United Source One, Inc. v. United States Department of Agriculture, Food Safety & Inspection Service
2017 U.S. App. LEXIS 14340
| D.C. Cir. | 2017Background
- United Source One, Inc. (US1) is a re-boxing facility that voluntarily participates in USDA/FSIS inspection under the Agricultural Marketing Act; it repackages meat purchased from an FSIS-inspected producing establishment and exports it.
- FSIS assigns establishment numbers: producing establishments (official) get traditional numbers and re-boxers receive a different prefix (V...). Directive 12,600.1 permits re-boxers to use a producer’s official establishment number only with documentation showing the producer’s knowledge/consent (e.g., transfer of labels).
- From 2012–2015 US1 replaced its own V21467 mark on labels with its supplier’s establishment number and printed those labels at its facility without the supplier’s transfer of labels or documented consent.
- In January 2015 an FSIS inspector refused to authorize continued use of the supplier’s inspection mark on US1 labels; FSIS Administrator later concluded absence of documentation made the labeling misleading/misbranded under the FMIA and withheld authorization.
- US1 petitioned for review; the D.C. Circuit majority denied the petition, applying arbitrary-and-capricious review and finding FSIS’s decision reasonable. A separate dissent argued FSIS was enforcing a de facto rule that had not been promulgated via notice-and-comment rulemaking.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FSIS permissibly withheld use of US1’s labels as "false or misleading" under FMIA §607(e) | US1: use of the producing establishment number is required/appropriate under FSIS examples/regulations and not misleading. | FSIS: use of another establishment’s number implies producer consent; absent documentation of consent (label transfer etc.) the mark is misleading and may render product misbranded. | Court: Held for FSIS — withholding was reasonable under arbitrary-and-capricious standard. |
| Whether FSIS imposed a new legislative rule (requiring supplier consent) without notice-and-comment | US1: FSIS created and enforced a new substantive rule (consent requirement) without APA rulemaking. | FSIS: no new rule; decision enforces existing statutory/regulatory ban on misleading/misbranded labeling. | Court: Rejected US1’s nonpromulgation challenge; found no new rule was created. |
| Whether FSIS departed from agency precedent by enforcing this consent practice after years of non-enforcement | US1: longstanding practice and tolerance by FSIS means enforcement is an unexplained departure. | FSIS: agency remedied isolated inspector non-enforcement; there is no formal change in policy requiring reasoned explanation. | Court: Found no arbitrary departure; enforcement was a legitimate application of existing standards. |
| Whether record supports FSIS factual conclusion that labels were misleading without producer consent | US1: labels did not mislead because meat origin was unchanged; no evidence of consumer deception. | FSIS: label use without documentation reasonably suggests producer authorization and risks misleading consumers; lack of documentation justified withholding. | Court: Held FSIS provided a rational connection between facts and conclusion; factual finding stands. |
Key Cases Cited
- Motor Vehicle Mfrs. Ass’n v. State Farm, 463 U.S. 29 (agency must examine relevant data and provide rational connection between facts and decision)
- Arent v. Shalala, 70 F.3d 610 (scope of APA review)
- Bowman Transp., Inc. v. Ark-Best Freight Sys., Inc., 419 U.S. 281 (uphold agency decision of less than ideal clarity if path discernible)
- SEC v. Chenery Corp., 332 U.S. 194 (court may not supply reasons for agency action that agency did not provide)
- Nat’l Min. Ass’n v. McCarthy, 758 F.3d 243 (distinction between legislative and interpretive rules; notice-and-comment requirement)
- ANR Pipeline Co. v. FERC, 71 F.3d 897 (agency departure from precedent requires reasoned explanation)
- Ramaprakash v. FAA, 346 F.3d 1121 (standard for identifying agency policy change)
- Greater Boston Television Corp. v. FCC, 444 F.2d 841 (framework for assessing deliberate policy change)
- Contractor’s Sand & Gravel, Inc. v. Fed. Mine Safety & Health Review Comm’n, 199 F.3d 1335 (agency cannot enforce a regulation that does not exist)