Western Iowa Farms Co. v. United States of America Bob Bergland, Secretary of Agriculture, Sioux City Stock Yards, Intervenor , 629 F.2d 502 ( 1980 )

ROSS, Circuit Judge.

Petitioners Western Iowa Farms Co., et ah, a group comprised of 16 of the 23 market agencies that handled livestock sales at the Sioux City Stock Yards, filed a petition for review of a decision and order of the Secretary of Agriculture with this court. The Secretary’s decision dismissed the challenge brought by the 16 market agencies to a new regulation, Rule 22, promulgated by the Sioux City Stock Yards establishing minimum annual sales requirements for all market agencies doing business at this terminal facility.¹

Petitioners sell livestock which they have solicited from their customers (farmers, livestock producers and feeders) for a commission based upon a per head rate. In connection with this service, these market agencies use the facilities of the Sioux City Stock Yards and collect from their customers a sales commission and the yardage charge made by the Sioux City Stock Yards which is the stockyards’ principal source of income and is, as is the commission of the market agencies, a part of the tariff on file with the Packers and Stockyards Administration.²

Under Rule 22, market agencies pay the usual yardage fee to the stockyard during each calendar year, but at the end of the effective year those which have not handled at least 25,000 cattle and 55,000 hogs will owe an additional sum to the stockyard, so that the total annual yardage fee paid by each of them will equal yardage fees calculated on 25,000 cattle and 55,000 hogs. If any deficiency is not paid within 30 days after the end of the year, that market agency shall not be able to continue to sell that species of livestock at the Sioux City Stock Yards. Agencies may choose to merge, terminate, drop one species of livestock or pay the deficiency.

Rule 22 was accepted by the Department of Agriculture for filing as Supplement No. 3 to Tariff No. 20 on September 19, 1977, and a formal hearing was granted petitioners and held in April of 1978. The Administrative Law Judge found the imposition of Rule 22 to be unreasonable and discriminatory in its effect. He ordered the Sioux City Stock Yards to cease and desist from its enforcement. On September 21, 1979, the Secretary of Agriculture, through a Judicial Officer, reversed the Administrative Law Judge and dismissed petitioners’ complaints. Petitioners now appeal to this court on the basis that the Rule is unjust, unreasonable and discriminatory³ and that it is not reasonably required to foster, preserve or insure an efficient, competitive public market.⁴

This court has set out the scope of review in cases such as this in the following language:

The scope of our review is limited to the correction of errors of law and to an examination of the sufficiency of the evidence supporting the factual conclusions. The findings and order of the Judicial Officer must be sustained if not contrary to law and if supported by substantial evidence. Also, this Court may not substitute its judgment for that of the Judicial Officer’s as to which of the various inferences may be drawn from the evidence.

Lewis v. Butz, 512 F.2d 681, 683 (8th Cir. 1975), quoting Livestock Commission Co. v. Hardin, 454 F.2d 109, 110-11 (8th Cir. 1972), rev’d on other grounds, 411 U.S. 182, 93 S.Ct. 1455, 36 L.Ed.2d 142 (1973). Using this standard, we have thoroughly reviewed the administrative record and find that the evidence relied upon by the Judicial Officer is not insubstantial nor is his order contrary to law.

Petitioners presented testimony which included predictions that Rule 22 would eliminate, by merger or termination, seven to nine of the smaller market agencies at Sioux City, and that the Rule would result in fewer solicitors and therefore a lower volume of livestock at market. The stockyards offered testimony to the effect that quota systems established in other stockyard markets were considered beneficial and that vigorous solicitation in the country was necessary to obtain livestock receipts at the market. All parties acknowledged that livestock receipts had generally been declining since 1959.

The Judicial Officer found that the stockyards’ management intended the Rule to provide the necessary incentive to the commission firms to work harder and increase livestock receipts. Additionally, the Rule was to make the small commission firms more financially sound thereby enabling them to hire and retain qualified people to better service their shipper-customers. Referring to excerpts from the House Subcommittee hearings on the 1968 amendments ⁵ to the Packers and Stockyards Act, the Judicial Officer concluded that the stockyard owner had authority to institute a quota system and that the rule is reasonably designed to accomplish a legitimate purpose, regardless of whether it proves to be successful or not. We cannot say this conclusion is contrary to law.

While petitioners argue that the Rule is a rate or charge for stockyard facilities, they do not argue error for any lack of statutory rate procedures. Rather, they ask the court to review the Rule on the basis of it being unjust, unreasonable or discriminatory— standards also found in regulatory rather than rate sections of the Packers and Stockyards Act. The Judicial Officer found the imposition of Rule 22 to have been made in a responsible manner following customary management principles; that although the quotas are easier for the large firms to meet, the Rule applies to all market agencies; and that petitioners failed to offer any evidence to show that the quota figures selected are unreasonable absent their general evidence attacking any quota system. While we might reach a different conclusion from our review of the evidence, we cannot say the decision of the Judicial Officer was not based upon substantial evidence. The evidence “may be substantial even if two inconsistent conclusions might have been drawn from it.” Corona Livestock v. United States Department of Agriculture, 607 F.2d 811, 814 (9th Cir. 1979).

Petitioners also argue that respondents must show substantial evidence that the Rule was reasonably required to foster, preserve or insure an efficient, competitive livestock market.⁶ The Judicial Officer, however, decided that it was not necessary for respondents to show that the quota regulation is a means of requiring the commission firms to conduct their operations in this manner. However, he remarked that even if such a showing were necessary, it would not change his decision. By implication he held that petitioners failed to demonstrate that Rule 22 could not accomplish the desired result of raising the quantities of cattle and hogs processed. In so holding he placed the burden of proof on the petitioners. Petitioners, in oral argument, agreed that they had the burden of proof as to the invalidity of the Rule, and based upon our review of the record, we cannot say that the Judicial Officer’s decision was contrary to law or factually erroneous.

The decision and order of the Judicial Officer is affirmed.

1 . Rule 22 as amended reads verbatim as follows:

In order to foster, preserve and insure an efficient competitive public market, every market agency engaged in the sale of livestock on a commission basis at the Sioux City Stock Yards shall conform to the following minimum standards:

1. Each market agency engaged in selling cattle and calves on a commission basis shall guarantee and pay to the Sioux City Stock Yards a minimum per annum yardage revenue equal to an amount computed on the basis of 25,000 cattle multiplied by the cattle yardage charge in effect during each calender year (auction ring fees shall not be considered yardage revenue).

2. Each market agency engaged in selling hogs and feeder pigs on a commission basis shall guarantee and pay to Sioux City Stock Yards a minimum per annum revenue equal to an amount computed on the basis of 55,-000 hogs multiplied by the hog yardage in effect during each calendar year.

The above minimum standards shall be effective for the calendar year 1980 and each year thereafter. Any market agency that does not comply with the minimum standards set forth in this rule shall have thirty days after the end of the year to pay any deficiency. Failure to pay shall cause its registration at the Sioux City Stock Yards to be cancelled and the privileges of the market denied.

Each new market agency that commences business at the Sioux City Stock Yards shall have completed two full calendar years of operation before the minimum standards shall apply. New market agency shall not mean purchase or merger of existing firms.

2 . At the time of the events giving rise to this action, the Packers and Stockyards Act of 1921, as amended, was administered by the Packers and Stockyards Administration which was then an agency of the United States Department of Agriculture. Effective December 30, 1977, the Packers and Stockyards Administration ceased to exist as a separate agency of the Department; administration of the Act is presently delegated to the Administrator of the Department’s Agricultural Marketing Service. 42 Fed. Reg. 65131 -65132, Dec. 30, 1977.

3 . Petitioners contend that Rule 22 is a rate or charge for the stockyard facilities and point to § 305 of the Packers and Stockyards Act of 1921, as amended, 7 U.S.C. § 206:

All rates or charges made for any stockyard services furnished at a stockyard by a stockyard owner or market agency shall be just, reasonable, and nondiscriminatory, and any unjust, unreasonable, or discriminatory rate or charge is prohibited and declared to be unlawful * * *.

4 . Section 307 of the Packers and Stockyards Act, 7 U.S.C. § 208(a) and (b), relates:

(a) It shall be the duty of every stockyard owner and market agency to establish, observe, and enforce just, reasonable, and nondiscriminatory regulations and practices in respect to the furnishing of stockyard services, and every unjust, unreasonable, or discriminatory regulation or practice is prohibited and declared to be unlawful.

(b) It shall be the responsibility and right of every stockyard owner to manage and regulate his stockyard in a just, reasonable, and nondiscriminatory manner, to prescribe rules and regulations and to require those persons engaging in or attempting to engage in the purchase, sale, or solicitation of livestock at such stockyard to conduct their operations in a manner which will foster, preserve, or insure an efficient, competitive public market. Such rules and regulations shall not prevent a registered market agency or dealer from rendering service on other markets or in occasional and incidental off-market transactions. (As amended July 31, 1968, Pub.L. 90-446, § 1(d), 82 Stat. 475.)

Additionally, 9 C.F.R. § 203.8(a) and (f) of the regulations promulgated under the Packers and Stockyards Act, provides:

(a) Stockyard services furnished by stockyard owners and market agencies pursuant to a reasonable request must be reasonable and nondiscriminatory. Stockyard owners and market agencies have the statutory right and duty to establish, observe, and enforce regulations and practices, which are not unreasonable or unjustly discriminatory, with respect to the furnishing of stockyard services.

(f) Market agencies at a terminal livestock market have invested time, resources and effort in establishing their businesses at the market. As long as a terminal livestock market continues in business as a terminal market, the market agencies at the market cannot be removed arbitrarily or capriciously by the stockyard owner. There must be good and sufficient reasons for any such action. Similarly, the number of market agencies operating at the terminal market may be reduced only if such action is reasonably required to foster and insure an efficient, competitive livestock market.

5 . See 7 U.S.C. § 208(b) as cited in n.4.- While Congressional intent can be elusive, the cited excerpts from the hearing can be said to be supportive of the stockyards’ position.

6 . See 7 U.S.C. § 208 and regulation § 203.8(f) in n.4.