United Source One, Inc. v. AGRI, et al

Filing

OPINION [1687346] filed (Pages: 14) for the Court by Judge Henderson, DISSENTING OPINION (Pages: 3) by Judge Sentelle. [16-1209]

USCA Case #16-1209

Document #1687346

Filed: 08/04/2017

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 20, 2017

Decided August 4, 2017
No. 16-1209

UNITED SOURCE ONE, INC.,
PETITIONER
v.
UNITED STATES DEPARTMENT OF AGRICULTURE,
FOOD SAFETY AND INSPECTION SERVICE, ET AL.,
RESPONDENTS

On Petition for Review from a Decision of the
Food Safety and Inspection Service
of the United States Department of Agriculture

Paul H. Gardner argued the cause for the petitioner.
Andrew H. Baida and David M. Wyand were with him on brief.
Joseph F. Busa, Attorney, United States Department of
Justice, argued the cause for the respondents. Benjamin C.
Mizer, Principal Deputy Assistant Attorney General at the time
the brief was filed, and Mark B. Stern, Attorney, were with him
on brief.
Before: HENDERSON and KAVANAUGH, Circuit Judges, and
SENTELLE, Senior Circuit Judge.

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Opinion for the Court filed by Circuit Judge HENDERSON.
Dissenting opinion filed by Senior Circuit Judge
SENTELLE.
KAREN LECRAFT HENDERSON, Circuit Judge:
Under the Federal Meat Inspection Act of 1907 (“FMIA”),
21 U.S.C. §§ 601 et seq., and implementing regulations, the
Food Safety and Inspection Service (“FSIS”), an agency of the
United States Department of Agriculture (“USDA”), is charged
with ensuring, inter alia, that certain commercial meat products
are not misbranded. If the FSIS determines that a meat
product’s labeling is “false or misleading in any particular,” 21
U.S.C. § 607(e), it can prohibit its use. Pursuant to that
authority, the FSIS determined that the packaging used by
United Source One, Inc. (“US1”), a meat exporter, was
misbranded because its label included the FSIS inspection
identification number of its supplier without the latter’s
permission. For the reasons that follow, we deny US1’s petition
for review.
I. BACKGROUND
Regulatory Landscape
The Congress enacted the FMIA to protect “the health and
welfare of consumers . . . by assuring that meat and meat food
products distributed to them are wholesome, not adulterated,
and properly marked, labeled, and packaged.” 21 U.S.C. § 602.
To that end, the FMIA mandates inspection of certain
commercial meat products as well as the facilities—referred to
as “official establishments”1—where those products are
An “official establishment” is “[a]ny slaughtering, cutting,
boning, meat canning, curing, smoking, salting, packing, rendering,
1

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handled. Id. § 608. By regulation, the FSIS carries out that
mandate. 9 C.F.R. § 300.2(b)(1). “[D]ay or night,” FSIS
inspectors have access to an official establishment to ensure
that it operates in sanitary conditions and that its meat is not
“adulterated.” 21 U.S.C. § 606(a). Commercial meat products
that meet the FMIA’s standards are marked as “[i]nspected and
passed.” Id. At 9 C.F.R. § 312.2, the following example of an
“official mark” of inspection appears:

or similar establishment at which inspection is maintained under” the
FMIA implementing regulations. 9 C.F.R. § 301.2. As explained
infra, US1 does not fit the “official establishment” description—US1
is a re-boxing facility that, at its option, is subject to FSIS inspection
under the Agricultural Marketing Act of 1946, 7 U.S.C. §§ 1621 et
seq., not the FMIA. But it, like an official establishment, is subject to
the misbranding/mislabeling prohibitions of the FMIA. 21 U.S.C. §
610 (“No person, firm, or corporation shall, with respect to . . . meat
or meat food products . . . do . . . any act while they are being
transported in commerce or held for sale after such transportation,
which is intended to cause or has the effect of causing such articles to
be . . . misbranded.”).

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Each FSIS inspection mark includes a unique
establishment number2 that identifies the product as having
been “prepared” in the facility to which the establishment
number belongs. 9 C.F.R. § 305.1(a) (“An official number shall
be assigned to each establishment granted inspection . . . [and]
shall be used to identify all inspected and passed products
prepared in the establishment.”). An authorized FSIS
inspection mark ordinarily must appear both on the “immediate
container” of a commercial meat product, for example, vacuum
packaging, id. § 317.1, and on any external container, for
example, a shipping box, see id. § 316.13.
Ordinarily, an official establishment does not ship its
products directly to the end-use consumer. Instead, an official
establishment ships meat to a “re-boxing” facility, a middleman
operation that repackages and resells meat, often under a
different brand name. Because the re-boxer itself does not
slaughter meat, it is not subject to the FMIA’s mandatory
2

FSIS Directive 5220.2 provides additional guidance on the
“issuance of traditional establishment numbers,” which are “used in
the official mark of inspection and may be used in labels.” FSIS
Directive 5220.2, Meat and Poultry Establishment Numbering
Procedures (U.S.D.A. 1992). A traditional establishment number
“begins with the single code letter that designates the type(s) of
inspection performed at the establishment.” Id. For example, “P”
indicates that poultry inspections are conducted at the establishment;
“E” indicates equine inspections; “I,” import inspections; and “A,”
animal food inspections. Id. “M” indicates meat inspections but, in
most instances, including here, it is not included in an establishment
number, presumably because meat inspections are so constant. Id.
(“[A]ny establishment number in the traditional format which does
NOT begin with a single letter code is designating red meat
inspection.”). Following the code letter (assuming one is required),
the “next 5 positions are numeric digits, but leading zeros are not
shown.” Id.

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inspection requirements. See 21 U.S.C. § 608 (“The Secretary
shall cause to be made . . . such inspection of all . . .
establishments in which amenable species are slaughtered and
the meat and meat food products thereof are prepared for
commerce . . . .”). Nonetheless, the Agricultural Marketing Act
of 1946 (“AMA”), 7 U.S.C. §§ 1621 et seq., and implementing
regulations provide that a re-boxing facility may voluntarily
pay for and obtain FSIS identification services.3 See 9 C.F.R. §
350.3. FSIS Directive 12,600.1, adopted pursuant to the AMA,
provides guidance on the implementation/enforcement of those
services. See FSIS Directive 12,600.1, Voluntary Reimbursable
Inspection Services (U.S.D.A. 2007) (hereinafter “Directive
12,600.1”). Once the re-boxer participates, the FSIS inspection
works, inter alia, to “ensure that the identity of federallyinspected and passed meat . . . is maintained throughout the
division of such meat . . . into smaller portions, its combination
into larger units, or its repackaging and relabeling.” Id. at 3. If
the FSIS “determine[s] that the identity [of the repackaged
meat] has been maintained,” that is, the meat has not been
adulterated once it has passed its official establishment
inspection, the FSIS “mark[s] such portions or units [of the
repackaged meat] with the marks of Federal inspection.” 9
C.F.R. § 350.3(a)(1).
As with an official establishment, the FSIS assigns each reboxing facility its own, unique establishment number that is
included as part of the inspection mark on the re-boxer’s label.
See Directive 12,600.1 at 6 (“If the [re-boxing] facility meets
the requirements for the requested service(s), the [FSIS] will
request the next available [establishment] number through the
Resource Information System . . . [and] assign the number to
the facility . . . .”). Unlike an official establishment’s
3

A re-boxer voluntarily participates in the FSIS inspection
program so that it can label the meat products it ships as USDA
inspected and approved. JA 52.

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establishment number, however, which begins with “P” or
“M,” etc., to designate that it is subject to poultry or meat
inspections, respectively, see supra 4 n.2, a re-boxer’s
establishment number begins with “V” to indicate that the FSIS
inspection conducted there is pursuant to the AMA inspection
regime. See FOOD SAFETY INSPECTION SERV., FSIS MEAT,
POULTRY AND EGG PRODUCT INSPECTION DIRECTORY LEGEND
FOR ESTABLISHMENT NUMBERS AND DIRECTORY SEARCH
GUIDANCE 1 (2017); accord JA 15, 69-70 (indicating US1’s
establishment number is “V21467”). Nevertheless, FSIS
Directive 12,600.1 provides that a re-boxer may use its
supplier’s establishment number on its label if certain
conditions are met:
Whenever labeling with the originating official
establishment number is used by [a re-boxing]
facility (i.e., labeling depicting the official number
of the establishment that produced the product),
inspection program personnel will verify that the
[re-boxing] facility code marks the product in a
manner that will clearly indicate that the product
was last handled and labeled at the [re-boxing]
facility. The [re-boxing] facility must maintain
records of label transfers and records of products
labeled or relabeled at the facility to identify
properly the product origin in the event of a
product control problem, (e.g., voluntary product
recall).
Directive 12,600.1 at 8-9.
Although the FMIA focuses on ensuring the quality of
meat products, it also prohibits—as noted earlier—misleading
and/or misbranded labeling. To wit, the FMIA prohibits both
an official establishment and a re-boxing facility from “do[ing]
. . . any act . . . which is intended to cause or has the effect of

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causing [meat] to be . . . misbranded.” 21 U.S.C. § 610(d). Meat
is misbranded “if its labeling is false or misleading in any
particular.” Id. § 601(n)(1) (emphasis added). 9 C.F.R. §
317.8(a) likewise provides that “[n]o product or any of its . . .
packaging . . . shall bear any false or misleading marking, label,
or other labeling and no statement, word, picture, design, or
device which conveys any false impression or gives any false
indication of origin or quality or is otherwise false or
misleading shall appear in any marking or other labeling.” The
misbranding prohibition includes the FSIS official mark of
inspection. 21 U.S.C. § 601(p) (“The term ‘labeling’ means all
labels and other written, printed, or graphic matter (1) upon any
article or any of its containers or wrappers, or (2) accompanying
such article.”).
If the FSIS determines that labeling is false or misleading,
thereby rendering a meat product “misbranded,” id. §
601(n)(1), it may direct that the labeling “be withheld” from
use, id. § 607(e) (“If the [FSIS] has reason to believe that any
marking or labeling . . . is false or misleading in any particular,
[it] may direct that such use be withheld . . . .”). Once the FSIS
determination becomes final, an aggrieved party may petition
for review within thirty days thereafter. Id. (“Any such
determination by the Secretary shall be conclusive unless,
within thirty days after receipt of notice of such final
determination, the person, firm, or corporation adversely
affected thereby appeals to the United States court of
appeals . . . .”).
Factual and Procedural Background
US1 operates a re-boxing facility that exports meat and
other food products to customers in the Middle East.4 Because
4

That is, US1 purchases vacuum-sealed meat products from an
official establishment and then re-boxes those products in packaging

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US1 is a re-boxer, it is not subject to the mandatory FSIS
inspection. See 21 U.S.C. § 608. Instead, US1 participates in
the AMA voluntary FSIS inspection services. See 7 U.S.C. §
1622; 9 C.F.R. § 350.3(a). In January 2012, US1 ceased
including its establishment number—“V21467”—on its
labeling; instead, it replaced “21467” with the FSIS-assigned
number of the official establishment from which US1
purchased meat products. The following is a depiction of the
two different marks:

Compare Letter, United Source One, Inc. v. USDA, Case No.
16-1209 (D.C. Cir. April 28, 2017) (arrow added) (US1
establishment number), with JA 67 (arrow added) (supplier
establishment number). US1 continued this practice for three
years.
On January 27, 2015, an FSIS inspector determined that
US1 did not have its supplier’s consent to include the latter’s
establishment number on its label. Accordingly, the Office of
Field Operations (“OFO”), FSIS, “refuse[d] to authorize”
US1’s continued use of its supplier’s “inspection legend and
establishment number.” JA 112. Viewing the consent
requirement as an unannounced policy change, US1
“request[ed] the FSIS [inspector] assigned to United Source
One be advised to allow the warehouse to resume re-boxing
bearing a label with US1’s name, address, branding (“Great Plains”)
and the FSIS inspection mark.

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product and applying the originating plant establishment
number.” JA 15. In response, the FSIS upheld its inspector’s
action, noting that US1 “must have permission from the
supplier to apply [its] establishment number to re-packaged
product.” JA 17. Subsequently, the FSIS explained that, if a reboxing facility uses an official establishment’s number, “it [is]
readily transparent that the producing establishment was
authorizing the use of their labels because they were physically
shipped by the producer to the receiving establishment or ID
warehouse for use.” JA 75. But US1’s supplier did not ship its
labels to US1; instead, US1 apparently printed labels with the
supplier’s establishment number without that supplier’s
consent/knowledge. JA 75 (“In this case, the labels are printed
at [US1’s] warehouse with another establishment’s (i.e., the
producer’s) number on it.”).5
US1 then appealed the decision, first to the FSIS Assistant
Administrator and, ultimately, to the FSIS Administrator. JA
81-83, 112-17. In his final determination, the Administrator
concluded, inter alia, that “[a]bsent a documented transfer of
labels, or other records that would assure FSIS of the
knowledge, consent, or direction of the owner of the official
establishment number, FSIS has reason to believe that the
consuming public may be misled by application of the
[supplier’s] official mark of inspection” on US1’s packaging.
JA 117. The Administrator emphasized that, consistent with
Directive 12,600.1, a re-boxer uses a supplier’s establishment
number only with that supplier’s consent, consent effected by,
5

THE COURT: Mr. Gardner, where did you get the
label from the original source? Did you print it?
MR. GARDNER: We printed it. Yes, Your Honor.

Oral Arg. Tr. 3.

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inter alia, the supplier transferring its labels to the re-boxer—
“[t]ransfer of labels itself provides clear knowledge and consent
of the use of an establishment’s inspection legend.”6 JA 114.
He concluded, “US1’s printing of labels, re-boxing, application
of labels, and other handling of the product in question was
done absent of [sic] the knowledge, direction, or control of the
originating establishment,” JA 114, and, further, that “[w]ithout
some form of documentation providing some means of written
consent for the use of an establishment’s official inspection
legend, FSIS is unable to determine that the label is not
misleading to the consumer, and cannot authorize its use,” JA
115. The Administrator thus deemed US1’s label “misleading,
therefore providing a false impression, and misbranded by
definition under 21 U.S.C. [§] 601” and denied US1’s appeal.
JA 114. US1 then filed a timely petition for review. Our
jurisdiction is based on 21 U.S.C. § 607(e).
II. ANALYSIS
Because the FMIA and implementing regulations plainly
authorize the FSIS to withhold from use labeling that is “false
or misleading in any particular,” 21 U.S.C. § 607(e), we review
its decision for reasonableness under the familiar arbitrary and
capricious review standard of the Administrative Procedure Act
(“APA”). 5 U.S.C. § 706 (directing court to “hold unlawful and
set aside agency action, findings, and conclusions found to be .
. . arbitrary, capricious, an abuse of discretion, or otherwise not
in accordance with law”); see also Arent v. Shalala, 70 F.3d
610, 616 (D.C. Cir. 1995). “The scope of review under the
FSIS Directive 12,600.1 requires “[t]he [re-boxing] facility . . .
[to] maintain records of label transfers . . . to identify properly the
product origin in the event of a product control problem . . . .”
Directive 12,600.1 at 8-9; see also id. at 8 (“Inspection program
personnel will verify that facilities are using approved labels,
wrappers, or containers bearing the official mark of inspection.”).
6

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‘arbitrary and capricious’ standard is narrow and a court is not
to substitute its judgment for that of the agency.” Motor Vehicle
Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463
U.S. 29, 43 (1983). We must ensure that the agency
“examine[d] the relevant data and articulate[d] a satisfactory
explanation for its action including a rational connection
between the facts found and the choice made.” Id. (internal
quotation marks omitted). Although we will “uphold a decision
of less than ideal clarity if the agency’s path may reasonably be
discerned,” id. (internal quotation marks omitted) (quoting
Bowman Transp., Inc. v. Ark.-Best Freight Sys., Inc., 419 U.S.
281, 286 (1974)), we cannot “supply a reasoned basis for the
agency’s action that the agency itself has not given,” id. (citing
SEC v. Chenery Corp., 332 U.S. 194, 196 (1947)).
Applying this standard here, we believe that the FSIS’s
determination that US1’s labeling is misleading is neither
arbitrary nor capricious. In his final determination, the
Administrator noted that the FSIS permits a re-boxer to use its
supplier’s establishment number only if the supplier consents
to the practice, consent “historically” given by transferring its
labels containing its establishment number to the re-boxer. JA
114 (“FSIS has previously explained that labeling policies and
the regulations have historically permitted official
establishments to arrange for off-site labeling/re-labeling of
their product at approved [re-boxing] facilities, by transferring
their labels, bearing their official inspection legend, to such
facilities, provided documentation of such transfers and other
applicable records are made available to inspection
personnel.”); accord Directive 12,600.1 at 8 (“The [re-boxing]
facility must maintain records of label transfers and records of
products labeled or relabeled at the facility . . . .”). The
Administrator further found that “US1 has not provided
documentation as requested, in accordance with 9 CFR
320.1(b)(11), showing consent of the official establishment.”

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JA 114. US1’s use of a supplier’s establishment number, then,
does not simply—and erroneously—signify that one five-digit
number is, or can be, interchangeable with another without
more; instead, it signifies that US1 has the supplier’s consent to
use the supplier’s establishment number on US1’s packaging.
But that signification is false—US1 printed its supplier’s
inspection mark at its own facility without the latter’s consent
and incorporated it as part of its label. JA 75. We believe the
Administrator reasonably concluded that
[a]bsent a documented transfer of labels, or other
records . . . assur[ing] FSIS of the knowledge,
consent, or direction . . . of the official establishment
number, FSIS has reason to believe that the
consuming public may be misled by application of
the official mark of inspection. FSIS cannot
authorize application of any label to a meat or poultry
product when there is reason to believe that its use
has the effect of causing such articles to become
misbranded.
JA 117; see also JA 114 (US1’s labeling “provide[d] a false
impression, and [was therefore] misbranded by definition under
21 U.S.C. [§] 601.”). On these facts, we conclude that the FSIS
“examine[d] the relevant data and articulate[d] a satisfactory
explanation for its action including a ‘rational connection
between the facts found and the choice made.’” Motor Vehicle
Mfrs. Ass’n, 463 U.S. at 43. Although the Administrator’s
analysis is less than pellucid, we must “uphold a decision of
less than ideal clarity if the agency’s path may reasonably be
discerned.” Id. (quoting Bowman Transp., 419 U.S. at 286).
US1 makes various counterarguments but none is
persuasive. First, US1 insists that the Administrator’s final
determination is “not in accordance with law,” reciting 9 C.F.R.
§ 350.3(a)(1)—the AMA regulation under which US1

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voluntarily participates in the FSIS inspection program—that
an FSIS inspector place the “marks of Federal inspection” on a
meat product’s label before resale. Examples of the “official
marks” of federal inspection are set forth in 9 C.F.R. § 312.2
and, as noted, the number “38” is used. See supra 3. Footnote
1 of that regulation explains that the “number ‘38’ is given as
an example only” and that the “establishment number of the
official establishment where the product is prepared shall be
used in lieu thereof.” 9 C.F.R. § 312.2 n.1 (emphasis added).
Because footnote 1 recites that the official establishment’s
number “shall be used” in place of “38,” US1 insists that it is
entitled to—indeed, required to—use the establishment
number of its supplier—the “official establishment”—instead
of its own, irrespective of the official establishment’s consent.
We disagree. Footnote 1 merely makes plain that the official
establishment is to use its establishment number instead of the
placeholder “38.” See id.
Next, US1 argues that the FSIS’s consent requirement
constitutes a new “legislative rule” and is invalid because it was
not promulgated in accordance with the APA. Granted, we have
often said that “[l]egislative rules have the ‘force and effect of
law’ and may be promulgated only after public notice and
comment.” Nat’l Min. Ass’n v. McCarthy, 758 F.3d 243, 250
(D.C. Cir. 2014). But no new rule was promulgated here. The
Administrator’s final determination does not impose any new
legal obligation on US1; instead, it enforces a preexisting
prohibition of misleading labeling set forth in the FMIA and
implementing regulations. See 21 U.S.C. §§ 601(n)(1), 607(e),
610(d); 9 C.F.R. § 317.8(a).
Finally, US1 insists that the Administrator’s final
determination represents an unexplained departure from agency
precedent because US1, while subject to FSIS inspection, used
its supplier’s establishment number on its labels for three years
without complaint. “[W]here an agency departs from

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established precedent without a reasoned explanation, its
decision will be vacated as arbitrary and capricious.” ANR
Pipeline Co. v. FERC, 71 F.3d 897, 901 (D.C. Cir. 1995). But
there was no departure from precedent—no “prior policies and
standards [were] deliberately changed.” Ramaprakash v. FAA,
346 F.3d 1121, 1124 (D.C. Cir. 2003) (quoting Greater Boston
Television Corp. v. FCC, 444 F.2d 841, 852 (D.C. Cir. 1970)).
Instead, the FSIS, albeit tardily, rectified its inspectors’
apparently isolated (on this record) failure to verify that US1
had its supplier’s consent to use the latter’s establishment
number. Although the non-enforcement is lamentable,
especially on the part of personnel charged with ensuring the
“health and welfare of consumers,” 21 U.S.C. § 602, we discern
no FSIS “depart[ure] from established precedent.” ANR
Pipeline Co., 71 F.3d at 901.
For the foregoing reasons, the petition for review is
denied.7
So ordered.

7

Regarding the dissenting opinion, we and our dissenting
colleague are like ships passing in the night. Of course he is right that
a rule must be preceded by notice and comment and that, if that
procedure is leapfrogged, the rule is ultra vires and cannot be
enforced. No argument there. But we are not dealing with an
unenforceable rule—the FSIS determined that the properly
promulgated (and unchallenged) regulation prohibiting misleading
and misbranded labeling was violated by US1’s failure to follow
Directive 12,600.1. That failure produced a false label.
Next, the dissent points out that the FSIS does not contend “that
United Source One obtained the meat anywhere other than [from] the
original establishment.” Dissent Op. 2. True. It does contend,
however, and US1 admits, that the supplier’s label was not obtained

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therefrom but was instead printed by US1 itself, necessarily without
its source’s consent.
Finally, the dissent apparently differentiates between a label
violation and “a violation of conduct,” concluding that the former
does not “cure the defective source of the nonexistent regulation.”
Dissent Op. 2. Unsure of what is meant by a “violation of conduct,”
we again respond that US1’s use of its supplier’s establishment
number is “misleading” because it signifies that US1 has the
supplier’s consent to use the latter’s establishment number on US1’s
packaging. Directive 12,600.1 explains why US1’s labeling is
misleading.

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SENTELLE, Senior Circuit Judge, dissenting:
It is not substantially justifiable for an agency to
persistently prosecute citizens for violating a regulation
that does not exist. Contractor’s Sand & Gravel, Inc.
v. Fed. Mine Safety & Health Review Comm’n, 199
F.3d 1335, 1341 (D.C. Cir. 2000).
No matter how many times I review the administrative
record, it appears to me each time that the Food Safety and
Inspection Service (“Service”) is sanctioning United Source
One, Inc. for violating the rule against using the original
establishment number without the permission of the original
establishment. The difficulty is there is no such rule. As the
majority correctly notes, “[l]egislative rules have the ‘force and
effect of law’ and may be promulgated only after public notice
and comment.” Maj. Op. at 13 (citing Nat’l Min. Ass’n v.
McCarthy, 758 F.3d 243, 250 (D.C. Cir. 2014)). The majority
does not explain how an agency position mandating conduct on
the part of a regulated entity can be something other than a
legislative rule or how such a rule can come into existence
without notice and comment.
The majority justifies its affirmance of the Service’s
decision by saying that “no new rule was promulgated here.”
Maj. Op. at 14. Again, I do not understand the majority’s
formulation. There is no record of any previous mandate that a
re-boxer of meat must obtain the permission of the original
establishment before using the original establishment number.
If this is not a new rule, I know not what is. Indeed, even if
there were such a record of enforcement, but no record of notice
and comment proceedings, I would fail to see how such a rule
could exist. At some point, whether in this proceeding or some
prior one, the rule has been “new.” Whenever it became new,
it needed the proper procedures mandated by the Administrative
Procedure Act in order to come into existence. See generally

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5 U.S.C. §§ 553, 556-57.
The Service attempts to circumvent the difficulties of the
lack of adoption of the rule by re-boxing the violation as a
“mislabeling.” It is mislabeling, the Service tells us, because it
might improperly cause the ultimate consumer to believe that
the shipper had complied with the rule requiring it to obtain
permission from the original establishment. But if there is no
such rule, then there is no misleading. The Service does not
contend, nor is there any evidence, that United Source One
obtained the meat anywhere other than the original
establishment. The re-boxing by the Service as a labeling
violation rather than a violation of conduct does not cure the
defective source of the nonexistent regulation.
It may well be that the Service is correct that such a rule
would be a good one. But that does not mean that it exists or
that the Service has the authority to create it without following
the process mandated by the Administrative Procedure Act. It
seems to me a giant step in the progress of the administrative
state to permit agencies to enforce regulations that do not exist
against regulated entities. I know of no case in which we have
previously permitted this. Indeed, in the closest I find,
Contractor’s Sand and Gravel, supra, we expressly held that an
agency could not enforce nonexistent regulations. 199 F.3d at
1341. In that case, there was a regulation requiring the
grounding of regulated equipment. The Mine Safety and Health
Administration (“MSHA”) cited a mine company for not using
the MSHA’s preferred method of grounding. See id. at 1336-38,
1341. The difficulty there was, though there was a regulation,
it did not require a particular method of grounding. Like the
Service in the present case, the MSHA offered good reasons
why its decision to require certain conduct was a sound one. We
held that the agency’s position not only did not provide a
sufficient foundation to enforce its decision, but also did not

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USCA Case #16-1209

Document #1687346

Filed: 08/04/2017

3
even pass the more forgiving standard of the Equal Access to
Justice Act that the government could be liable for litigation
expenses where its conduct was not substantially justified. See
id. at 1340-42. We further advised the Secretary of Labor that
if the reasons for the nonexistent rule are good ones, then “it is
time for the Secretary to repair to rulemaking, not to bring one
more unsupportable citation.” Id. at 1342.
Were I writing for the majority rather than in dissent, I
would suggest in this case that if there is a good reason for
requiring the secondary shipper to obtain the permission of the
original establishment for the use of its number, then it is time
for the Secretary of Agriculture to repair to the process of
rulemaking.
I respectfully dissent.

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