Sultan Chemists, Inc. v. United States Environmental Protection Agency

Filed February 6, 2002
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 00-3711
SULTAN CHEMISTS, INC.,
Petitioner
v.
UNITED STATES ENVIRONMENTAL
PROTECTION AGENCY,
Respondent
Petition for Review of the Final Decision of the
Environmental Appeals Board,
Environmental Protection Agency
(No. 97-7)
Argued July 12, 2001
Before: SLOVITER, ALITO, and GREENBERG,
Circuit Judges
(Filed February 6, 2002)
Bruce Robins (Argued)
Feder, Kaszovitz, Isaacson, Weber,
Skala & Bass
New York, N.Y. 10122
Attorney for Petitioner
Michele L. Walter (Argued)
United States Department of Justice
Environmental Defense Section
Washington, D.C. 20026-3986
Attorney for Respondent
OPINION OF THE COURT
SLOVITER, Circuit Judge.
The petitioner, Sultan Chemists, Inc. ("Sultan"), has filed
a petition for review of the final decision of the
Environmental Appeals Board ("EAB") of the Environmental
Protection Agency ("EPA"). The EAB affirmed an
administrative enforcement action against Sultan for
eighty-nine violations of S 12 of the Federal Insecticide,
Fungicide, and Rodenticide Act ("FIFRA"), 7 U.S.C. S 136j
(2001),1 which makes unlawful, among other things, the
sale or distribution of a pesticide that has not been
registered or otherwise authorized in the manner required

-- 1 of 13 --

by law. Sultan was found liable for distributing or selling
unregistered pesticide products and was assessed a civil
penalty of $175,000. Sultan does not challenge the violation.2
Instead it relies on the guaranty provision of FIFRA
S 12(b)(1), which allows a person to avoid liability if s/he
received the pesticide from a person who guaranteed, in
writing and in a specified form, that the pesticide was
legally registered and otherwise satisfied the requirements
of FIFRA. Sultan claims that it has established that it
received such a guaranty and therefore it should not be
liable under S 12. It appears that this case raises a matter
of first impression in the federal appellate courts about
what constitutes a guaranty under FIFRA S 12(b)(1) that
will shield distributors from liability.
_________________________________________________________________
1. We refer to S 12 of FIFRA by its section number throughout the text
in the interest of brevity, but all other FIFRA sections will be referenced
by their U.S. Code section numbers.
2. On appeal, Sultan states that four of the counts involve products that
were not shipped out. However, these products were found, as part of
the EPA’s inspections, in finished packages, released for shipment, and
stored with other such pesticides that were finished and released for
shipment. This fits within the statutory preclusion of prohibited actions.
7 U.S.C. S 136(gg).
2
I.
BACKGROUND
FIFRA regulates the manufacture, sale, distribution, and
use of pesticides through a national registration system.
Under FIFRA, pesticides must be registered with the EPA
before they can be sold or distributed. 7 U.S.C.SS 136a(a),
136j(a)(1)(A).
Sultan manufactures and distributes dental supplies and
has held various pesticide registrations with the EPA since
1973. On October 14, 1992, Sultan entered into an
agreement ("the Agreement") with Health Care Products Inc.
("HCP"), a Canadian manufacturer, and Meditox Inc.
("Meditox"), HCP’s principal distributor in the United States.
App. at 405-35. The Agreement provided that Sultan would
distribute a line of antimicrobial pesticide products
manufactured by HCP ("Products"), including
glutaraldehyde solution ("the Solution"), disinfectant
towelettes, infection control kits, infection control kit refills,
disinfectant spray, and disinfectant solution concentrate.
App. at 428. The Agreement contained an explicit guaranty
as to the Solution’s registration. The Agreement also stated
that the Solution formed the basis for all of the Products.
App. at 423 ("Meditox and HCP warrant that the U.S. EPA
has assigned No. 58994-1 to the Solution, the formulation
of which forms the basis for all of the Products."). See also
App. at 411, 431.

-- 2 of 13 --

During two EPA inspections in 1993, the Office of
Enforcement and Compliance Assurance found that four of
the products distributed or sold by Sultan were not
registered. These four products were: (1) WipeOut
Disinfectant Towelettes ("Towelettes"); (2) WipeOut
Disinfectant Spray ("Spray"); (3) WipeOut Disinfectant
Wand ("Wand"); and (4) QuicKit Biological Fluid Emergency
Spill Kit ("QuicKit"). Each of these contained the Solution,
which had been properly registered with the EPA. However,
FIFRA requires a separate registration for each pesticide
product, defined in the applicable regulation as:
[A] pesticide in the particular form (including
composition, packaging, and labeling) in which the
3
pesticide is, or is intended to be, distributed or sold.
The term includes any physical apparatus used to
deliver or apply the pesticide if distributed or sold with
the pesticide.
40 C.F.R. S 152.3(t) (2001). The Wand, Towelettes, Spray,
and QuicKit were not separately registered.
On February 15, 1995, the EPA issued a complaint
against Sultan for eighty-nine counts of distributing or
selling the four unregistered products, in violation of FIFRA
S 12(a)(1)(A), 7 U.S.C. SS 136a(a), 136j(a)(1)(A), and seeking
$445,000 in penalties. Each count pertained to the
distribution or sale of a specific unregistered pesticide to
particular customers on separate occasions. Sultan
requested a formal administrative hearing, which was held
on September 23, 1998 with an Administrative Law Judge
as the Presiding Officer ("PO"). Sultan defended primarily
with two arguments.
First, Sultan argued that the Agreement created a valid
guaranty from HCP and Meditox under FIFRA S 12(b)(1)
with respect to all the Products, thereby shielding Sultan
from liability for distributing the four unregistered
products. Section 12(b)(1) allows an exemption from liability
for violating the registration requirement for:
[A]ny person who establishes a guaranty signed by,
and containing the name and address of, the registrant
or person residing in the United States from whom the
person purchased or received in good faith the
pesticide in the same unbroken package, to the effect
that the pesticide was lawfully registered at the time of
sale and delivery to the person, and that it complies
with the other requirements of this subchapter, and in
such case the guarantor shall be subject to the
penalties which would otherwise attach to the person
holding the guaranty under the provisions of this
subchapter.
7 U.S.C. S 136j(b)(1). Second, Sultan argued that the
proposed penalty was inappropriate and was not properly

-- 3 of 13 --

assessed under the statutory criteria set out in FIFRA. See
7 U.S.C. S 136l.
4
The PO focused on whether the Agreement created a valid
guaranty under FIFRA S 12(b)(1). Even granting that Sultan
believed in good faith that the Agreement contained an
unambiguous guaranty that all of the Products were
registered, the PO found that the guaranty language of the
Agreement only applied to the Solution. With respect to the
other Products, the Agreement failed to fulfill all of the
requirements set out in FIFRA’s guaranty clause. Sultan
had argued that the statement in the Agreement to the
effect that the Solution formed the basis for all of the
Products was sufficient to establish a written guaranty that
all of the Products were registered. The PO rejected that
argument, finding that the Agreement clearly distinguished
between the Solution and the Products since the Agreement
defined "Products" to include the Solution as well as the
Towelettes, QuicKit, and Spray. Further, the PO interpreted
FIFRA as establishing specific criteria for creating a
guaranty, and he found that at least one of these elements
was not satisfied, namely HCP and Meditox did not assert
in the Agreement that the Products were lawfully registered
at the time of the sale and delivery to Sultan.
At the hearing Sultan sought to introduce extrinsic
evidence to support its view of the meaning of the
Agreement. The EPA objected to this evidence, which
included the testimony of Sultan’s attorney, Gabriel
Kaszovitz, and its president, Paul Seid, both of whom took
part in negotiating the Agreement. In testimony, both Seid
and Kaszovitz said that they were assured during the
negotiations with Meditox and HCP that the Products met
EPA regulations and, further, that the signers of the
Agreement intended it to warrant that the Products were
approved by the EPA. App. at 268-71, 336, 344-45. This
extrinsic evidence also included draft labels for some of the
Products, which contained EPA registration numbers, and
advertising material, which Meditox sent to Sultan, stating
that the WipeOut products passed EPA efficiency tests.
Sultan argued that this evidence established a "course of
dealing" that showed the parties intended to create a
guaranty covering all of the Products (including those that
were in fact unregistered pesticides).
The PO held he would consider extrinsic evidence under
5
S 672.202(1) of the Uniform Commercial Code contained in
the Florida Code,3 which provides that terms of a contract
"may be explained or supplemented" by evidence of the
"course of dealing" or "course of performance." Fla. Stat.
S 672.202 (2001). The PO decided, however, that the
evidence offered was insufficient to establish a clear course
of dealing. He also excluded evidence pertaining to the

-- 4 of 13 --

course of performance because Sultan did not specifically
raise the issue in its post-hearing brief.
On August 4, 1999, the PO issued an Initial Decision
finding Sultan liable for all eighty-nine counts. The EPA
had proposed a penalty of $445,000 (eighty-nine counts
multiplied by $5,000 per count). In considering the
appropriate penalty, the PO applied the following penalty
factors set forth in FIFRA: (1) the gravity of the violation; (2)
the size of the business; and (3) the ability to pay. 7 U.S.C.
S 136l(a)(4). In accordance with the rules governing EPA
assessment of civil penalties, 40 C.F.R. S 22.27(b) (2001),
the PO also turned to the "FIFRA Enforcement Policy" set
forth by the EPA Office of Compliance Monitoring and Office
of Pesticides & Toxic Substances in the Enforcement
Response Policy for the Federal Insecticide, Fungicide, and
Rodenticide Act (July 2, 1990), App. at 556-609, to help
interpret these factors. In consideration of the penalty
factors, the PO first reduced the base penalty to $197,421.
Then because of additional factors (i.e., Sultan was not the
actual manufacturer; Sultan did not intentionally violate
the law; Sultan held a good faith belief that there was a
valid guaranty for the unregistered pesticides), the PO made
an additional, discretionary eleven-percent reduction of the
penalty to $175,000.
On September 24, 1999, Sultan appealed to the EAB,
raising three issues: (1) whether the PO erred in holding
that the Agreement failed to create a valid guaranty under
FIFRA S 12(b)(1); (2) whether he improperly excluded
extrinsic evidence relating to the parties’ "course of
_________________________________________________________________
3. The Agreement provided that it shall "be construed and enforced in
accordance with the laws of the State of Florida." App. at 426. The EPA
and Sultan agree that Florida contract law guides the construction of the
Agreement.
6
performance"; and (3) whether he improperly assessed the
$175,000 penalty. On September 13, 2000, the EAB
affirmed the PO’s findings and penalty.
The EAB reiterated the PO’s interpretation of FIFRA
S12(b)(1) as establishing six specific requirements. For
Sultan to have a valid guaranty, FIFRA requires that:
(1) the guaranty was written;
(2) the guaranty included the signatures, names, and
addresses of HCP and Meditox;
(3) the guaranty provided that the unregistered
products were lawfully registered at the time of sale
and delivery to Sultan;
(4) the guaranty provided that the unregistered
products comply with the other requirements of FIFRA

-- 5 of 13 --

subchapter II;
(5) Sultan received the unregistered products in good
faith; and
(6) Sultan purchased or received the unregistered
products in an unbroken package.
See App. at 43-44. The EAB agreed with the PO that the
Agreement lacked the third requirement. The EAB found
that the Agreement also failed to satisfy the fourth
requirement since it did not assert that the unregistered
pesticides complied with FIFRA’s other requirements.
With regard to extrinsic evidence, the EAB found that the
PO erred in excluding evidence as to course of performance
because, in its brief, Sultan used the terms "course of
dealing" and "course of performance" interchangeably.
Nonetheless, it held that the extrinsic evidence offered was
insufficient to establish either a course of dealing or a
course of performance. The EAB also affirmed the penalty
that the PO assessed, rejecting Sultan’s arguments that the
penalty was still excessive in light of Sultan’s good faith,
lack of willfulness, and limited finances.
Sultan petitioned this court for review and listed the
following as the issues presented: (1) whether the EAB
abused its discretion by construing the Agreement as failing
7
to satisfy the requirements of FIFRA S 12(b)(1); (2) whether
the EAB abused its discretion in deciding that Sultan’s
extrinsic evidence was insufficient to show that the
Agreement created a guaranty under S12(b)(1); and (3)
whether the EAB abused its discretion in interpreting
FIFRA’s penalty factors and in assessing the $175,000
penalty.
II.
JURISDICTION AND STANDARD OF REVIEW
This court has jurisdiction to review the decision of the
EAB pursuant to 7 U.S.C. S 136n(b). Under FIFRA, the
factual findings of the EAB "shall be sustained if [they are]
supported by substantial evidence when considered on the
record as a whole." 7 U.S.C. S 136n(b)."Substantial
evidence" is "such relevant evidence as a reasonable mind
might accept as adequate to support a conclusion." Pierce
v. Underwood, 487 U.S. 552, 564-65 (1988) (quotations and
citation omitted). With regard to the interpretation of
FIFRA, "if [a] statute is silent or ambiguous with respect to
the specific issue, the question for the court is whether the
agency’s answer is based on a permissible construction of
the statute." Chevron U.S.A., Inc. v. NRDC , 467 U.S. 837,
843 (1984). With respect to legal questions generally, under
the Administrative Procedure Act this court’s scope of
review is limited to determining whether an agency’s

-- 6 of 13 --

decision was "arbitrary, capricious, an abuse of discretion,
or otherwise not in accordance with law." 5 U.S.C.
S 706(2)(A) (2001).
III.
DISCUSSION
A. Requirements of FIFRA S12(b)(1)
We first evaluate the EAB’s interpretation of FIFRA
S12(b)(1) as establishing six requirements necessary for
creating a guaranty. The EPA argues that one must first
look to the plain language of the statute in order to
8
interpret it. See Consumer Prod. Safety Comm’n v. GTE
Sylvania, Inc., 447 U.S. 102, 108 (1980) (interpreting the
Freedom of Information Act). When read in its ordinary,
everyday sense, the provision does set out clear
requirements. The EAB’s construction of these
requirements as providing for six specific elements
comports with the plain language of the provision.
Sultan argues that the EPA’s interpretation of FIFRA is
"hypertechnical" and that the statute does not impose
"rigid" or "overly exacting" standards. Sultan notes that the
statute requires only that there be a guaranty "to the effect"
that the pesticide was lawfully registered, 7 U.S.C.
S 136j(b)(1), which it argues suggests that the guaranty
requirement is not especially stringent. In contrast, the
EAB interprets the same language to require that there
must be some assertion in the written instrument"to the
effect" that the pesticides were "lawfully registered." That is
not an unreasonable interpretation. Even if a statute’s
language is ambiguous, courts should defer to an agency’s
reasonable interpretation of a statute if Congress has
explicitly or implicitly delegated to the agency the authority
to issue an interpretation having the force of law and the
interpretation at issue is promulgated in the exercise of
that authority. United States v. Mead Corp., 121 S.Ct. 2164,
2171 (2001). Such delegation may be inferred when the
agency issues the interpretation in "formal adjudication,"
id. at 2173, which is what occurred here.
Sultan also takes issue with the EAB’s interpretation of
the guaranty in the Agreement as applying only to the
Solution. The EPA asserts that the language of the
Agreement provides "the best evidence of the intent and
meaning of the parties." Boat Town U.S.A., Inc. v. Mercury
Marine Div. of Brunswick Corp., 364 So. 2d 15, 17 (Fla.
Dist. Ct. App. 1978) (citation omitted). It also argues that
the EAB gave the terms of the Agreement "the meaning that
would be attached to them by an ordinary person of
average understanding." Steuart Petroleum Co., Inc. v.
Certain Underwriters at Lloyd’s London, 696 So. 2d 376,
379 (Fla. Dist. Ct. App. 1997) (quotations and citation
omitted).

-- 7 of 13 --

9
Sultan argues that the Agreement contained
representations that all of the Products were registered at
the time of the sale and delivery to Sultan, thus satisfying
FIFRA S 12(b)(1). Specifically, Sultan points to the
statement that "Meditox and HCP warrant that the U.S.
EPA has assigned No. 58994-1 to the Solution, the
formulation of which forms the basis for all of the
Products." App. at 423.
The PO and the EAB pointed to other statements in the
Agreement that clearly undermine Sultan’s argument.
Throughout the Agreement there is a distinction made
between the "Solution" and the general category of the
"Products," which includes the Solution along with three of
the unregistered pesticides that Sultan distributed. 4 This
distinction is shown most clearly in Schedule "A" of the
Agreement which defines the Solution as one of the
Products, establishing "Solution" and "Products" as
separate terms. App. at 428. This distinction is also shown
in S 10 of the Agreement in which Meditox and HCP
warrant that the Solution has an EPA number assigned to
it while HCP confirms that the Products have"received all
necessary regulatory authority approvals in Canada." App.
at 423-24 (emphasis added). Such language in the
Agreement shows that the assertions about the Solution
apply only to the Solution and not to the remaining
Products. See Campbell v. Campbell, 489 So. 2d 774, 777
(Fla. Dist. Ct. App. 1986) (stating that "the use of different
language strongly implies that a different meaning was
intended"). As the PO noted, "[t]he fact that the Solution
‘forms the basis for all the Products’ does not make the
Solution the equivalent of the Products." App. at 14.
In addition, the Wand is not specifically mentioned in the
Agreement. App. at 424. There is, thus, no argument that
the Agreement intended the Wand to be registered. Further,
there is no assertion in the Agreement that any of the
unregistered products complied with the other FIFRA
requirements.5 The fact that the parties failed to include
guaranty language for the unregistered products similar to
_________________________________________________________________
4. Although Sultan distributed four unregistered products, as noted in
the text infra only three are mentioned in the Agreement. The Wand is
not.
5. For example, an applicant for registration under FIFRA must state the
pesticide’s complete formula, the claims made by the pesticides,
directions for its use, and a complete copy of the label. 7 U.S.C.
S 136a(c).
10
that used for the Solution clearly shows that they did not
intend the other products to be covered. See Azalea Park
Utils., Inc. v. Knox-Florida Dev. Corp., 127 So. 2d 121, 123

-- 8 of 13 --

(Fla. Dist. Ct. App. 1961) (noting that courts are reluctant
to add terms to a contract by implication).
Finally, Sultan’s assertion that the guaranty for the
Solution creates a guaranty for the other Products conflicts
with FIFRA. Under FIFRA’s implementing regulations, one
registration cannot apply to other pesticide products that
have different compositions, packaging or labeling, or
include different delivery or application apparatus.
Notwithstanding the presence of the same active ingredient
in the pesticides, each is an individual "pesticide product"
if it has a different composition, packaging, labeling,
delivery or application method. 40 C.F.R. S 152.3(t). It
follows that the Towelettes, QuicKit, Spray, Wand, and
Solution are each a separate pesticide product, requiring
separate registrations. Although the Solution was assigned
a registration number, this number could not be assigned
to more than one pesticide product.
Sultan asserts that it clearly intended for all of the
Products to be covered by the guaranty in the Agreement
since it would be against common sense for Sultan to have
obtained a guaranty for only one of the products it intended
to distribute. Whatever Sultan’s subjective intention, the
language of the Agreement contains no assertion to show
that HCP and Meditox guaranteed the registration of all of
the Products. A court cannot cure Sultan’s failure to obtain
broader assurances from HCP and Meditox, as it must not
"rewrite a contract to make it more reasonable for one of
the parties or to relieve a party from what turns out to be
a bad bargain." Barakat v. Broward County Hous. Auth.,
771 So. 2d 1193, 1195 (Fla. Dist. Ct. App. 2000) (citation
omitted).
Finally, Sultan argues that the EPA’s "hypertechnical"
interpretation of both the Agreement and FIFRA’s guaranty
provision runs counter to the purpose of the guaranty
provision, which is to shift liability to manufacturers who
lie about whether or not their products are registered. Br.
of Petitioner at 4. Sultan argues that if the guaranty
provision does not apply when a distributor made a good
11
faith mistake about a guaranty, then it is unclear under
what circumstances, if any, it would apply. As discussed
above, however, the EAB’s construction of FIFRAS 12(b)(1)
is a reasonable interpretation of the provision’s
requirements. Although a distributor’s good faith belief is
one of the six requirements to qualify for the guaranty
exemption from liability under S 12(b)(1), it is not the only
factor required and it is not by itself sufficient to escape
liability.
Further, Sultan cites no authority for the proposition that
the purpose of the guaranty provision is to shift liability to
deceitful manufacturers. The guaranty provision must be
construed in accordance with, and not inconsistent with,
the purpose of FIFRA’s registration program to protect

-- 9 of 13 --

human health and the environment from risks associated
with pesticides. Accordingly, the EPA may rigorously
enforce FIFRA against the distributor if the requirements of
the guaranty provision have not been met. Such a system
of enforcement is designed to encourage all parties to make
additional efforts to ensure registration as required by the
statute. The guaranty provision releases an innocent
distributor who reasonably relies on the written assurances
of the products’ manufacturers but it does not shield the
distributor of pesticides from the responsibility of ensuring
to the extent possible that the manufacturer has complied
with FIFRA’s requirements. We see no reason to reject the
EAB’s interpretation of S 12(b)(1) which places responsibility
on the distributor, thereby providing additional protection
for the consumer.
The EPA and the EAB both state that it is a matter of
first impression in the federal courts whether a distributor
who intended to obtain a guaranty that the product was
registered can be excused from this requirement by a good
faith belief that it was in fact registered. We agree with their
position that unless all of the requirements of the guaranty
provision have been met, the distributor does not qualify for
an exemption of liability. Accordingly, we will affirm the
EAB’s decision that the Agreement, coupled with Sultan’s
apparent intention to obtain a guaranty, does not satisfy
the requirements for a guaranty under FIFRA S 12(b)(1).
12
B. Course of Dealing
Sultan sought to rely on extrinsic evidence pertaining to
its dealings with HCP and Meditox in an effort to show that
"the parties clearly intended for the guarantees in the
Agreement to apply to the entire Product Line." Br. of
Petitioner at 15. It argues that the testimony of Seid and
Kaszovitz, the draft labels for some of the Products, and the
advertising material provided by Meditox show the intent of
the parties to the Agreement. It cites Florida law holding
that in interpreting a contract, it is necessary to first
ascertain the parties’ intent and references the statement of
the Florida Supreme Court that "[c]ontracts are not to be
interpreted by giving a strict and rigid meaning to general
words or expressions without regard to the surrounding
circumstances or the apparent purpose which the parties
sought to accomplish." St. Lucie County Bank & Trust Co.
v. Aylin, 114 So. 438, 441 (Fla. 1927) (quotations and
citations omitted).
The EPA responds that even under Florida law Sultan
can only introduce extrinsic evidence of a course of dealing
or performance if the language of the Agreement is
ambiguous. See Emergency Assocs., P.A. of Tampa v.
Sassano, 664 So. 2d 1000, 1002 (Fla. Dist. Ct. App. 1995)
(citing Boat Town U.S.A., 364 So. 2d at 17). Sultan does not
contend that the Agreement was ambiguous as its position
is that it clearly created a guaranty for all of the Products.
Thus, the EPA contends that Sultan had no basis for

-- 10 of 13 --

introducing extrinsic evidence.
Moreover, the EPA continues, even if the Agreement were
ambiguous, the EAB correctly determined that Sultan’s
extrinsic evidence is insufficient to establish a course of
dealing or performance. "Course of dealing" refers
specifically to conduct preceding the formation of the
contract. "Course of performance" refers to conduct
following contract formation. The EPA points out that the
advertising material and several of the draft labels were not
dated, and therefore could not be used as specific evidence
of conduct occurring either before or after the contract
formation. Also, the EAB’s finding that Sultan sent several
draft labels to HCP, App. at 442-46, that contained false
registration numbers, App. at 61-62, undermines Sultan’s
13
argument that it received materials that represented proper
EPA registration.
Perhaps most important is the EPA’s argument that
Sultan’s reliance on the extrinsic evidence is misplaced
because, under Florida law, extrinsic evidence may be
considered "not to vary the terms of the contract, but to
explain, clarify or elucidate the ambiguous language."
Vienneau v. Metro. Life Ins. Co., 548 So. 2d 856, 859 (Fla.
Dist. Ct. App. 1989). See Fla. Stat. S 672.202(1). Inasmuch
as the Agreement does not contain a clear, written guaranty
as to the registration of the four unregistered products, the
only purpose of the extrinsic evidence would be to vary,
rather than to simply explain, the Agreement terms. It
follows that the EAB did not abuse its discretion in
determining that the extrinsic evidence offered by Sultan
was insufficient to alter the PO’s interpretation of the
Agreement.6
C. Penalty
Much of Sultan’s remaining argument is directed to the
parties’ intent in establishing a guaranty that met the
requirement of S 12(b)(1). As we concluded above, Sultan’s
intent, even if innocent, cannot transform the language of
the Agreement into something that it is not. Such intent,
even if not relevant to liability, may be relevant to the
penalty. Sultan argues that if it is not protected by the
FIFRA guaranty provision, its good faith, noted by the PO,
makes the penalty the PO assessed against it
unconscionable, inequitable, and unwarranted. Sultan
states that the mitigating factors identified by the PO
warrant a much larger reduction in the penalty than the
eleven-percent reduction that was granted. According to
Sultan, under the assessment procedure followed in this
case, virtually any offender will be penalized the maximum
amount allowed by law. This is hardly a persuasive
argument inasmuch as the PO reduced Sultan’s penalty by
approximately sixty percent from the maximum amount
_________________________________________________________________

-- 11 of 13 --

6. In light of our disposition, we need not decide the extent to which
state law is relevant in the determination whether an Agreement meets
the requirement of S 12(b)(1), a strict liability statute.
14
allowed ($445,000 to $175,000) based on various mitigating
factors.
The EPA is charged with choosing the means by which to
enforce and achieve the goals of FIFRA. In such a case,
heightened deference is due to the agency’s penalty
assessment. Butz v. Glover Livestock Comm’n Co. , 411 U.S.
182, 185 (1973) (citing Am. Power & Light Co. v. SEC, 329
U.S. 90, 112 (1946)). FIFRA requires the EPA to consider
three factors in assessing a penalty: (1) the gravity of the
violation; (2) the size of the business; and (3) the ability to
pay. 7 U.S.C. S 136l(a)(4). The PO took these factors into
account. The PO also applied the FIFRA Enforcement Policy
to guide his interpretation of the statutory penalty factors.
Sultan offers no evidence to show that the PO went beyond
the bounds of the FIFRA penalty scheme. A review of the
EAB’s analysis shows that the PO’s interpretation of these
factors was based on a permissible construction of the
statute. App. at 70-79. It should therefore be given
deference. See Chevron USA, Inc. v. NRDC, 467 U.S. 837,
843 (1984).
The EAB interpreted the "gravity" factor as including the
ideas of risk, harm, and culpability, which is reasonable
given that the purpose of the FIFRA registration program is
to protect against the risk of harm from pesticide products.
The EPA explains that there are significant risks from the
distribution of unregistered pesticides, because, for
example, the liquid form of a pesticide may be more readily
absorbed through the skin than if the pesticides were in
granular form, causing more adverse effects. Br. of
Respondent at 6. On a scale of 1 (lowest) to 4 (highest), the
PO assigned Sultan a score of 2 for gravity and score of 2
for culpability. We have no basis to interfere with these
evaluations. The products were to be used to disinfect
dental equipment, and distribution of an ineffective
pesticide could cause harm both to dentists and patients.
The score reflects the PO’s decision that Sultan was not as
careful as the law requires. In particular, Kaszovitz,
Sultan’s lawyer, admitted that he had never read FIFRA,
nor had he considered it when drafting the Agreement. App.
at 320. This lack of diligence is compounded by the fact
that Sultan has held EPA pesticide registrations since 1973
15
and should have been quite familiar with the process
involved. App. at 636-37.
Similarly reasonable was the PO’s determination of
Sultan’s "size of business" in terms of its gross annual
revenues. A company’s revenue indicates the amount of

-- 12 of 13 --

resources it can allocate to regulatory compliance
programs. Sultan’s gross annual revenues were calculated
as being greater than $1,000,000, and the PO determined
Sultan could have been expected to comply with all EPA
requirements.
In determining Sultan’s ability to pay the penalty, the PO
considered Sultan’s average gross sales in the years 1990-
1993, a method set out in the FIFRA Enforcement Policy.
Sultan argues that its penalty is inappropriate because its
net income was only $27,000 for 1997. The PO found,
however, that Sultan’s assets exceeded its liabilities by
$1,500,000. App. at 25. Further, the penalties were
calculated based on Sultan’s gross income rather than its
net income. App. at 582. The PO found that Sultan’s gross
income provided sufficient revenue to pay the reduced
penalty.
Finally, the PO exercised his discretion in reducing the
penalty by an additional eleven percent to $175,000. This
reduction was based on three additional factors: that
Sultan was not the manufacturer; that Sultan did not
intentionally break the law; and that Sultan thought the
guaranty covered all of the pesticides. Although these
factors are not expressly included in the statute, the PO did
not abuse his discretion in considering them and in
denying a larger reduction.
The final penalty of $175,000 is well within the limits set
by FIFRA. Sultan has offered no evidence to show an abuse
of discretion by either the PO or the EAB at any point
during the penalty calculation process.
16
IV.
CONCLUSION
For the reasons set forth, we will deny the Petition for
Review with respect to the EAB’s determination of Sultan’s
liability and its penalty assessment.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
17

-- 13 of 13 --