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Knapp v. United States Department of Agriculture

United States Court of Appeals, Fifth Circuit

July 31, 2015

BODIE S. KNAPP, doing business as the Wild Side, Petitioner

Petition for Review of an Order of the Department of Agriculture.

For Bodie S. Knapp, doing business as: Wild Side, Petitioner: Phillip Westergren, Corpus Christi, TX.

For United States Department of Agriculture, Respondent: Charles Edward Spicknall, Colleen A. Carroll, Charles Edward Spicknall, James Michael Kelly, Leslie Karen Lagomarcino, Esq., Senior Counsel, Loretta Lynch, Margaret Reinholt, U.S. Department of Agriculture, Washington, DC.




The United States Secretary of Agriculture (" Secretary" ) fined Bodie Knapp $395,900 after finding that he bought and sold regulated animals without a license, in violation of the Animal Welfare Act (" AWA" ) and implementing regulations. In his petition for review, Knapp argues that his activities were lawful, and that the Secretary abused its discretion in its choice of sanction. We GRANT in part and DENY in part the petition for review.


Bodie Knapp formerly operated a business in Mathis, Texas, that exhibited wild and exotic animals to the public. See In re Knapp, 64 Agric. Dec. 756, 757 (U.S.D.A. Jan. 4, 2005). Knapp possessed a license to exhibit these animals under the Animal Welfare Act. Id. In 2004, the Administrator of the Animal and Plant Health Inspection Service (" Administrator" ), an agency within the U.S. Department of Agriculture (" Department" ), filed two complaints against Knapp alleging that he had mishandled animals, failed to provide them with adequate veterinary care, and failed to keep required records relating to, but not limited to, the deaths of two tigers and two lions. In re Coastal Bend Zoological Ass'n, 65 Agric. Dec. 993, 994 (U.S.D.A. 2006); In re Knapp, 64 Agric. Dec. at 757. In January 2005, after Knapp failed to timely respond to the allegations in one of the complaints, the Administrative Law Judge (" ALJ" ) entered a default decision revoking Knapp's license and ordering him to cease and desist from future violations of the AWA or the " [r]egulations and [s]tandards." In re Knapp, 64 Agric. Dec. at 773. The decision was affirmed by the Judicial Officer, who has final authority to issue decisions on behalf of the Secretary in formal adjudicatory proceedings. See 7 C.F.R. § 2.35(a); In re Knapp, AWA Docket No. 04-0029, 2005 WL 1283510, at *29 (U.S.D.A. May 31, 2005). The revocation of Knapp's license became effective on September 10, 2005, after the denial of Knapp's motion for reconsideration. In re Knapp, AWA Docket No. 09-0175, 2013 WL 8213607, at *4 (U.S.D.A. June 3, 2013). In August 2006, pursuant to the second complaint, another ALJ assessed a $5,000 penalty against Knapp and ordered him to cease and desist from further violations of the AWA or the " [r]egulations and [s]tandards." In re Coastal Bend Zoological Ass'n, 65 Agric. Dec. at 1019.

In 2009, the Administrator initiated the instant action against Knapp, alleging that after losing his AWA license, he continued to buy, sell, and transport hundreds of animals in violation of the AWA and regulations. The complaint alleges that Knapp " offered for sale, delivered for transportation, transported, sold, or negotiated the purchase or sale" of 429 animals in thirty separate transactions between November 2005 and September 25, 2010.[1] The ALJ held a hearing, at which Knapp was represented by counsel and called three witnesses and introduced evidence. In re Knapp, AWA Docket No. 09-0175, 2011 WL 4946791, at *1. The ALJ determined that eight of the thirty transactions violated the AWA and regulations, and he assessed Knapp a $15,000 penalty and ordered him to cease and desist from further violations. Id. at *8, 11. The ALJ found that the Administrator " was not substantially justified" in challenging Knapp's other transactions, and that Knapp was therefore entitled to attorney's fees and expenses based on those allegations under the Equal Access to Justice Act. Id. at *8 (citing 5 U.S.C. § 504). The parties cross-appealed to the Judicial Officer.

The Judicial Officer found that Knapp violated the Animal Welfare Act, Department regulations, and the terms of his prior cease and desist orders by operating as an animal dealer without a license with respect to many of the animals listed in the complaint. In re Knapp, AWA Docket No. 09-175, 2013 WL 8213607, at *15-18. The Judicial Officer assessed Knapp a $42,800 penalty for buying or selling 214 animals without a license in violation of the AWA, 7 U.S.C. § 2134, and two regulatory provisions, 9 C.F.R. § § 2.1(a) and 2.10(c). Id. at *8, 10. The Judicial Officer imposed an additional $353,100 penalty on the ground that each of these transactions constituted a knowing violation of the two prior cease and desist orders. Id. at *10. The Judicial Officer also ordered Knapp to " cease and desist from violating the Animal Welfare Act and the Regulations and, in particular, [to] cease and desist from operating as a dealer without an Animal Welfare Act license." Id. at *19. Finally, the Judicial Officer found that the ALJ's determination regarding attorney's fees was premature. Id. at *12. On November 6, 2013, the Judicial Officer denied Knapp's amended petition for reconsideration. In re Knapp, AWA Docket No. 09-0175, 2013 WL 8208439, at *13 (U.S.D.A. Nov. 6, 2013). Knapp filed a timely petition for review in this court on January 2, 2014. See 7 U.S.C. § 2149(c) (allowing 60 days after a final order to file a petition for review); 7 C.F.R. § 1.146(b).


We have jurisdiction to review the Judicial Officer's decision under 7 U.S.C. § 2149(c). We may overturn that decision only if it is " arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A); Allred's Produce v. U.S. Dep't of Agric., 178 F.3d 743, 746 (5th Cir. 1999). The arbitrary and capricious standard is " highly deferential." Pension Benefit Guar. Corp. v. Wilson N. Jones Mem'l Hosp., 374 F.3d 362, 366 (5th Cir. 2004) (internal quotation marks and citation omitted). " Arbitrary and capricious review focuses on whether an agency articulated a rational connection between the facts found and the decision made, and '[i]t is well-established that an agency's action must be upheld if at all, on the basis articulated by the agency itself.'" Id. at 366-67 (quoting Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 42-43, 50, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983)). However, " we may 'uphold a decision of less than ideal clarity if the agency's path may reasonably be discerned.'" Id. at 367 (quoting Bowman Transp., Inc. v. Arkansas-Best Freight Sys., Inc., 419 U.S. 281, 286, 95 S.Ct. 438, 42 L.Ed.2d 447 (1974)).

The Judicial Officer's factual findings must be upheld as long as they are supported by substantial evidence. 5 U.S.C. § 706(2)(E); ZooCats, Inc. v. U.S. Dep't of Agric., 417 F.Appx. 378, 381 (5th Cir. 2011) (per curiam); Brock v. U.S. Dep't of Agric., 335 F.Appx. 436, 437 (5th Cir. 2009) (per curiam). " Substantial evidence is more than a scintilla, less than a preponderance, and is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Ellis v. Liberty Life Assurance Co. of Bos., 394 F.3d 262, 273 (5th Cir. 2004) (internal quotation marks and citation omitted). In determining whether an administrative order is based on substantial evidence, we must consider " whatever in the record fairly detracts from [the] weight" of the evidence. Universal Camera Corp. v. NLRB, 340 U.S. 474, 488, 71 S.Ct. 456, 95 L.Ed. 456 (1951). The Judicial Officer, in making factual findings, may substitute its judgment for that of the ALJ. See 5 U.S.C. § 557(b); Robinson v. United States, 718 F.2d 336, 338 (10th Cir. 1983); Mattes v. United States, 721 F.2d 1125, 1129 (7th Cir. 1983). However, " [i]n cases where the Secretary of an agency does not accept the findings of the ALJ, this court has an obligation to examine the evidence and findings of the [JO] more critically than it would if the [JO] and the ALJ were in agreement." Young v. U.S. Dep't of Agric., 53 F.3d 728, 732 (5th Cir. 1995) (second and third alterations in original) (internal quotation marks and citations omitted); see also In re Knapp, AWA Docket No. 09-0175, 2013 WL 8208439, at *4 (" [T]he consistent practice of the Judicial Officer is to give great weight to the findings by, and particularly the credibility determinations of, administrative law judges . . . ." ).

We review the Judicial Officer's legal conclusions de novo, but with the appropriate level of deference to his interpretations of the AWA and of Department regulations. See Theodros v. Gonzales, 490 F.3d 396, 400 (5th Cir. 2007); see also Perfectly Fresh Farms, Inc. v. U.S. Dep't of Agric., 692 F.3d 960, 966 (9th Cir. 2012). We generally grant Auer deference to an agency's interpretation of its own ambiguous regulation, unless that interpretation is " 'plainly erroneous or inconsistent with the regulation,'" or " there is reason to suspect that the agency's interpretation 'does not reflect the agency's fair and considered judgment on the matter in question.'" Christopher v. SmithKline Beecham Corp., 132 S.Ct. 2156, 2166, 183 L.Ed.2d 153 (2012) (quoting Auer v. Robbins, 519 U.S. 452, 461-62, 117 S.Ct. 905, 137 L.Ed.2d 79 (1997)); see also Decker v. Nw. Envtl. Def. Ctr., 133 S.Ct. 1326, 1337, 185 L.Ed.2d 447 (2013). Because the Judicial Officer acts on behalf of the Secretary in AWA hearings, his decisions qualify for Auer deference. 7 C.F.R. § 2.35(a); see Excel Corp. v. U.S. Dep't of Agric., 397 F.3d 1285, 1296 (10th Cir. 2005) (deferring to the Judicial Officer's interpretation of a Department regulation intended to implement another statute administered by the Department).

To determine the appropriate level of deference to the Judicial Officer's interpretation of the AWA, we are guided by the two-step analysis set forth in United States v. Mead Corp., 533 U.S. 218, 226-27, 121 S.Ct. 2164, 150 L.Ed.2d 292 (2001). " [A]dministrative implementation of a particular statutory provision qualifies for Chevron deference when it appears [ (1) ] that Congress delegated authority to the agency generally to make rules carrying the force of law, and [ (2) ] that the agency interpretation claiming deference was promulgated in the exercise of that authority." Id. (citing Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984)); see also Perfectly Fresh Farms, Inc., 692 F.3d at 966 (framing the question of whether Chevron applies as a two-step analysis). With respect to the first requirement, Congress has authorized the Secretary to " make such investigations or inspections as he deems necessary to determine whether any dealer [or] exhibitor . . . has violated" the AWA. 7 U.S.C. § 2146(a). After notice and an opportunity for a hearing, the Secretary may revoke licenses, assess civil penalties, and issue cease and desist orders against dealers or exhibitors who are found to have violated the AWA. Id. § 2149(a), (b). These provisions reflect Congress's intent to create a " relatively formal administrative procedure tending to foster the fairness and deliberation that should underlie" pronouncements entitled to Chevron deference. Mead Corp., 533 U.S. at 230. Indeed, the Supreme Court has recognized that " express congressional authorizations to engage in . . . adjudication that produces . . . rulings for which deference is claimed" is " a very good indicator of delegation meriting Chevron treatment." Id. at 229 (citing cases).

With respect to the second requirement, the Judicial Officer promulgated its decision pursuant to formal procedures, as contemplated by Congress. Knapp received a hearing before the ALJ, at which his counsel presented evidence and cross-examined witnesses. See 7 C.F.R. § § 1.131, 1.132 (providing that the ALJ's decision is to be " made in accordance with the provisions of 5 U.S.C. [§ § ] 556 and 557," which govern formal adjudication). The Judicial Officer, after reviewing the record of that hearing, issued a written opinion supported by reasoning. In re Knapp, AWA Docket No. 09-0175, 2013 WL 8213607. In addition, the agency treats decisions by the Judicial Officer as precedential. See In re GH Dairy, AWA Docket No. 10-0283, 70 Agric. Dec. 508, at *15 (U.S.D.A. Oct. 5, 2011) (" [P]ertinent decisions by the Judicial Officer, if affirmed or unappealed, do have precedential authority in this proceeding . . . ." ); In re Billy Gray, 52 Agric. Dec. 1044, 1993 WL 308542, at *14 (U.S.D.A. July 23, 1993) (" The precedents of the Judicial Officer are required to be followed." ).

In light of these considerations, we find that the Judicial Officer's decision was " promulgated in the exercise" of the authority that Congress delegated to the agency to make rulings carrying the force of law. See Mead, 533 U.S. at 227. The Judicial Officer's interpretations of the AWA therefore qualify for Chevron deference. Accord 907 Whitehead Street, Inc. v. Sec'y of U.S. Dep't of Agric., 701 F.3d 1345, 1350 (11th Cir. 2012) (holding that the Judicial Officer's interpretation of the AWA was entitled to Chevron deference); cf. Perfectly Fresh Farms, Inc., 692 F.3d at 967 (granting Chevron deference to statutory interpretations contained in the Judicial Officer's opinions applying the Perishable Agricultural Commodities Act); Coosemans Specialties, Inc. v. Dep't of Agric., 482 F.3d 560, 564-65, 375 U.S.App.D.C. 468 (D.C. Cir. 2007) (same); G & T Terminal Packaging Co. v. U.S. Dep't of Agric., 468 F.3d 86, 95-96 (2d Cir. 2006) (same). Where, as here, an agency's decision qualifies for Chevron deference, we will accept the agency's reasonable construction of an ambiguous statute that the agency is charged with administering. Nat'l Cable & Telecomms. Ass'n v. Brand X Internet Servs., 545 U.S. 967, 980, 125 S.Ct. 2688, 162 L.Ed.2d 820 (2005).

Finally, we review the Judicial Officer's choice of sanction for abuse of discretion. Am. Fruit Purveyors, Inc. v. United States, 630 F.2d 370, 374 (5th Cir. 1980) (per curiam). The sanction may be overturned only if it is " unwarranted in law or without justification in fact." Butz v. Glover Livestock Comm'n Co., 411 U.S. 182, 186, 93 S.Ct. 1455, 36 L.Ed.2d 142 (1973) (internal quotation marks and citations omitted).


The Animal Welfare Act intends, in part, " to assure the humane treatment of animals during transportation in commerce," and " to insure that animals intended for use in research facilities or for exhibition purposes or for use as pets are provided humane care and treatment." 7 U.S.C. § 2131(1)-(2). Among other provisions, the Act regulates " dealers" of animals. A " dealer" is defined, inter alia, as a " person who, in commerce, for compensation or profit, delivers for transportation, or transports, except as a carrier, buys, or sells, or negotiates the purchase or sale of . . . any dog or other animal whether alive or dead for research, teaching, exhibition, or use as a pet." Id. § 2132(f).[2] Under the AWA, a dealer must possess a valid license to (1) " sell or offer to sell or transport or offer for transportation, in commerce, to any research facility or for exhibition or for use as a pet any animal," or (2) " buy, sell, offer to buy or sell, transport or offer for transportation, in commerce, to or from another dealer or exhibitor under this chapter any animals." Id. § 2134. Similarly, Department regulations provide, in relevant part, that any person operating as a dealer " must have a valid license," unless the person qualifies for one of eight exceptions. 9 C.F.R. § 2.1(a)(1), (3). The regulations further provide that " [a]ny person whose license has been suspended or revoked shall not buy, sell, transport, exhibit, or deliver for transportation, any animal during the period of suspension or revocation." Id. § 2.10(c). " Animal," in turn, is defined as including " any . . . warmblooded animal, which is being used, or is intended for use for research, teaching, testing, experimentation, or exhibition purposes, or as a pet," with several express exceptions. Id. § 1.1; see also 7 U.S.C. ยง 2132(g) (defining " animal" similarly as " any . . . warm-blooded animal, as the Secretary may determine is being used, or is intended for use, for research, testing, experimentation, or exhibition purposes, or as a pet," with several express exceptions). The Judicial Officer concluded ...

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