) of this title, and sections 1891 to 1893 of Title

42.

7 U.S.C. § 1624. Cooperation with Government and State

agencies, private research organizations,

etc.; rules and regulations

(a) In carrying out the provisions of this chapter, the

Secretary of Agriculture may cooperate with other branches

of the Government, State agencies, private research organi-

zations, purchasing and consuming organizations, boards of

trade, chambers of commerce, other associations of business

or trade organizations, transportation and storage agencies

and organizations, or other persons or corporations engaged

in the production, transportation, storing, processing, mar-

keting, and distribution of agricultural products whether

B-9

[APPENDIX)

operating in one or more jurisdictions. The Secretary of

Agriculture shall have authority to enter into contracts and

agreements under the terms of regulations promulgated by

him with States and agencies of States, private firms, in-

stitutions, and individuals for the purpose of conducting re-

search and service work, making and compiling reports and

surveys, and carrying out other functions relating thereto

when in his judgment the services or functions to be per-

formed will be carried out more effectively, more rapidly,

or at less cost than if performed by the Department of

Agriculture. Contracts under this section may be made for

work to be performed within a period not more than four

years from the date of any such contract, and advance,

progress, or other payments may be made. The provisions

of section 529 of Title 31 and section 5 of Title 41 shall not

be applicable to contracts or agreements made under the

authority of this section. Any unexpended balances of ap-

propriations obligated by contracts as authorized by this

section may, notwithstanding the provisions of section 713

of Title 31, remain upon the books of the Treasury for not

more than five fiscal years before being carried to the sur-

plus fund and covered into the Treasury. Any contract

made pursuant to this section shall contain requirements

making the result of such research and investigations avail-

able to the public by such means as the Secretary of Agri-

culture shall determine.

(b) The Secretary of Agriculture shall promulgate

such orders, rules, and regulations as he deems necessary

to carry out the provisions of this chapter.

7 U.S.C. p 1626. Transfer and consolidation of functions,

powers, bureaus, etc.

In order to facilitate administration and to increase the

effectiveness of the marketing research, service, and regu-

latory work of the Department of Agriculture to the fullest

extent practicable, the Secretary of Agriculture is author-

B-10

[APPENDIX]

ized, notwithstanding any other provisions of law, to trans-

fer, group, coordinate, and consolidate the functions, powers,

duties, and authorities of each and every agency, division,

bureau, service, section, or other administrative unit in the

Department of Agriculture primarily concerned with re-

search, service, or regulatory activities in connection with

the marketing, transporation, storage, processing, distribu-

tion of, or service or regulatory activities in connection

with, the utilization of, agricultural products, into a single

administrative agency. In rnaking such changes as may be

necessary to carry out effectively the purposes of this chap-

ter, the records, property, personnel, and funds of such

agencies, divisions, bureaus, services, sections, or other ad-

ministrative units in the Department of Agriculture affected

are authorized to be transferred to and used by such ad-

ministrative agency to which the transfer may be made, but

such unexpended balances of appropriations so transferred

shall be used only for the purposes for which such appro-

priations were made.

7 USC. ie Definitions

When used in this chapter, the term “agricultural prod-

ucts” includes agricultural, horticultural, viticultural, and

dairy products, livestock and poultry, bees, forest products,

fish and shellfish, and any products thereof, including pro-

cessed and manufactured products, and any and all products

raised or produced on farms and any processed or manu-

factured product thereof, and the term “State” when used

in this chapter shall include the Virgin Islands and Guam.

7 U.S.C. § 1627. Appointment of personnel; compensation;

7 employment of specialists

. The Secretary of Agriculture shall have the power to

appoint, remove, and fix, in accordance with existing law,

the compensation of such officers and employees, and to

B-11

[APPENDIX]

make such expenditures as he deems necessary, including

expenditures for rent outside the District of Columbia,

travel, supplies, books, equipment, and such other expend-

itures as may be necessary to the administration of this

chapter: Provided, That the Secretary of Agriculture may

appoint and fix the compensation of any technically quali-

filed person, firm, or organization by contract or otherwise

on a temporary basis and for a term not to exceed six

months in any fiscal year to perform research, inspection,

classification, technical, or other special services, without

regard to the civil-service laws.

7 U.S.C. § 1628. Repealed. Pub.L. 93-86, § 2, Aug. 10, 1973,

87 Stat. 246.

” U.S.C. § 1629. Establishment of committees to assist in

research and service programs

In the furtherance of the research and service work

authorized by sections 427 and 427h to 427j of this title and

this chapter, the Secretary of Agriculture may, in addition

to the national advisory committee, establish appropriate

committees, including representatives of producers, indus-

try, government, and science, to assist in effectuating spe-

cific research and service programs.

7 U.S.C. § 1630. Availability of appropriations for commit-

tee expenses in effectuating research and

service work [repealed]

APPENDIX C

TEXT OF 7 C.F.R. 52.13 (a)

[Newly redesignated at 7 C.F.R. § 2853.11 (a) ] 7

Denial or withdrawal of service.

(a) For misconduct — (1) Bases for denial or with-

drawal. An application or a request for service may be

rejected, or the benefits of the service may be otherwise

denied to, or withdrawn from, any person who, or whose

employee or agent in the scope of his employment or agency,

(i) has wilfully made any misrepresentation or has com-

mitted any other fraudulent or deceptive practice in con-

nection with any application or request for service under

the regulations; (ii) has given or attempted to give, as a

loan or for any other purpose, any money, favor, or other

thing of value, to any employee of the Department author-

ized to perform any function under the regulations; (iii)

has interfered with or obstructed, or attempted to interfere

with or to obstruct, any employee of the Department in

the performance of his duties under the regulations by in-

timidation, threats, assaults, abuse or any other improper

means; (iv) has knowingly falsely made, issued, altered,

forged, or counterfeited any official certificate, memoran-

dum, mark, or other identification, or device for making

any such mark or identification; (v) has knowlingly ut-

tered, published, or used as true any such falsely made,

issued, altered, forged, or counterfeited certificate, memo-

randum, mark, identification, or device; (vi) has knowingly

obtained or retained possession of any such falsely made,

issued, altered, forged, or counterfeited certificate, memo-

randum, mark, identification, or device, or of any such of-

ficial device, or of any product bearing any such falsely

made, issued, altered, forged or counterfeited mark or iden-

tification, or of any carcass or wholesale or retail cut bear-

ing any designation specified in subdivision (vii) of this

subparagraph which has not been federally graded or de-

rived from a carcass graded as being of the indicated grade:

C-2

APPENDIX]

(vii) has applied the designation “Prime,” “Choice,” “Good,”

“Star “ird,” “Commercial,” “Utility,” “Cutter,” “Canner,”

“Cui,” “Medium,” ‘No. 1,” “No. 2,” “No. 3,” “No. 4,” “yield

Grade 1,” “yield, Grade 2,” “yield, Grade 3,” “yield, Grade

4,” or “yield, Grade 5” by stamp, or brand directly on any

carcass, as part of a grade designation; or (viii) has applied

to immediate containers or shipping containers of carcasses,

wholesale cuts, or retail cuts, grade designations specified

in paragraph (a) (1) (vii) of this section, when such car-

casses, wholesale cuts, or retail cuts contained therein have

not been federally graded; or (ix) has in any manner not

specified in this paragraph violated subsection 203 (h) of the

Act: Provided, That paragraph (a) (1) (vi) of this section

shall not be deemed to be violated if the person in pos-

session of any item mentioned therein notifies the Director

or chief without delay that he has pcssession of such item

and, in the case of an official device, surrenders it to the

Chief, and, in the case of any other item, surrenders it to

the Director or Chief or destroys it or brings it into com-

pliance with the regulations by obliterating or removing

the violative features under supervision of the Director or

Chief: And provided, further, That paragraph (a) (1) (ii)

through (viii) of this section shall not be deemed to be

violated by any act committed by any person prior to the

making of an application for service under the regulations

by the principal person. An application or a request for

service may be rejected, or the benefits of the service may

be otherwise denied to, or withdrawn from, any person

who operates an establishment for which he has made ap-

plication for service if, with the knowledge of such oper-

ator, any other person conducting any operations in such

establishment has committed any of the offenses specified

in paragraph (a) (1) (i) through (ix) of this section after

such application was made. Moreover, an application or a

request for service made in the name of a person otherwise

eligible for service under the regulations may be rejected,

or the benefits of the service may be otherwise denied to,

or withdrawn from, such a prson (a) in case the service is

C-3

(APPENDIX)

or would be performed at an establishment operated (1) by

a corporation, partnership, or other person from whom the

benefits of the service are currently being withheld under

this paragraph, or (2) by a corporation, partnership, or

other person having an officer, director, partner, or sub-

stantial innvestor from whom the benefits of the service

are currently being withheld and who has any authority

with respect to the establishment where service is or would

be performed, or (b) in case the service is or would be

performed with respect to any livestock or product in which

any corporation, partnership, or other person within para-

graph (a)(1) (ix) (a)(1) of this section has a contract or

other financial interest.

(2) Procedure. All cases arising under this paragraph

shall be conducted in accordance with the rules of practice

governing withdrawal of inspection and grading service

under the Agricultural Marketing Act of 1946 as contained

in Part 50 of this chapter.

(b) For miscellaneous reasons. An application or re-

quest for service may be rejected, or the benefits of the

service may be otherwise denied to, or withdrawn from,

any person, without a hearing, by the official in charge of

the appropriate office of grading, with the concurrence of

the Director or Chief (1) for administrative reasons such

as the nonavailability of personnel to perform the service;

(2) for the failure to pay for service; (3) in case the ap-

plication or request relates to livestock or products which

are not eligible for service under §53.5, or which are un-

clean or are in an unclean establishment; (4) for other non-

compliance with the conditions on which service is available

as provided in the regulations, except matters covered by

paragraph (a) of this section; or (5) in case the person is

a partnership, corporation, or other person from whom the

benefits of the service are currently being withheld under

paragraph (a) of this section. Notice of such denial or with-

drawal, and the reasons therefor, shall promptly be given

to the person involved.

C-4

[APPENDIX]

(c) Filing of records. The final orders in formal pro-

ceedings under paragraph (a) of this section to deny or

withdraw the service under the regulations (except orders

required for good cause to be held confidential and not

cited as precedents) and other records in such proceedings

(except those required for good cause to be held confiden-

tial) shall be filed with the Hearing Clerk and shall be

available for inspection by persons having a proper interest

therein.

APPENDIX D

[Filed January 14, 1980]

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

No. 79-1711. September Term, 1979

Frank R. West, )

Appellant, ) Appeal from the United

vs. ) States District Court

) for the District of

Bob Bergland, etc., )

)

)

et al.,

Nebraska.

Appellees.

The Court having considered petition for rehearing en

banc filed by counsel for appellant and, being fully advised

in the premises, it is ordered that the petition for rehearing

en banc be, and it is hereby, denied.

Considering the petition for rehearing en banc as a pe-

tition for rehearing, it is ordered that the petition for re-

hearing also be, and it is hereby, denied.

January 14 ,1980