other two issues raised by Sandoz is hereby denied for the reasons set forth above.

So ordered.

IN THE MATTER OF MEDZAM, LTD.

FIFRA Appeal No. 91–1

FINAL DECISION

Decided July 20, 1992

Syllabus

The Respondent in this action has appealed from the issuance to it of a Default Order under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA). Respondent contends that it was not properly served with the Complaint. It asserts that the Complaint was not properly "directed" under 40 CFR §22.05(b)(1)(ii) because the acknowledgement of receipt of the Complaint was signed by a bookkeeper, rather than an officer, partner, or managing agent of the company. Respondent also challenges the determination that its product is a pesticide and thus subject to FIFRA and contends that its actions were not violations of FIFRA.

Held: To be properly directed under § 22.05(b)(1)(ii), a Complaint must be addressed and mailed to a person within one of the classes of persons specified therein. If it is properly addressed and mailed, and the return receipt signed, it is valid without regard to which of Respondent's employees signed the receipt on behalf of the Respondent. In this instance, the Complaint was addressed and mailed to the Respondent without being further directed to any person within any of the classes listed in § 22.05(b)(1)(ii). Therefore, service of the Complaint was not properly directed to the Respondent, and thus is invalid. Accordingly, the Default Order is vacated and the Complaint dismissed.

Before Environmental Appeals Judges Ronald L. McCallum and Edward E. Reich.

Opinion of the Board by Judge Reich:

Respondent, Medzam, Ltd., has appealed the issuance to it of a Default Order under the Federal Insecticide, Fungicide, and Rodenticide Act, as amended, 7 U.S.C. § 136 et seq. (FIFRA). The order was issued on July 30, 1991, by Constantine Sidamon-Eristoff, the Regional Administrator of the U.S. Environmental Protection Agency's Region II. The order assesses a $3,500 penalty for alleged violations of Section 12(a)(1)(A) of FIFRA, 7 U.S.C. § 136j(a)(1)(A), arising from the distribution or sale of an unregistered pesticide,

Red-Z, at Respondent's store in North Tonawanda, N.Y. on March 22, 1989.

The order issued by the Regional Administrator constitutes an initial decision of the Agency, pursuant to 40 CFR § 22.17(b). Initial decisions may be appealed to the Environmental Appeals Board pursuant to 40 CFR §22.30 (57 Fed. Reg. 5325, February 13, 1992). This appeal has been taken under that provision.

I. BACKGROUND

The basic facts of this case do not appear to be in dispute.1 On March 22, 1989, an inspector from the New York State Department of Environmental Conservation collected a sample of Respondent's product, Red-Z, from the stock that Respondent held for sale or distribution at its North Tonawanda store. The product sample bore a label that stated in part, "Sanitizer Deodorizer Red-Z is a unique fast acting encapsulator with stabilized chlorine available at 10,000 ppm. The application of a chlorine compound is consistently recommended for use on spilled body fluids. Aggressively attacks: AIDS, Hepatitis and any other blood bourne [sic] virus."

Red-Z is not registered as a pesticide with EPA. As will be discussed later, Respondent asserts that Red-Z is not a pesticide and thus is exempt from registration under FIFRA.

Region II's Director, Environmental Services Division, having determined that Red-Z was subject to the registration requirement, issued a Complaint to Respondent on September 27, 1990, alleging that Respondent violated FIFRA by distributing or selling an unregistered pesticide. In the Complaint, Region II proposed a civil penalty of $3,500, calculated in accordance with the EPA Enforcement Response Policy for FIFRA issued on July 2, 1990. The Complaint advised Respondent of its right to a hearing pursuant to Section 14(a) of FIFRA, 7 U.S.C. § 136 l(a)(3) and 40 CFR Part 22. The Complaint further provided that to avoid being found in default, an Answer had to be filed within twenty days after service of the Complaint, which Answer may include a request for a hearing. The Complaint outlined the consequences of failure to respond as follows:

Failure to admit, deny, or explain any of the factual
allegations in the Complaint will be deemed to con-
stitute an admission of the allegations. Failure to

1 Moreover, if a default is determined to have occurred, 40 CFR § 22.17 provides that such default constitutes an admission of all facts alleged in the complaint.

file a written Answer within twenty (20) days of
receipt of this Complaint will be deemed to represent
Respondent's admission of all facts alleged in the
Complaint and a waiver of its right to contest such
facts. In such event, a Final Order of Default will
be issued by the Regional Administrator, and the
civil penalty proposed herein will be imposed without
further proceedings.

Complaint at 3.

The Complaint was mailed on September 27, 1990, via certified mail. Region II received a return receipt for the Complaint stamped October 1, 1990, and bearing the signature of "Kathleen Moreland" as signing for Respondent. Respondent admits that it did not file an Answer to the Complaint prior to the expiration of the 20 days. However, Respondent contests the validity of the service of the Complaint.

On May 30, 1991, Complainant filed a Motion for Default Order with the Region II Regional Administrator pursuant to 40 CFR §§ 22.16 and 22.17. A copy of the Motion was served on Respondent pursuant to 40 CFR § 22.17(a) and was received on June 5, 1991. Respondent filed a timely response on June 10, 1991, entitled "Respondent's Answer and Affirmative Defenses." Complainant then entered into negotiations with Respondent which were unsuccessful. The Regional Administrator issued the Default Order on July 30, 1991. The final order, while noting the receipt of Respondent's reply in the Preliminary Statement section, was virtually identical to the proposed order included with the Motion for Default Order. Respondent then appealed.

Respondent's appeal raises both procedural and substantive issues. Respondent asserts that the Complaint was not properly served because it was not "directed to an officer, partner, a managing or general agent, or to any other person authorized by appointment or by Federal or State law to receive service of process." (40 CFR § 22.05(b)(1)(ii)). Respondent states that Kathleen Moreland, a bookkeeper, was not authorized to receive service. In fact, Respondent characterizes Ms. Moreland as a "disgruntled employee" who was terminated on or about the October 1, 1990, date listed on the return receipt. The Respondent-Appellant's Brief on Appeal and Motion to Set Aside, on page 3, refers back to the discussion of this issue in its June 10, 1991, "Answer". In that document, Respondent states:

19. At no time was Kathleen Moreland an employee
of respondent authorized to accept service of process
or complaints, nor was she a "managing agent" or
person of authority of respondent.

20. Kathleen Moreland was employed by respondent
as a bookkeeper, but was fired for incompetency on
or about October 1, 1990. At all times herein mate-
rial, after being terminated, Kathleen Moreland was
angry and resentful and did certain physical damage
and engaged in certain physical damage and acts
of retribution in respondent's offices.

21. At no time did Kathleen Moreland turn over to
respondent or any of its officers or employees a copy
of the complaint which she allegedly received on or
about October 1, 1990.

22. Respondent does not believe that said complaint
was served on Kathleen Moreland on October 1,
1990, but rather, on a later date and that she fal-
sified or altered the date of receipt in anger and
retribution.

Respondent's Answer and Affirmative Defenses (June 10, 1991) at

5.

Respondent contends that due to the allegedly defective service of the Complaint, its first notice of this proceeding was on June 5, 1991, when it received a copy of the Motion for Default Order and thus its Answer on June 10 was timely and the Default Order should not have been issued.

Respondent further challenges whether Red-Z is in fact a pesticide within the meaning of 7 U.S.C. § 136. Respondent describes its product as follows:

Respondent's product is essentially an encapsulation product which performs a mechanical encapsulating function on liquids, i.e., it solidifies liquids.

The presence of an extremely low level (less than 1%) of available chlorine is incidental to the encapsulating function, and is far less than the 2% minimum. Respondent's Red-Z product resembles a host