*1 502 believe,

Robinson had no reason to at least trial, any- was advancing

until that MFA Now, thing other fide than bona defenses.

however, deceit, the cause of action is require proof

if it is to succeed will substan-

tively presented from that different in Rob- policy proceeds.

inson’s suit for the See City,

Robbins v. District Court of Worth

Iowa, 1015, (8th 1979); F.2d 1017 592 Cir. 688,

Roach v. Local Teamsters No. 595 F.2d

446, 1979).6 449

Reversed and remanded.

Affirmed.

WESTERN FARMS IOWA CO. et al., Petitioners,

v. America;

UNITED STATES of Bob Bergland, Secretary Agriculture,

Respondents.

Sioux Intervenor.

No. 79-1904.

United States Court of Appeals,

Eighth Circuit. 15, April

Submitted 1980. 10, July

Decided

Rehearing 13, Aug. Denied ry penalty against companies. provided insurance Tano faith tort because the state has Corp. Co., v. penalty legislatively. Florida, Louisiana Health Serv. & Indem. something of an (La.App.1978); Bye 355 So.2d 604 v. American anomaly, currently statutory penalty, has a has Co., (La.App. Income Life Ins. 316 So.2d 164 recognized tort, statutory the bad faith but its 1975). Illinois, statutory pen with a state penalty repealed has been effective 1982. Fla. alty, appellate the intermediate courts di are (West 1972) (re- Stat.Ann. §§ 627.427-.428 district, Fifth, recognizing vided with one 1976, pealed by 76-168, 3, laws Florida ch. tort, Ledingham the bad faith v. Blue Cross 1, July 1982). Apparently, eff. the view is Plan, Hospital 339, Corp., Ill.App.3d Service 29 slowly spreading that states will have either (1975), 330 N.E.2d 540 with three other dis statutory penalty, the bad faith tort or the but tricts, Fourth, Country Urfer v. Mutual In not both. Co., 469, 744, IIl.App.3d surance 60 17 Ill.Dec. 1073, denied, appeal 376 N.E.2d leave holding judicata 6. Our on the res issue does not Third, (1978), Ill.2d 616 DeBolt v. Mutual of appellee raising foreclose from this issue at a Omaha, Ill.App.3d 13 Ill.Dec. stage proceedings. later in these The issue denied, appeal N.E.2d leave to 71 Ill.2d 602 appear sufficiently justify does not clear to (1978) First, and the Tobolt v. Allstate Insur pleadings. dismissal on Ill.App.3d ance 30 Ill.Dec. (1979), expressly rejecting N.E.2d 1171 the bad

ROSS, Judge. Circuit et Farms Western Iowa Petitioners ah, the comprised of 16 of 23 mar- group a livestock sales at ket that handled a petition filed City the Stock Sioux the review a decision and order of for of this court. Secretary Agriculture with of the chal- decision dismissed agencies to lenge brought by the 16 market Lich, Jr., Lich, Mack- Herold & Victor J. by regulation, promulgated a new Rule Neb., iewiea, Omaha, Crary, A. Craig Raby, establishing City the Stock Yards Sioux Iowa, Clem, for Huff, City, Yates & Sioux all for requirements minimum annual sales petitioners. agencies doing at ter- business this market Wolle, Shull, & Marshall R. Charles facility.1 minal Marks, Iowa, intervenor-re- City, for Sioux which have sell livestock Petitioners Yards. City Stock spondent, Sioux (farmers, their customers solicited from Wenker, USDA-OGC, Wash- Judith feeders) producers and for a com- Daniel, brief, D.C., argued, on Alice ington, a In upon per head rate. mission based Gen., Wil- Kaplan and Atty. William Asst. service, this these market connection with Kanter, Dept, of Jus- Attys., U.S. liam G. City the agencies use the facilities of Sioux tice, D.C., James Michael Washington, and from their custom- Yards and collect Stock Counsel, Raymond W. Gen. Kelly, Asst. yardage commission and the ers a sales Division, Fullerton, Director, Ju- Litigation charge by City Yards made Sioux Stock Heinz, At- A. and Thomas C. dith Wenker stockyards’ of principal which is the source Agriculture, Washington, Dept, of tys., is, income and as the commission of brief, D.C., Dept, Agr. on agencies, part a of the tariff on file market Stockyards with the Packers and Adminis- LAY, ROSS, Judge, Before Chief Circuit LARSON, Judge.* District tration.2 Judge, and Larson, hogs multiplied by hog yardage in Earl R. Senior United

*The Honorable year. during Judge each calendar Minne- effect States for the District of District sota, ef- by designation. minimum standards shall be sitting above year 1980 each fective for the calendar and Any agency year market thereafter. Rule amended reads verbatim as fol- as comply does not with the minimum stan- lows: thirty shall dards set forth days this rule have foster, preserve and insure order year pay the end after market, every competitive public efficient deficiency. pay its Failure to shall cause agency engaged live- in the sale of market City registration at the Sioux Stock Yards basis at the Sioux stock on commission privileges market be and cancelled City Yards shall conform the follow- Stock denied. ing minimum standards: agency Each new market that commences selling engaged agency 1. Each market City Sioux Stock shall at the Yards business cattle and calves on commission basis shall completed years of two full calendar have pay City guarantee and Sioux Stock to the operation before the minimum standards per yardage Yards a minimum annum reve- apply. agency shall New shall not market equal computed to an nue amount on purchase merger existing mean firms. 25,000 multiplied by basis of cattle the cattle yardage charge during in effect each calender giving At the time of the events rise to (auction year ring shall be con- fees action, Stockyards Act of the Packers and revenue). yardage sidered amended, as was administered selling agency engaged 2. Each market Stockyards Packers Administration hogs pigs feeder basis on a commission agency De- then an of the United States guarantee City pay shall to Sioux Agriculture. partment of Effective December per equal Yards a minimum annum revenue the Packers and Adminis- 55,- computed to an amount on the basis separate agency exist ceased to tration the Rule 22 to pay Under Rule unreasonable and discrimina- tory stockyard during in its effect. He yardage usual fee ordered the Sioux year, but at the end of the Stock Yards to each calendar cease and desist from its 21, 1979, which have not handled enforcement. year September effective those On 55,000 25,000 hogs Secretary will of Agriculture, cattle and through least a Ju- Officer, dicial stockyard, so reversed owe an sum additional Administrative *3 Law paid by Judge yardage petitioners’ annual fee and the total dismissed com- plaints. equal yardage each them will fees calcu- Petitioners now appeal of to this 55,000 25,000 hogs. If court on the lated on cattle and basis that the unjust, Rule is days any deficiency paid is not within 30 unreasonable and discriminatory3 and that year, agen- is required after the end of the that market not reasonably foster, to pre- efficient, to serve or cy shall not be able to continue sell insure an public species of livestock the Sioux market.4 may merge, choose to ter- Agencies Yards. court has set out of scope This review minate, drop species pay one of livestock or in as following cases such this lan- deficiency. guage: scope of our review is to limited Rule 22 accepted by Department was the correction of errors of law and to Agriculture filing of for Supplement as No. of the sufficiency examination of the evi- 19, 1977, 3 to on September Tariff No. 20 supporting dence the factual conclusions. hearing granted and a formal petition- findings and order of ers of the Judicial April and held 1978. The Adminis- contrary Officer must if trative Law be sustained not Judge imposition found Department; pre- administration of the Act is erations in manner serve, will efficient, delegated competitive pub- presently or to insure an the Administrator of regulations Marketing lic market. Such rules Department’s Agricultural and shall Service. prevent registered agency -65132, 30, not market or Reg. 42 Fed. 65131 Dec. rendering dealer from kets service on other mar- or in occasional and incidental off-mar- 3. Petitioners contend that Rule 22 is a rate or (As July 31, ket transactions. amended charge stockyard point for the facilities and to 90-446, 475.) 1(d), Pub.L. 82 § Stat. Stockyards § 305 of the Packers and Act of amended, Additionally, 203.8(a) (f) 9 7 C.F.R. § § U.S.C. 206: and of the regulations promulgated under the Packers and charges any All or rates made for stock- Act, Stockyards provides: yard stockyard by services furnished at a (a) Stockyard by services furnished stock- stockyard agency or owner market shall be yard agencies pursuant owners and market just, reasonable, nondiscriminatory, and and request to a reasonable must be reasonable unreasonable, any unjust, discriminatory or nondiscriminatory. Stockyard and and and owners charge prohibited or rate is and to declared agencies statutory right * * have the be unlawful *. establish, observe, duty to and enforce regulations practices, and or which are un- 4. Section 307 of the Packers and unjustly discriminatory, reasonable with Act, 208(a) (b), 7 and relates: U.S.C. respect furnishing stockyard serv- (a) duty every stockyard It shall be the ices. establish, agency owner to ob- and market (f) agencies Market at a terminal livestock serve, just, reasonable, and enforce and non- time, market have invested resources and discriminatory regulations practices and establishing effort in their businesses at the respect stockyard furnishing serv- long market. As as a terminal livestock mar- ices, unreasonable, every unjust, and or dis- ket continues in business as a terminal mar- criminatory regulation prohibit- practice or is ket, the market at the market can- ed and declared to be unlawful. arbitrarily capriciously not be removed or (b) responsibility right It shall be the and stockyard good owner. There must be every stockyard manage owner to any and sufficient reasons for such action. regulate just, reasonable, his ain Similarly, op- the number of market manner, nondiscriminatory prescribe erating may at the terminal market re- re- be require rules and those only reasonably duced quired if such action is persons engaging attempting engage in or to foster and insure an com- purchase, sale, or solicitation of live- petitive livestock market. op- stock at such to conduct their

505 regardless proves of whether it purpose, by substantial supported and if to law say this We cannot or not. Also, may not sub- be successful this Court evidence. contrary Judi- to law. for that of the conclusion judgment its stitute of the various as to which cial Officer’s argue that the Rule is a petitioners While from the evi- drawn inferences facilities, they charge rate or dence. statutory argue error for lack do not Butz, 512 F.2d Lewis v. Rather, they ask the court procedures. rate v. Commission Co. 1975), Livestock quoting being of it on the basis to review the Rule 1972), Hardin, 109, 110-11 (8th Cir. F.2d discriminatory— unjust, unreasonable grounds, other U.S. rev’d on regulatory rather found in standards also (1973). Using 36 L.Ed.2d S.Ct. Packers and Stock- than rate sections standard, thoroughly we have reviewed found The Judicial Officer yards Act. find that the record and the administrative been made in 22 to have imposition of Rule *4 the Judicial Officer upon by relied evidence following customary manner responsible a contrary nor is his order is not insubstantial although that management principles; to law. large firms to are easier for the quotas meet, applies agen- to all market the Rule testimony which in- presented Petitioners cies; to offer petitioners and that failed that Rule would elimi- predictions cluded quota figures evidence to show that the any termination, nate, seven to merger or gen- their are unreasonable absent selected agencies at nine of the smaller market attacking any quota system. eral evidence result City, and that the Rule would Sioux different conclu- might While we reach a therefore a lower in fewer solicitors and evidence, review of the we sion from our market. The stock- volume of livestock at the Judicial say the decision of Offi- cannot that testimony to the effect yards offered upon substantial evi- cer was not based in other stock- systems established quota substantial “may evidence dence. The were considered beneficial yard markets might if two inconsistent conclusions even vigorous country solicitation in the and that it.” Live- have been drawn from Corona receipts to obtain livestock at necessary Agri- Department stock v. United States parties acknowledged All that the market. 1979). culture, 607 F.2d receipts generally had been de- livestock clining since 1959. argue respon Petitioners also must show substantial evidence

The Judicial found that dents Officer reasonably required Rule was intended the Rule stockyards’ management preserve or insure an incentive to the provide necessary Officer, The Judicial firms harder and in livestock market.6 commission to work however, necessary decided that it was not receipts. Additionally, crease livestock reg respondents quota for to show that the Rule was to make commission the small requiring the commis thereby firms more sound enab ulation is a means financially operations to conduct their ling qualified peo them to hire and retain sion firms However, manner. he remarked that ple shipper-custom to better service their showing necessary, were it from the House even if such a Referring excerpts ers. By implica change his decision. hearings on the 1968 amend would Subcommittee Act, to dem petitioners tion he held that failed ments Packers and accomplish onstrate that Rule 22 could not the Judicial Officer concluded that raising quantities the desired result of authority owner had to institute holding processed. In so hogs the rule is reason of cattle and quota system and that peti- on the placed proof he the burden of ably designed accomplish legitimate 203.8(f) regulation 208(b) § 6. See U.S.C. 208 and § While 5. See 7 U.S.C. as cited n.4.- § elusive, Congressional n.4. intent can be the cited excerpts hearing from the can be said to be stockyards’ position. supportive of the tablish, observe, Petitioners, regulations enforce argument, tioners. in oral agreed that proof practices, had burden of which are not unreasonable Rule, invalidity unjustly discriminatory, respect and based or with record, upon our furnishing review the we cannot services. say that the Judicial Officer’s decision was (f) agencies at a terminal live- Market contrary factually to law or erroneous. time, re- stock market have invested sources, establishing and effort in their The decision and order of the Judicial long businesses at the market. As as a Officer affirmed. terminal market continues in market, business as a terminal the mar- LAY, Judge, Dissenting. Chief ket the market cannot be respectfully I dissent. arbitrarily capriciously by removed This is not a typical involving case factu- good owner. There must be findings al leading adjudicatory agen- to an and sufficient reasons for such ac- cy question presented decision. The Similarly, tion. the number of market review complies is whether Rule'22 with the agencies operating at the terminal mar- statutes and applicable to rules only ket if such be reduced action is adopted by stockyard Although owners. reasonably required to foster and insure the statute provide precise does not calcu- efficient, competitive livestock mar- lus for measuring rule, the validity of the ket. does set forth relevant criteria which the 203.8(a) (f). 9 C.F.R. Secretary Agriculture is required to use *5 Judge (ALJ) Administrative Law determining whether Rule 22 is a legally unreasonable, found Rule 22 unjust, permissible rule. I find the Secretary total- since, and discriminatory according to his ly failed to determine whether the rule met “foster, analysis, the rule would pre- not the relevant statutory criteria. serve, efficient, or insure The governing provides: statute market.” His analysis is detailed and in- It shall be the responsibility right and following cludes the observations: of every stockyard owner manage quotas The minimum by established regulate his stockyard just, in a reasona- multiplied by Rule when the number ble, manner, and nondiscriminatory operating of commissionfirms now at the prescribe regulations rules and and to stockyards produces a total that is less require persons those engaging in or at- projected than the receipts tempting to engage purchase, sale, in the the stockyards for 1978 and less than the or solicitation of livestock at such stock- actual receipts annual livestock for at yard to conduct their operations in a Kuhl, least the years. last ten Mr. L. V. manner which will preserve, or Manager General City the Sioux Stock insure an competitive public Yard that time testified at the market. rules Such shall that, institution of the Rule 22 he realized not prevent a registered market agency upon receipts, based nine firms or dealer from rendering service on other would probably quota not make the markets or in occasional and incidental cattle, and 9 or 10 firms would probably off-market transactions. quota hogs. meet the quite It is 208(b) (emphasis added). U.S.C. § therefore, apparent, that the real thrust pertinent regulations read: of Rule 22 would directly affect 9 or 10 of (a) Stockyard services furnished by the small firms presently during [sic] stockyard owners and business Respondent’s stockyard. Rule pursuant to a reasonable request must be presumes that there will be no attri- reasonable nondiscriminatory. tion in the by business done the presently Stockyard owners and market large they firms so will be relatively have the statutory right and duty to es- by unaffected Rule 22. Mr. Kuhl made firms without rea- many of the small all on the projection at no scientific even assurance of enhanced or would re- sonable sales that amount of stimulus the Stock Yard. some should commensurate benefit to Only Rule 22. that sult from result. which firms alternative for the One require is to that quotas meet the

cannot be increased would pro-rata charges their testimony Mr. Kuhl’s It is clear from choose to rates if above the fixed firm he believes commission Yard. do business at Stock continue to Rule quotas meet the under which cannot financial- them against This discriminates doing business at 22 should not be meeting larger firms ly in favor of the terms, impres- simple Yard. Stock charged only which would be quotas which that those firms conveyed sion was aspect of fixed rates. While this quota would not be did not meet their Regula- not treated in “discrimination” is for themselves or doing good job either 203.12, is real and supra, very tion of the Sioux support for the obvious. Yard. available to the The other alternatives meeting quotas their is smaller firms not the evidence disclos- In the instant case go altogether, go out of out of business adequate pen Yard has es that the Stock livestock, specie in one or to business larger overall volume capacity to do merge. In this connection we conclude That it would like to have business. deci- that the rationale of to the fullest extent capacity excess used decision, Carpenter-Walsh sion in the su- recognized and is reasonable. possible is today. We pra, equally is viable conclude However, showing that there is no which tend to quotas the use of and other services providing pens costs easily firms can liquidate commission commission firms smaller or two bring monopoly about a of one their likely quotas are not to meet firms successive eliminations excessive, the small firms do not or that doing first the least business. This Yard pay their fair share of these Stock illegal. Evi- main is unreasonable and *6 words, there is no show- costs. In other system by a quota dence for the use of a generated of business ing that the level in demon- stockyard must be conclusive any way in consti- by these small firms in each benefits of its use strating the disproportionate an unreasonable or tutes which would be sub- particular situation on the Yard. In- financial burden Stock inher- to off-set the evils enough stantial deed, the evidence discloses that these tendency ent in the towards creation very smaller firms contribute substantial- employed. We monopolies if it is be to the sales volume of the market and ly has been conclude that no such evidence well-being profit, Yards’ Stock presented in the instant situation. performing public well as service to as consideration of all of the evidence On serve. sellers whom imposi- we conclude the presented sup- The rationale of the Yard in Stock is tion of Rule 22 the Yard Stock that its port hoped of Rule 22 is that it is discriminatory in its ef- unreasonable and imposition generate would more business fect. It should be vacated. There by the smaller commission firms. contrast, Secretary’s analysis is showing that this result the is no substantial astonishing. Secretary The does not at- reasonably would be achieved. On the unreasonableness, the hand, tempt analyze out that reduc- pointed other it was discriminatory unjustness some or the effect might of small firms cause tion statutory mandate. the Rule 22 in terms of fall-off in the overall business of agency and the came The fact that the ALJ We consider it to be a sali- Yard. Stock factor to conclusions is a salient the Rule to different imposition ent fact that Corp. v. be considered. Universal Camera cause the demise expectation would all 508 legislative The

NLRB, industry. history 340 71 95 L.Ed. U.S. S.Ct. FTC, Act, amended, (1951); Procter Co. v. 456 & Gamble Packers and 1966), on other F.2d 74 rev’d Congress 358 does not indicate that intended 1224, 18 grounds, 386 U.S. 87 stockyard S.Ct. Risks give owners free rein. (1967). Supreme 303 Court L.Ed.2d The accompany and are business decisions “[Ejvidence supporting commented: has acceptable to ordinary an businessman may be less substantial when an conclusion im- unacceptable to a owner who impartial, experienced examiner has plementing rule because the observed the lived with the witnesses and subject statutory owner is constraints case has drawn from conclusions different nondiscriminatory” “just, reasonable and has [Secretary’s] than when he reached whether the rule will foster terms of the same conclusion.” Universal Camera insure efficient livestock an NLRB, 474, 496, Corp. v. 340 71 U.S. S.Ct. market. 456, 469, (1951). L.Ed. 456 Secre- Secretary’s analysis turns whether on tary candidly expresses complete indiffer- complainants have met their burden ence whether or not the rule will work. proof; intended to Congress and whether says: He give rein under owners free have I no concern in with proceeding deficiency The basic 1968 amendment.1 respondent’s the wisdom of Rule review of the is the rule which is indeed fortunate I have no since that: statement idea whether the rule wise or unwise. is It also necessary is not to show that e., it stronger If works —i. if it results quota regulation requiring is a means of commission firms greater the commission firms “to their conduct wise; volume —it is if it doesn’t work —i. operations in á manner which will e., if it personnel results in the loss preserve, competi- or insure an (who are not replaced) and less volume— (7 208(b); public tive market” cf. U.S.C. § unwise. 203.8(f)), particularly 9 CFR since Rule Western Iowa City Farms Co. v. Sioux reducing is not aimed at the number of Yards, Agric.Dec. Stock City. at Sioux (1979). Western Iowa Farms Co. v. Sioux seriously I discerning doubt this is the anal- 1296,1315 (1979) Agric.Dec. ysis of a proposed Congress rule that con- added). (emphasis templated the Secretary would make under This statement demonstrates the Secre- 208(b). 7 U.S.C. § tary’s failure investigate clear rule as The Secretary equates rule with by the mandated statute. ordinary business decision and concedes *7 enough It is not to casually observe that there well imple- be risk involved appears reasonable, a rule to just or menting the rule generally as there is in nondiscriminatory. A any management analysis correct must decision. would appear It relate Secretary justness reasonableness and some judgments assumed business to acceptable proper which contain Here statutorily risk and are to an end. that end is ordinary acceptable prescribed: “foster, business are to the preserve also rule must stockyard business. But few businesses are or competitive public insure regulated stockyard extent of the 208(b). market.” 7 U.S.C. There is no anything, history legislative suggests Cong. Admin.News, If 1. pp. U.S.Code & 2868. Congress give Nothing legislative intended history suggests own- in the Con- power more gress ers so right could deal with unscru- intended extend the pulous agencies acting impose market quotas who were not owners minimum which patrons the best possibly prac- interests of or anticompetitive the market could result See, g., S.Rep.No.1331, the market. e. 90th tices. Cong., (1968), reprinted 2nd Sess. in [1968] criteria as to these essential analysis BARTELS, findings.2 personal Gayle Jeane representative the Estate of John this deficien- majority acknowledges Bartels, Deceased, Appellant, Mark However, panel points Secre-

cy. says: comment which tary’s footnote v. However, necessary if it were even WILLISTON, Appellee. CITY OF require 22 was to show that Rule No. 79-1941. opera- to conduct their commission firms foster, pre- which will tions in a manner Appeals, Court of United States serve, efficient, competitive or insure an Eighth Circuit. market, change my that would not public April 1980. Submitted is, That I proceeding. decision in this complainants, who would still hold that July Decided failed to dem- proof, have the burden of Rehearing Rehearing En Banc 22 in this deficiency in Rule any onstrate Aug. Denied respect. Western Iowa Farms Co. v. Sioux 1315 n.9 Agric.Dec.

(1979). impro- on the

This observation focuses Secretary’s review. I submit

priety of the misreads the Secre- statement regulations. Act

tary’s duty under the

It likewise excludes consideration acknowledge removed arbi- cannot be

trarily capriciously by

owner; can occur that reduction of reasonably required to foster and

only if market. competitive

insure an efficient and 208.8(f). findings, The ALJ’s

See C.F.R. § disregarded. supra, totally cannot be

quoted findings, there

In view of the ALJ’s showing

clearly prima has been a facie

lessening competition by promulgation require

the rule. This alone should More

Secretary proper analysis. to make a burden of

importantly, regardless of the the rule must be

proof, under the statute

evaluated in of whether it will foster terms

and insure an efficient Secretary

market. The failed to make such

a review. proper analytical

I remand for a would

investigation by Secretary to determine *8 prescribed

whether Rule 22 meets the statu-

tory criteria. Co., If, states, U.S. 87 S.Ct. Gamble as the ALJ the obvious effect of the (1967); competi- United States v. Pabst L.Ed.2d 303 rule will be to lessen the number of tors, Brewing 384 U.S. 86 S.Ct. it is difficult to understand how this effect (1966); generally see 15 U.S.C. of a L.Ed.2d 765 can be considered the best interests market. See FTC v. Procter &