                           UNITED STATES COURT OF APPEALS
                                 FOR THE SECOND CIRCUIT
                                    _______________

                                       August Term, 2006

               (Argued: September 15, 2006          Decided: November 3, 2006
                                                    Errata Filed: November 21, 2006)
                                     Docket No. 05-5634-ag
                                      _______________

                  G&T TERMINAL PACKAGING CO ., INC. & TRAY-WRAP, INC.,

                                           Petitioners,

                                             —v.—

                        UNITED STATES DEPARTMENT OF AGRICULTURE ,

                                           Respondent.


                                       _______________


              B e f o r e : MESKILL, SOTOMAYOR, and KATZMANN, Circuit Judges.


                                       _______________


Petition for review from a decision of the Secretary of Agriculture revoking petitioners’ licences
to operate in the wholesale produce trade pursuant to the Perishable Agricultural Commodities
Act (“PACA”). The Secretary found that petitioners failed “to perform [a] specification or duty,
express or implied, arising out of any undertaking in connection” with any “transaction involving
any perishable agricultural commodity,” 7 U.S.C. § 499b(4), by making illicit cash payments to
USDA inspectors. The Secretary further found that the pattern of corruption practiced by the
USDA inspectors was not sufficiently coercive to provide “reasonable cause” for the petitioners’
breaches of this duty. We accord Chevron deference to the Secretary’s construction of the scope
of the implied duties created by the PACA and find that construction to be reasonable. We do
not decide whether the Secretary’s unexplained conclusion that the inspectors’ corruption did not
supply “reasonable cause” for the petitioners’ breaches is similarly entitled to deference under
Chevron because we would reach the same result were we to review the agency’s decision de
novo. AFFIRMED.
                                       _______________
APPEARING FOR PETITIONERS:                    LINDA STRUM PF (Sarah R. Smetana, on the brief),
                                              New Canaan, CT


APPEARING FOR RESPONDENT :                    STEPHEN M. REILLY, Senior Counsel, Office of the
                                              General Counsel (JAMES MICHAEL KELLY , Acting
                                              General Counsel and MARGARET M. BREINHOLT ,
                                              Assistant General Counsel, on the brief), U.S.
                                              Department of Agriculture, Washington, D.C.


                                        _______________
KATZMANN, Circuit Judge:

       The matter at hand calls upon us to interpret the Perishable Agricultural Commodities Act

(“PACA”), 7 U.S.C. § 499b, et seq., specifically, to determine whether a PACA licensee bears an

implied duty to refrain from paying illegal gratuities to a United States Department of

Agriculture (“USDA”) inspector, and the scope of the circumstances that constitute “reasonable

cause” for the breach of such a duty.

       This case arises out of the rampant corruption that existed for years, if not decades, in the

Hunts Point Terminal Produce Market in the Bronx, NY. It is undisputed that many of the

produce inspectors hired by the Department of Agriculture to provide impartial assessments of

the condition of agricultural commodities arriving at Hunts Point for distribution throughout the

metropolitan New York City area, far from acting as honest brokers, regularly accepted, and

often demanded, cash payments from the merchants they were supposed to serve. When they did

not receive payments from a merchant, the unscrupulous inspectors often would delay the

performance of their duties or intentionally skew the results of their inspections in a manner

calculated to harm the bottom line of the non-compliant merchant. In contrast, these inspectors

gave preferential treatment to the merchants who crossed their palms with silver, quickly

                                                 2
responding to their requests for inspections and, at least in some cases, shading the outcomes of

their inspections in favor of merchants who agreed to pay. This situation left merchants

operating in the Hunts Point Market to decide whether to acquiesce in the corruption and pay the

illicit gratuities, knowing that if they did not, they risked operating at a competitive disadvantage

vis-à-vis the complicit merchants. Petitioners G&T Terminal Packaging Co, Inc. and Tray-Wrap,

Inc., by their agent, Anthony Spinale, chose to pay. The question now before us is whether we

may affirm the Secretary of Agriculture’s conclusions (1) that the petitioners breached a duty

impliedly imposed by the Perishable Agricultural Commodities Act in making these illegal

payments, and (2) that the situational coercion created by the inspectors’ corruption did not

constitute “reasonable cause” for this breach. We grant Chevron deference to the Secretary’s

construction of the scope of the implied duties created by the PACA and affirm that construction

as reasonable. We do not decide whether the Secretary’s unelaborated determination that the

“extortion evidenced in this proceeding is not a ‘reasonable cause’” for Spinale’s payments” is

similarly entitled to deference under Chevron because we would reach the same conclusion upon

a de novo review. We therefore deny the petition for review and affirm the Secretary’s decision.

                                                  I.

                                                 A.

       The Perishable Agricultural Commodities Act establishes a wide-ranging regulatory

regime governing the wholesale trade in perishable goods such as fresh fruits and vegetables.1

       1
         7 U.S.C. § 499a(b)(4) provides that the term “perishable agricultural commodity . . .
[m]eans any of the following, whether or not frozen or packed in ice: Fresh fruits and fresh
vegetables of every kind and character; and . . . [i]ncludes cherries in brine as defined by the
Secretary in accordance with trade usages.”

                                                  3
As Congress explained in enacting an amendment to PACA in 1956:

       The Perishable Agricultural Commodities Act is admittedly and intentionally a
       ‘tough’ law. It was enacted in 1930 for the purpose of providing a measure of
       control and regulation over a branch of industry which is engaged almost
       exclusively in interstate commerce, which is highly competitive, and in which the
       opportunities for sharp practices, irresponsible business conduct, and unfair
       methods are numerous. The law 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--
       and for the protection of consumers who frequently have no more than the oral
       representation of the dealer that the product they buy is of the grade and quality
       they are paying for.


       The law has fostered an admirable degree of dependability and fairness in this
       industry chiefly through the method of requiring the registration of all those who
       carry on an interstate business in perishable agricultural commodities and denying
       this registration to those whose business tactics disqualify them.


S. Rep. No. 84-2507, at 3 (1956), as reprinted in 1956 U.S.C.C.A.N. 3699, 3701.

       The Secretary of Agriculture is charged with implementing and enforcing this regulatory

regime, which permits only persons and entities that hold a valid license from the Secretary to

participate in this trade. 7 U.S.C. § 499c(a).2 By statute, the Secretary is empowered to award




       2
         This subsection provides that “no person shall at any time carry on the business of a
commission merchant, dealer, or broker without a license valid and effective at such time.” 7
U.S.C. § 499c; see also 7 U.S.C. § 499d(a) (providing that the issuance of a license “entitle[s] the
licensee to do business as a commission merchant and/or dealer and/or broker unless and until it
is suspended or revoked by the Secretary.”). 7 U.S.C. § 499a(b)(5) defines the term “commission
merchant” to mean “any person engaged in the business of receiving in interstate or foreign
commerce any perishable agricultural commodity for sale, on commission, or for or on behalf of
another.” The term “dealer” is defined to mean, with certain exceptions, “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. §
499a(b)(6). “Broker” is similarly defined under the PACA, again with limited exceptions, as

                                                 4
damages to persons injured by PACA violations. See § 499e.3 In addition, the Secretary

possesses authority to revoke a previously granted license if, after the filing of a complaint and

subsequent administrative proceedings, see generally § 499f, the license holder is found to have

committed “flagrant or repeated” violations of § 499b. See § 499h(a). This sanction is strong

medicine, as it has the effect of exiling the violator from the portions of the produce trade

governed by the PACA. However, it is also integral to Congress’ goal of restricting participation

in this critical interstate trade to honest businesspersons.

                                                  B.

        Petitioners G&T Terminal Packaging Co., Inc. (“G&T”) and Tray-Wrap, Inc. (“Tray-

Wrap”) are New York corporations that have held PACA licenses since 1964 and 1970,

respectively. G&T deals in wholesale potatoes, while Tray-Wrap operates in the wholesale

tomato trade. The two companies share a common mailing address, a common pool of

employees, and operated out of the same office at the Hunts Point Terminal Market in the Bronx,




“any person engaged in the business of negotiating sales and purchases of any perishable
agricultural commodity in interstate or foreign commerce for or on behalf of the vendor or the
purchaser, respectively.” 7 U.S.C. § 499a(b)(7).
        3
          Under the terms of this section, “[i]f any commission merchant, dealer, or broker
violates any provision of section 499b of this title he shall be liable to the person or persons
injured thereby for the full amount of damages . . . sustained in consequence of such violation.”
7 U.S.C. § 499e(a). The section further provides that “[s]uch liability may be enforced either (1)
by complaint to the Secretary as hereinafter provided, or (2) by suit in any court of competent
jurisdiction; but this section shall not in any way abridge or alter the remedies now existing at
common law or by statute, and the provisions of this chapter are in addition to such remedies.”
7 U.S.C. § 499e(b).

                                                   5
NY.4 In addition, they share close ties to Anthony Spinale, who was the director, president and

100 percent owner of G&T, and Tray-Wrap’s founder and principal manager.

       In late 1996, the USDA Office of the Inspector General and the FBI launched an

investigation into allegations of corruption in the USDA office in Hunts Point, tipped off by

“complaints from a variety of growers that wholesalers seemed to be taking advantage of the

inspection system at Hunts Point, forcing growers to make constant price concessions.” The

investigators discovered that “corrupt inspectors . . . were taking cash payments (usually $50 per

container of produce) from produce wholesalers in exchange for agreeing to ‘downgrade’

produce on inspection certificates, to the substantial financial detriment of growers.” The

investigation also “revealed the existence of an ongoing, coordinated criminal organization

operating within the Hunts Point USDA office. Supervisory inspectors used their positions to

assign corrupt inspectors under them to conduct inspections that were likely to produce payoffs.

These inspectors in turn often kicked back a percentage of the cash payments to the supervisors

in exchange for the favorable assignments.”

       William Cashin was one of the unscrupulous USDA inspectors. After his arrest, Cashin

cooperated with the ongoing investigation into the Hunts Point corruption by surreptitiously

making audio and video recordings of his interactions with various Hunts Point inspectors and

merchants. Cashin’s cooperation led to the arrest and indictment of seven other USDA

inspectors. The dragnet also ensnared several merchants who were making payments to the



       4
         The Hunts Point Terminal Market is the largest wholesale produce terminal in the United
States, with annual revenues in excess of $1.5 billion annually. See
http://www.terminalmarkets.com/huntspoint.htm (last visited Sept. 26, 2006).

                                                6
inspectors, including Spinale, who was indicted in the Southern District of New York on October

21, 1999, and charged with nine counts of bribing a public official in violation of 18 U.S.C.

§§ 201(b)(1)(A) and (2).5 On January 26, 2001, Spinale pleaded guilty to Count Nine of that

indictment before Magistrate Judge Ronald Ellis. In the course of his allocution, Spinale

admitted that “[o]n August 13, 1999, I paid money to Bill Cashin for the purpose of influencing

the outcome of his inspection report on a load of potatoes. I told him the specific amount I

wanted him to put in the inspection report. On the other dates in the Indictment, I paid Mr.

Cashin $100 per inspection to influence the outcome of the report.” Spinale immediately

followed that statement by saying, “Your Honor, I would like to state I never intended to defraud

the shippers who had sent me the produce.” Spinale then reiterated that he was “paying [Cashin]

to dictate what he was putting into the report.” He also gave an affirmative response when the

court asked, “[s]o it was [Cashin’s] job to make reports about the produce that he was inspecting,

and you were trying to influence him to write things in the report?” On August 21, 2001, District

Judge Richard C. Casey accepted Spinale’s plea and sentenced him, upon a downward departure,

to a five-year term of probation, including twelve months of home confinement, and a $30,000

fine.

        On June 3, 2003, the government filed an administrative complaint charging G&T and

Tray-Wrap with having “willfully, fragrantly, and repeatedly violated Section 2(4) of the PACA



        5
         The Hunts Point investigation and its conclusions are described in further detail in
Illegal Activities at the Hunts Point Market: Hearing Before the Subcomm. on Livestock and
Horticulture of the H. Comm. on Agric., 106th Cong. 1-122 (2000),
http://commdocs.house.gov/committees/ag/hag10658.000/hag10658_0.htm (last visited Oct. 9,
2006).

                                                7
by failing, without reasonable cause, to perform any specification or duty, express or implied,

arising out of any undertaking in connection with transactions involving perishable agricultural

commodities purchased, received and accepted in interstate or foreign commerce” by making

payments, through Spinale, to Cashin. See 7 U.S.C. § 499p (providing that a regulated merchant

is liable for the acts, omissions and failures of any of its agents and officers). Specifically, the

complaint charged G&T with having “made illegal payments to a USDA inspector in connection

with four federal inspections of perishable agricultural commodities” between July 1999 and

August 1999. It similarly charged Tray-Wrap with having made six illegal payments to a USDA

inspector between March 1999 and June 1999. The petitioners responded by filing a joint answer

which, in sum and substance, denied the charges against them but admitted that Spinale had been

indicted on federal bribery charges and subsequently pleaded guilty to a single count of that

indictment.

       ALJ William Moran presided over a six-day disciplinary hearing beginning on October

25, 2004, during which he heard extensive testimony from Cashin and Spinale, as well as other

witnesses. Spinale testified that he began to make what became customary gratuity payments in

1991, shortly after the petitioners moved to the Hunts Point Terminal market. According to

Spinale, he and Lou Guerra, another produce merchant, “were talking and I had just - - I don’t

know if somebody had handed me an inspection or had an inspection, and I turned around and

told them that these people up here, they’re just impossible to work with. They don’t know what

they’re looking at, you can’t get a fair inspection, you can’t get a timely inspection, and Mr.

Guerra made some kind of signal to me and basically he was going like this here [rubbing two

fingers together], and I said, well, you know, look. If I have to do that, I have to do it. So he

                                                   8
turned around and said he’s going to send somebody to see me and the guy will mention my

name and you’ll know what you have to do.” Spinale testified that he understood Mr. Guerra to

mean that he had to give somebody money “[t]o get a fair inspection or a fast inspection.”

Spinale further described that “the next time I ordered an inspection, Mr. Cashin popped up, and

he turned around and said Lou . . . said that I should [say] hello to you, or something similar to

that. . . . [A]fter he finished the inspection, I just turned around and slipped a hundred dollars,

just gave him the hundred dollars. . . . I just gave him a hundred dollars, didn’t ask him anything,

he didn’t say anything to me and I didn’t say anything to him.” Spinale stated that he continued

to make cash payments to several inspectors thereafter, including Cashin. However, Spinale

repeatedly denied that he had made the payments to induce the inspectors to make inaccurate

inspections of the arriving produce.6 On the contrary, Spinale testified that, as a general matter,

he gave the inspectors cash for the sole purpose of obtaining “fair, fast [and] accurate”

inspections. Spinale described the inspectors’ practice of withholding timely and accurate

produce inspections unless they were paid as “soft extortion,” and contended that giving in to

that “soft extortion” “was something you had to do if you wanted to run a successful business. It

was just a necessity.”

       Spinale’s account was corroborated in several respects by the testimony of Paul Cutler



       6
         Spinale did admit that, on at least one occasion—which was caught on tape as part of the
sting operation—he “dictated” the contents of an inspection report to Cashin. Spinale explained
that “the reason I was dictating these reports was because, in my mind, the man was [in]capable
of writing a fair inspection. . . . And I turned around and dictated these reports so that we could
get a fair appraisal of what was actually in the car. . . .” At another point in his testimony,
Spinale asserted that he gave “in my opinion, what I thought was a correct and accurate report
because Cashin wasn’t able to do it. He was a nervous wreck.”

                                                  9
and Edmund Esposito, two former Hunts Point USDA inspectors who, like Cashin, were active

participants in the bribery scheme and pled guilty to bribery charges. Cutler explained that there

was a chronic shortage of USDA inspectors in the Hunts Point office, and that because of this

shortage it sometimes took “a day or two” to perform a requested inspection. As Cutler testified,

this situation created a profit opportunity for inspectors willing to “put pressure” on merchants to

extend gratuities in their direction: “a lot of times I would come down to do an inspection, like I

had applicants would have to sell things, you know - - you know, the produce is perishable and

they would have to get an inspection in a timely manner. . . . And when we came down there, like

I said, they would be yelling a lot and saying where were you, you know. And I would be so

ticked off at them, because we have a big load, and here you have an applicant yelling at you, and

I would try in some of these stores to say hey, if you want a right inspection, I would tell them to

pay me.” Cutler was then asked what he would do if a merchant refused to pay him. “If he

refused to pay me, it depends on the inspection on - - you know, on what defects I found. If it

was on the border . . . I would pass it. If he paid me . . . I would add maybe - - say it was on the

border, I add like two or three percentage points . . . to fail it.” Cutler explained that he felt that

he had significant power over the merchants in the market because “we could kind of force them

to pay to get an inspection, or else they knew they wouldn’t get the - - a right inspection.”

        Esposito similarly testified that when Hunts Point merchants refused to pay him, “I

usually screwed them.” Asked to elaborate, Esposito stated: “I would adjust the inspection. If

they had an inspection that might fail good delivery, I might go in there and change - - you know,

change the numbers and make sure that it passed a good delivery, and they would not get an

adjustment on it. Or I would just change temperatures and make the inspection worthless.”

                                                   10
Esposito also explained that although as many as “30, 35” merchants were paying the inspectors,

not all of paying merchants received the same return on their investments. Instead, according to

Esposito, “there were people that paid and you didn’t do nothing for them, but they still paid.

And then there was people that you did things for that paid, also.” Esposito clarified that for the

first group “[y]ou just did the normal fair inspection. You gave them a fair inspection and they

paid you,” but that he would write false inspection reports on behalf of the second group of

merchants. Esposito did not explain why the inspectors treated some paying merchants

differently than others. Esposito testified, however, that Spinale never asked him to alter, falsify

or downgrade an inspection, though he also testified to having given Spinale “a benefit of doubt

on inspections” without having been asked to do so because he “got paid and [Spinale is] a nice

guy.”

        Cashin also testified at the hearing. Unlike Esposito, Cashin asserted that Spinale had

paid the inspectors for more than just “fast, fair and accurate” inspections. Cashin testified that

he and Spinale had an “understanding” that Spinale’s payments were intended to influence, and

in fact did influence, the outcome of Cashin’s inspections. According to Cashin, this

“understanding” originally arose from an agreement between Spinale and another USDA

inspector, Bob Snolec, and that when Snolec left the USDA, Cashin took over at G&T and Tray-

Wrap, telling Spinale, “I’ll be coming here a lot, I think, and, you know, I’ll help you like Bob

helped you.” Cashin did not describe Spinale’s response to that statement. Cashin explained that

he provided “help” for Spinale and other merchants that paid him illegal gratuities “in any one of

three ways, and it’s a combination of any one of the three factors. The first factor is increasing

the number of containers reported on a certificate. . . . The second way was to increase on the

                                                 11
certificate, under the defects, the percentages of condition. . . . And the third way of help was the

temperatures recorded on the certificate.” By inaccurately recording the quantity and quality of

the produce received by the wholesaler, Cashin testified that an inspector could reduce the price

that a wholesaler would have to pay a supplier for the produce he had received. Cashin further

testified that he would “usually” help Spinale by adjusting the percentage of defects found in

Spinale’s favor, explaining that Spinale “would be very specific and tell me what he wanted

written down,” “oftentimes” telling Cashin what to put in his inspection reports, and that when

Cashin “helped” Spinale, his inspections did not accurately reflect the conditions of the produce

received.

       On March 28, 2005, Judge Moran issued a lengthy opinion dismissing the government’s

complaint against the petitioners. Judge Moran rejected Cashin’s claim that Spinale had made

the gratuity payments for the purpose of inducing him to make inaccurate inspections, and

instead credited Esposito’s testimony that Spinale “was paying only for a fair and accurate

inspection,” also finding broadly that “in all aspects where [Cashin’s] testimony conflicted with

Mr. Spinale’s testimony, Mr. Spinale’s testimony was credible and Cashin’s was not.” Judge

Moran also took note of the substantial economic power that the inspectors wielded over the

Hunts Point merchants. As Judge Moran colorfully put it, “Cashin and his cabal of corrupt

cronies knew they had merchants like Mr. Spinale over a barrel. The merchants could pay them

or risk either a delayed inspection or an inspection which rated produce as acceptable when an

honest assessment would determine otherwise.” In light of these findings, Judge Moran

determined that the payments made by Spinale to Cashin were a “personal fee” extracted by

Cashin “for every visit to Mr. Spinale’s place of business and that in no instance was Mr. Spinale

                                                 12
 benefitting from those visits [by obtaining] . . . an inspection report which downgraded a load of

 produce from its actual condition.” Having found that Spinale did not benefit in this way, Judge

 Moran declined to extend preclusive effect to the fact or substance of Spinale’s admission of

 guilt to a federal bribery charge, and found that Spinale “was not bribing Cashin but that

 unlawful gratuities were made.” To Judge Moran, this distinction was determinative, as he found

 that a licensee has an implied duty to refrain from paying bribes, but does not bear such a duty to

 refrain from paying illegal gratuities that do not benefit the licensee. He further found that even

 if the payment of illegal gratuities constitutes a breach of a PACA duty, the illicit payments that

 Spinale had made to Cashin did not “constitute sufficient cause to warrant revocation of the

 licenses of G&T and Tray-Wrap when the central contention of the [Petitioners] is that they were

 being extorted by the Agriculture inspectors in that, if they wanted an accurate inspection of the

 produce, they would have to pay off the inspectors to receive one.”

       The government appealed Judge Moran’s decision to Judicial Officer William G. Jenson

who, pursuant to 7 C.F.R. § 2.35(a), is authorized to make final determinations on behalf of the

Secretary of Agriculture in adjudicatory proceedings. The Judicial Officer adopted Judge Moran’s

credibility determinations with respect to the witnesses who had testified at the hearing, and did not

explicitly overturn any of Judge Moran’s other factual findings. He nonetheless reversed Judge

Moran’s ultimate decision and revoked the petitioners’ PACA licenses, taking a very different

view of both the scope of the petitioners’ implied duties under the PACA and the circumstances

under which extortionate pressure may constitute reasonable cause for the breach of an implied




                                                 13
duty. 7

          With respect to the first, the Judicial Officer concluded that PACA licensees “have a duty

to refrain from making payments to [USDA] inspectors in connection with the inspection of

perishable agricultural commodities which will or could undermine the trust produce sellers place

in the accuracy of the [USDA] inspection certificates and the integrity of [USDA] inspectors,” and

that “[a] PACA licensee’s payment to a [USDA] inspector, whether caused by bribery or extortion

and whether to obtain an accurate [USDA] inspection certificate or an inaccurate [USDA]

inspection certificate, undermines the trust a produce seller places in the accuracy of the [USDA]

inspection certificate and the integrity of the [USDA] inspector.” As such, he concluded that “the

purpose and reasons for Anthony Spinale’s payments to William Cashin are not relevant to this

proceeding. A payment to a [USDA] inspector in connection with the inspection of perishable

agricultural commodities, whether the result of extortion evidenced in this proceeding or bribery

and whether to obtain accurate or inaccurate [USDA] inspection certificates, is a violation of

section 2(4) of the PACA.”

          The Judicial Officer also rejected the petitioners’ claim that the inspectors’ practice of “soft

extortion” constituted reasonable cause for the payments made by Spinale, concluding that “[t]he

extortion evidenced in this proceeding is not a ‘reasonable cause’ . . . for a commission merchant,

dealer, or broker to fail to perform the implied duty to refrain from paying [USDA] inspectors in

connection with the inspection of perishable agricultural commodities. Moreover, avoidance of

inspection delays and avoidance of the issuance of inaccurate [USDA] inspection certificates are



           7
               The Judicial Officer’s order was stayed pending the outcome of this appeal.

                                                    14
not ‘reasonable causes’” for the commission of such an breach. The Judicial Officer offered no

further explanation of what circumstances might be encompassed by the term “reasonable cause,”

however.8

       Relying on Spinale’s repeated admissions that he had made numerous payments9 to Cashin

in connection with Cashin’s inspections of agricultural commodities for the petitioners, the Judicial

Officer concluded that Spinale, and therefore the petitioners, had “engaged in willful, flagrant, and

repeated violations of section 2(4) of the PACA . . . by failing, without reasonable cause, to

perform an implied duty arising out of an undertaking in connection with transactions involving

perishable agricultural commodities purchased, received, and accepted in interstate or foreign

commerce.” He therefore ordered the petitioners’ PACA licenses revoked.

       This timely petition for review of the Secretary’s decision followed.

                                                 II.


         8
           We also note that the respondent was not able to point us to any guiding principle
 articulated by the Secretary with respect to the meaning of “reasonable cause” in its main brief,
 upon our call for supplemental briefing, or at oral argument. The respondent instead principally
 defended the Secretary’s conclusion by analogizing to the manner in which this Court and others
 have treated the relationship between bribery and extortion in construing various federal criminal
 statutes. See, e.g., Respondent’s Supp. Br. at 6-7 (citing, inter alia, United States v. Barash, 365
 F.2d 395 (2d Cir. 1966)). We need not and do not address the persuasiveness of these analogies
 here.
         9
          Spinale insisted during his testimony before the ALJ that he did not “pay” Cashin or
 make “payments” to him, and that he instead “gave” him money, explaining, “I told you, I gave
 them money which I considered to be soft extortion. I didn’t pay anybody to do anything. . . . I
 didn’t pay him, I keep on telling you that it wasn’t a payment. It was, as far as I’m concerned,
 soft extortion.” The petitioners pick up on this theme in their opening brief, claiming that the
 Judicial Officer erred in describing Spinale as having “paid” or made “cash payments” to
 inspectors when he in fact “gave” them money. Given the Judicial Officer’s conclusion that the
 giving of any money in connection with a perishable commodities inspection violates PACA
 Section 2(4), we find it unnecessary to address this dispute.

                                                 15
                                                   A.

       The petitioners challenge two conclusions adopted by the Secretary in the course of a

formal adjudication conducted pursuant to the agency’s express statutory authority to administer

and implement the PACA regulatory regime. See 7 U.S.C. § 499a(b)(2) (defining the term

“Secretary” as used in the PACA to mean the Secretary of Agriculture); §§ 499d-f (empowering

the Secretary of Agriculture to enact a PACA licensing scheme, enforce that scheme, and award

damages to persons injured by PACA violations). First, the petitioners challenge the Secretary’s

generally applicable view that § 499b(4) encompasses a duty to refrain from making a payment to

an inspector that only is intended to cause, and does in fact only cause, the inspector to create an

accurate and timely inspection report. They argue that because a USDA inspector’s duty is to

provide timely and accurate inspections, the Secretary’s construction is unreasonable. Second, they

challenge the Secretary’s case-specific determination, unaccompanied by a comprehensive

discussion of the meaning of “reasonable cause,” that the inspectors’ actions did not constitute

“reasonable cause” for Spinale’s payments. The petitioners claim that Spinale reasonably feared

that the petitioners would suffer significant economic loss if he did not pay regular gratuities to the

inspectors, and that such a fear must be encompassed by the term “reasonable cause.”

       We consider both of the petitioners’ arguments against the backdrop of the familiar two-

step framework set forth by the Supreme Court in Chevron U.S.A., Inc. v. Natural Resources

Defense Council, Inc., 467 U.S. 837 (1984). Under Chevron, “[f]irst, always, is the question

whether Congress has directly spoken to the precise question at issue. If the intent of Congress is

clear, that is the end of the matter; for the court, as well as the agency, must give effect to the

unambiguously expressed intent of Congress. If, however, the court determines Congress has not

                                                   16
directly addressed the precise question at issue, the court does not simply impose its own

construction on the statute, as would be necessary in the absence of an administrative

interpretation. Rather, if the statute is silent or ambiguous with respect to the specific issue, the

question for the court is whether the agency’s answer is based on a permissible construction of the

statute.” Chevron, 467 U.S. at 842-43 (footnotes omitted). As a result, unless we find the

Secretary’s construction of the statute to be “arbitrary, capricious, or manifestly contrary to the

statute,” id. at 844, we must yield to that construction of the statute even if we would reach a

different conclusion of our own accord. See Regions Hosp. v. Shalala, 522 U.S. 448, 457 (1998).

        It is firmly established that we review under the Chevron standard an agency’s binding and

generally applicable interpretation of a statute that it is charged with administering when that

interpretation is adopted in the course of a formal adjudicatory proceeding. See United States v.

Mead Corp., 533 U.S. 218, 230 n.12 (2001) (citing prior Supreme Court cases applying Chevron to

agency adjudicatory decisions); Freeman v. Burlington Broadcasters, Inc., 204 F.3d 311, 322 (2d

Cir. 2000) (“An agency’s interpretation of an ambiguous statute it is charged with administering is

entitled to Chevron deference not only when the agency interprets through rule-making, but also

when it interprets through adjudication.”). The Supreme Court has indicated that because some

“ambiguous statutory terms” can be given concrete meaning only “through a process of case-by-

case adjudication,” the individual determinations reached by an agency engaged in that process

also “should be accorded Chevron deference.” INS v. Aguirre-Aguirre, 526 U.S. 415, 425 (1999);

see also INS v. Cardoza-Fonseca, 480 U.S. 421, 449 (1987) (citing Chevron) (“There is obviously

some ambiguity in a term like well-founded fear which can only be given concrete meaning

through a process of case-by-case adjudication. In that process of filling any gap left, implicitly or

                                                   17
explicitly, by Congress, the courts must respect the interpretation of the agency to which Congress

has delegated the responsibility for administering the statutory program.”) (quotation marks

omitted); In re Sealed Case, 223 F.3d 775, 779-80 (D.C. Cir. 2000) (extending Chevron deference

to the Federal Election Commission’s case-specific probable cause determination).

                                                  B.

       Our task at the first step of the Chevron analysis is a simple one, as it is pellucidly clear that

Congress has not spoken to the precise issues before us in this appeal: whether a PACA licensee

bears an implied duty to refrain from paying illegal gratuities to a USDA inspector, and the scope

of the circumstances that constitute “reasonable cause” for the breach of such a duty. 7 U.S.C.

§ 499b provides that “[i]t shall be unlawful in or in connection with any transaction in interstate or

foreign commerce . . . (4) For any commission merchant, dealer, or broker . . . to fail, without

reasonable cause, to perform any specification or duty, express or implied, arising out of any

undertaking in connection with any [transaction involving any perishable agricultural

commodity].” This statutory language plainly leaves undelineated what implied duties and

specifications a PACA licensee might be required to bear, and under what circumstances a breach

owes its occurrence to a “reasonable cause,” and therefore must be excused. It is the province of

the Secretary of Agriculture, who as we have noted above, has been charged with implementing

and administering the PACA, to fill in these gaps. Accord JSG Trading Corp. v. Dep’t of Agric.,

235 F.3d 608, 614 n.8 (D.C. Cir. 2001) (“Given the substantial ambiguity in § 499b(4), it is the

Department’s function, not ours, to define offenses under that provision.”). Therefore, in light of

Congress’ silence, we turn to step two of the Chevron analysis, asking whether the Secretary has

filled these statutory gaps in a manner reasonably consonant with the language, structure and

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purposes of the Act.

                                                  C.

                                                  1.

       We affirm as reasonable the Secretary’s conclusion that the PACA imposes an implied duty

upon licensees to refrain from making payments to USDA inspectors in connection with produce

inspections, irrespective of whether those payments induce, or are intended to induce, the

inspectors to issue inaccurate inspection certificates. Indeed, given a statutory scheme which

assigns government inspectors to protect the financial interests of distant shippers by providing

impartial assessments of the condition of the produce upon arrival, see § 499n(a); cf. "R" Best

Produce, Inc. v. Shulman-Rabin Mktg., Corp., No. 04-6352-cv, 2006 U.S. App. LEXIS 26793, *6-

7 (2d Cir. Oct. 26, 2006) (noting that Congress amended PACA in 1984 to provide sellers with

“additional protection”), we can hardly conceive of a duty more clearly implicated than the

obligation of recipients not to make side-payments to these inspectors. As the Judicial Officer

noted, such payments give rise to a strong inference that the inspector’s loyalty has been purchased

by the payor, and therefore “undermine[] the trust a produce seller places in the accuracy of the

[USDA] inspection certificate and the integrity of the [USDA] inspector.” The facts of this case do

not belie that presumption. Even accepting Judge Moran’s conclusion that Spinale made his

payments intending only to procure “fast, fair and accurate inspections,” the record suggests that

Spinale received additional benefits from the inspectors he paid. Esposito testified, for example,

that he sometimes gave Spinale “a benefit of doubt on inspections,” in part because he “got paid.”

Cutler similarly testified that he would shade his inspection results to benefit the merchants that



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paid him. This undisputed testimony tends to confirm what common sense and common

experience suggest: that strict impartiality and secret cash payments do not easily co-exist.

        Given that a principal purpose of the PACA is to “protect[] . . . 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,” see S. Rep. No. 84-2507, at 3, we think it is appropriate for the Secretary

to construe the implied duties owed by PACA licensees in a manner designed to secure shippers’

confidence in the USDA agents hired, in effect, to stand in their shoes when the produce arrives at

its destination. We therefore conclude that the Secretary has permissibly construed § 499b(4) as

encompassing an implied duty to refrain from paying illicit gratuities to USDA inspectors in

conjunction with inspections of perishable agricultural products, even where those payments are

not intended to result, and do not result, in the filing of an inaccurate inspection certificate.

                                                    2.

        We also affirm the Secretary’s conclusion that the inspectors’ practice of withholding “fast,

fair and accurate” inspections from merchants who refused to pay illegal gratuities does not excuse

the petitioners’ decision to breach the implied duties owed under the PACA by making such

payments. Once again we begin with the statute, which provides that “[i]t shall be unlawful in or

in connection with any transaction in interstate or foreign commerce . . . (4) For any commission

merchant, dealer, or broker . . . to fail, without reasonable cause, to perform any specification or

duty, express or implied, arising out of any undertaking in connection with any [transaction

involving any perishable agricultural commodity].” 7 U.S.C. § 499b (emphasis added). In



                                                   20
construing this clause—the expansiveness of which suggests that Congress intended to grant the

Secretary broad leeway to address the infinite variety of facts and circumstances that might

surround a PACA violation—the Secretary rejected the petitioners’ claim that “any violation of the

statute was unavoidable due to extortion,” instead finding that the “avoidance of inspection delays

and avoidance of the issuance of inaccurate [USDA] inspection certifications are not ‘reasonable

causes’” for the payment of unwarranted gratuities to a USDA inspector.

       We think the Secretary’s case-specific determination that “reasonable cause” had not been

demonstrated typically would be entitled to Chevron deference because agencies are generally

accorded Chevron deference when they give “ambiguous statutory terms concrete meaning through

a process of case-by-case adjudication.” See, e.g., INS v. Aguirre-Aguirre, 526 U.S. 415, 425

(1999) (internal quotation marks omitted); In re Sealed Case, 223 F.3d 775, 779-780 (D.C. Cir.

2000) (extending Chevron deference to the Federal Election Commission’s case-specific probable

cause determination). Although such case-by-case adjudication may ultimately be necessary to

give concrete meaning to the term “reasonable cause” as used in 7 U.S.C. § 499b, our task in

reviewing the Secretary’s determination in this case would have been considerably aided had the

Secretary provided some guiding principle for identifying what constitutes “reasonable cause,” or

at least a rationale for rejecting petitioners’ alternative construction. However, we need not reach

the question whether the Secretary’s cursory treatment of the term “reasonable cause” is still

entitled to Chevron deference, as we would reach the same conclusion as the Secretary under either

a de novo or deferential standard.

       Coercion, as the various hypotheticals drawn up by the parties in their written submissions

and at oral argument reaffirm, exists in many degrees and can take many forms. We may presume

                                                 21
that there are species of coercion so extreme that they rob an individual of any meaningful

opportunity to resist, as well as varieties too moderate to ever excuse the performance of an illegal

act. We need not engage these or other hypotheticals, however, because we have before us a well-

developed factual record of the circumstances faced by Spinale. The facts in the record reveal that

the “extortion” practiced by Cashin and his cohorts, while real, was indeed “soft” enough to

support the view that no reasonable cause existed for the petitioners’ breach of duty. Spinale has

never suggested that he was physically threatened, and Esposito specifically denied that the

inspectors employed such threats to obtain their gratuities. Nor did the inspectors threaten Spinale

with the loss or destruction of his business, harm to his family or employees, blackmail, or the

outright denial of produce inspections. Indeed, Spinale’s payment relationship with Cashin was

not even initiated by an inspector’s suggestion; rather, according to Spinale’s own testimony, he

decided of his own accord, at the suggestion of a fellow produce merchant, that it would be

worthwhile to start making cash payments to the inspectors, and began to do so at the next

available opportunity. We also note Cashin’s testimony that while many of the Hunts Point

merchants gave in to the inspectors demands, some twenty-five to forty percent of the merchants

managed to resist. In the same vein, we note petitioners’ concession at oral argument that Spinale

never attempted to report the illegal activities at Hunts Point to the Bronx District Attorney’s

Office, the United States Attorney’s Office for the Southern District of New York, the USDA

Inspector General, the NYPD, or any other official body. While we need not and do not address

whether he bore an affirmative obligation to do so, we simply point out that there were clearly

available—and potentially anonymous—means of resisting the inspectors’ illegal scheme that

Spinale never explored. We think this fact serves to bolster the Secretary’s decision to reject the


                                                  22
petitioners’ assertion that Spinale had no choice but to make cash payments to the inspectors for

over a decade.

       In short, we view the record as demonstrating that the inspectors’ corrupt practices left

Spinale with choices about how to respond to their demands for illegal payments—hard choices,

perhaps, but meaningful ones all the same. Given that backdrop, we concur in the Secretary’s view

that “[t]he extortion evidenced in this proceeding is not a ‘reasonable cause’. . . for a commission

merchant, dealer, or broker to fail to perform the implied duty to refrain from paying [USDA]

inspectors in connection with the inspection of perishable agricultural commodities.” (emphasis

added). We therefore affirm the Secretary’s decision to strip the petitioners of their PACA

licenses.

                                                 III.

       We have considered all of petitioners’ other arguments and find them to be without merit.

Therefore, for the reasons set forth above, the petition for review is DENIED and the decision of

the Secretary of Agriculture is hereby AFFIRMED.




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