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In determining whether the Secretary's action was "arbitrary or capricious," the Court must "consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment." The inquiry must "be searching and careful," but "the ultimate standard of review is a narrow one." Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416 (1971).

As discussed above, the Secretary found that the base-excess provisions no longer tended to effectuate their purpose. The purpose of the base-excess plan in Order 108 was to distribute the total amount of producer funds in a manner that encourages individual producers to achieve a more even production level during seasonal variations. The Secretary, when promulgating the Order 108 base-excess plan in 1955, found that it was necessary to the purpose of the plan that the individual producers under the marketing order actually be paid under the base-excess plan.

The Secretary found, and ADCA does not dispute, that none of the cooperatives are paying milk producers according to the base-excess plan. Thus, the Secretary's decision to terminate the plan was rational and based on the evidence.

The Court also finds that the Notice of Proposed termination of rule adequately advised interested parties of the subject matter and substance of the proposed action. See Walmsley v. Block, 719 F.2d 1414, 1418 (8th Cir. 1983) ("Notice of proposed rule making.. 'must be sufficient to fairly apprise interested parties of the issue involved. . . but it need not specify every precise proposal which [the agency] may ultimately adopt as a rule.”).

..

Thus, the Court finds that Secretary's termination of the base-excess plan was not arbitrary, capricious or unlawful.

CONCLUSION

Accordingly, plaintiff's motion for summary judgment is denied; AMPI's motion to dismiss is denied; AMPI's motion for summary judgment and the Secretary's motion for summary judgment are granted; plaintiff's motion to strike is denied. Judgment will be entered accordingly.

It is ORDERED this 15th day of November, 1994.

1020

ANIMAL QUARANTINE ACT AND RELATED LAWS

COURT DECISION

DEAN REED, d/b/a DEAN REED CATTLE COMPANY, PETE DONATHAN v. UNITED STATES DEPARTMENT OF AGRICULTURE.

No. 93-9535.

Filed November 1, 1994.

(Cite as 39 F.3d 1192 (Table))

Interstate movement of cattle without required certification - Substantial evidence - Hearsay Affidavits - Adverse inference from failure to testify - Civil penalty not excessive.

The circuit court affirmed the decision of the JO, which imposed a $8500 civil penalty against petitioners for the interstate movement of cattle without the proper certification. Reliable hearsay may constitute substantial evidence in administrative proceedings. The court rejected arguments that the ALJ could not draw an adverse inference from petitioner's failure to testify, that the introduction of affidavits deprived petitioners of their rights to cross examination, and that Congress intended to include a mens rea requirement in the civil provisions of the statute. Civil penalties assessed against petitioners were not excessive.

Before: Seymour, Chief Judge, Logan and Anderson, Circuit Judges.

UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT.

ORDER AND JUDGMENT1

After examining the briefs and appellate record, this panel has determined unanimously that oral argument would not materially assist the determination. of this appeal. See Fed. R. App. P. 34(a); 10th Cir. R. 34.1.9. The cause is therefore ordered submitted without oral argument.

Dean Reed and Pete Donathan filed a petition with this court to review a final order of the Secretary of the United States Department of Agriculture (USDA), which imposed civil sanctions upon them for shipping cattle

'This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel. The court generally disfavors the citation of orders and judgments; nevertheless, an order and judgment may be cited under the terms and conditions of the court's General Order filed November 29, 1993. 151 F.R.D. 470.

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interstate without proper certification. We affirm the Secretary's order. The USDA's Chief Administrative Law Judge (ALJ) found that Mr. Reed and Mr. Donathan had violated regulations promulgated pursuant to the Cattle Contagious Diseases Act. 21 U.S.C. §§ 111-313, 120-22. The ALJ determined that Mr. Reed, doing business as Dean Reed Cattle Company, and Mr. Donathan made interstate shipments of brucellosis reactor, brucellosis exposed, or brucellosis test-eligible cattle between 1988 and 1991 which failed to comply with the requirements of 9 C.F.R. 78 (1994). The ALJ assessed civil penalties of $8,500 against Mr. Reed for 3 violations. For violations that did not create a risk of spreading the disease, the ALJ calculated the penalties at half the amount of the penalties imposed for those violations that did threaten to spread brucellosis.

Mr. Reed and Mr. Donathan appealed to the Secretary of Agriculture, who referred the matter to the Judicial Officer (JO). Petitioners asserted that the ALJ erred by: (1) relying upon inadmissible hearsay; (2) limiting their right of cross-examination by allowing unsworn testimony; (3) relying upon uncertified, unofficial records or documents; (4) inferring from Mr. Reed's failure to appear that his testimony would have been adverse to his interests; (5) assessing civil penalties under 21 U.S.C. § 122 without evidence that Mr. Reed and Mr. Donathan knew they were committing a violation; and (6) imposing excessive penalties. The JO adopted the ALJ's Initial Decision and Order with minor changes, and Mr. Reed and Mr. Donathan filed this appeal, raising the same six objections. We exercise jurisdiction under 28 U.S.C. § 2342(2).

We defer to factual findings of administrative agencies that are supported by substantial evidence. See Wyoming v. Alexander, 971 F.2d 531, 536 (10th Cir. 1992) (discussing standard of review for Department of Education's factual findings); see also 5 U.S.C. § 706(2)(E). "Substantial evidence is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Hargis v. Sullivan, 945 F.2d 1482, 1486 (10th Cir. 1991). In further deference to the unique fact-finding role of agencies, the Federal Rules of Evidence do not govern agency proceedings. Sorenson v. National Transp. Safety Bd., 684 F.2d 683, 686 (10th Cir. 1982). An agency must only exclude evidence which is "immaterial, irrelevant, or unduly repetitious, or which is not of the sort upon which responsible persons are accustomed to rely." 7 C.F.R. § 1.141(g)(iv) (1994); see also Administrative Procedure Act, 5 U.S.C. § 556(d); Sorenson, 684 F.2d at 686. Therefore, reliable hearsay may constitute substantial evidence in an administrative proceeding. See Richardson v. Perales, 402 U.S. 389, 402 (1971).

Mr. Reed and Mr. Donathan allege that the ALJ erred by allowing the introduction of hearsay in the following forms: (1) copies of brucellosis test records, permits for the movement of restricted animals and other documents which are kept pursuant to government requirements; (2) the sworn affidavits of third parties corroborated by additional documents and taken by USDA investigators who are legally authorized to take such affidavits for use in administrative proceedings; and (3) testimony of USDA investigators regarding information obtained from third parties. We agree with the JO that this evidence "clearly meets[s] the requirement for admissibility under the Rules of Practice," Aplt. App. at 35, as it is not "irrelevant, immaterial, or unduly repetitious," see 5 U.S.C. § 556(d); 7 C.F.R. § 1.141(g)(iv) (1994), and is "of sort upon which responsible persons" rely. Id.

Mr. Reed and Mr. Donathan also claim that the introduction of the affidavits deprived them of their right to cross-examine witnesses. We find this argument unpersuasive as neither side can compel testimony under the Rules of Practice unless authorized by statue, 7 C.F.R. § 1.149(a) (1994); the Cattle Contagious Diseases Act does not authorize such subpoena power. Mr. Reed and Mr. Donathan also had ample opportunity to depose the affiants under procedures provided in 7 C.F.R. § 1.148 (1994).2

In addition, after consideration of the record, the ALJ's findings, and relevant case law, we reject the argument that the ALJ could not draw an adverse inference from Mr. Reed's failure to testify.

Mr. Reed and Mr. Donathan also assert that the imposition of civil penalties under 21 U.S.C. § 122 requires a "knowing" violation of the regulations, and that the government failed to prove they had the requisite knowledge. We review this question of law de novo. See Miera v. N.L.R.B., 982 F.2d 441, 444 (10th Cir. 1992). The text of the statute clearly requires a "knowing" violation for the imposition of criminal penalties, but omits such a requirement from the civil penalty provisions. 21 U.S.C. § 122. We therefore reject the petitioners' argument that Congress intended to include a mens rea requirement in the civil provisions of the statute.

Finally, Mr. Reed and Mr. Donathan claim that the civil penalties assessed by the ALJ were excessive. Under the provisions of the statute, the Secretary of Agriculture may assess civil penalties of "not more than one thousand dollars" for each violation. 21 U.S.C. § 122. The ALJ imposed penalties of

The complainant filed its list of proposed exhibits and witnesses on February 18, 1992. The hearing took place on June 25, 1992.

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$8500 on Mr. Reed for 10 violations and $2500 on Mr. Donathan for 10 violations. He also assessed the penalties for those violations which did not create a risk of spreading the disease at half the amount imposed for violations that did. We agree with the JO that these penalties are "modest considering the importance of the Brucellosis Eradication Program." Aplt. App. at 47. We hold that the penalties assessed against Mr. Reed and Mr. Donathan are not excessive.

We AFFIRM the order of the Secretary of the United States Department of Agriculture.