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United States v. High Plains Livestock

United States District Court, D. New Mexico

July 10, 2017

UNITED STATES OF AMERICA, Plaintiff,
v.
HIGH PLAINS LIVESTOCK, dba PRODUCERS LIVESTOCK AUCTION, MICHAEL FLEN, CALVIN PAREO, and DARCIE PAREO, Defendants.

          MEMORANDUM OPINION AND ORDER

          M. CHRISTINA ARMIJO Chief United States District Judge

         THIS MATTER is before the Court on the United States&#3');">39; Motion for a Preliminary Injunction to Enjoin Defendants from Violating the Packers and Stockyards Act and Memorandum in Support [Doc. 7] and the United States&#3');">39; Motion for Appointment of Receiver and/or Co-Special Master or Preliminary Injunctive Relief [Doc. 1');">1');">1');">153');">3]. The Court previously granted both motions for the reasons set forth in the Court&#3');">39;s March 3');">31');">1');">1');">1, 201');">1');">1');">17 Memorandum Opinion and Order [Doc. 296');">296]. Therein, the Court allowed the parties to submit additional briefing, [1');">1');">1');">1" name= "FN1');">1');">1');">1" id="FN1');">1');">1');">1">1');">1');">1');">1] which has now been submitted. [Doc. 3');">302');">3');">302');">3');">302');">3');">302; Doc. 3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3; Doc. 3');">305] The Court also held a status conference and invited the parties to submit proposed instructions to the co-special master. [Doc. 23');">31');">1');">1');">1 (transcript), p. 5');">p. 58, 67, 69] The parties have done so. [Doc. 3');">322; Doc. 3');">323');">3] In addition, the parties have filed the following motions: Defendants&#3');">39; Motion to Strike Docs. 3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3, 3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3-1');">1');">1');">1 to 3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3-9 and 3');">305 [Doc. 3');">308');">3');">308');">3');">308');">3');">308]; Defendants&#3');">39; Motion to Postpone Appointment of Co-Special Master [Doc. 3');">309');">3');">309');">3');">309');">3');">309]; and The United States&#3');">39; Motion to File a Sur-Reply [Doc. 3');">33');">30]. This Memorandum Opinion and Order addresses all of the above submissions, that is, motions and briefs filed after March 3');">31');">1');">1');">1, 201');">1');">1');">17 regarding the appointment of a co-special master. The Court has considered the submissions, the relevant law, and is fully advised in the premises.

         BACKGROUND

         Early in this case, the Court appointed Gayland Cowen as Special Master to oversee, monitor, and report concerning the activities of High Plains Livestock (HPL). [Doc. 1');">1');">1');">104, pp. 2-3');">3, ¶ 2] As set forth in the Court&#3');">39;s Memorandum Opinion and Order entered on March 3');">31');">1');">1');">1, 201');">1');">1');">17 [Doc. 296');">296], though Mr. Cowen&#3');">39;s reports “leave many questions and are not presented in a manner which allows a quick or easy determination of whether Defendants are operating while insolvent, ” the information in Mr. Cowen&#3');">39;s reports is sufficient to raise a serious question regarding the continued solvency of HPL. [Doc. 296');">296, 3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">34');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">34] The Court further concluded that “the status quo is insufficient to protect the cattle sellers doing business with Defendants, Defendants&#3');">39; creditors, and the livestock market as a whole.” [Doc. 296');">296, 3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">35');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">35] After considering several alternatives proposed by the Government, the Court ordered that Mr. Cowen continue his duties as Special Master, and the Court added a new duty for Mr. Cowen: to randomly contact 20% of the cattle sellers each month to determine whether they are receiving their proceeds from Defendants in a timely fashion. [Doc. 296');">296, 3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">35');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">35] Furthermore, the Court stated it would appoint a co-special master “for the purposes of a) conducting a viability/solvency analysis of HPL, and, if HPL is not solvent b) proposing a plan to wind down HPL.” [Doc. 296');">296, 3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">35');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">35] Thus, the Court granted the United States&#3');">39; Motion for a Preliminary Injunction to Enjoin Defendants from Violating the Packers and Stockyards Act and Memorandum in Support [Doc. 7] and the United States&#3');">39; Motion for Appointment of Receiver and/or Co-Special Master or Preliminary Injunctive Relief [Doc. 1');">1');">1');">153');">3].

         In its March 3');">31');">1');">1');">1, 201');">1');">1');">17 Memorandum Opinion and Order, the Court invited the parties to file additional briefing regarding the Court&#3');">39;s reliance on the Special Master&#3');">39;s reports thus far, selecting a co-special master, and proposed instructions to the co-special master. As requested by the Court, by email dated April 1');">1');">1');">14, 201');">1');">1');">17, the United States submitted a letter from Johnson, Miller & Co. expressing interest in the co-special master appointment, along with curricula vitae for three accountants from the firm who would work together to conduct the viability analysis of HPL. Also by email dated April 1');">1');">1');">14, 201');">1');">1');">17, Defendants submitted letters of interest of two separate potential co-special masters, H. Myrle Schwalm and Pamela A. Rice. The parties also submitted a Joint Report as to Status of Administrative Proceeding. [Doc. 3');">301');">1');">1');">1] Therein, the parties informed the Court that the Administrative Law Judge entered an Exchange Order, that both parties have submitted initial witness and exhibit lists, and that expert reports had not yet been exchanged. [Doc. 3');">301');">1');">1');">1]

         Defendants submitted a Response to Memorandum Opinion and Order (Doc. 296');">296) in Regard to FRCP 53');">3(f) (hereafter, Defendants&#3');">39; Rule 53');">3 Brief). [Doc. 3');">302');">3');">302');">3');">302');">3');">302] Therein, Defendants made three alternative requests: 1');">1');">1');">1) that “Mr. Cowen should be provided the opportunity to answer the Court&#3');">39;s questions and concerns, either through a written report submitted to the Court or at a hearing” [Doc. 3');">302');">3');">302');">3');">302');">3');">302, p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2]; 2) that, if a co-special master is appointed, “the Parties be allowed to submit proposals for the parameters of the review by the co-special master” [Doc. 3');">302');">3');">302');">3');">302');">3');">302, pp. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2-3');">3]; and 3');">3) that, if a co-special master is appointed, the parties be given notice and an opportunity to respond prior to the Court acting on the Special Master&#3');">39;s report, consistent with Rule 53');">3(f). [Doc. 3');">302');">3');">302');">3');">302');">3');">302, 3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3]

         The United States submitted The United States&#3');">39; Position Based on the Court&#3');">39;s Action on the Special Master&#3');">39;s Reports Pursuant to Federal Rule of Civil Procedure 53');">3(f) (hereafter, the United States&#3');">39; Rule 53');">3 Brief). [Doc. 3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3] Therein, the United States “agree[d] with the Court that a co-special master should be appointed for the purpose of conducting a viability/solvency analysis of HPL.” [Doc. 3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3, 7');">p. 7] The United States expressed concern that “HPL has destroyed documents that are required to establish whether HPL is solvent.” [Doc. 3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3, 7');">p. 7] Accordingly, the United States requested that the co-special master establish a plan to wind down HPL “if the co-special master cannot establish HPL&#3');">39;s solvency with reasonable certainty.” [Doc. 3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3, 7');">p. 7] The United States also requested that the Court appoint someone experienced in forensic accounting and that the “Court order Defendants to provide the co-special master with unfettered access to the HPL facility and all of HPL&#3');">39;s books, records, accounting software, financial accounts, and assets.” [Doc. 3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3, p. 8] Finally, the “United States continues to question the impartiality of Special Master Cowen.” [Doc. 3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3, p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4] The United States presented several arguments and attached numerous documents supporting this position, including a Preliminary Report of Edward R. Street, CPA/ABV/CFF/CVA, ASA [Doc. 3');">307] and a Declaration of Nancy Speer, a “Senior Auditor with the U.S. Department of Agriculture Grain Inspection Packers & Stockyards Administration” [Doc. 3');">305]. [Doc. 3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3-1');">1');">1');">1 to Doc. 3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3-3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3-9; Doc. 3');">305]

         In response to the United States&#3');">39; Rule 53');">3 Brief [Doc. 3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3], Defendants filed a Motion to Strike Docs 3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3, 3');">301');">1');">1');">1-1');">1');">1');">1 to 3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3-9 and 3');">305. [Doc. 3');">308');">3');">308');">3');">308');">3');">308] Defendants argued that the Court did not “request that the Parties provide their position on the Court&#3');">39;s action, ” and that the United States&#3');">39; filing is “an improper post-decisional filing of additional evidence and argument.” [Doc. 3');">308');">3');">308');">3');">308');">3');">308, 3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3] Defendants argued that the United States&#3');">39; arguments are beyond what Rule 53');">3(f) allows in response to a special master&#3');">39;s report. [Doc. 3');">308');">3');">308');">3');">308');">3');">308, p. 5');">p. 5] Defendants further argued that the United States&#3');">39; submission of documentation, including the report of a GSA Auditor and the report of an expert, were inappropriate and prejudicial because Defendants do not have an opportunity to respond and the expert report was not disclosed in compliance with the deadline for expert disclosures by the United States. [Doc. 3');">308');">3');">308');">3');">308');">3');">308, p1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">10-1');">1');">1');">13');">3] Finally, Defendants argued that the reports are speculative, unreliable and based on incomplete or possibly inaccurate information. [Doc. 3');">308');">3');">308');">3');">308');">3');">308, pp. 8-1');">1');">1');">11');">1');">1');">1]

         The United States responded, submitting that it properly set forth its “position that the Special Master reports, upon which the Court relied in issuing its March 3');">31');">1');">1');">1, 201');">1');">1');">17 Memorandum Opinion and Order, are unreliable, and [the United States] offers evidence to support its position.” [Doc. 3');">329');">3');">329');">3');">329');">3');">329');">3');">329');">3');">329');">3');">329');">3');">329, 1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1] The United States points out that Rule 53');">3(f) allows the Court to receive evidence in reviewing de novo all factual findings and legal conclusions made by a special master. [Doc. 3');">329');">3');">329');">3');">329');">3');">329');">3');">329');">3');">329');">3');">329');">3');">329, p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2] The United States argued: “[b]ecause the Special Master&#3');">39;s reports, as well as the rest of Defendants&#3');">39; financial and other records, are unreliable, the United States requested the Court to give the Co-Special Master the authority to test Defendants&#3');">39; financial records.” [Doc. 3');">329');">3');">329');">3');">329');">3');">329');">3');">329');">3');">329');">3');">329');">3');">329, 3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3] The United States submitted that Ms. Speer&#3');">39;s and Mr. Street&#3');">39;s opinions are not speculative and are admissible. [Doc. 3');">329');">3');">329');">3');">329');">3');">329');">3');">329');">3');">329');">3');">329');">3');">329, pp. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4-6] The United States also argued that it timely and properly disclosed its experts&#3');">39; testimony, and it attached its expert disclosures made on March 3');">30, 201');">1');">1');">17 as evidence thereof. [Doc. 3');">329');">3');">329');">3');">329');">3');">329');">3');">329');">3');">329');">3');">329');">3');">329, 7');">p. 7; Doc. 3');">329');">3');">329');">3');">329');">3');">329');">3');">329');">3');">329');">3');">329');">3');">329-2]

         Defendants also filed a Motion to Postpone Appointment of Co-Special Master. [Doc. 3');">309');">3');">309');">3');">309');">3');">309] Defendants noted that a hearing on the merits in the administrative proceeding related to this case is set for September 1');">1');">1');">11');">1');">1');">1 to 22, 201');">1');">1');">17, and that, “[o]nce the administrative proceeding is concluded, the Court&#3');">39;s jurisdiction to impose temporary injunctive relief under §228a will end.” [Doc. 3');">309');">3');">309');">3');">309');">3');">309, 3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3] Thus, Defendants argued that “it is very possible that proceedings relating to the Co-Special Master would not be concluded prior to the conclusion of the administrative proceedings, at which time the Court would no longer have jurisdiction to take any action on a report or recommendation by the Co-Special Master.” [Doc. 3');">309');">3');">309');">3');">309');">3');">309, p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4] Defendants argued that it is not a good use of the Court&#3');">39;s or the parties&#3');">39; time and resources to appoint a co-special master because there is already a Special Master in place, no customers have complained that they have not been paid, there have been no claims on HPL&#3');">39;s bond, and HPL&#3');">39;s creditors have not brought any complaints. [Doc. 3');">309');">3');">309');">3');">309');">3');">309, p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4]

         The United States responded to Defendants&#3');">39; Motion to Postpone Appointment of Co-Special Master by arguing that, “[w]hen the purpose of section 228a is to obtain interim relief until the Secretary&#3');">39;s order has become final, it is nonsensical to stay that very relief until the Secretary&#3');">39;s order becomes final.” [Doc. 3');">320');">3');">320');">3');">320');">3');">320, 1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1] The United States pointed to the many reasons it had already raised to show the need for additional relief: the United States&#3');">39; claim that Defendants have defrauded cattle sellers of over $2.7 million; the financial reports indicate that Defendants are operating while insolvent; and the large number of cattle sellers with whom Defendants conduct business who are at risk if Defendants&#3');">39; business fails. [Doc. 3');">320');">3');">320');">3');">320');">3');">320, p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2] Defendants replied by arguing that the relief requested by the United States, specifically, winding down HPL&#3');">39;s operations, would be permanent and the most severe form of relief potentially granted by the ALJ, and, therefore, granting such relief is a “decision [which] should be made by the ALJ as part of the administrative case.” [Doc. 3');">326');">3');">326');">3');">326');">3');">326, 3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3] Defendants further argued that the parties may settle or, at a hearing, the ALJ may fashion a remedy other than suspending or terminating HPL&#3');">39;s operations. [Doc. 3');">326');">3');">326');">3');">326');">3');">326, 3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3] Defendants disputed the United States&#3');">39; arguments that HPL is a threat to the livestock industry or insolvent and that Defendants have defrauded cattle sellers of $2.7 million. [Doc. 3');">326');">3');">326');">3');">326');">3');">326, pp. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4-9] Defendants also challenged the declaration of Mr. Prather as incorrect and inappropriate given the ongoing proceedings, calling the affidavit “nothing more than a self-serving, seemingly sham affidavit, ” which Defendants assert does not represent the position of GIPSA. [Doc. 3');">326');">3');">326');">3');">326');">3');">326, p. 9] Defendants submitted a letter written by defense counsel to Mr. Gordy, general counsel for GIPSA, summarizing defense counsel&#3');">39;s conversations with Mr. Gordy and submitting that, based on his understanding of his conversation with Mr. Gordy, Mr. Prather&#3');">39;s statements are “misleading and inaccurate.” [Doc. 3');">326');">3');">326');">3');">326');">3');">326, pp. 26-27] This letter is dated May 1');">1');">1');">10, 201');">1');">1');">17, and Defendants&#3');">39; filed their Reply May 1');">1');">1');">11');">1');">1');">1, 201');">1');">1');">17. [Doc. 3');">326');">3');">326');">3');">326');">3');">326]

         The United States filed a Motion to File a Sur-Reply [Doc. 3');">33');">30] to Defendants&#3');">39; reply regarding Defendants&#3');">39; Motion to Postpone Appointment of Co-Special Master. The United States submits that Mr. Gordy responded to defense counsel&#3');">39;s email of May 1');">1');">1');">10, 201');">1');">1');">17 prior to Defendants filing their Reply. [Doc. 3');">33');">30, ¶ 1');">1');">1');">10] The United States attached its proposed sur-reply, its GIPSA Complaint, and Mr. Gordy&#3');">39;s email response to Defendants&#3');">39; Counsel. [Doc. 3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3-1');">1');">1');">1, 3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3');">3');">303');">3-3');">3] In his email, Mr. Gordy stated that he did not believe that any of Mr. Prather&#3');">39;s statements were inaccurate and that GIPSA will seek over $2.5 million dollars in civil penalties and a ten-year suspension if the administrative case proceeds to a hearing. [Doc. 3');">33');">30-3');">3, 1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1] Mr. Gordy also stated that defense counsel had indicated that it would be impossible for the Defendants to remit the full amount allegedly due to the sellers, which Mr. Gordy states, he had previously told defense counsel was the main method for reducing civil penalties. [Doc. 3');">33');">30-3');">3, 1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1] Accordingly, the United States argued, settlement was unlikely. [Doc. 3');">33');">30, ¶ 6] Defendants responded, requesting this Court to decline to allow the Sur-Reply, which Defendants state “is nothing more than an effort to correct glaring deficiencies in Mr. Prather&#3');">39;s declaration.” [Doc. 3');">33');">38, p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2] Defendants did not address the statements within Mr. Gordy&#3');">39;s email, but instead attacked Mr. Prather&#3');">39;s declaration, particularly his statements regarding the likelihood of settlement and how long the GIPSA proceeding may take, as not based on personal knowledge and violative of Federal Rules of Evidence 701');">1');">1');">1, 702, 703');">3, 802, 403');">3, 408. [Doc. 3');">33');">38] The United States replied, arguing that its sur- reply was necessary to address Defendants&#3');">39; “unsubstantiated allegations and the omission of material information.” [Doc. 3');">341');">1');">1');">1, p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2');">p. 2]

         While the briefing discussed above was being submitted, the Court held a status conference, at which Mr. Cowen was present, during which the Court addressed both concerns raised by Mr. Cowen and some of the matters raised by the briefs to that point. Based on a letter received from Mr. Cowen the Court clarified his duties going forward as Special Master. [Doc. 3');">321');">1');">1');">1, pp. 9-1');">1');">1');">11');">1');">1');">1] The Court addressed a document entitled “Accountant&#3');">39;s Compilation Report, ” which had been the subject of briefing, particularly by the United States. [Doc. 3');">321');">1');">1');">1, p1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">11');">1');">1');">1-1');">1');">1');">12] The Court asked Mr. Cowen to explain a paragraph which stated that the owners have elected to omit substantially all of the disclosures ordinarily included in financial statements prepared in accordance with the income tax basis of accounting. [Doc. 3');">321');">1');">1');">1, p1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">11');">1');">1');">1-1');">1');">1');">13');">3] Mr. Cowen explained that this statement means that his reports did not contain “any notes there consisting of the method of accounting that was used to arrive at these figures.” [Doc. 3');">321');">1');">1');">1, 1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">12] The Court also asked Mr. Cowen to explain the statement in the Accountant&#3');">39;s Compilation Report that: “If the omitted disclosures were included in the financial statements, they might influence the user&#3');">39;s conclusions about the company&#3');">39;s assets, liabilities, equity, revenues, and expenses.” [Doc. 3');">321');">1');">1');">1, 1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">15] Mr. Cowen answered that this statement means that the disclosure statements were omitted because the information in the report is not audited and he therefore assigned no assurances to the statements therein. [Doc. 3');">321');">1');">1');">1, 1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">15] With the agreement of the parties, the Court ordered Mr. Cowen to provide the disclosure statements for all reports he has provided thus far. [Doc. 3');">321');">1');">1');">1, p3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">34');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">34-3');">36] The Court finally asked Mr. Cowen to explain the statement in the Accountant&#3');">39;s Compilation Report which stated: “We are not independent with respect to High Plains Livestock, L.L.C.” [Doc. 3');">321');">1');">1');">1, 1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">16] Mr. Cowen explained that the statement is a term of art, required for purposes of peer review by the New Mexico Accounting Board, and it reflects the fact that he does not need to call his “client” when reconciling amounts and making journal entries. [Doc. 3');">321');">1');">1');">1, p1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">16-1');">1');">1');">17]

         The Court addressed a concern Mr. Cowen raised about instructions given to him in the Court&#3');">39;s March 3');">31');">1');">1');">1, 201');">1');">1');">17 Memorandum Opinion and Order. The Court ordered that Mr. Cowen “randomly inquire, each month, with 20% of the sellers with whom Defendants did business that month to determine that the sellers are receiving their proceeds within the deadlines required by the PSA and GIPSA regulations, or their credit agreement (if any).” [Doc. 296');">296, 3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">35');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">3');">3');">3');">p. 3');">35] Mr. Cowen indicated that no one person he might contact at a business, such as the dairyman, the herdsman, or the bookkeeper, would have all of the relevant information. [Doc. 3');">321');">1');">1');">1, 7');">p. 75] Therefore, Mr. Cowen proposed that HPL bring the checks to his office and he or his staff would log the checks and mail them, to ensure that the checks were mailed within the period required. [Doc. 3');">321');">1');">1');">1, 7');">p. 75] The parties agreed to this solution. [Doc. 3');">321');">1');">1');">1, p7');">p. 78-81');">1');">1');">1] As to the approximately four dairies who pick up their checks rather than receive them in the mail, Defendants proposed to list those dairies, limit that method to those dairies, and provide copies of the documents regarding those sales to Mr. Cowen immediately. [Doc. 3');">321');">1');">1');">1, p. 80]

         In addition, Mr. Cowen sought guidance from the Court as to the proper method of communication, particularly between counsel and himself as well as between himself and the Court. [Doc. 3');">321');">1');">1');">1, p7');">p. 76-77]

         Mr. Cowen also explained that he revised the December, 201');">1');">1');">16 and January, 201');">1');">1');">17 financial statements based on the sale of some corn that was an asset which was not previously represented on Mr. Cowen&#3');">39;s reports, the sale of some sorghum, a wheatlage crop, and other matters he “cleaned up, ” and the value of those crops and assets were discussed. [Doc. 3');">321');">1');">1');">1, p1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">19-23');">3, 3');">36-50] Mr. Cowen also discussed an annual report submitted to GIPSA, stating that there is a difference between his reports and the GIPSA report because Mr. Cowen reports the lease agreement as an operating lease while the GIPSA report, which he did not prepare, shows the lease as a capital lease. [Doc. 3');">321');">1');">1');">1, pp. 24-25, 44-45]

         The Court asked Mr. Cowen to leave the room so the Court could take up other matters with the parties. The Court informed the parties that the Court would appoint Johnson, Miller & Co. (JM&C) as the co-special master. [Doc. 3');">321');">1');">1');">1, pp. 58-59] The United States stated it would take 90 to 1');">1');">1');">120 days for JM&C to complete an evaluation of HPL. [Doc. 3');">321');">1');">1');">1, p. 84] The parties presented argument to the Court regarding whether the Court should postpone the appointment of the co-special master until after the trial before the administrative law judge. [Doc. 3');">321');">1');">1');">1, pp. 5');">p. 58-67] Defendants argued that if any evaluation occurred, that it should not include the period of time prior to Mr. Cowen&#3');">39;s appointment. [Doc. 3');">321');">1');">1');">1, pp. 67');">p. 67-69] The Court asked the parties to submit proposed instructions for the co-special master. [Doc. 3');">321');">1');">1');">1, p. 67');">p. 67] The parties could not agree on the proposed instructions, and thus submitted separate proposals, which are discussed in detail below.

         ANALYSIS

         Defendants&#3');">39; Motion to Postpone Appointment of Co-Special Master [Doc. 3');">309');">3');">309');">3');">309');">3');">309]

         Defendants ask the Court to postpone appointment of a co-special master because:

it is very possible that proceedings relating to the Co-Special Master would not be concluded prior to the conclusion of the administrative proceedings, at which time the Court would no longer have jurisdiction to take any action on a report or recommendation by the Co-Special Master.

[Doc. 3');">309');">3');">309');">3');">309');">3');">309, p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4] Defendants argue that “it would not be a good use of the Court&#3');">39;s, the Parties&#3');">39; or the Co-Special Master&#3');">39;s time, money or resources to implement injunctive relief over which the Court may no longer have jurisdiction by December 3');">31');">1');">1');">1, 201');">1');">1');">17.” [Doc. 3');">309');">3');">309');">3');">309');">3');">309, p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4');">p. 4]

         The only remaining cause of action is the United States&#3');">39; request for injunctive relief as allowed by 7 U.S.C. § 228a. To the extent the Court has the authority to grant injunctive relief, including the appointment of a co-special master, the relief must be consistent with the text and purpose of Section 228a. Likewise, in deciding Defendants&#3');">39; request to postpone the appointment of a co-special master, the analysis must begin with Section 228a. See United States v. Sprenger, 3');">3d 1');">1');">1');">13');">305');">625 F.3');">3d 1');">1');">1');">13');">305, 1');">1');">1');">13');">307 (1');">1');">1');">10th Cir. 201');">1');">1');">10) (“Our interpretation of a statute begins with its plain ...


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