Petition for Writ of Certiorari — Mandell, Spector, Rudolph Co. v. United States

LIBRARY,

; ; : a ay PME C 1

2 8 ral 9

8 October Term, 1966.

V Now 7 3

. MANDELL, SPECTOR, RUDOLPH co,

25

—

A

\

\

THE UNITED STATES,

CC Respondent.

— FOR A WRIT OF CERTIORARI 10 1

a UNITED STATES COURT OF APPEALS»

’ FOR-THE THIRD CIRCUIT.

me: 13 Kony,

2600 Fidelity Philadephia Trust Bldg, Se

xg ah Brent Philadelphia, Pa. 19109

} s Attorneys for Petitioners.

Of Counsel: ee 2 3

idx

Dr.worrs, Paxéox, - | FF..

Kaisa, Kon & Levy, \ eee g

2600 Fidelity-Phila. Trust Nds. 3

Philadelphia, Pu 110 Z

3 Petitioner,

JJ 8

1420 Walnut Street,

. Philadelphia, Pa. 19102

International, 711 So. Soth St., Phila., Pa, 19143—Tel. SA 78711 Area Code 15

g ö 5 i .

e 2 ‘ . : :

8

2 2 . : ‘ .

\ * 2 ry : i 5

5 ay

9

0 ee /

ey 8

“ee fore 175 ’

7 .

le F

5 2 *

* e ; -~ *

7 755 \ &

25 \ :

5 5 —

*

OPINIONS 1 sestneqetenenscestansendanees casenent

*

«

. Jorispicrion eee

sion Eliminates From §9(b) of

Procedure Act the Right to Achieve”

Compliance Guaranteed by ‘Congressional Statute to

. Prevent: Administrative Abuse of the Licensing Power

Wi

Concruston Were eee este

55 —— of the United States. Court of - Ate for

2

7

*

a 4 rt *

‘ : ei —

7 9 : ve *s,

9 5

* 2 * 2 6

° 5 e Oa 8 7

aN 4 ;

o

ot

4 5

18 “8 :

*

* >

3 * K Oo

; 7

5 dis

e *

( .

r a

’ 0 — 8

He

o

ey

* * x 7

; 3

ae A 2

‘ 5 .

a

„„

yt

* oon

ee

RY

5 f 8 ae .

TABLE oF CITATIONS. ,: ere

8 “Pan Atinntic. 88. op , Atlantic C. L: NR. 258 U. S5. i

. 1 L. Ed. 2d 963, 77'S. . 8 5 8

Statutes an a ee Fage.

‘Aiigsitiistrative Procedure Act, 60 Stat. 242, §9(b), 5 v. 8. 2 ie

a WN a ee 3,4, 6, 7, 8

Attorney Generals Manual on the Administrative Procedure. 3

Act, p. 90 (1947) C ee e ee 7

House Report No: 1980, 79th Cong. 2nd Sess., Pp. 404l, re ea

printed, Sen. Doc. 248, pp. 27497 poe

. Lavery, Federal Administrative Law, § 125 (1952), p. 74 fe .

Note, Procedural Safeguards for ‘Licensees : Section, 908) « of |

oe the APA,” 75 Harv. L. Rev. 383-84 (1961) . easy OS

.. Perishable Agricultural Commodities W: 5

( „„ „

§ 9, 7 U. %%%%%ùdw / ĩͤ ane BARS

"Remarks of Sektor McCaren, reprinted, Sen. Dec. 248, p. 323 <i

» Remarks of Rep. Walter, 92 Congressional Record 5654, 720m

Cong. - 2nd Sess. (1946), . Sen. “Dos. 246 79th

G W cova oo elk ce. a

Senate Document 248, 79th Cong. 2nd. Sess., 1946 p. 35 „

Senate Report No. 752, 79th Cong., Ist Sess., ——. Sen. 2 8

„%% ⁵pdd / % ĩͤ v. 6

JJ... osc end 5 2

28 U. 8. C. 100. VVFCCFCFCCCCCCCCCCCC ceUscelushe aa

27 f n

16 :

a

ee. ge

_IN THE!

3,

‘Supreme Court of the United States. a 5

| Ocrosen Ta, 1966 8

Ben a

ea +.

Cee one fe | No. we a . |

: MANDELL, , SPECTOR, RUDOLPH: 00

foe i Petitioner,

Ae On a ‘oi 2 : 3

„„ UNITED STATES, |

| VVV Respondent

UNITED STATES COURT OF APPEALS

FR THE THIRD CIRCUIT. 5

Petitioner, Mandell, Spector, Rudolph Co., prays that

a writ of certiorari issue to review the judgment of the

United States Court of Appeals for the Third Circuit which

affirmed an order of the Judicial Officer 925 the —

of e N ; oa

OPINIONS BELOW. xy ve

‘PETITION ror A WRIT OF CERTIORARI TO THE

The Oninion of the Court of Appeals för the Third Cir-

Officer of the Department of Agriculture are reported at

24 A. D. 651, 897, 1025, and are reprinted in the Joint Ap-

pendix filed in the Court of Appeals at pp. 594a-6454

thereof, copies of which have been deposited herewith. The

. uit is reported at 364 F. 2d 889 and is reprinted in the

Appendix, infra, pp. 11-20. The opinions of the Judicial '

Hearing Examiner’s Recommended Decision is also re-:

eee . Joint’ e at pp. 479-5713 8 Og

Nas

WP

—— ear

+ Ro

ay

2 Petition: m for Writ a oem

wunpiorion.

The Judgment of the Oourt of Appeals tor the Third

Circuit sought to be reviewed was entered on September

23, 1966. A Petition for Rehearing was denied on Septem-

_. ber 23, 1966. The jurisdiction of this Court is invoked

under 28 U. S. C. §.1254(1) and.5 U. S. C. § 1040. 5

*

’ QUESTION: PRESENTED.

a Pe Heats, having been 250 of visiating 725

accounting and record-keeping provisions of the Perishable. _.

Agricultural Commodities Act, tendered repayment of the

alleged underpayments: and corrected ‘its’ record-keeping

system to conform with the Act and Regulations there- 5

under. There has been no further complaint against it for

‘any reason since that time, 1962. The Department of Agri-

culture refused to accept petitioner-licensee’s tendered re-

Payment as constituting compliance and took the position

that it was impossible for petitioner to achieve compliance,

notwithstanding the right to achieve compliance provided

to federal licensees by the Administrative Procedure Act.

s disciplinary proceedings before the Judicial Officer for

the Secretary of Agriculture, a 90-day license suspension

was imposed which, it is admitted, will effectively destroy

petitioner's business permanently. The Court of Appeals

kor the Third Circuit . Therefore, the ‘question 8

presented i eee Gave

Did not The aiiministiative . . ey the.

dcoourt below eliminate from the Administrative Procedure

Aäet and deny to petitioner the vital protection guaranteed

by Congress to federal licensees accused of statutory viola-

tions—the right to achieve compliance with the law i in ad-

| vance of license N e

3 y 2

+

0 ‘ 1

7

4

ue

— nr 0

srarurz INVOLVED.

4 9(b) of the Administrative Procedure As 60 Bint,

242, 5 U. S. C. § 1008 (b) is the statutory provision here in

Auestion ace Janguage relevant to. this case is e

5

In the exercise of any power or authority a

poet — *

28

(00 In ity case in which 3 is wade fon a

- /Hieense required by law the agency, with due regard to

the rights or privileges of all the interested parties or

| adversely affected. persons and with, reasonable dis-

patch, shall set and complete any proceedings required

to be conducted pursuant to séctions 1006 and 1007 of

this title or other proceedings required by law and shall

make Ats decision. Except in cases of willfulness or

those in which public health, interest, or safety requires.

ot ae otherwise, no withdrawal, suspension, revocation, ee

annul ment of any license shall be lauful unless, prior to

the institution of agency proceedings therefor, facts or

conduct which may warrant such action shall have

5 been called to the attention of the licensee by the agency

in writing and the licensee shall have been accorded

opportunity to. demonstrate or achieve: ‘compliance with

all lawful requirements. In any case in which the li-

censee has, in accordance with agency rules, mads

timely and sufficient application for a renewal or a new

license, #0 license with reference to any activity of a

continuing nature shall. expire until such application

shall have been finally determined 505 the agency.’ <a. ee

—

He 5 f oe i 4 ee — —

5 . . 5

7 : A : FG: ie ie , gt 723 {

: ee 73 — for a Writ of Certiorari

5 “STATEMENT or TE OAS . 4

* . * ö During 1961 and 1962 officers, of the United States De- :

«partment of Agriculture investigated the records of peti-

r. Mandell, Spector, Rudolph: Company (MSR), a

iladelphia ‘wholesaler of fresh fruits and vegetables. The

Fre claimed that MSR had violated the: Perishable

— Agricultural Commodities Act (PACA) by failing to main-

n tain adequate records and by underpaying and failing prop-

erly { to account, to’a few of its. shippers and consignors.’ .

At the conclusion of the investigations, petitionery;with- — -

out admitting liability, issued a check in the full amount of re

the alleged underpayment to- one cohsignor, and tendered *

repayment of the remaining od under payments. In

addition, petitioner revised and reformed its. record-keep-

ing system to bring it into strict, technical compliance with

the applicable Regulations under the PACA.

The officers of the Department of Agriculture took the

3

0 Position that petitiorier could not demonstrate or achieve.

oe Compliance with the PACA, since it could not undo its past

Mike Rowe oe - violations. Accordingly, the Department re i to accept

„ |. the, tendered. repayments as constituting compliance and

ignored the fact that petitioner’s record-keeping reforms

had gured the deficiencies charged by the investigators. :

ad N The Department, in token recognition of the require-

ments of Section 9(b) of the Administrative Procedure Act,

sent petitioner a formal notice of the alleged violations. —

It then instituted license revocation proceedings under 88 22

and 9 of the PACA .. U. 8. C. 8 499i), in which the

: 1 and overpayments were claimed which aggre-

gated,a total underpayment .of only $3,856 over a period of a year

and a Half, in a business withija volume of $5,000,000 per year. f

. oe 2. No subsequent complaint has been received from any private

Soest party or Government officer ‘concerning petitioner’s accounts of sales we

5 or re ord- keeping. This remains true to the present time,, during

which petitioner’s business has been iti continuous ee

* VC

1 = — * 5 Se 2 1 75 z 10 . BR —

: Ps ee Back Pe)

4 * 7 N Bb 5 5 . . 0

“ee

7 ° ee — 8

eee ; ä 9

N FP .

1 5 . Go Path

: 22 : . 8

4 Piet Tao for — of certoruri e

4 * * é

90 days.“ The Court of Appeals for the Third Circuit Sa)

affirmed. It is admitted that fhe license suspension for such a

aa an extended’ period will destroy petitioner’s business _ Sarees

ing approximately 85,000, 000 a year because. of alleged~

estimated non-willful underpayments (and overpayments)

. totaling $3,856, payment of whieh petitioner has tendered, as

and destroy tha jobs of its 30 employees. : : |

J udicial Officer ordered petitioner's’ license niapoded for

5

4 . —— te a ed violations had

been willfiil, and no finding of willfulness was made by the Judicial

9 veh ae

o

8 i 4

~ * e ö b 2

@ 1 1

; * 18 .

* 0

*

e

ey

* A

*

*

©

5

0 5 2

* / a 4 z

5 “a *

& S8

88 : 2 I.

\

*

1 8 >

8 a

EASILY SENET EGE A IN

2

:

—

2 oo 2nd Sess

6 Peetition for a Writ of Certiorari

REASONS FOR GRANTING THE “WRIT.

e

True Third Circuits. Decision Eliminstes From §9(b) of

the Administrative Procedure Act the Right to Achieve

Compliance: Guaranteed by Congressional Statute to

Prevent Administrative Abuse of the Licensing Power.

The W question here at i issue is one of vital! im-

portance, not merely to petitioner and the Department of

Agriculture, but to the hundreds of thousands of holders

of federal licenses throughout the country. Congress en- .

- acted 5 9 0b) of the Administrative Procedure Act in recog-

_ nition that the power to suspend and revoke licenses is

. literally the power of commercial life and death. In order

to restrict the use of this most powerful of weapons in the -

administrative agency’s arsenal, Congress. established both

procedural and substantive safeguards to the licensee which

were to come into play prior to any license suspension

proceeding. See Note, Procedural Safeguards for Licen-

sees: Section 9(B) of the 2 778 mary: L, Rev. 383-84

(1961).

ee 3 9(b) first requires oiling notice of the alleged

violations which may warrant, suspension.” In this respect

Congress merely restated the ‘pre-existing due process re-

quirement of notice and opportunity to defend. But Con-

gress went much further by requiring in addition‘ that

4. An examination of the Congressional Record and the com-

mittee reports leaves no doubt that the opportunity to achieve com-

; pllesce wee to be a protictiog'to the Hcenste 1 in addition to thé notice

| 1 Remarks of. we Walter, 92 Congressional Record

79th Cong., 2nd Sess, (1946), reprinted, Sen. Doc. 248, 79th

, 2nd Sess., p. 368. See also remarks of Senator McCaren,

nted, Sen. en. Doc. 248, p. 525; 1 1980, 79th

"ts, 7 reprinted, Sen. Doc. 248, pp. 274.75;

l. rt No. 52, h Cone 1st Sess, reprinted, Sen. Doc.

*

Petition for a Writ of Certiorart 5 7:

“the licensee shall live been accorded: opportunity »

demonstrate or achieve compliance with all.lawful require-

ments“ prior to institution of suspension proceedings. The

nature of this opportunity was explained by the Senate

Judiciary Committee as an Pede for the correction

of conduct questioned by the agency’’. (Senate Document’

248, 79th Cong., and Sess., 1946, p. 35.) 8

„ supplied.)

The Department o Agriculture in the present case

adopted a position obviously at odds with the plain lan-

guage of §9(b) which guarantees petitioner the right to

achieve compliance as a condition precedent to disci-

plinary action. The Department successfully contended.

below that the acoountings already rendered could not be

undone, and that the reformed record-keeping system could

not amount to compliance in the past when proper records

had not been kept.“

To say that a licensee does not “achieve n eee

unless he demonstrates past compliance the equiyalent of

a successful denial of the offense charged —is clearly to

eliminate the right of compliance from the Act and re-

7 5. The Government’s position was summarized as follows at 7 a

pp. 44-45 of its brief below:

“The short of the matter is that, as to the false accountings which

had beert rendered, MSR could not of course, achieve com-

pliance; 1 6., it could not undo the (erroneous accounts sales

which had ‘been rendered: And, while it had every opportunity

to ‘demonstrate’ compliance throughout the administrative pro-

ceedings, it utterly failed to do so. . And, whether or not

petitioner may now be keeping accurate and proper records, that

does ndt amount to ‘compliance’ in the 1252 when proper records

admittedly were not kept.” 88

Thus, the Department 0 Justice rej ected its own previous in

tion of § 9(b) as set forth in the 7—ç— General's ere

Administrative Procedure Act, p. 90 (1947 ), and quoted in Lavery, -

Federal Administrative Law, 5 125 (1952), p. 74:

This sentence requires an Agency to give a 33 an oppor- * 5

tunity to * his conduct before his License can be revoked ©

by any 0 —, supplied.)

2

‘ 8 | | Petition r a Writ of Gertiorari :

due the two-fold protection of § 9(b) mand to the single

and pre-existing due process p on of notice and oppor-” bees

- , tunity. to defend. Yet the-Judicial- Officer and the Court — 2

of Appeals adopted the Department’s construction of §9(b) |

and found that the Administrative Procedure Act had been

satisfied by the mere ser ding of a formal letter giving

notice of the violations charged. The construction of the

court below, unless revie and reversed by this Court, 0

will drastically curtail the protections to federal lioensees a

expressly provided by Congress. It will.relieve adminis- ö

trative agencies of the burden of ever having. to prove

willfulness in license suspension or revocation proceedings.

Administrative officers, under this decision, will be able to

. impose at will the capital punishment of commercial ex- .

tinction for first offenses and unintentional misconduct vio- ae

lative of even the most minor of the myriad regulations : |

under which federal licensees must operate. .

It was this very danger which Congress sought to

remedy by enacting § 9(b) and granting licensees the right

to take corrective action before losing their licenses. This

Court has said in construing another provision of § 9(b),

„Where the remedy for an evil is clear, the remedial pro- 1

_ Visions of the Administrative Procedure Aet- hae

given full effect.” Pan Atlantic’ 88. Corp. v. “Atlantic

C. L. RR., 353 U. S. 436, 440, 1 L. Ed. 2d 963, 77 8. Ct. 999

(1957). It is therefore imperative that this Court resolve

the construction of §9(b) to preserve to the licensee the |

right to a second chance to reform his conduct which 19

Congress intended and provided as a limitation on he Ad- | he

|

oe PS —

ministrative power over licenses.

e Note, supra, 75 Harv. L Rev. 38, 384, 386

8

CONCLUSION.

For ‘ha’ reasons ‘stated above, this Court should grant

the petition and issue a writ of certiorari to review the

decision of the Court of Appeals for the Third 9

Respeotfully submitted, ae nis @

Hanon E. Kox, |

Wu T. Coreman, In.,

Dam H. Marron,

2600 Fidelity- Philadelphia Trust Bldg. *

Philadelphia, Pennsylvania 19109

We for Petitioner.

07 Counsel:

Du. wonrk, Paxson, Kauisx, Konn & Lavy,

2600 Fidelity-Philadelphia Trust _— *

Philadelphia, Pennsylvania. 19109

Nb Sram, *

1420 Walnut St.- . 5

elphia, . 19102

3 Von .

2

Petition for a Writ * Oertiorur - 9

9

e dees

*

ä

: APPENDIX.

* ‘UNITED STATES COURT OF APPEALS |

ate el rn, 85

1 1 ber.

‘MANDELL, SPECTOR, ‘RUDOLPH €0.,°

Petitioner

8 ime 4 1

5 *

UNITED Savas or AMERICA, 2

.

o Pee e ee eu ok Chait 2

or THE SronRTART o AGRICULTURE 5

& 3 i =

Argued March 24, 196

Before McLavenum, Hastie and Ganzy, Circuit Judges. .

or or THE couRT °

| (Filed en 24, 1966)

By dane: Circuit Judge. :

This is an appeal under the Judicial Review Act of

1950, seeking a review of an order issued by the Judicial

1. 64 Stat. 1127, as amended, 5 U. S. C. 1031, et seg.

es GP.

2

12 f - Appendia :

Officer | of the 8 of Agriculture, pursuant to au-

thority delegated to him by the Secretary of Agriculture.

Tue order was issued pursuant to the Perishable Agricul- i

tural Commodities Act, wherein the petitioner was sus-

pended for 90.days from operating in interstate commerce

as a commission merchant, dealer and broker in fresh fruits

and vegetables: The execution of this order has been

stayed by the e Oer pending the outcome ef this

appeal.

ME Perishable Agrioaltiial Commodities Act requires

of all persons transacting business in fresh fruits and

: vegetables in interstate and foreign commerce as commis-

af sion merchants, brokerg or dealers, to be licensed under

the Act. 7 U. S. C. 4 The Act makes it unlawful for

persons to engage in unfair conduct’’ as defined in 7

VU. 8. C. 499 b. The relevant subsection (4): makes it un-

„ lawful— ;

to fail or refuse truly and correctly to account

ol make full payment promptly in vespect of any

transaction in any such — to the person with

whom rock transaction is had; 8

The statute 5 for the filing of a complaint with the

Secretary of Agriculture of anyone complaining of a viola-

tion and whenever the Secretary deems it warranted, a

copy. of the complaint made will be forwarded by the Secre-

tary to the commission merchant, dealer or broker, who will

be called upon to answer. 7 U. S. C. 499f (a). e

7 U. S. C. 499 (b) provides as follows:

Any ilar or agency. of any State or. 8

: having jurisdiction over commission merchants, deal- 5

ers, or brokers in such State or Territory and any

employee of the United States Department of Agricul-

ans. 8292 or any interested — ~ file, i in accordance

= For any commission merchant, desler, or healer :

5

—— —

; é with rules and regulations of the e Ser Sin a com-

plaint of any violation of any provision of this chapter

wg 8 by any commission merchant, dealer, or broker and

may request an —— of such h complaint ‘th * |

Sebretary. * |

Ik, in the opinion of the Secretary, the 4050 8 80 8 he

may have the complaint served on the person concerned

and afford him an oppertunity for a hearing before a hear-

@ing examiner and, in accordance with the provisions of 7

U. S. C. 499b, if the violation is proven, he may suspend the

license of the offender for a period not to extend 90 days.

In addition, licensed brokers are required to assign

2 lot number to each load of the produets received and

to be sold for the account of another and enter the assigned

lot number on the receiving record.in connection with the

respective loads and on sales tickets: identifying sales from

such lots and such lot numbers shall be placed on the sales

tickets at the time of the sale. Additionally, these records

and documents must be kept in file for a period of 2 years.

In early 1961, Hicks Produce, Inc., filed with De-

partment of Agrieulture a complaint concerning 57 ip-

ments of tomatoes Consigned to the petitioner for its ac-

count. These shipments comprised 98,692 cartons of

tomatoes. Upon investigation by the Department, thabooks

of the petitioner were examined for the period through

May, 1961, during which the above shipments had been

handled by the petitioner. The investigators were unable

to secure the accounts receivable records for this period

for the reason, as averred in the petition for review, certain |

. “business records were unavailable since it was alleged they —

5 had disappeared in an accident which had occurred in a

“ee 7. S.C. 499 gives the Secretary authority to make such ney

es an ons as may

of the A N R. 42905) provides that Bieeipi — Fer

og ys sewer y be' instituted only upon moving papers filed by the Deputy

: Administrator acting either as a result of the e informal-complaint pro- %

ceduce hereinbefore provided on. on his own motion. (Italics aia 25 f

‘etna ‘places of bees 8 However, the in-

5 vestigators compared. invoices reflecting the sale of Hicks’

a “tomatoes with prices actually paid by the buyers and a

PE e

1

comparison of the prices actually paid revealed a number :

of discrepancies and; as a result of their examination, the -

investigators were able to identify sales of 83,313 con:

tainers and they reconstructed an account sales which .

showed net proceeds of $106,221.77 in connection therewith.

Comparison of the figures reported by the petitioner to

Hicks showed net proceeds of $104,545.57; there thus was

° an underpayment by the petitioner to Hicks of 51, 676.202

Aooordingly, on April 17, 1962, after the investigation

of Hicks was completed, representatives of the Department

of Agriculture met with the officers of the petitioner and

their attorney and went over their findings. While there

was a denial of any underpayment or discrepancies by the

petitioner, in order to close the matter out the ep

2 tendered a check for $1,676.20, payable to Hicks.

On the next day, April 18, 1962, the chief investiqater BE

for thé Department of Agribalture, Koenigsburg, informed

the officers of the petitioner that, in conformity’ With the

Department 's procedure, its records would be spot-checked

to determine whether the Hicks case was an isolated case

or whether it wag a regular practice. The record discloses

that at that time ani’ informal disciplinary complaint Was

served by Investigator Koenigsburg upon the respondent,

3 but, on motion of the petitioner when listed for argument

in this court, any reference to this informal complaint was

stricken by the ‘court since the complaint itself was not

ey introduced i in evidence. and 28 55 a part of the record i in

the case. 5 4 g

sities The main thrust of the n en is that

= to the commencement of this second of the two in-

estigations on April 18, 1962, one day after the completion

of the Hicks investigation, which uncovered wrongdoing,

: ot

thers had not heen fled by the Becretary of Agricaltare * 4

pt 3 : wae a

—

3 8

2 5 eee, „% ae

‘complaint’ by.a 9. 885 aggriovedyby, an alleged violation

of the Act.“

However, at that time no objéction was sahil by the

petitioner to the investigators’ perusal ef- the company’s ©

3 but, i in fact, it advised them that it would cooperate

fully and would furnish all books, wecords and accounts

to be available to the investigators who began the investiga.

tion the following day. As adverted to ahove,.and at the

-Petitioner’s suggestion, it placsd at the disposal of the ' |

inves rs all of thie books, records, ‘eté., that were

available. It can thus be readily seen that the petitioner |

had adequate notice of the investigation and was willing ef

that it proceed and by their conduct in ing the books

and records that were available at the investi eder dispo-

sal, waived. any technicality of being ‘served with an in-

faumal complaint. Furthermore, it can be seen that this

investigation, one day later, stemmed from the Hicks inves-

. tigation which was. begun after a complaint, so there was

3 continuity of the investigation to determinę additional

wrongdoing, prompted. by the discovery of the wrongdoing -

1 discovered in the Hicks investigation. There wöuld be

„ manifest unfairness to the Department of Agriculture if

this objection, raised long after#he administrative process

- was over, and oecasioned by the , Government’s ’s failure to

make the infornial complaint part of the record, caused us

to hold that the requirement of such an informal didcipli- ee

nary complaint“ was requisite, and could not be waived:

by respondent’s consent. In the face of. the petitioners

agreement to the investigation, the aid and assistance’ ren-

' . dered by it, it was tantamount to a waiver of the require-

ment of the statute, as we shall in ore detail point out.

The investigators selected, at random for detailed in-

véstigation, 35 shipments receiyed by. the petitioner ‘iit

the périod October 4, 1960, through April 1 1962, and

they discovered that the petitioner (1) did ot maintan =. *

proper receiving records at the store or depot; (2) While 1

. les at the store were not identined we lot — in ses

2 e

=

Q°.

ee Smee Siete a 2 8

chses, in many cases shipper’s initials or other identifying

tently destroyed.

» Later,

petitioner a 78 page letter setting out in a most detailed

r ˙²˙ . 2 A

3 .

'@

16 Appende

marks had been used, which method, while unsatisfactory

in a number of cases, was the only available method; (3)

. while the sales made at the depot were identified hy the

number of the railroad car in which the produce was re-

ceived, when a portion of the shipment was transferred to

the store for gale, a ticket was issued showing a sale to the

store at a price which was normally lower than other sales

mde at-the depot; and (4) the petitioner’s accounts receiv-

. . able records for the period January 1, to July 1, 1961, were

missing and they alleged they had been pet or inadver-

*

Based on the petitioner's records, the investigators

compared aceount sales for these shipments with the ac- = 1

gount sales petitioner had actually rendered to the shippers

and in each of the 35 instances, the comparisons disclosed

discrepancies Fänging from an underfayment of $840.26

to an overpayment of $159.62, which is substantially suß-

ported in the record. „ aire eae, 5

On May 23, 1962; after edtapletion of the investigation,

the investigators again met with Messrs. Mandell, Spector

—

and Rudolph, and Ned Stein, their attornèy, and advised

them of sults of their investigation: |

July 26, 1962, the Department “wrote to the

accounting each one of the 35 cases investigated and noted

. the underpayments and discrepancies therein. While it is

a fact that the sales from the shipments received had to be

reconstructed both at the petitioner’s store location, as well

as * . at the depot location (two service centers main-

'. tained by the petitionen, by matching sales tickets and

shipments name or initials; and, further, that fewer sales of

of a commodity from a shipment could be found than were

actually contained in that shipment, in Which instances the

investigators were compelled to compute an average price

ol a commodity from the identifiable sales-of a particular

shipment, nevertheless, all of this was the best and only

a 2 5 0

*

— Yaa Re > 4

0 F „

.

N .

“tt f 33 —

‘ i. ——

— — ts ine

*

Appendiuy 1 ee

method available by reason or mislaid or lost records and

the failure to assign lot numbers to shipments by the

petitioner, | e e

Some six ménths later, on November 27, 1962, the :

- Department again wrote to the petitioner ‘explaining that

an examination of the records of the Hicks case revealed

that it did not maintain proper receiving records, that it

did not assign and use lot numbers and that it was unable

to locate and produce the accounts receivable ledgers. It

also reminded petitioner of the fact that it had tendered N

tòô Hicks a check in the amount of $1,676.20 in restitution

of its underpayment; that concerning. the additional inves-

tigation made as a result of what was uncovered in the.

„Hicks case, 35 additional shipments were investigated co

une a period from Oetober, 1960, to April, 1962, which

vealed that it had under- reported and under-paid the net

proceeds of 28 shipments and had over- reported and ovet-

paid in 7 shipments. It can thus be seen that, here again,

the Government reiterated to the petitioner the discrepan-

cies that it had previously found. The letter further

ad advised petitioner that it was to make restitution of ‘the

underpayments, but it had declined to so do and that viola-

„tions such as had been found were of sufficient grounds 126

to institute disciplinary action which could result in the

revocation or suspension of its license and, finally, the

letter. was, addressed to it, as stated, in compliance with

*

§9(b) of the Administrative Procedure Act, 5 U. S. C. f

1008 (b), and they were Now affording petitioner an 8

portunity to furnish any explanation or comments pertain-

ing to the transactions therhin listed and stating that its

reply should reach the office Uf the Department not later

than December 19, 1962. 3 SR ie aie se

Ned Stein, ati deh the petitioner, replied to this

letter on December 17, 1962, and he specifically denied

the underpayments, as well as the overpayments, and ad-

mitted therein that a request had been made for ‘paythent -

_ of these underpayments, but his client felt that there was

4: ey.

* —

82

—_ vn ee — el Le

3 Ea Avedis e 5

| no. liability 0 therefor and that, Under the circumstances,

my client is desirous of defending any disciplinary action.

which your department may care to institu

The record discloses that at the hearing es Rien.

iner Curry on March 24; 1964, Eugene N. Carlucci, an in:

vestigator, testified with respect to 25 oft the ee

discovered, as follows: =~

We advised them [petitioner]. of the Wa 5

dies in the last 25 acoountings. And Mr. Stein [odunsel.

for the*petitioner] stated that he could not dispute our

figures, as we had thoroughly examined the records,

and the figures were obtained from his client’s rec-

ords. We asked thé officers of the firm if they thought

. dtfferently, and they replied’ that they did not. Mr.

. Mandell said that there must be some explanation

because they actually did not underpay anyone even

© though the records indicated,they did,

‘Mr. Stein also said at' this time he wanted to

discuss this matter with Mr. Gardner and Mr. Dimond - ‘

before recommending tlie payment of the underpay-

ments found.

2. At that time they could not come forward with

any explanation as to the discrepancies. that you found?

ser A. No, sir.

Q. At that time did they attempt to indigate to

vou how they arrived at the manner in which they put

together the figures from which they made up their

* respondent’s account sales?

ohn No sir. a

On March 20, 1963, the acting director of the Fruit

and Vegetable Division filed with the Secretary of Agricul-.

ture a formal complaint charging petitioner with (1) having

failed to account and make payment for the net proceeds

realized from sales concerned; (2) having failed to main-

tain and preserve such accounts and state fully and cor-

Tectly all transactions involved in its business; and (3)

ff 8. O. 4995

3

—

by its failure to account and make payment truly and cor-

rectly. Petitioner's license automatically terminated on

October 21, 1963, because of their failure to pay the annual

licensing fee which was apparently an oversight on its

part, rather than a desire on its part to permit the license

to terminate. In December, 1963, the Director of the

Fruit and Vegetable Divisien filed with the Secretary nod-

tice to show causé why a license should not be denied to

the petitioner, the grounds therein asserted being substan-

- tially identical to those previously made in the complaint.

The two proceedings were consolidated and a hearing con-

ducted in Philadelphia before a hearing examiner. In De-

cember, 1964, the hearing examiner recommended that any

license held by the petitioner under the Act’ be revoked

and its application for.a new license denied, to which

exceptions were duly filed by the petitioner... ==

Following oral argument, on May 14, 1964, the Judi-

cial Officer entered his order containing extensive findings

of fact and conclusions of law with respect to the Hicks

transaction and with respect to the erroneous accounting

concerning the 35 other lots which the investigators had

examined. He also found that, by letter dated November

27, 1962, sent in accordance with § 9(b) of thé Administra:

tive Procedure Act, 5 U. S. C. 1008 (b), petitioner had been

afforded the opportunity to achieve compliance with the

Act, but failed to so do. He also found that the averaging

of sales was not arbitrary and had basis in fact and logic

to support it and could not be characterized as unreason-

able and was necessary to arrive at the approximate amount

_ actually owing to the consignors and joint account partners.

He considered the violations ‘‘the most seridus and flagrant

type possible under the act“ since they involved ‘breaches

or fiduciary duty by an agent to his principal and by a

joint account partner to his joint venturer”’ And, finally,

ordered the suspension for ninety days of any license held

by the petitioner and that a new license should not be is-

sued until. the expiration of that period. - -

* * . SN Ge AM GUTS RUE eT Ge ea ee re N

*

In American Export and Isbrandtsen v. Federal Mari.

time Commission, 334 F. 2d 185, where a letter, in an in-

_ Stance similar to the factual situation here under review,

was held not to be a formal complaint, nevertheless the

1 _ court held that from a review of the record they were

ree satisfied that no substantial right of due process was denied

5 to the petitioner and no prejudioe was suffered by it by

its failure to comply with Rule 5b) and 8 (o) concerning

formal complaints under the Federal Maritime, Commis- .

sion Rules of Practice and Procedure, 46 C. F. .

5502.67. ae „

It is submitted that 5 9(b) of the Administrative Pro-

cedure Act, 5 U. S. C. 5 1008 (b), was fully complied with

bere by reason of the fact that the petitioner was notified

r _ by letter of the violations and given an opportunity. to re-

a dress ãts misconduct, but it failed to so do.

It is submitted the Secretary of Agriculture sustained

_ the burden of proving violations of the Perishable Agricul-

tural Commodities Act for purpose of imposing a punitive

license suspension and that his order of license suspension.

should be affirmed: — : . Raley.

A True Copy: 8

cid of -the United Sed Court of Apseali

; for the Third cr, , %t fue

3..This section, in pertinent. provides: Except in cases f

= fulness or those in which public he Ith, interest or safety requires

ise, no withdrawal, suspension or revocation, or annulment. of

any license shall be lawful unless, prior40 the institution of agency

proceedings therefor, facts or conduct which may warrant such action

shall have been called to the attention of the licensee by the agency in

writing and the licensee shall have been ‘accorded opportunity to

demonstrate or achieve compliance with all the lawful requirements.”

°

2 *

—

4

—— — — we 5

cue

8 a

8

*

.

°

’

5 *

* *

.

*

.

:

.

S ; |

> °

i *

y ,

.2: :

a

©

-

— 5 e