Summary of a Recent
Judicial Development in
Perishable Commodities

Sixth Circuit Affirms Decision to Revoke
Produce Broker's PACA License

Harrison M. Pittman
Staff Attorney

Summary of Decision

In H.C. MacClaren, Inc. v. U.S. Dep't of Agric., 342 F.3d 584 (6th Cir. 2003), the United States Court of Appeals for the Sixth Circuit affirmed an USDA Judicial Officer's decision to revoke the license of a wholesale produce broker whose employees committed numerous and repeated violations of the Perishable Agricultural Commodities Act ("PACA"), 7 U.S.C. §§ 499a-499t.

Background

H.C. MacClaren, Inc. ("MacClaren") was a wholesale produce broker whose employees committed sixty-one violations of PACA. See id. at 586-87. In June of 1999, the USDA brought an action against MacClaren, requesting that MacClaren's "license be revoked due to its 'willful, flagrant and repeated violations' of PACA." Id. at 587-88. The Administrative Law Judge ("ALJ") found that MacClaren violated PACA and imposed a $50,000.00 civil penalty on MacClaren. See id. at 588. The USDA appealed the ALJ's decision to the USDA Judicial Officer ("JO"), arguing that the ALJ erred in not determining that MacClaren's actions were willful and therefore should have revoked MacClaren's license rather than simply imposing a civil monetary penalty. See id. Finding that the owners of MacClaren "'did not know, but should have known'" of the employees' unlawful conduct, the JO reversed that ALJ's decision to impose a civil monetary penalty and ordered that MacClaren's license be revoked. See id. MacClaren appealed the JO's decision to the Sixth Circuit. See id.

Arguments

MacClaren's first principle argument to the Sixth Circuit contended that the JO failed to consider all relevant circumstances before deciding to revoke its license, especially the fact that the sanction falls exclusively on the owners, while the employees who engaged in the unlawful conduct were not subject to any penalty. See id. MaClaren's second principle argument asserted that the JO's decision to revoke its license was unjustified because there was no evidence that license revocation was necessary to deter future violations. See id.

Analysis and Holding

The court noted that PACA "establishes a strict licensing system" and subjects all dealers, commission merchants, and brokers of perishable agricultural commodities to "severe sanctions for violations of PACA's requirements." Id. at 589 (citations omitted). The court explained that these sanctions include first, the suspension of a PACA license for up to ninety days; second, revocation of a PACA license if a violation is flagrant or repeated; or third, the imposition of "a civil monetary penalty not to exceed $2,000 per violation or $2,000 each day a violation continues." Id. (citations omitted).

The court rejected both of MacClaren's principle arguments and held that because the employees "were acting within the scope of their employment when they knowingly and willfully violated PACA, their knowing and willful violations are deemed to be knowing and willful violations by MacClaren." Id. See 7 U.S.C. § 499p (providing that "'the act, omission, or failure of any . . . person . . . employed by any commission merchant, dealer, or broker . . . shall in every case be deemed the act, omission, or failure of such commission merchant, dealer, or broker . . . .'").

The court also stated that

[l]icense revocation under PACA is authorized where the violation is "flagrant or repeated." In determining whether violations are "flagrant" under PACA, the court considers "the number of violations, the amount of money involved, and the time period during which the violations occurred." "Repeated" violations under PACA are violations that are not committed simultaneously. The . . . [JO] found that MacClaren's violations of PACA were both flagrant and repeated. The Secretary's findings are supported by the record. . . . Therefore, the revocation of MacClaren's license was well within the Secretary's authority and discretion.

Id. (citations omitted). See Butz v. Glover Livestock Comm'n Co., Inc., 411 U.S. 182, 185-86 (1973) (stating that "the Secretary's decision regarding an appropriate sanction may only be overturned if it is found to be unwarranted in law or without justification in fact.").

The case was decided on Sept. 4, 2003; this summary was posted Dec. 23, 2003.