Federal Fruit & Produce Company v. Liborio Markets #9, Inc. et al
ORDER granting 5 Plaintiff's Motion for TRO and Order setting Hearing on Preliminary Injunction; Motion Hearing set for 5/14/2012 03:00 PM in Courtroom A 801 before Judge William J. Martinez, by Judge William J. Martinez on 5/3/2012.(ervsl, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge William J. Martínez
Civil Action No. 12-cv-1145-WJM-BNB
FEDERAL FRUIT & PRODUCE COMPANY, a Colorado corporation
LIBORIO MARKETS #9, INC., a California corporation, in its corporate capacity d/b/a
LIBORIO MARKETS #11, INC., a California corporation d/b/a RANCHO LIBORIO,
LIBORIO COLORADO HOLDING COMPANY, a California corporation in its corporate
capacity d/b/a RANCHO LIBORIO,
LIBORIO HOLDING COMPANY, a California corporation in its corporate capacity d/b/a
TRIPLE A. GROCERS, INC., a California corporation in its corporate capacity d/b/a
JOHN ALEJO, in his corporate and individual capacity,
RANDY ALEJO, in his corporate and individual capacity,
ENRIQUE M. ALEJO, in his corporate and individual capacity, and
ANTHONY TRUJILLO, in his corporate and individual capacity
ORDER GRANTING PLAINTIFF’S MOTION FOR TEMPORARY RESTRAINING
ORDER AND SETTING HEARING ON PRELIMINARY INJUNCTION
Plaintiff Federal Fruit & Produce Company (“Plaintiff”) brings this action against
Liborio Markets #9, Inc., et al. (“Defendants”) alleging violations of various provisions of
the Perishable Agricultural Commodities Act (“PACA”), 7 U.S.C. § 499 et seq. (ECF
No. 1.) Contemporaneous with the filing of the Complaint, Plaintiff filed a Motion for
Temporary Restraining Order Without Notice and Preliminary Injunction (“Motion”).
(ECF No. 5.) For the reasons set forth below, the Motion is granted.
Plaintiff Federal Fruit & Produce Company is a Colorado corporation that sells
wholesale quantities of perishable agricultural commodities. (Compl. ¶ 3.) Defendants
are various corporate entities who are licensed to act as dealers and commission
merchants of perishable agricultural commodities, as well shareholders, officers, and
directors of these entities. (Id. ¶¶ 4-13.)
Between February 11, 2011 and September 17, 2011, Plaintiff sold Defendants
fresh produce worth $305,841.70. (Id. ¶ 15.) Of that amount, $266,646.95 remains
unpaid. (Id.) Each of the outstanding invoices sent by Plaintiff to Defendants contained
the following language:
The Perishable Agricultural Commodities listed on this
invoice are sold subject to the statutory trust authorized by
section 5(C) of the Perishable Agricultural Commodities Act,
1930 (7 U.S.C. 499E(C)). The Seller of these Commodities
retains his trust claim over these commodities, all inventories
of food or other products derived from these commodities
and any receivables or proceeds from the sale of these
commodities until full payment is received.
(E.g., ECF No. 1-1 at 7.)
Plaintiff has contacted Defendants in recent months to collect payment but has
been unsuccessful. (Kouba Decl. (ECF No. 6-1) ¶ 10.) Plaintiff believes that
Defendants are “experiencing severe financial difficulty.” (Id. ¶ 9.) Eight companies
related to Defendants have filed for bankruptcy within the past twenty days. (Id. ¶ 10.)
Entitlement to Injunctive Relief
To prevail on a motion for injunctive relief, the movant must establish that four equitable
factors weigh in his favor: (1) he is substantially likely to succeed on the merits; (2) he
will suffer irreparable injury if the injunction is denied; (3) his threatened injury
outweighs the injury the opposing party will suffer under the injunction; and (4) the
injunction would not be adverse to the public interest. See Westar Energy, Inc. v. Lake,
552 F.3d 1215, 1224 (10th Cir. 2009). “[B]ecause a preliminary injunction is an
extraordinary remedy, the right to relief must be clear and unequivocal.” Greater
Yellowstone Coal. v. Flowers, 321 F.3d 1250, 1256 (10th Cir. 2003).
The Court finds that Plaintiff has satisfied each of these four prongs. First,
Federal regulations provide that payment for perishable agricultural commodities is due
no later than 30 days after delivery. See 7 C.F.R. § 46.2(aa). Plaintiff has submitted
invoices showing that it delivered produce to Defendants through most of 2011 but has
still yet to be paid for much of this. (ECF No. 1-1; Kouba Dec. ¶ 6.) Plaintiff has
submitted a sworn statement by its controller stating that it has attempted to collect
these debts and Defendants have ceased communication. (Kouba Decl. ¶ 10.) On this
record, the Court finds that Plaintiff has shown a substantial likelihood of success on
the merits of their claims.
Although purely monetary loss is not typically found to be an irreparable injury,
dissipation of PACA’s statutory trust is an exception to this rule. See Frio Ice v.
Sunfruit, Inc., 918 F.2d 154, 159 (11th Cir. 1990); Continental Fruit Co. V. Thomas J.
Garziolis & Co., 774 F.Supp. 449, 453 (N.D. Ill. 1991) (stating that an argument that
only monetary damages were at stake in an action to enjoin trust dissipation might be
persuasive in the absence of the PACA statute). Because it is well accepted that once
the trust is dissipated it is almost impossible for a beneficiary to obtain recovery, courts
have held that dissipation of a PACA trust’s assets is irreparable injury. Id.; Tanimura &
Antle, Inc. v. Packed Fresh Produce, Inc., 222 F.3d 132, 139 (3d Cir. 2000) (“Thus, the
prevention of trust dissipation becomes essential to any meaningful remedy at all.”).
Plaintiff here has submitted evidence showing that Defendants are likely dissipating
trust assets. (Kouba Decl. ¶ 9.) Moreover, given the recent bankruptcy filings of
companies associated with Defendants, it is likely that recovery of monetary damages
from Defendants will be difficult, if not impossible. (Id. ¶ 10.) Therefore, the Court finds
that Plaintiff has shown that it is likely to suffer irreparable injury if injunctive relief is not
With respect to harm to the Defendant, PACA provides that buyers of produce
are required to hold proceeds from the sale of such produce in trust for the benefit of
the sellers. See 7 U.S.C. § 499e(c)(2). This is meant to ensure that sellers are paid in
full from the proceeds derived from the re-sale of the produce. Under the statute, the
trust is formed at the moment the produce is shipped to the buyer and remains in effect
until the seller is paid in full. See 7 C.F.R. § 46.46(c)(1). The evidence shows that
Plaintiff delivered perishable commodities to Defendants worth $266,646.95 and has
not received its trust proceeds for this exchange. (Kouba Decl. ¶ 6.) Because
Defendants have a legal obligation to pay the trust assets to Plaintiff, they will not suffer
harm if the Court orders them to fulfil this obligation. See Tanimura, 222 F.3d at 140.
Accordingly, the Court finds that Plaintiff has satisfied the third prong of the test for
Public interest also weighs in favor of granting an injunction. The underlying
purpose of PACA’s statutory trust provision is to protect perishable commodity
producers such as Plaintiff in situations precisely like this. See 7 U.S.C. § 499e(c)(1)
(“This subsection is intended to remedy such burden on commerce in perishable
agricultural commodities and to protect the public interest.”). In passing the statutory
trust provisions, Congress explicitly noted that reducing the burden on commerce
associated with production of perishable commodities was in the public interest. Id.
Thus, the Court has little trouble finding that issuance of injunctive relief in this case is
in the public interest.
Issuance of Relief Without Notice to Defendants
Therefore, the Court finds that Plaintiff has met its burden with respect to all four
factors and are entitled to injunctive relief. The sole remaining issue is whether Plaintiff
should be granted this relief without notice to Defendants. A temporary restraining
order, such as that requested here, may be issued without notice to the adverse party
or its counsel only if “(A) specific facts in an affidavit or a verified complaint clearly show
that immediate and irreparable injury, loss, or damage will result to the movant before
the adverse party can be heard in opposition; and (B) the movant’s attorney certifies in
writing any efforts made to give notice and the reasons why it should not be required.”
Fed. R. Civ. P. 65(b)(1); see also D.C.COLO.LCivR 65.1(A). Where a plaintiff seeks
such relief without notice to the adverse party, he should be able to show that notice
would result in immediate, irreparable harm such that notice would “render fruitless the
further prosecution of the action.” Reno Air Racing Ass’n, Inc. v. McCord, 452 F.3d
1126, 1131 (9th Cir. 2006).
Here, Plaintiff has submitted an attorney certification which states that it has not
attempted to provide notice to Defendants. (ECF No. 5-3.) Instead, Plaintiff contends
that “notice should not be required, because notice will afford Defendants an
opportunity to further dissipate trust assets which are required by statute to be held for
the benefit of Plaintiff.” (Id. at 1 (emphasis in original).) Given the evidence regarding
Defendants’ financial state and the clear law with respect to the impossibility of
recovering trust assets after the trust has been dissipated, the Court finds that Plaintiff
has satisfied Rule 65(b)(1) and further, that it has shown that notice is not required in
this case. See, e.g., S. Katzman Produce, Inc. v. Depiero’s Farm, Inc., No. 12-1384
(ES), 2012 WL 764235, at *2 (D.N.J. March 7, 2012) (granting TRO without notice to
Defendants); Batth v. Market 52, Inc., No. 1:11-cv-1806-AWI-SKO, 2011 WL 5240439,
at *2 (E.D. Cal. Nov. 1, 2011) (same); C&C Carriage Mushroom Co. v. Greenwood
Choice, Inc., No. 10-62116-CIV, 2011 WL 5059557, at *1 (S.D. Fla. Nov. 24, 2010)
For the reasons set forth above, Plaintiff’s Motion for Temporary Restraining
Order Without Notice and Preliminary Injunction (ECF No. 5) is GRANTED in so far as
it seeks a temporary restraining order and asks that the Court set a hearing on a
preliminary injunction. The Court therefore ORDERS as follows:
Defendants Liborio Markets #9, Inc., Liborio Markets #11, Inc., Liborio Colorado
Holding Company, Liborio Holding Company, Triple A Grocers, Inc., John Alejo,
Randy Alejo, Enrique M. Alejo, Enrique J. Alejo, and Anthony Trujillo, and their
officers, agents, servants, employees, attorneys, and financial institutions, are all
hereby restrained from dissipating and/or disbursing any and all trust funds,
monies, and/or liquidated interests of any type whatsoever now in their
possession or under their control that are generated by or resulting from the sale
of perishable agricultural commodities, as well as any and all trust funds and/or
monies hereafter received, except for payment in full to Plaintiff’s counsel, until
compliance with ¶ 2, below.
Within five business days of this Order, Defendants shall pay Plaintiff’s counsel
or, should a bona fide defense exist, deposit into an interest bearing escrow
account with a federally-insured financial institution the amount of $266,646.95.
No withdrawals from this account shall be made without Court approval, except
for payment to Plaintiff’s counsel.
Within five business days of this Order, Defendants shall serve this Order upon
any and all financial institutions with which they have a relationship.
Within five business days of this Order, Defendants shall provide Plaintiff’s
counsel and this Court with a verified and detailed accounting of business
operations, including records concerning Defendants’ assets, bank accounts,
accounts receivable, accounts payable, including a list of all PACA Trust
Creditors, operating expenses and sales.
A hearing on Plaintiff’s Motion for Preliminary Injunction shall be held on May 14,
2012 at 3:00 p.m., Courtroom A801 of the Alfred A. Arraj United States
Courthouse, 901 19th Street, Denver, Colorado 80294, at which time Defendants
shall appear and show cause as to why Plaintiff’s request for preliminary
injunction should not be granted.
The $266,646.95 in PACA trust assets belonging to Plaintiff and in the
possession of Defendants shall serve as Plaintiff’s security for purposes of Fed.
R. Civ. P. 65(c). No additional security need be provided.
Plaintiff shall serve a copy of all documents filed in this case, including the
Complaint, Motion for Temporary Restraining Order Without Notice and
Preliminary Injunction, and this Order upon Defendants by hand delivery and
electronic mail (to the extent practicable) on or before Saturday, May 5, 2012.
This Order shall remain in full force and effect for ten days from the date of entry
or until further Order of Court.
Dated this 3rd day of May, 2012.
BY THE COURT:
William J. Martínez
United States District Judge
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