Alphas Company, Inc. v. Dan Tudor & Sons Sales, Inc.

Filing

OPINION issued by Sandra L. Lynch, Chief Appellate Judge; Kermit V. Lipez, Appellate Judge and Jeffrey R. Howard, Appellate Judge. Published. [11-1226]

Case: 11-1226

Document: 00116379021

Page: 1

Date Filed: 05/16/2012

Entry ID: 5641816

United States Court of Appeals
For the First Circuit

No. 11-1226
ALPHAS COMPANY, INC.,
Plaintiff, Appellant,
v.
DAN TUDOR & SONS SALES, INC.,
Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Patti B. Saris, U.S. District Judge]

Before
Lynch, Chief Judge,
Lipez and Howard, Circuit Judges.

Noah B. Goodman on brief for appellant.
Valerie S. Carter, Carter & Doyle LLP, Bart M. Botta, and
Rynn & Janowsky, LLP on brief for appellee.

May 16, 2012

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LYNCH, Chief Judge.

Date Filed: 05/16/2012

Entry ID: 5641816

This case involves the statutory

appeals process to the federal courts for review of disputes over
perishable agricultural goods. The question presented, new to this
court, is whether a petitioner's failure to comply with the bond
requirement in the Perishable Agricultural Commodities Act of 1930
("PACA"), 7 U.S.C. § 499a et seq., which authorizes an appeal to a
federal district court from a reparation order by the Secretary of
Agriculture, renders that appeal ineffective under 7 U.S.C. §
499g(c).

We hold that appellant's failure to file the required

bond here rendered its appeal to the district court ineffective.
We affirm the district court's grant of the motion to dismiss the
appeal.
I.
Dan Tudor & Sons Sales is a California-based grower of
perishable agricultural commodities; appellant Alphas Company is a
Massachusetts-based produce supplier. Both companies were licensed
to do business under PACA. Between September 21, 2005 and November
5, 2005, Tudor sold Alphas seventeen shipments of table grapes, for
which Alphas failed to make payment. In response, on May 18, 2006,
Tudor

filed

a

reparation

complaint

against

Alphas

with

the

Secretary under PACA for recovery of the payment due.
In an administrative decision on November 4, 2009, the
Secretary awarded reparations to Tudor in the amount of $70,328.06,
plus interest, as well as the $300.00 filing fee.

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Alphas filed a

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motion for reconsideration, which the Secretary granted in part on
April 14, 2010, in an order revising the reparation award to
$61,065.46, plus interest, the $300.00 filing fee, and $6,940.97
for fees and expenses.

This case involves Alphas' attempt to

challenge that order in federal court.
After entry of the Secretary's order, Alphas and Tudor
entered

into

settlement

negotiations.

These

negotiations

ultimately failed,1 and on May 14, 2010, Alphas filed a petition
and notice to appeal the reparation order pursuant to 7 U.S.C.
§

499g

in

the

U.S.

district

court

for

the

District

of

Massachusetts.
Section 499g authorizes an appeal from a reparation order
within thirty days of the order's issuance to the district court of
the district in which the administrative hearing was held.
§ 499g(c).

Id.

Section 499g also provides that:
[An] appeal shall not be effective unless
within thirty days from and after the date of
the reparation order the appellant also files
with the clerk a bond in double the amount of
the reparation awarded against the appellant
conditioned upon the payment of the judgment
entered by the court, plus interest and costs,
including a reasonable attorney's fee for the
appellee, if the appellee shall prevail.

1

Alphas contends that the two parties reached a mutual
agreement to dismiss the underlying action two days before the
appeals deadline ran, but that Tudor subsequently failed to execute
and return the settlement documents, forcing Alphas to file its
petition for appeal on short notice.
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Id.

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Entry ID: 5641816

Although Alphas stated in its petition and notice of appeal

that it had "procured a bond as required by statute," it did not
file the required bond.
On June 4, 2010, Tudor filed a Rule 12(b)(1) motion to
dismiss, in which it argued that the district court lacked subject
matter jurisdiction to hear Alphas' appeal because Alphas had
failed to timely file the mandatory bond.

In its June 18, 2010

opposition to Tudor's motion to dismiss, Alphas represented to the
district court that it had made inquiries to twelve bond companies,
completed eight bond applications, and was in the process of
obtaining approval for a bond from two different companies.
Alphas also contended that its failure to file the bond
should be excused because that failure was due entirely to what it
described as bad-faith conduct on Tudor's part.

Specifically,

Alphas alleged that Tudor had agreed to settle the case as of May
12, 2010, two days before the appeals deadline ran.

Alphas

maintained that it had transmitted what it called final settlement
papers to Tudor for signature, and had only realized upon not
receiving back the executed settlement documents by noon on May 14,
2010, the same day as the appeals deadline, that Tudor did not
intend to settle the case after all.

As a result of Tudor's

tactics, Alphas argued, it was not able to post the required bond
in time; nevertheless, Alphas assured the court, by the time the
court addressed Tudor's motion, it "will have filed its Bond."

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Alphas additionally asked the district court to deny
Tudor's motion to dismiss, arguing that Tudor would not suffer any
prejudice as a result of a delay allegedly caused by Tudor's own
fraud and misconduct.
By the time the motion to dismiss was argued, however,
over six months later, Alphas still had not filed the required
bond.

Instead, Alphas stated to the court that it was "ready to

file the bond within ninety days" should the court decide not to
dismiss the petition.

Alphas Co. v. Dan Tudor & Sons Sales, Inc.,

No. 10-10831, 2011 WL 662723, at *2 (D. Mass. Jan. 11, 2011).
The district court referred the case to a magistrate
judge.
and

On January 11, 2011, the magistrate judge issued a report

recommendation,

finding

the

bond

requirement

to

be

"jurisdictional" and recommending that Tudor's motion to dismiss be
granted, with prejudice.

Id. at *3, *5.

The magistrate judge

rejected Alphas' argument that failure to file the bond should be
excused in this case on grounds of equity.

The magistrate judge

found that the "jurisdictional" nature of the bond requirement
rendered any misconduct on the part of Tudor irrelevant.
*4.

Id. at

The magistrate judge also reserved ruling on Tudor's request

for attorney's fees until the district court ruled on the motion to
dismiss.

Id.

On January 25, 2011, Alphas objected to the

magistrate judge's report and recommendation, reiterating the
arguments it raised in opposition to the motion to dismiss.

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In a February 1, 2011 order, the district court adopted
the magistrate judge's report and recommendation in full, and
remanded for a determination of attorney's fees. Alphas Co. v. Dan
Tudor & Sons Sales, Inc., No. 10-10831, 2011 WL 578809 (D. Mass.
Feb. 1, 2011).
Alphas timely appealed to this court and sought a stay of
the district court's judgment while its appeal was pending so as to
preserve its agricultural license under PACA.

Absent such a stay,

PACA provides for the automatic suspension of an appellant's
license upon the district court's dismissal of the appeal.

7

U.S.C. § 499g(d).
Tudor moved to dismiss the appeal to this court as
premature in light of its pending motion for attorney's fees. This
court denied that motion on April 5, 2011, but stayed appellate
proceedings until the district court either acted on Tudor's
pending request for attorney's fees or communicated its intention
to hold those proceedings in abeyance until the appeal issued.
On August 1, 2011, the district court awarded attorney's
fees to Tudor in the amount of $4,808.50, and the following day
entered an order denying Alphas' motion to stay unless Alphas
posted a supersedeas bond within sixty days.

On August 24, 2011,

Alphas posted a supersedeas bond -- which is not the same as a

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§ 499g bond2 -- in the amount of $100,000.

Entry ID: 5641816

On September 8, 2011,

this court lifted the stay of appellate proceedings.
Alphas argues to us that PACA's bond requirement is not
necessarily jurisdictional and that the district court has some
discretion to excuse strict compliance with the requirement in
certain exceptional cases, and that Tudor's misleading conduct here
presents such a case.

Tudor argues that the appeal should be

dismissed because the bond requirement is jurisdictional, and that,
in any event, it did not engage in any inequitable conduct.

As we

explain, we view the issue differently.
II.
This court reviews de novo the district court's order
dismissing the appeal for lack of subject matter jurisdiction.
Murphy v. United States, 45 F.3d 520, 522 (1st Cir. 1995).
PACA was enacted during the Great Depression in the 1930s
"to

suppress

certain

unfair

and

fraudulent

marketing of fresh fruits and vegetables."

practices

in

the

S. Rep. No. 73-554, at

1 (1934). It requires all "merchants, dealers, or brokers" subject
to its terms to obtain from the Secretary of Agriculture a license
to engage in business transactions under the Act.
2

Id.

Licensees

In general, in order to stay the district court's
judgment during an appeal to the federal appeals court, a party
must file a supersedeas bond in the district court. See Fed. R.
Civ. P. 62(d); Fed. R. App. P. 8(a)(1)(B).
Section 499g(c)
requires any party seeking to appeal an adverse decision by the
Secretary to the federal district court to file a bond in that
court in double the amount of the reparation order, plus interest,
costs, and fees.
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must "keep such accounts and records as will show fully and
correctly all transactions."
see 7 U.S.C. § 499b(4).

H.R. Rep. No. 87-1546, at 2 (1962);

Certain practices are prohibited; among

"the most important" of these, S. Rep. No. 73-554, at 1, PACA makes
it unlawful for a licensee "to fail or refuse truly and correctly
to account and make full payment promptly" for any transaction
under the Act, 7 U.S.C. § 499b(4).
To enforce its provisions, PACA authorizes the Secretary
to investigate complaints, issue reparation orders, make public
certain information concerning violations, and suspend and revoke
licenses.

In particular, PACA provides for a complaint process

through which any licensee subject to the Act may petition the
Secretary to review allegations of violations of the Act's terms.
7 U.S.C. § 499f.

After a hearing, or in some cases without one,3

the Secretary may determine whether any violation of PACA has
occurred and may order the losing party to make reparations to the
prevailing party accordingly.

Id. § 499g(a).

Unless the losing party pays the reparation order within
five days of the payment compliance period set by the Secretary, or
takes an appeal from that order, PACA provides for the automatic
and indefinite suspension of that party's license unless and until
the

party

fully

complies

with

3

the

Secretary's

order.

Id.

Complainants have the opportunity for a hearing where the
damages claimed exceed $30,000. 7 U.S.C. § 499f(c)(2).
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§ 499g(d).

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Entry ID: 5641816

Where the losing party elects to file an appeal, the

automatic suspension provision goes into effect upon either the
court's dismissal of the appeal or affirmance of the Secretary's
order.

Id.
To "discourage frivolous appeals" from the orders of the

Secretary, taken simply to delay payment and so "escape the
automatic suspension of license provided by the act for nonpayment
of a reparation award" until the appeal is decided, H.R. Rep. No.
75-915, at 3 (1937), Congress added the bond requirement to PACA.
Section 499g(c) provides that a party's "appeal shall not be
effective unless within thirty days . . . the appellant also files
with the clerk a bond."

7 U.S.C. § 499g(c).

The bond requirement

in section 499g(c) provides a disincentive to parties seeking to
appeal in order to defer their payment obligations for some months
or years, while still benefitting from their PACA license in the
interim.

See H.R. Rep. No. 75-915, at 3.

The requirement also

protects the prevailing party from suffering the consequences of
any financial deterioration -- including bankruptcy -- experienced
by the losing party during the sometimes lengthy appeals process.4
The bond requirement is critical to the effective operation not
only

of

PACA's

complaint

process

and

internal

enforcement

mechanism, but also to the effective operation of PACA as a whole.

4

PACA also permits successful appellees to recover the
costs and attorney's fees they incur in defending the decisions of
the Secretary on appeal. 7 U.S.C. § 499g(c).
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The

language

in

Page: 10

section

Date Filed: 05/16/2012

499g(c)

is

Entry ID: 5641816

unambiguous

and

mandatory: a party's appeal "shall not be effective" unless the
bond is timely filed.

7 U.S.C. § 499g(c).

Courts have repeatedly

recognized as much and held that failure to file the required bond
renders a party's appeal ineffective (albeit they have frequently
used the language that the defect is "jurisdictional"). See, e.g.,
Bagwell

Farms

Produce

Co.

v.

Farm-Wey

Produce,

Inc.,

No.

CV-97-C-0321-S (N.D. Ala. July 21, 1997) (dismissing appeal due to
failure to timely file bond), aff'd, 162 F.3d 1177 (11th Cir. 1998)
(Table); Miloslavich v. Frutas Del Valle De Guadalupe, S.A., 637 F.
Supp.

434,

436

(S.D.

Cal.

1986)

(finding

bond

requirement

"jurisdictional"), aff'd, 815 F.2d 714 (9th Cir. 1987) (Table);
O'Day v. George Arakelian Farms, Inc., 536 F.2d 856, 862 (9th Cir.
1976) (upholding requirement that a bond be filed); Chidsey v.
Geurin, 314 F. Supp. 480, 482 (W.D. Mich. 1970) (same), aff'd, 443
F.2d 584 (6th Cir. 1971).
The legislative history of Section 499g(c) confirms that
noncompliance with the mandatory bond requirement negates the
effectiveness of the appeal.

See H.R. Rep. No. 87-1546, at 7

(report accompanying bill) (amending 7 U.S.C. § 499g(c)) ("Section
9 [of the bill] amends section 7(c) of the act to make it clear
that an appeal from a reparation award of the Secretary shall not
be effective as an appeal, and therefore not a matter within the
jurisdiction of the district court of the United States in which

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the petition is filed, unless the required bond is filed with the
court within 30 days from and after the date of the Secretary's
order.").
Here, it is undisputed that Alphas did not file the
required

bond.

Alphas

argues

nonetheless

that

there

is

an

exception to the bond requirement: where warranted by the general
equitable circumstances, the district court may excuse strict
compliance

with

the

rule.

It

argues

that

where

a

party

deliberately misleads its opponent into thinking a settlement
agreement has been reached, right up until the appeals deadline
runs -- as Alphas alleges Tudor did here -- the district court may
excuse a late or defective bond filling.
To support its argument, Alphas cites several cases in
which courts considered whether the bond amount had been properly
calculated.

These cases do not support Alphas' position.

In this

court's 1948 opinion in L. Gillarde Co. v. Joseph Martinelli & Co.,
168 F.2d 276 (1st Cir. 1948),5 we affirmed the district court's
refusal to dismiss the appeal where "there [had] been substantial
compliance" with the bond requirement even though the parties
disputed the exact amount of the required bond.

Id. at 281.

Nothing in that case, or in the other cases cited by Alphas,

5

Alphas' citation to O'Day v. George Arakelian Farms,
Inc., 536 F.2d 856 (9th Cir. 1976), is inapposite because that case
concerned the as-applied constitutionality of the double bond
requirement.
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supports the argument that there is discretion to ignore the bond
requirement entirely.
Tudor argues that the bond requirement is jurisdictional,
and thus permits no exceptions, equitable or otherwise.

The topic

of whether a rule is properly considered to be jurisdictional or
merely a claims processing rule has been the subject of a number of
Supreme Court decisions over the last several years.

See, e.g.,

Stern v. Marshall, 131 S. Ct. 2594, 2606-08 (2011); Bowles v.
Russell, 551 U.S. 205, 209-14 (2007). Here, Congress set forth the
rule that the "appeal shall not be effective" without the required
bond, and while the statutory language does not frame the rule in
terms of jurisdiction, a House Committee Report does.
Rep. No. 87-1546, at 7.

See H.R.

Still, the bond requirement may be

analogized to something more like a condition precedent, somewhat
akin to the certificate of appealability in 28 U.S.C. § 2253(c)(3),
which was held non-jurisdictional in Gonzalez v. Thaler, 132 S. Ct.
641 (2012), or the copyright registration requirement held nonjurisdictional in Reed Elsevier, Inc. v. Muchnick, 130 S. Ct. 1237
(2010).
The outcome of this case, however, does not turn on
whether

compliance

jurisdictional.

with

the

bond

requirement

is

viewed

as

We are convinced that Congress has precluded a

reading of the statute that allows federal courts the discretion to
exercise jurisdiction absent compliance with the bond requirement.

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Whether there can ever be such extreme circumstances as to warrant
judicial creation of an equitable exception is not a question
presented by this case, since Alphas does not come close to making
such a showing.
Here, there is no question that Alphas never undertook to
file the required bond.
requirement

by

filing

Alphas argues that it satisfied the bond
a

$100,000

supersedeas

bond

after

the

district court dismissed its appeal, for the purpose of staying the
district court's judgment pending appeal to this court.

However,

the supersedeas bond is not the required bond under PACA, it was
not filed until more than fifteen months after PACA's deadline ran,
and it may not be sufficient to cover the full sum due to Tudor in
this case.6
Because Alphas did not file the required bond here, we
hold that its appeal was not effective.
III.
For these reasons, we affirm the district court's grant
of the motion to dismiss.

Costs are awarded to Tudor.

6

If Tudor seeks attorney's fees for the appeal, it should
file the appropriate motion.
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