                                                                                                                           Opinions of the United
2000 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


3-1-2000

In Re: Magic Rest
Precedential or Non-Precedential:

Docket 99-5113




Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2000

Recommended Citation
"In Re: Magic Rest" (2000). 2000 Decisions. Paper 42.
http://digitalcommons.law.villanova.edu/thirdcircuit_2000/42


This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
University School of Law Digital Repository. It has been accepted for inclusion in 2000 Decisions by an authorized administrator of Villanova
University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.
Filed March 1, 2000

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 99-5113

IN RE: MAGIC RESTAURANTS, INC.;
MAGIC AMERICAN CAFE, INC.,

       Debtors

MAGIC RESTAURANTS, INC.;
MAGIC AMERICAN CAFE, INC.

v.

BOWIE PRODUCE CO., INC.,

       Appellant

PATRICIA A. STAIANO,

       Trustee.

On Appeal From the United States District Court
For the District of Delaware
(D.C. Civ. No. 97-300-JJF)
District Judge: Honorable Joseph J. Farnan, Jr.

Argued: December 8, 1999

Before: NYGAARD, RENDELL and ROSENN,
Circuit Judges.

(Filed: March 1, 2000)

       Stephen P. McCarron, Esquire
        (Argued)
       McCarron & Associates
       4910 Massachusetts Avenue, N.W.,
        Suite 18
       Washington, DC 20016




       Mark Minuti, Esquire
       Saul, Ewing, Remick & Saul
       222 Delaware Avenue, Suite 1200
       Wilmington, DE 19899

        Counsel for Bowie Produce
       Co., Inc.
       Brendan Linehan Shannon, Esquire
        (Argued)
       Laura Davis Jones, Esquire
       Young Conaway Stargatt &
        Taylor, LLP
       Rodney Square North, 11th Floor
       Wilmington, DE 79899-0391

       John A. Lee, Esquire
       Andrews & Kurth, L.L.P.
       4200 Chase Tower
       Houston, TX 77002

        Counsel for Magic Restaurants,
       Inc. and Magic American Cafe,
       Inc.

OPINION ANNOUNCING THE JUDGMENT
OF THE COURT

ROSENN, Circuit Judge.

The sole question presented by this appeal is whether
restaurants are "dealers" under the Perishable Agricultural
Commodities Act, 7 U.S.C. S 499a et seq. ("PACA"), and
therefore subject to its trust provision, 7 U.S.C.S 499e(c).
The United States Bankruptcy Court for the District of
Delaware held that they are, and subsequently granted
partial summary judgment in favor of the Appellant. The
United States District Court reversed. We hold that
restaurants are dealers under the plain language of PACA,
and we therefore reverse the order of the district court and
reinstate the order of the bankruptcy court.

                                  2


I.

On April 6, 1995, Magic Restaurants, Inc. and Magic
American Cafe, Inc. (collectively "Magic")filed voluntary
bankruptcy petitions in the bankruptcy court for
reorganization under Chapter 11 of the Bankruptcy Code.
Magic, directly or through its subsidiaries, owned and
operated fifteen restaurants in the Washington, D.C. and
New York City metropolitan areas. These restaurants
generated $20 million in sales revenues in a six month
period in 1995-96. Magic purchased fresh fruits and
vegetables from Bowie Produce Co., Inc. ("Bowie"), which it
processed into food items, including salads or hamburger
trimmings, and sold to its restaurant customers. At the
time Magic filed for bankruptcy in April 1995, it owed
Bowie $98,983.74 for these produce purchases.
Bowie commenced an adversarial proceeding in the
bankruptcy court to recover full payment from Magic on the
ground that the proceeds from the produce Magic had
purchased were trust funds under Section 5(c) of PACA, 7
U.S.C. S 499e(c). Magic moved for summary judgment on
the ground that as a restaurant, it was not a "dealer," and
was therefore not subject to PACA's trust provision. By
memorandum opinion and order dated June 18, 1996, the
bankruptcy court denied Magic's motion and held that
Magic was a "dealer" under the plain language of PACA. On
January 15, 1997, the bankruptcy court granted partial
summary judgment for Bowie, awarding it $93,173.29 in
trust proceeds.

Magic appealed the bankruptcy court's ruling to the
district court pursuant to 28 U.S.C. S 158(a). The district
court reversed the bankruptcy court by memorandum
opinion and order dated January 6, 1999, holding that
Magic was not a "dealer" under PACA and therefore was not
subject to its trust provision. This timely appeal followed.

II.

A. Statutory Background.

Congress enacted PACA in 1930 "to promote fair trading
practices in the marketing of perishable agricultural


                               3


commodities, largely fruits and vegetables." Consumers
Produce Co., Inc. v. Volante Wholesale Produce, Inc. , 16 F.3d
1374, 1377-78 (3d Cir. 1994). PACA was " `designed
primarily for the protection of the producers of perishable
agricultural products -- most of whom must entrust their
products to a buyer or commission merchant who may be
thousands of miles away, and depend for their payment
upon his business acumen and fair dealing.' " In re
Kornblum & Co., Inc., 81 F.3d 280, 283 (2d Cir. 1996)
(quoting H.R. Rep. No. 1196, at 2 (1955), reprinted in 1956
U.S.C.C.A.N. 3699, 3701). Producers of perishable
agricultural goods are in large part dependent upon the
honesty and scrupulousness of the purchaser or consignee
who geographically may be far removed. To provide
producers with some protection, Congress fortified the
original PACA with two primary weapons. First, it
prohibited certain conduct by "commission merchants,"
"brokers," or "dealers." 7 U.S.C. S 499b. Failure to abide by
these prohibitions rendered the "commission merchant,
dealer, or broker . . . liable to the person or persons injured
thereby for the full amount of damages . . . sustained in
consequence of such violation." Id. SS 499e(a) & 499e(b).
Second, PACA established a mandatory licensing scheme,
under the supervision of the Secretary of Agriculture, for
any "person" carrying on "the business of a commission
merchant, dealer, or broker." Id. S 499c. The Secretary was
given the power to refuse, suspend, or terminate licenses
on numerous grounds, including conduct prohibited under
S 499b. See 7 U.S.C. SS 499c, 499d, 499h. Any person
doing business without the required license was subject to
monetary penalties. Id. S 499c(a).

PACA in its original form therefore protected produce
growers and producers, and worked to make "the marketing
of perishable agricultural commodities more orderly and
efficient." Hull Co. v. Hauser's Foods, Inc., 924 F.2d 777,
779 (8th Cir. 1991). Even with the passage of a half-century
after its initial enactment, Congress, in 1984, determined
that prevalent financing practices in the perishable
agricultural commodities industry were placing the industry
as a whole, including produce sellers, in jeopardy. It
responded by amending PACA, explaining:

                               4


       It is hereby found that a burden on commerce in
       perishable agricultural commodities is caused by
       financing arrangements under which commission

       merchants, dealers, or brokers, who have not made
       payment for perishable agricultural commodities
       purchased, contracted to be purchased, or otherwise
       handled by them on behalf of another person,
       encumber or give lenders a security interest in, such
       commodities, or on inventories of food or other
       products derived from such commodities, and any
       receivables or proceeds from the sale of such
       commodities or products, and that such arrangements
       are contrary to the public interest. . . .

7 U.S.C. S 499e(c)(1).1

In order to "remedy such burden on commerce in
perishable agricultural commodities and to protect the
public interest," id., Congress "increase[d] the legal
protection for unpaid sellers and suppliers of perishable
agricultural commodities until full payment of sums due
_________________________________________________________________

1. The legislative history of the 1984 PACA amendments further explains
the problem Congress intended to address:

        Sellers of agricultural commodities are often located thousands of
       miles from their customers. Sales transactions must be made
       quickly or they are not made at all . . . . Under such conditions,
it
       is often difficult to make credit checks, conditional sales
       agreements, and take other traditional safeguards.

       * * *

        Many [buyers], in the ordinary course of their business
       transactions, operate on bank loans secured by [their] inventories,
       proceeds or assigned receivables from sales of perishable
       agricultural commodities, giving the lender a secured position in
the
       case of insolvency. Under present law, sellers of fresh fruits and
       vegetables are unsecured creditors and receive little protection in
       any suit for recovery of damages where a buyer has failed to make
       payment as required by the contract.

        In recent years, produce sellers have been subjected to increased
       instances of buyers failure to pay and slow payments.

H.R. Rep. No. 98-543, at 3 (1983), reprinted in   1984 U.S.C.C.A.N. 405,
406.

                               5


have been received by them," H.R. Rep. No. 98-543, at 3
(1983), reprinted in 1984 U.S.C.C.A.N. 405, 406 (emphasis
added), by enacting 7 U.S.C. S 499e(c). This provision
imposes a floating, non-segregated trust on produce buyers
for the benefit of unpaid produce suppliers.2 The corpus of
this trust is comprised of (1) the perishable agricultural
commodities purchased from these suppliers, (2) all
inventories of food or other products derived from the
perishable agricultural commodities, and (3) receivables or
proceeds from the sale of such commodities or products. 7
U.S.C. S 499e(c)(2). The statutory trustee is the delinquent
"commission merchant, dealer, or broker." Id. The unpaid
supplier loses the benefits of the trust unless written notice
of intent to preserve the trust is given to the trustee within
thirty calendar days after payment must be made. Id.
S 499e(c)(3). In essence, PACA's trust provision gives the
unpaid supplier an interest in the trust corpus superior to
the interest of any other lien or secured creditor. See
Consumers Produce, 16 F.3d at 1379; In re W.L. Bradley
Co., Inc., 75 B.R. 505, 509 (Bankr. E.D. Pa. 1987) (quoting
In re Prange Foods, Corp., 63 B.R. 211, 214 (Bankr. W.D.
Mich. 1986)).

B. The District Court's Decision.

Bowie's appeal hinges on its contention that Magic is a
"dealer" under PACA.3 If Bowie is correct, it has priority to
_________________________________________________________________
2. The trust provision states, in relevant part:

       Perishable agricultural commodities received by a commission
       merchant, dealer, or broker in all transactions, and all
inventories

       of food or other products derived from perishable agricultural
       commodities, and any receivables or proceeds from the sale of such
       commodities or products, shall be held by such commission
       merchant, dealer, or broker in trust for the benefit of all unpaid
       suppliers or sellers of such commodities or agents involved in the
       transaction, until full payment of the sums owing in connection
with

       such transactions has been received by such unpaid suppliers,
       sellers, or agents. . . .

7 U.S.C. S 499e(c)(2).

3. Bowie did not contend in the bankruptcy court or the district court
and does not contend now that Magic is a "commission merchant" or a
"broker."

                               6


certain of Magic's assets as the beneficiary of PACA's
statutorily imposed trust. PACA defines the term"dealer" as
"any person engaged in the business of buying or selling in
wholesale or jobbing quantities, as defined by the
Secretary, any perishable agricultural commodity in

interstate or foreign commerce . . . ." 7 U.S.C.S 499a(b)(6).
PACA also provides three exceptions to this definition:

       (A) no producer shall be considered as a "deale r" in
       respect to sales of any such commodity of his own
       raising;

       (B) no person buying any such commodity solely for
       sale at retail shall be considered as a "dealer" until the
       invoice cost of his purchases of perishable agricultural
       commodities in any calendar year are in excess of
       $230,000; and

       (C) no person buying any commodity other than
       potatoes for canning and/or processing within the
       State where grown shall be considered a "dealer"
       whether or not the canned or processed product is to
       be shipped in interstate or foreign commerce, unless
       such product is frozen or packed in ice, or consists of
       cherries in brine . . . .
Id. Finally, this provision notes that "[a]ny person not
considered as a `dealer' under clauses (A), (B), and (C) may
elect to secure a license under the provisions of section
499c of this title, and in such case and while the license is
in effect such person shall be considered as a `dealer'."
Magic has never secured such a license, and contends that
no restaurant has done so.

The parties do not dispute that Magic purchases
"wholesale or jobbing quantities" of perishable agricultural
commodities in interstate commerce.4 Bowie therefore
contends that, based on the plain language of the statute,
Magic is a "dealer" and is subject to the trust. The
_________________________________________________________________

4. Regulations promulgated by the United States Department of
Agriculture ("USDA") define "wholesale or jobbing quantities" as
"aggregate quantities of all types of produce totaling one ton (2,000
pounds) or more in weight in any day shipped, received, or contracted to
be shipped or received." 7 C.F.R. S 46.2(x).

                               7


bankruptcy court agreed, but the district court reversed.
The court held that PACA "is silent on the issue of whether
restaurants qualify as `dealers,' " and therefore, "Congress
has not spoken directly to the issue of PACA's applicability
to restaurants." (A.7). Thus, the district court proceeded to
consider regulations promulgated by the USDA under its
authority to administer PACA. See 7 U.S.C.S 499o.

These USDA regulations define "dealer" as:

       any person engaged in the business of buying or selling
       in wholesale or jobbing quantities in commerce and
       includes:

        (1) Jobbers, distributors and other wholesaler s;

        (2) Retailers, when the invoice cost of all pu rchases
       of produce exceeds $230,000 during a calendar year.
       In computing dollar volume, all purchases of fresh and
       frozen fruits and vegetables are to be counted, without
       regard to quantity involved in a transaction or whether
       the transaction was intrastate, interstate or foreign
       commerce;

        (3) Growers who market produce grown by others.

7 C.F.R. S 46.2(m). The district court concluded that under
this regulation, in order to be a "dealer" an entity had to fall
into one of the categories enumerated in 7 C.F.R.
S 46.2(m)(1), (2), or (3). The court determined that the only
possible category a restaurant such as Magic could fall into
was that of "retailers" under 7 C.F.R. S 46.2(m)(2), but
concluded that restaurants such as Magic were consumers,
not retailers. Accordingly, the district court held that under
this USDA regulation, Magic was not a dealer.

The court found support for this conclusion in two
additional sources. First, in 1996, USDA amended its
regulatory definition of "fresh fruits and vegetables," 7
C.F.R. S 46.2(u), to include oil-blanched frozen fruits and
vegetables, thereby bringing such produce within PACA's
reach. In its statement accompanying publication of the
final rule, USDA described a comment it received from a
representative of a major restaurant chain voicing its
concern that the rule change "might bring restaurants
under the jurisdiction of the PACA." Final Rule,

                               8


"Regulations (Other Than Rules of Practice) Under the
Perishable Agricultural Commodities Act, 1930 (PACA)," 61
Fed. Reg. 13385, 13386 (Mar. 27, 1996). USDA responded:

       Restaurants traditionally have not been considered
       subject to the PACA by USDA or Congress unless the
       buying arm of the restaurant is a separate legal entity,
       and is buying for and/or reselling the product to
       another entity. Since restaurants are not subject to the
       PACA, this change in the regulation will not impact
       restaurants.

Id.

Second, in 1995, Congress amended PACA. These
amendments had no bearing on who was and was not
covered by the statute.5 In the report of the House
Committee on Agriculture accompanying the 1995 PACA
Amendments Act, the Committee explained that:

       Section 3 phases out license fees for retailers and
       grocery wholesalers. It defines the term "retailer" as a
       person who is a dealer engaged in the business of
       selling any perishable commodity at retail.
       Approximately 4,000 retailers are currently estimated
       to be licensed under PACA. Those businesses such as
       grocery stores and other like businesses that
       predominantly serve those consumers purchasing food
       for consumption at home or off the premises of the
       retail establishment are considered to be included in
       the definition of retailer. It is not the intent of the
       Committee that the definition of retailer be construed
       to include foodservice establishments such as
_________________________________________________________________
5. Essentially, the 1995 amendments phased retailers and grocery
wholesalers out of license fee payment, allowed USDA to adjust license
fees under its rulemaking authority, "require[d] USDA to receive a
written complaint before pursuing an investigation, require[d] additional
USDA investigation notification procedures, increase[d] . . .
administrative penalties, establishe[d] civil penalties, clarifie[d] the
status
of collateral fees and expenses, and clarifie[d] misbranding prohibitions
. . . ." H.R. Rep. No. 104-207, at 6 (1995), reprinted in 1995
U.S.C.C.A.N.

453, 453. Other than these changes, the House Committee on
Agriculture explained, the law remained unaffected. Id.

                                9


       restaurants, or schools, hospitals and other
       institutional cafeterias.

H.R. Rep. No. 104-207, at 7 (1995), reprinted in   1995
U.S.C.C.A.N. 453, 454.

Accordingly, based on this regulatory interpretation and
legislative history, the district court held that restaurants
such as Magic are not "dealers" and are therefore not
subject to PACA's trust provision.

III.

The question of whether a restaurant with extensive
operations such as Magic is a "dealer" under PACA is a
purely legal determination. Accordingly, this court exercises
plenary review over the judgment of the district court. In re
Reading Co., 115 F.3d 1111, 1124 (3d Cir. 1997).

A. The Statutory Language.

In resolving this issue, the first question we must ask is
whether the plain language of the statute is unambiguous.
Idahoan Fresh v. Advantage Produce, Inc., 157 F.3d 197,
202 (3d Cir. 1998). If it is, there is generally no need to look
to administrative interpretations or to legislative history.
Ratzlaf v. United States, 510 U.S. 135, 147-48 (1994);
Idahoan Fresh, 157 F.3d at 202; West v. Sullivan, 973 F.2d
179, 185 (3d Cir. 1992), cert. denied, 508 U.S. 962 (1993).
If the statute is "silent or ambiguous as to the specific
issue," and an administrative agency charged with
administering the statute has devised its own regulatory
interpretation of the statute, the court must then ask
"whether the agency's answer is based on a permissible
construction of the statute." West, 973 F.2d 179 at 185
(quoting Chevron, U.S.A., Inc. v. Natural Resources Def.
Council, Inc., 467 U.S. 837, 842-43 (1984)).

In the more than half-century since the initial enactment
of PACA, only three other courts have addressed whether
restaurants are "dealers" under it. We appear to be the only
United States Court of Appeals to consider the question.
Recently, two district courts in California concluded, like
the bankruptcy court in this case, that restaurants are

                               10


"dealers" under the plain language of PACA. See Royal
Foods Co. v. L.R. Holdings, Inc., No. C 99-01609, 1999 WL
1051978 (N.D. Cal. Nov. 10, 1999); JC Produce, Inc. v.
Paragon Steakhouse Restaurants, Inc., 70 F. Supp.2d 1119
(E.D. Cal. 1999). However, in In re Italian Oven, Inc., 207
B.R. 839 (Bankr. W.D. Pa. 1997), the bankruptcy court, like
the district court in this case, held that PACA's definition of
"dealer" is ambiguous, that the USDA regulation defining
"dealer" did so to the exclusion of anyone not expressly
described by the regulation, and that the restaurant debtor
in that case was not a retailer under this regulation and
therefore not subject to PACA's trust provision. The Italian
Oven court considered and expressly rejected the reasoning
of the bankruptcy court in this case. Id. at 842-43.6

As noted above, USDA, the agency charged with
administering PACA, has indicated its view that restaurants
are not "dealers" under that statute. Indeed, that agency's
consistent practice for seven decades since PACA's
enactment has been to deny that the statute gives it
jurisdiction over restaurants.7 Nevertheless, "a reviewing
_________________________________________________________________

6. It gave three reasons in support of its holding that PACA's definition
of "dealer" was ambiguous and resort to administrative materials was
appropriate. The first reason was that prior to the bankruptcy court's
decision in this case, there had been no reported decisions dealing with
whether PACA applies to restaurants, even though the statute had been
in existence since 1930. Id. at 843. The court's second reason is
confusing, but appears to have had something to do with PACA's silence
as to its applicability to restaurants. Id. The third reason was that PACA
empowered the USDA to administer the statute by enacting regulations.
Id. at 843-44. For the same reasons discussed herein, the Italian Oven
court's first two reasons for looking beyond the plain statutory
definition

of "dealer" are unconvincing to us. Additionally, its third reason is
irrelevant to an inquiry into the ambiguity of statutory text.

7. This practice is further evidenced by USDA's communications with
Magic. A July 6, 1995 letter to counsel for Magic from a USDA official
apparently responsible for license and program review in the PACA
Branch of USDA's Fruit and Vegetable Division explained that official's
view that "[r]estaurants are not considered`dealers,' `brokers,'
`commission merchants' or any other entity whose operations are subject
to the PACA," and that "[t]he PACA is not applicable to a restaurant that
does not act as a central distributor for subsidiary restaurants
irrespective of where it obtains it perishable commodities." (A.16).

                               11


court should not defer to an agency position which is
contrary to an intent of Congress expressed in
unambiguous terms." Estate of Cowart v. Nicklos Drilling
Co., 505 U.S. 469, 476 (1992).

Ultimately, this case turns on whether the statutory
definition of "dealer" found in PACA is unambiguous with
respect to its inclusion of restaurants such as Magic. As
discussed above, PACA states that subject to certain
exceptions, a dealer is "any person engaged in the business
of buying or selling in wholesale or jobbing quantities, as
defined by the Secretary, any perishable agricultural
commodity in interstate or foreign commerce . . . ." 7 U.S.C.
S 499a(b)(6). Because "the term `person' includes
individuals, partnerships, corporations, and associations,"
id. S 499a(b)(1), Magic is a "person" under PACA.
Furthermore, the parties do not dispute that Magic
purchased "wholesale or jobbing quantities" of produce,
which USDA regulations define as "aggregate quantities of
all types of produce totaling one ton (2,000 pounds) or more
in weight in any day shipped, received, or contracted to be
shipped or received." 7 C.F.R. S 46.2(x). Additionally, Magic
does not contend that it falls within any of the three
statutory exceptions to PACA's definition of "dealer." See 7
U.S.C. S 499a(b)(6)(A), (B), and (C).

At oral argument in this case, it was suggested that
Congress's employment of the words "engaged in the
business of " in defining the category of"dealers" rendered
this definition ambiguous, because this language could be
interpreted to restrict the meaning of "dealer" to include
only those engaged primarily in the business of buying or
selling perishable agricultural commodities. However,
nothing about the ordinary meaning of the words"engaged"
or "business" indicates that the statutory definition should
be understood to apply only to those engaged primarily in
this business. This "engaged in the business of " language
speaks to the type of business required to invoke
jurisdiction under PACA, not to the quantity thereof.
Congress spoke to quantity later in this definition, when it

                               12
restricted the category of "dealers" to those doing business
"in wholesale or jobbing quantities."8

There is therefore nothing ambiguous about the
application of this statutory definition to the facts of this
case. The district court's conclusion that the definition is
ambiguous because it does not explicitly state whether
restaurants are dealers is specious. Because Congress
chose to define the word "dealer" in broad terms, rather
than by specifically identifying each entity that falls into
this category, does not automatically render the definition
ambiguous.

B. The Statutory Purpose.

Even where the express language of a statute appears
unambiguous, a court must look beyond that plain
language where a literal interpretation of this language
would thwart the purpose of the overall statutory scheme,
United States v. Jersey Shore Bank, 781 F.2d 974, 977 (3d
Cir. 1986), aff 'd, 479 U.S. 442 (1987), would lead to an
absurd result, id., or would otherwise produce a result
"demonstrably at odds with the intentions of the drafters,"
_________________________________________________________________

8. The interpretation given to the definition of "dealer" in the Packers
and
Stockyards Act, 7 U.S.C. S 181 et seq. ("PSA"), lends additional support
to this conclusion. PACA's trust provision was modeled on that of the
PSA, and this court has previously observed that authority developed
under the PSA is persuasive in interpreting PACA's trust. See Consumers
Produce, 16 F.3d at 1382 n.5. Using language nearly identical to that
used in PACA, the PSA defines a "dealer" as"any person . . . engaged in
the business of buying or selling in commerce livestock at a stockyard
. . . ." Id. S 201(d). The only decision interpreting the PSA's "engaged
in

the business of " language of which we are aware confirms our
interpretation of PACA's identical language. See Kelley v. United States,
202 F.2d 838, 841 (10th Cir. 1953) ("engaged in the business of "
language cannot be read to mean engaged in the sole business of); see
also United States v. Perdue Farms, Inc., 680 F.2d 277, 285 (2d Cir.
1982) (interpreting PSA's nearly identical definition of "live poultry
dealer," 7 U.S.C. S 218b (repealed 1987), and concluding that "rather
than focusing upon the absolute amount of packing business or live
poultry business a firm engaged in, Congress chose to make the USDA's
jurisdiction dependent upon the activity of the business . . . , no matter
how small . . . .").

                               13


Demarest v. Manspeaker, 498 U.S. 184, 190 (1991) (quoting
Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 571
(1982)).

Nevertheless, it cannot be seriously contended that
holding that restaurants purchasing perishable agricultural
commodities in wholesale or jobbing quantities, as defined
by the Secretary, are "dealers" under PACA is contrary to
the statute's purpose, absurd, or "demonstrably at odds
with the intentions of the drafters." There is no clear
evidence of legislative intent regarding treatment of such
restaurants at the time the definition of "dealer" was
originally enacted in 1930. Indeed, the only such evidence
of legislative intent is the statement contained in the 1995
House Agriculture Committee report that the Committee did
not intend that restaurants be included within the
definition of "retailers" enacted in the 1995 PACA
Amendments Act. That statement, however, is confined to
the amendment. This committee report was issued more
than 30 years after the last time Congress modified the
definition of "dealer" in any substantial way,9 and dealt with
issues wholly different from this definition. See supra note
6. This report language is not something "upon which other
legislators might have relied in voting for or against" the
statutory definition of "dealer," and cannot constitute
evidence of the legislative intent behind that definition. See
Heintz v. Jenkins, 514 U.S. 291, 298 (1995). As the
Supreme Court has observed, "the views of a subsequent
Congress form a hazardous basis for inferring the intent of
an earlier one." United States v. Price, 361 U.S. 304, 313
(1960); see also Pennsylvania Med. Society v. Snider, 29
F.3d 886, 898 (3d Cir. 1994). We therefore disregard this
House committee report.
_________________________________________________________________

9. Pub L. No. 87-725, 1962 U.S.C.C.A.N. 2749, substituted "wholesale or
jobbing quantities" for "carloads." Amendments in 1969, 1978, and 1981
increase the monetary amount under current section 499a(b)(6)(B) from
$90,000 to $100,000, $100,000 to $200,000, and $200,000 to $230,000,
respectively. See Pub. L. No. 97-98, 1981 U.S.C.C.A.N. (95 Stat.) 1213,
1269; Pub. L. No. 95-562, 1978 U.S.C.C.A.N. (92 Stat.) 2381; Pub. L. No.
91-107, 1969 U.S.C.C.A.N. 1225. In addition, the 1978 amendment
inserted "other than potatoes" after "commodity" in current section
499a(b)(6)(C). See Pub L. No. 95-562, 1978 U.S.C.C.A.N. (92 Stat.) 2381.

                               14


Moreover, requiring restaurants that purchase large
quantities of produce to comply with PACA furthers the
goals of the statute as amended in 1984. Although the
original PACA was enacted to protect produce growers and
producers, the 1984 amendments, including the trust
provision, were enacted for the protection of all produce
sellers and suppliers. Holding restaurant-purchasers
responsible to produce sellers such as Bowie provides
protection of produce suppliers up through the distribution
chain and therefore furthers the purposes of the trust
provision.

Magic contends that if this court holds that restaurants
are "dealers," and therefore subject to PACA, the
repercussions would be "staggering" because"all of the
hundreds of thousands of restaurants in this country" that
have never applied for licenses under PACA "have been in
direct violation of federal law, for decades." (Appellee's Br.
at 18-19). To some extent, Magic may have a point. Under
PACA, any person failing to obtain a license through
inadvertence rather than wilfulness may "be permitted by
the Secretary . . . to settle his liability in the matter by the
payment of fees due for the period covered by such violation
and an additional sum, not in excess of $250, to befixed by
the Secretary . . . ." 7 U.S.C. 499c(b). Should the Secretary
choose to pursue such violations, these licensing fees could
add up to substantial amounts over the 70-year period in
which PACA has been in force.

It is not clear how many restaurants actually purchase
produce in "wholesale or jobbing quantities," and are
therefore subject to PACA's licensing requirement. The
parties have offered no evidence on this point. We suspect,
however, that the number of restaurants that do so is far
smaller than Magic contends. In addition, we would be very
surprised if the Secretary chose to pursue enforcement of
such violations retroactively. Even if the Secretary does
attempt to enforce PACA's penalty provisions against these
"violating" restaurants, the long history of non-enforcement
against restaurants in this case may be sufficiently
extraordinary as to permit restaurants to successfully argue
the application of equitable estoppel or laches.

                                15


We recognize that the USDA has refused to exercise
jurisdiction over restaurants pursuant to PACA for
approximately seven decades. It is this benign neglect that
is responsible for much of the confusion in this area.
Nevertheless, we are constrained by PACA's unambiguous
statutory language to hold that a restaurant such as Magic,
which purchases produce in wholesale or jobbing quantities
(and in excess of $230,000 per year), is a "dealer" under 7
U.S.C. S 499a(b)(6), and administrative interpretations
contrary to this plain language are therefore not persuasive.

IV.

For the foregoing reasons, the January 6, 1999 order of
the district court will be reversed, and the case remanded
to the district court with instructions to reinstate the
January 15, 1997 order of the bankruptcy court granting
partial summary judgment in favor of Bowie. Each side to
bear its own costs.

                               16


RENDELL, Circuit Judge, dissenting:

I respectfully dissent because I find the phrase"engaged
in the business of buying or selling . . ." to be susceptible
of a different meaning from that given it by the majority.

Restaurants are engaged in the business of preparing
and selling meals to customers. Not only is buying or
selling perishables in large quantities not their primary
business, it is not their business at all. 10 Admittedly, in the
course of their business, they do buy perishables in great
quantities. If PACA was intended to include them, Congress
should have said, "any business that buys or sells . . ."; it
did not. As I read the statute, it confines the concept of
"dealer" to those who do this as their bread and butter, so
to speak. The majority reading would make most prisons
"dealers," yet prisons are not engaged in the perishable
commodity-buying business.

The reading I have proffered, together with the majority's
rejection of it, leads me to conclude that the statutory
language is ambiguous. Once we have found an ambiguity
in the statutory language, our resort to legislative history
would confirm that PACA is not intended to cover
restaurants and food service institutions. In discussing the
definition of "retailer" (which relies in part on the definition
of dealer), the House Report made clear that food service
establishments such as restaurants or schools, hospitals,
_________________________________________________________________

10. The majority relies by analogy upon the Kelley case, which found
that the Packers and Stockyards Act did not require a dealer to be
engaged solely in the business of selling livestock. See Kelley v. United
States, 202 F.2d 838 (10th Cir. 1953). This analogy is inapposite. In
Kelley, the livestock dealer was clearly engaged in the business of
selling

livestock. Kelley was a proprietor of a stockyard that, because it was
private, was not itself subject to the Packers and Stockyards Act. See id.
at 839. The Tenth Circuit Court of Appeals found that, by buying
livestock from stockyards that were subject to the Act, Kelley became a
"dealer" subject to the registration and bond requirements of the Act. See
id. at 841. That is, the issue in Kelley was whether the livestock dealer
had to be registered when his dealing in livestock subject to the Act was
not his sole business due to the fact that his sales of other livestock
might predominate. There is no question that the core of Kelley's
business was dealing livestock, and this clearly distinguishes his case
from the instant case where Magic's business is not dealing in produce.

                                17


and other institutional cafeterias are not required to be
licensed. The agency's construction of PACA is consistent
with this position.11 In short, dealers and brokers are those
whose business is in dealing in, or brokering, these items.
They should be licensed and are subject to the Act. Magic
is engaged in a very different business, and is not in my
view subject to regulation as a "dealer" under PACA.

A True Copy:
Teste:

       Clerk of the United States Court of Appeals
       for the Third Circuit

_________________________________________________________________

11. The majority notes that we "should not defer to an agency position
which is contrary to an intent of Congress expressed in unambiguous
terms." Ante at 12 (quoting Estate of Cowart v. Nicklos Drilling Co., 505
U.S. 469, 476 (1992)). Here, however, the only unambiguous statement
of Congressional intent appears in the House Report. The agency's
position is consistent with the intent expressed in the legislative
history.
See In re The Italian Oven, Inc., 207 B.R. 839, 843-44 (Bankr. W.D. Pa.
1997) (describing agency position on, and legislative history of, the
"dealer" provision of PACA).

                               18
