Midland Banana & v. Dept. of Agriculture ( 1997 )

No. 95-3552
Midland Banana & Tomato *
Company, Inc.; Robert S. *
Heimann; Susan Heimann, *
*
Petitioners, *
*
* On Petition for Review
* of a Decision of the
v. * United States Department
* of Agriculture
*
United States Department *
of Agriculture, *
*
Respondent. *
Submitted: November 22, 1996
Filed: January 7, 1997
Before RICHARD S. ARNOLD, Chief Judge, MAGILL, Circuit Judge, and SACHS,*
District Judge.
SACHS, District Judge
This petition for review stems from consolidated Department of
Agriculture disciplinary proceedings under the Perishable Agricultural
Commodities Act, 7 U.S.C. § 499a et seq. (PACA), as amended, in which
petitioner Robert Heimann was found to have committed repeated violations
of the Act by failing to make full and prompt
*
The Honorable Howard F. Sachs, United States District
Judge for the Western District of Missouri, sitting by
designation.
payment for purchases of agricultural commodities and by making false and
misleading statements on a PACA application. Heimann asserts that he was
deprived of due process because the Department procedures were tainted by
irrelevant, prejudicial evidence which biased the decisionmakers and
because there was blanket adoption of adverse claims, unsupported by
evidence. We conclude that Heimann's contentions are lacking in support,
and we affirm.
I.
The Perishable Agricultural Commodities Act was enacted to regulate
the marketing of fresh and frozen fruits and vegetables in interstate
commerce. See H.R. Rep. No. 87-1546 (1962), reprinted in 1962 U.S.C.C.A.N.
2749. Under the Act, all commission merchants, dealers and brokers in the
perishable commodities industry are required to be licensed by the
Department. 7 U.S.C. § 499c. All are subject to the Act, which declares
certain conduct by commission merchants, dealers and brokers to be
unlawful.
On August 25, 1993, the Director of the Fruit and Vegetable Division
of the Agricultural Marketing Service, an agency within the Department of
Agriculture, commenced a disciplinary proceeding against Royal Fruit Co.,
Inc. ("Royal") for alleged willful, repeated and flagrant violations of
Section 2(4) of the Act, 7 U.S.C. § 499b(4), which makes it unlawful for
any commission merchant, dealer or broker licensed under the Act to fail
to make full and prompt payment in connection with any transaction in
interstate commerce involving perishable agricultural commodities. On the
same day, the Director commenced a disciplinary proceeding against Midland
Banana & Tomato Co., Inc. ("Midland"), alleging that Midland violated
Section 8(c) of the Act, 7 U.S.C. § 499h(c), which makes it unlawful for
a PACA license applicant to make any false or misleading statements in a
license application. The complaints against both companies alleged that
both entities were "alter egos" of Robert Heimann, making Heimann
individually responsible for the alleged violations.
2
The Royal and Midland cases were consolidated and on July 26, 1994,
following a hearing, an administrative law judge (ALJ) found that Royal
committed willful, flagrant, and repeated violations of the Act by failing
to make full and prompt payment of over $500,000; that Royal was the alter
ego of Heimann; that Midland had violated the Act by making false and
misleading statements in its application for a PACA license; and that
Midland was Heimann's alter ego.
Heimann (the only party now before us) appealed to the Department's
Judicial Officer,1 challenging the alter ego determinations in both cases.
On August 16, 1995, in a lengthy and thorough opinion, Judicial Officer
Donald A. Campbell adopted, with modifications, the ALJ's decision. This
appeal followed.
II.
In 1988, Robert Heimann purchased Royal, then a sole proprietorship,
in an agreement that provided for Jeffrey Heimann, Robert's son, and Joseph
Cali to manage the business.2 Robert Heimann and his wife Beverly signed
the contract for Royal's sale as purchasers. There is no evidence Robert
Heimann ever gave or sold the business to Jeffrey Heimann or Joseph Cali.
Royal was licensed by PACA, however, as a partnership whose partners
were identified as Joseph Cali, Jeffrey Heimann and Beverly Heimann. On
November 21, 1988, Royal was incorporated and issued a new PACA license
reflecting its corporate status. The listed directors, officers and
shareholders were Cali, Jeffrey Heimann and Beverly Heimann. The license
was terminated on
1
The Secretary has delegated final administrative authority
to the Judicial Officer to decide cases subject to 5 U.S.C. §§
556 and 557. 7 C.F.R. § 2.35.
2
Cali's role at Royal is referred to in related litigation.
Conforti v. United States, 74 F.3d 838, 840-1 (8th Cir. 1996).
3
December 1, 1992, due to Royal's failure to pay the required annual renewal
fee.
In May 1989, Robert Heimann became a consultant for Royal. Heimann's
$10,000 per month fee was paid to Continental Oil & Gas Corp. ("Continen-
tal"), a non-operating entity Robert Heimann owned. After Robert Heimann
formally joined the firm, Royal's business increased substantially. In
December 1989, Royal purchased a new, larger location. The funds for this
purchase and for improvements to the property were provided through a Small
Business Administration loan secured by a mortgage on Robert and Beverly
Heimann's personal residence. The lenders took Robert Heimann's management
experience into account when deciding to approve the loan.
Robert Heimann was actively involved in Royal's management. He
negotiated the purchase and sale of produce and arranged for its transpor-
tation. He appeared, to individuals dealing with the company, to be the
person in charge of Royal's operations. Royal carried a "key man" life
insurance policy on Robert Heimann and not on any other Royal employees.
When Royal began experiencing financial difficulties at the end of
1991, Robert Heimann allowed Royal to reduce his consulting fee to help
keep the business solvent. During the first few months of 1992, Robert
Heimann, through checks from Continental, provided Royal with a number of
short-term, interest-free loans to cover Royal's checking account when
Royal needed to pay suppliers quickly.
Between July 1992 and November 1992, Royal failed to make prompt
payment to 21 sellers for produce purchased in the amount of $500,370.54.
Royal ceased operations on November 17, 1992. That same day, Midland was
incorporated. Midland's PACA license application identified Susan Heimann,
Robert's daughter, an inexperienced college student, as its sole officer,
director and
4
shareholder. The funds used for Midland's initial capitalization came
primarily from two of Robert Heimann's friends. Susan Heimann invested
$500 in the firm. Robert Heimann served as general manager and was
essentially responsible for all aspects of the operation.
Midland and Royal had almost identical operations. Midland had the
same address, telephone and facsimile numbers as Royal. It used Royal's
office and warehouse equipment. It had the same customers as Royal and
retained approximately one-third of Royal's employees.
Midland's PACA application asserted that Midland was not a successor
to another firm. The Judicial Officer found, however, that Midland had
succeeded Royal. He further found that Midland, in its application, had
falsely denied that any employee had been the owner of a firm whose license
is under suspension. The Judicial Officer found that the license of
Gilbert Brokerage Co., a company Robert Heimann had owned and operated in
the 1970s, was under "ongoing suspension." He additionally found the
Midland application to be misleading because it concealed the identity of
the true principal of the firm, Robert Heimann.
In concluding that Royal and Midland were alter egos of Robert
Heimann, the Judicial Officer considered the witnesses' credibility to be
critical. He found that the testimony of Robert, his family members, and
Joseph Cali, was not credible. In so finding, he pointed to the fact that
each of these individuals had misled authorities during the Department's
investigation of the case. He concluded that Robert Heimann had the least
credibility. To support this determination, he noted that Heimann had
walked away from Gilbert Brokerage's disciplinary proceedings without
producing required documents, had signed a number of fraudulent "State of
Kansas Inspection Forms" while associated with another produce company,
United KC, in the 1980s, and had structured a number of
5
transactions in a misleading manner, apparently in order to avoid financial
responsibility. The Judicial Officer also found that Heimann's malfeasance
prior to his involvement with Royal and Midland was relevant to the
proceedings because it provided a motive for Heimann to disguise his true
role in Royal's and Midland's operations.
Heimann asserts that consideration of these misdeeds was improper and
tainted the opinions so that the ALJ and Judicial Officer were no longer
neutral, unbiased decisionmakers. In support of this claim, Heimann
contends the Judicial Officer uniformly credited the Agricultural Marketing
Service position, even where the Department's findings were, he alleges,
unsupported by or inconsistent with the evidence.3 As a result, Heimann
argues, he was not afforded the fundamental due process to which he is
entitled.
III.
We review federal constitutional questions de novo. United States
v. Bates, 77 F.3d 1101, 1104 (8th Cir. 1996). Our determination is limited
to whether introduction of the allegedly irrelevant evidence so prejudiced
the Secretary that Heimann was denied the fundamental fairness required in
administrative hearings by the due process clause of the Fifth Amendment.
See Beef Nebraska, Inc. v. United States, 807 F.2d 712, 719 (8th Cir.
1986), quoting Silverman v. Commodity Futures Trading Commission, 549 F.2d
28, 33 (7th Cir. 1977).
This court has recognized the right to "a fair, unbiased, and
impartial" administrative hearing. Local No. 3, United Packinghouse
Workers v. NLRB, 210 F.2d 325, 330 (8th Cir. 1954), cert.
3
The contention is unsound. For example, there was a rejec-
tion of contention that Jeffrey B. Heimann was the alter ego of
Midland and that the payment of bills through Continental
amounted to check-kiting.
6
denied, 348 U.S. 822 (1954). Heimann considerably overplays his hand
by suggesting that any uniform adoption of one party's proposed findings
signifies "bias" and supports a conclusion that there has been a due
process violation.4 Heimann's argument relies on NLRB v. Miami Coca-Cola
Bottling Co., 222 F.2d 341, 345 (5th Cir. 1955), in which the court stated
that such a practice by a trial judge or hearing examiner "deprives his
credibility findings of the weight usually afforded them." We agree that
signs of superficial analysis invite closer scrutiny of the proceedings
below; but this does not routinely or usually result in a reversal, much
less a conclusion that there has been a violation of constitutionally
mandated procedures.
There are occasions when the correct result is so obvious that a
trial judge or hearing examiner may be less than completely thorough in
express analysis. As we have observed, this did not occur here.
We are not compelled by petitioner's briefing to address whether the
challenged evidence was properly admitted. Heimann simply assumes, without
citation, that the evidence was inadmissible. Additionally, because
Heimann's sole argument on appeal is that he was denied due process, we
need not analyze the Secretary's findings under the "substantial evidence"
test. We note, however, that we are satisfied the Secretary's decision was
well supported by substantial evidence and believe the challenged evidence
was admissible, at least to show motivation. Fed. R. Evid. 404(b).
While it is thus not necessary to determine whether the proceedings
before the Department were error-free, we note that the Department
successfully responds to two claims of error that are emphasized before us.
With respect to whether Heimann was still
4
Occasional wording in the 122-page opinion that suggests
irritation was fairly induced by the evidence.
7
under a cloud because of the Gilbert Brokerage affair in the 1970s, he
contends there was a two-year limit on the suspension because of the
failure to pay suppliers. The Department contends, however, that there was
an "ongoing suspension" pursuant to 7 U.S.C. § 499m(b) (last sentence)
because Heimann never produced that company's records, and that such a
suspension remains until and unless the records are produced. As the
Judicial Officer concluded, Heimann had "good reason to worry" that the
Gilbert Brokerage experience would prejudice a new application in his own
name.
With respect to his personal falsification of inspection certificates
during the United KC activities, proof of such conduct was made in this
case and Heimann simply declined to meet the issue, although he could have
done so without waiving his claim of irrelevance.
Nothing has been presented that would approach a denial of Heimann's
right to due process.
Accordingly, we affirm the decision of the Secretary.
Affirmed.
A true copy.
Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.
8