FreshPack Produce, Inc., v. VM Wellington LLC, et al.,

Filing 41

ORDER Plaintiffs request for preliminary injunctive relief ECF No. 1 is GRANTED with respect to named-Defendants below. The Court therefore ORDERS as follows: Defendants (1) VM Operations LLC, (2) Village Markets Holding Ltd., LLC, (3) Savoy Incom e Fund I LP, (4) Samuel J. Mancini, and (5) Ronald S. Allen, 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 Plaintiffs counsel, by Judge William J. Martinez on 1/3/2013. (ervsl, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge William J. Martínez
Civil Action No. 12-cv-3157-WJM-MJW
FRESHPACK PRODUCE, INC.,
Plaintiff,
v.
VM WELLINGTON LLC, d/b/a BELLA’S MARKET WELLINGTON,
VM OPERATIONS LLC,
VILLAGE MARKETS HOLDING LTD., LLC,
SAVOY INCOME FUND I LP,
SAMUEL J. MANCINI,
RONALD S. ALLEN, and
ALAN CARMAN,
Defendants.

ORDER GRANTING PLAINTIFF’S REQUEST FOR PRELIMINARY INJUNCTION

This matter involves a dispute over the enforcement of a statutory trust under the
Perishable Agricultural Commodities Act (“PACA” or “Statute”), 7 U.S.C. §§ 499 et seq.
(ECF No. 1 ¶¶ 21-23.) The matter is before the Court on the request by Plaintiff
Freshpack Produce, Inc. (“Plaintiff”) for preliminary injunctive relief against VM
Wellington LLC, et al. (“Defendants”). (ECF No. 28.) Defendants oppose the relief.
(ECF No. 24.) Defendants also seek to vacate a Temporary Restraining Order (“TRO”)
granted on December 6, 2012.1 (ECF No. 19.)
On December 28, 2012, the Parties supplemented these filings with further
materials to assist the Court in disposition of the instant matter. (ECF No. 37; ECF No.
1

With respect to Defendant's Motion to Vacate, the Court finds this Motion moot at the
expiration of the TRO on January 3, 2013. (ECF No. 34.)

39.) Having reviewed the parties’ materials, the Court grants Plaintiff’s relief consistent
with the discussion below.
I. BACKGROUND
A.

Factual Background
Plaintiff is a Colorado corporation engaged in the business of buying and selling

wholesale quantities of produce in interstate commerce. (ECF No. 1.) Defendants are
various corporate entities who are licensed to act as dealers of perishable agricultural
commodities; as well shareholders, officers, and directors of these entities. (Id. ¶¶ 410.)
Between January 2, 2012 and September 25, 2012, Plaintiff sold and delivered to
Defendants fresh produce worth $263,835.71. (Id. ¶ 14.) Of that amount, $74,705.95
remains unpaid (“Unpaid Monies”). (Id. ¶ 17.) 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. 6 at 2.) To date, Plaintiff has been unsuccessful in collecting payment
from Defendants of the Unpaid Monies. (Sweeney Decl. (ECF No. 5) ¶ 15.)
Importantly, two entities related to Defendants and who received produce from
Plaintiff, have filed for bankruptcy protection: VM Odell’s LLC (“VM Odell’s”), which filed
for bankruptcy on September 24, 2012; and VM Williams LLC (“VM Williams”), which
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filed for bankruptcy on September 25, 2012. (ECF No. 37 at 1-2.)
Defendant VM Operations LLC (“VM Operations”) is the entity that owns and
manages the two operating entities that are in bankruptcy. (Id.) Prior to the bankruptcy
petitions, VM Operations would pay the accounts receivable for those entities, including
payments for produce received from Plaintiff. (Id. at 2.) Since filing for bankruptcy, VM
Operations no longer receives monies from the bankrupt entities without court order. (Id.)
Defendant VM Wellington LLC (“VM Wellington”) is a separate entity that
operates a single store in Wellington, Colorado. (Id. at 3.) There are no officers and
directors of that entity. (Id. at 5.) Defendants allege that VM Wellington has paid
Plaintiff (in full) for produce amounting to $3,000. (Id. at 5-6.)
Defendant Sam Mancini is: (1) the President and CEO of VM Operations; (2) the
President and manager of Defendant Village Market Holding Ltd., LLC (“VM Holding”);
and (3) a general partner of Defendant Savoy Income Fund I LP (“Savoy”). (Id. at 4-5.)
Defendant Ronald S. Allen is the CFO of VM Operations and Defendant Alan Carman is
the Vice President of VM Operations, but has no check writing authority for that entity.
(Id.)
B.

Procedural Background
On December 4, 2012, Plaintiff brought this action against Defendants alleging

statutory violations under PACA. (ECF No. 1.) Contemporaneous with the filing of the
Complaint, Plaintiff filed a motion seeking entry of an immediate TRO. (ECF No. 3.)
The Court granted that Motion on December 6, 2012. (ECF No. 19.) In the TRO Order,
the Court set a hearing for December 20, 2012. (Id.) The Court also stated that

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“Defendants shall appear and show cause as to why Plaintiff’s request for preliminary
injunction should not be granted.” (Id. at 7.)
On December 20, 2012, the Court (1) reserved judgment on whether injunctive
relief should be granted; and (2) extended the terms of the TRO for an additional
fourteen days through 11:59 p.m. on Thursday, January 3, 2013, pursuant to Fed. R.
Civ. P. 65(b)(2). (ECF No. 34.) Because of the complex corporate structure of the
Defendant entities, the Court also sought a detailed description from the parties of the
“day-to-day operational role” of the entities currently in bankruptcy and “operations of
the named Defendants.” (Id.) The inter-relatedness of Defendants is well-illustrated by
the chart contained in ECF No. 24-2.
For the purposes of the present Motion, the Court has reviewed all the originally
filed materials, and additional filings since December 20, 2012. The Court thus
conducts a similar analysis to what was conducted on December 6, 2012, albeit with the
assistance of transcript and the additional filings. See Emmis Communications Corp. v.
Media Strategies, Inc., 2001 WL 111229, *2 (D. Colo. Jan. 23, 2001.)
C.

Equitable Jurisdiction
The Court holds that it has full equitable jurisdiction to grant injunctive relief

against each of the named Defendants. Section 499e(c)(5) specifically provides that
“[t]he district courts are vested with jurisdiction to entertain actions by trust beneficiaries
to enforce payment from the trust.” Such language supports the full exercise of the
Court’s equitable remedies. See Tanimura & Antle, Inc. v. Packed Fresh Produce, Inc.,
222 F.3d 132, 139 (3d Cir. 2000); see also Frio Ice, S.A. v. Sunfruit, Inc., 918 F.2d 154,
157 (11th Cir. 1990).
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Accordingly, there is no limitation as to the power of this Court to bind parties in
the present suit.
II. ANALYSIS
A.

Statutory Scheme: PACA and its Interface with the Bankruptcy Code
This matter involves application of PACA’s trust provisions within the context of

the Bankruptcy Code, 11 U.S.C. §§ 701 et seq. For purposes of background, it is worth
addressing these statutes, especially since this matter involves questions of first
impression in the District of Colorado.
Congress enacted PACA “to promote fair trading practices” in the marketing of
produce. Consumers Produce Co., Inc. v. Volante Wholesale Produce, Inc., 16 F.3d
1374, 1377-78 (3d Cir. 1994); In re Kornblum & Co., Inc., 81 F.3d 280, 283 (2d Cir.
1996). In 1984, PACA was amended to provide further credit protection to sellers of
produce. The amendment provides:
Perishable agricultural commodities received by a commission merchant, dealer,
or broker in all transactions . . . and any receivables or proceeds from the sale of
such commodities or products, shall be held . . . in trust for the benefit of all
unpaid suppliers or sellers of such commodities . . . until full payment of the sums
owing in connection with such transactions has been received.
7 U.S.C. § 499e(c)(2). “[T]he legislative history and the text of the statute . . . all make
clear that trust assets are intended exclusively to benefit produce sellers.” See Best
Produce, Inc. v. Shulman–Rabin Marketing, Corp., 467 F.3d 238, 242 (2d Cir. 2006).
Relevant to this case, and with respect to PACA’s application to the Bankruptcy
Code, ordinary principles of trust law apply. In re Kornblum, 81 F.3d at 286. Here, this
means that Defendants hold legal title to the produce (and its proceeds); but Plaintiff
retains an equitable interest in the trust assets pending payment. Id. Provided Plaintiff
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can show that the Defendant entities fall within PACA as dealers or fiduciaries to the
trust, the assets are excluded from any bankruptcy estate. Morris Okun, Inc. v. Harry
Zimmerman, Inc., 814 F. Supp. 346, 348 (S.D.N.Y. 1993); Golman Hayden Co. v. Fresh
Source Produce Inc., 217 F.3d 348, 351 (5th Cir. 2000).
B.

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). If the moving party demonstrates that the
second, third, and fourth factors “tip strongly in his favor, the test is modified,” and the
moving party “may meet the requirement for showing success on the merits by showing
that questions going to the merits are so serious, substantial, difficult, and doubtful as to
make the issue is [ripe] for litigation and deserving of more deliberate investigation.”2

2

The Court notes that the continuing validity of this doctrine is questionable in light of
Winter v. Natural Res. Def. Council, Inc., 129 S.Ct. 365 (2008). See Predator Intern., Inc. v.
Gamo Outdoor USA, Inc., 669 F. Supp. 2d 1235, 1243 (D. Colo. 2009) (noting that Winter may
affect the viability of the relaxed standard for success on the merits). However, since Winter,
the Tenth Circuit has continued to refer to and employ the modified or relaxed injunctive relief
standard. See RoDa Drilling Co. v. Siegal, 552 F.3d 1203, 1209 n.3 (10th Cir. 2009).
Accordingly, the relaxed standard appears to continue to be binding law in this circuit. See San
Luis Valley Ecosystem Council v. U.S. Fish and Wildlife Servs., 657 F. Supp. 2d 1233, 1239 n.1
(D. Colo. 2009) (“[T]he Tenth Circuit appears to recognize the continuing validity of the modified
success-on-the-merits formula notwithstanding the Winter decision.”) In this case, the Court
notes that all parties that are bound by the preliminary injunction would satisfy both the
traditional and the relaxed (modified) standard.

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Okla. ex rel. Okla. Tax Comm’n v. Int’l Registration Plan, Inc., 455 F.3d 1107, 1113
(10th Cir. 2006). The moving party bears the burden of persuasion as to each of the
four factors relevant to injunctive relief. Heideman v. South Salt Lake City, 348 F.3d
1182, 1189 (10th Cir. 2003).
For the reasons that follow, the Court finds that Plaintiff has satisfied the four
factors with respect to all of the Defendants, with the exception of putative Defendants
VM Wellington and Alan Carman.
1.

Irreparable Injury

A party seeking injunctive relief “must show that the injury complained of is of
such imminence that there is a clear and present need for equitable relief to prevent
irreparable harm.” Heideman, 348 F.3d at 1189. “Irreparable harm, as the name
suggests, is harm that cannot be undone, such as by an award of compensatory
damages or otherwise.” Salt Lake Tribune Publ’g Co. v. AT&T Corp., 320 F.3d 1081,
1105 (10th Cir. 2003).
Without issuance of preliminary injunction, the Court finds that Plaintiff will likely
suffer irreparable harm. Although monetary loss is not typically found to be an
irreparable harm, dissipation of PACA trust assets is an exception to the rule. See Frio
Ice, 918 F.2d at 159 (11th Cir. 1990) (holding that because it is near impossible for a
beneficiary to recover outstanding assets once a PACA trust is dissipated, the
dissipation of trust assets constitute irreparable harm.); Tanimura, 222 F.3d at 139.
Plaintiff has submitted evidence showing that Defendants are likely dissipating
trust assets. (Sweeney Decl. ¶¶ 15-16.) Specifically, Defendants’ failure to pay the

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Unpaid Monies (approximately $74,705.95) demonstrates that Defendants are failing to
maintain sufficient assets in the statutory trust. (Id.) Such harm to the trust is near
irreversible. Moreover, given the recent bankruptcy filings of companies associated with
Defendants, it is likely that recovery of monetary damages from Defendants will be
difficult. This only heightens the need for the remedy sought by Plaintiff to prevent
irreparable harm. (Sweeney Decl. ¶ 10.)
Tipping the scales further in Plaintiff’s favor is that injunctive relief will ensure that
the status quo is preserved. Section 499b(4) provides that once a plaintiff shows that
invoices for perishable “commodities” have been delivered, the Statute imposes a
statutory “trust over the . . . proceeds from the sale of such commodities.” See also
Anthony Marano Co. v. MS–Grand Bridgeview, Inc., No. 08 C 4244, 2010 WL 5419057,
at *5 (N.D. Ill. Dec. 23, 2010) (holding that the trust arises upon the commencement of
the buyer’s receipt of produce, and exists throughout the life of the buyer’s business).
Here, Plaintiff has established that it delivered produce to Defendants. (Sweeney
Dec. ¶¶ 7-10.) Plaintiff has yet to receive payment of the Unpaid Monies. Id. Once the
produce was delivered, PACA’s provisions “kicked in” and the Statute immediately
imposed a trust over the Plaintiff’s produce (and the proceeds of same). Moreover,
PACA provides that Defendants have a statutory duty to maintain these trust assets.
7 C.F.R. § 46.46(e)(1). The Court’s relief—in placing proceeds from the trust into
escrow until final disposition of the proceedings—maintains the status quo and guards
against irreparable injury to the trust assets. Univ. of Tex. v. Camenisch, 451 U.S. 390,
395 (1981); United States v. Adler’s Creamery, 107 F.2d 987, 990 (2d Cir. 1939)
(holding its function is to “preserve the status quo ante . . . upon a showing that there
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would otherwise be danger of irreparable injury.”); SIFMA v. Garfield, 469 F. Supp. 2d
25 (D. Conn. 2007).
Accordingly, the Court finds that Plaintiff will incur irreparable harm should
injunctive relief not be granted. Since Defendants have failed to rebut this finding with
evidence to the contrary, this factor tips heavily in Plaintiff’s favor.
2.

Threatened Injury Outweighs the Injury of the Opposing Party

This factor is an internal balancing test. It requires that “the possible harm to the
Plaintiff if the injunction is not entered be balanced against the possible harm to the
Defendant[s] if the injunction is entered.” Pelletier v. U.S., 2011 WL 2077828, at *3 (D.
Colo. May 25, 2011). While not always taken into account, this factor has also been
employed to consider the interests of third parties. Ayres v. City of Chicago, 125 F.3d
1010, 1013 (7th Cir. 1997) (Posner, C.J.) (holding that injunctive relief should be
granted if the plaintiff faces “irreparable harm and the defendant very little harm unless
third parties would be hurt” by the relief).3
The harm that Plaintiff will suffer if the injunction is not entered is discussed
above (factor 1). Plaintiff will be left empty handed to the sum of $74,705.95.
(Sweeney Decl. ¶¶ 7-10.) By contrast, if the injunctive relief is entered—and because
most of the Defendant entities have a legal obligation to pay the trust assets to
Plaintiff—they will not suffer harm if the Court orders them to fulfil their obligations under
the Statute. See Tanimura, 222 F.3d at 140.
On balance, and given the purpose of PACA to preserve trust assets, the Court

3

Consideration of third parties naturally intertwines with the level of irreparable harm to
Plaintiff—i.e., the first factor, above.

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finds that the threatened injury to Plaintiff outweighs the injury to most of the namedDefendants. The only exception is to VM Wellington. As to this Defendant, there is
evidence in the record to suggest that the harm to this entity would be severe if the
Court were to grant Plaintiff’s relief. Defendants assert that VM Wellington has paid
Plaintiff in full for produce amounting to $3,000. (ECF No. 37 at 5-6.) Defendant
Mancini also stated at the December 20, 2012 hearing that VM Wellington was itself
close to having to file for bankruptcy protection. He indicated that the grant of injunctive
relief would be a tipping point for its filing of a bankruptcy petition (much like the other
bankrupt entities). Such evidence is not without merit and favors Defendant VM
Wellington on this factor—particularly at this stage where formal discovery has yet to
commence.
VM Wellington’s position is further buttressed by the fact that third parties may be
harmed by any injunction requiring VM Wellington to pay trust assets. See Ayres, 125
F.3d at 1013. At the hearing, Mancini represented to the Court that to impose injunctive
relief against VM Wellington would lead to “punishment [of] people” who were not
parties subject to the litigation. (See also ECF No. 37 at 1-2) Specifically, Mr Mancini
said that Defendant Savoy owns only sixty-nine percent of VM Wellington. The
remaining thirty-one percent of VM Wellington is owned by third parties. This evidence
was also reiterated in the supplemental filings on December 28, 2012. (ECF No. 37 at
1.) Because Plaintiff did not dispute the effect of injunctive relief on third parties, such
evidence points against it.
While the Court sides with VM Wellington on this factor because its injury
outweighs that of Plaintiff, it could well be short-lived. As provided for in this Order,
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leave is granted to Plaintiff to move for injunctive relief against VM Wellington if (1)
further discovery shows a closer relationship between VM Wellington and the trust
assets, or (2) if evidence were to be presented that another Defendant entity, which is
bound by this injunctive order, transfers trust assets to VM Wellington following the
issuance of the preliminary injunction and in an effort to shield such assets from the
reach of this Court’s order.4
Accordingly, and with the exception of VM Wellington, the Court finds that
Plaintiff has satisfied this prong of the test for injunctive relief.
3.

The Injunction Would Not Be Adverse to the Public Interest

A party seeking a preliminary injunction must show the issuance of the injunction
would not be adverse to the public interest. Heideman, 348 F.3d at 1188.
Here, this factor weighs heavily in favor of Plaintiff. The purpose behind PACA is
to protect suppliers in situations just like this—i.e., where produce has yet been paid.
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.”).
Moreover, in passing PACA’s provisions, Congress explicitly noted that the statutory
trust was created to ensure that suppliers do not suffer when “dealers abandon their
business without paying their debts.” See Shepard v. K.B. Fruit & Vegetable, Inc., 868
F.Supp. 703, 707 (E.D. Pa.1994). Thus, in this case, issuance of the injunction would

4

The Court notes that Mr Mancini was given liberty to address the Court from the bar
table. He represented to the Court that bankrupt parties are in the currently in the midst of a
"reorganization plan,” which should be finalized towards the end of January, 2013. While he did
not agree to extension of the TRO until this time, he did assert that the outstanding amounts of
$74,705.95 would ultimately be paid to Plaintiff. As provided for in the Orders below, the parties
are to provide a status report regarding the reorganization on January 31, 2013.

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not be adverse to the public interest and only promote the purpose behind the Statute.
Accordingly, the Court finds that Plaintiff has satisfied this prong of the test for
injunctive relief.
4.

Substantially Likely to Succeed on the Merits

To demonstrate a substantial likelihood of success on the merits, Plaintiff is
“required to present a prima facie case showing a reasonable probability that [it] will
ultimately be entitled to the relief sought.” Salt Lake Tribune Pub., 320 F.3d at 1100.
a.

Prima Facie Case: VM Operations’ Liability

To determine whether Plaintiff can establish a prima facie case, the Court must
first construe the term “dealer” pursuant to the Statute. Whether the Defendants are
ultimately liable depends on the construction of this term. Relevantly, § 499a(b)(6)
defines “dealer” as “any person engaged in the business of buying or selling . . . any
perishable agricultural commodity in interstate commerce.” (emphasis added.) The
parties heavily disputed the construction of the phrase “buying and selling.”
Defendants argue that VM Operations, inter alia, is not a dealer for purposes of
the Statute. Specifically, Defendants contend that PACA is inapplicable because VM
Operations did not buy produce from Plaintiff—i.e., there was no “buying or selling” as
required by § 499a(b)(6). The argument has been put forward that VM Operations
merely “purchased” produce on the behalf of other entities, for e.g., VM Williams (one of
the bankrupt entities). But Defendants’ construction misses the mark. Were the Court
to adopt this construction, it would mean that any person could choose to erect a
corporate structure where any upstream entity is not directly “buying” produce (but
paying invoices); and, at the same time, that same entity is shielded from liability
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because it is not a “dealer” since it is not involved in the commercial exchange of actual
produce.
Defendants’ construction of this statutory term is far too narrow. Such
construction does not achieve the purpose of the Statute. PACA was enacted “to
promote fair trading practices,” not circumvent liability with a complex corporate
structure (intended or otherwise). Consumers Produce Co., Inc. 16 F.3d at 1377-78;
D.M. Rothman & Co. v. Korea Commercial Bank of N.Y., 411 F.3d 90, 93 (2d Cir. 2005)
(stating that PACA provides suppliers of produce with remedies to protect against
losses; including, “slow-pay and no-pay practices”). As such, the Court broadly
construes the word “buying” to include those parties who buy produce both directly and
indirectly from a supplier—i.e., on behalf of others.
Here, there can be no dispute that the VM Operations is a “buyer” under the
Court’s construction of § 499a(b)(6) because it bought produce on behalf of the
bankrupt entities. VM Operations paid for wholesale quantities of produce delivered
from Plaintiff, and the price for that produce exceeded $230,000.00 in 2012. (Sweeney
Dec. ¶¶ 10 & 14.) Given these purchases, the Court finds there is a strong likelihood of
success for Plaintiff on the merits of its PACA claim against VM Operations.
b.

Prima Facie Case: Defendants Other Than VM Operations

In order to attach liability to Defendants other than VM Operations, Plaintiff relies
on a fiduciary theory. This theory attaches secondary liability.5 That is, individuals or
entities who are in a position to control PACA trust assets—and who breach their

5

Golman–Hayden Co. v. Fresh Source Produce Inc., 217 F.3d 348, 351 (5th Cir.2000)
(discussing at length the distinction between primary and secondary liability).

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fiduciary duty to preserve those assets—may be held secondarily liable under the
Statute. See Bear Mountain Orchards, Inc. v. Mich–Kim, Inc., 623 F.3d 163, 169 (3d
Cir. 2010) (listing the relevant authorities). Defendant opposes this theory and argues
that it should not be followed in the District of Colorado. But given the weight of
authorities supporting the fiduciary theory, the Court finds that it has equal application in
this district and to this case. See Coosemans Specialties, Inc. v. Gargiulo, 485 F.3d
701, 706 (2d Cir. 2007); Golman-Hayden Co., 217 F.3d at 351-52 (an individual in a
position to control PACA trust assets is personally liable under PACA regardless of
whether he exercised that control); Sunkist Growers, Inc. v. Fisher, 104 F.3d 280, 283
(9th Cir. 1997); Okun, 814 F.Supp. at 348 (holding that a PACA trust imposes fiduciary
liability on a trustee whether that entity is a “corporation or a controlling person of that
corporation”). In applying this theory, the Court will address each of the Defendants in
turn.
i.

VM Holding

First, the Court finds that there is evidence that Defendant VM Holding owed and
breached fiduciary obligations to Plaintiff for the purposes of a prima facie case.
Plaintiff has provided sufficient evidence to show that VM Holding is a controlling entity
of trust assets. For example, VM Holding was involved in the Credit Application for
Plaintiff’s produce. It submitted the Credit Application, which was then executed by
Defendant Mancini (being President and Manager of same and also CEO of VM
Operations). (Supplemental Declaration of Suzanne Sweeney (ECF No. 28) ¶ 5)
(“Suppl. Dec.”) Moreover, the Colorado Secretary of State's records reflect that VM
Operations is a trade name of VM Holding. (Id.) Coupled with Mancini’s key role in
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both these entities, this indicia of control shows the close relationship between VM
Holding and VM Operations. In the Court’s view, this level of control establishes a
likelihood of fiduciary obligations to maintain PACA trust assets for Plaintiff’s benefit.
K.B. Fruit & Vegetable, 868 F. Supp. at 706.
The above showings are also supported by the fact that VM Operations was
wholly owned by VM Holding. Because it owned 100 percent of VM Operations; it
follows that it also owned 100 percent of its assets. These assets included proceeds
from Plaintiff’s produce upon which a PACA trust was imposed. This further points
towards VM Holding being a fiduciary to Plaintiff and liable under the Statute for
dissipation of trust assets. Accordingly, Plaintiff has shown a strong likelihood of
success on the merits against VM Holding. See Sunkist Growers, 104 F.3d at 283.
ii.

Savoy

Second, the Court finds that there is also evidence that Defendant Savoy owed
and breached fiduciary obligations to Plaintiff for the purposes of a prima facie case.
The reasons mirror much of that expressed above with respect to VM Holding.
Critically, VM Holding is wholly owned by Savoy. VM Holding wholly owns VM
Operations. The inter-relatedness of these Defendants is well-illustrated by the chart in
ECF No. 24-2. That chart clearly provides a direct line of ownership between Savoy
and VM Operations who controls Plaintiff’s trust assets. Because VM Operations held
trust assets—and as Savoy indirectly owns and controls VM Operations—it follows that
Savoy is a fiduciary to Plaintiff with respect to the trust assets. The association between
Savoy and VM Operations is only strengthened by the key role Mancini plays in
controlling each of these entities—including his role as a general partner at Savoy; a
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position that typically holds greater responsibility than limited partners. See generally In
re Snyder, 184 B.R. 473, 475 (D. Md. 1995). These facts alone would be enough to
attach secondary liability to Savoy; but the conclusion is reinforced because Defendants
have not discharged their burden to demonstrate that the disputed trust assets were not
acquired with proceeds from the sale of Plaintiff’s produce. In re Kornblum & Co., 81
F.3d at 280.
iii.

Samuel Mancini

Third, the Court finds that there is evidence that Defendant Mancini is personally
liable because he owed and breached fiduciary obligations to Plaintiff for the purposes
of a prima facie case. Defendant Mancini is: (1) the President and CEO of VM
Operations; (2) the President and manager of VM Holding; and (3) a general partner of
Savoy Income Fund I. (ECF No. 37 at 4-5.) He lies at the core of all three entities,
which draws parallels with other cases which attach secondary liability. In Okun, 814
F. Supp. 346, the court found the defendant personally liable under PACA because he
had control of the “day-to-day operations” of an entity that controlled trust assets. Id.
Similarly, here, Mancini plays a key role in the day-to-day operations of all Defendantentities who are found liable for the purposes of a prima facie case. Plaintiff has thus
provided sufficient evidence to show that there is a strong likelihood of success on its
claim that Mancini breached his fiduciary obligations for allowing dissipation of Plaintiff’s
trust assets. Id. at 350. See also Coosemans Specialties, 485 F.3d at 706.
iv.

Ronald Allen

Fourth, the Court also finds that there is evidence that Defendant Allen is
personally liable as a fiduciary to Plaintiff for the purposes of a prima facie case. His
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role at VM Operations was CFO. (ECF No. 37 at 5.) Given this position, strong
inferences can be made that he was fully cognizant of VM Operations’ financial
obligations—including those owed to Plaintiff. Indeed, involvement in the financial
operations of a company is one of the obligations that comes with being a CFO. As
such, Plaintiff has provided sufficient evidence to show that there is a likelihood of
success on its claim against Defendant Ronald Allen. See Reds Market v. Cape
Canaveral Cruise Line, Inc., 181 F. Supp. 2d 1339, 1343 (M.D. Fla. 2002) (individual in
control of PACA trust assets is liable for failure to preserve trust res without regard to
whether the failure was intentional or not).
v.

VM Wellington

Fifth, at this stage of these proceedings, the Court finds that there is insufficient
evidence to tie VM Wellington to the trust assets. Indeed, Defendant has proffered
some evidence to distance itself from both primary and secondary liability. (ECF No. 37
at 5-6.) Such evidence has been addressed with respect to balancing of the harms.
Accordingly, the Court does not extend the preliminary injunction to Defendant VM
Wellington because Plaintiff does not succeed on this factor.6
vi.

Alan Carmen

Sixth, the Court also finds that there is insufficient evidence to determine that
Plaintiff will ultimately prevail against Defendant Carmen. This conclusion derives, in
part, from the fact that Carmen did not have check writing authority on behalf of any of
the Defendants found to be subject to this order. (ECF No. 37 at 5). This suggests that

6

The Court notes that irrespective of the standard applied as to this factor (traditional or
modified), the same result yields. See Davis v. Mineta, 302 F.3d 1104, 1111 (10th Cir.2002).

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he would have played a marginal role in the day-to-day running of VM Operations (at
least with respect to financial obligations). There is certainly nothing filed by Plaintiff, at
this stage of the litigation, from which this Court can conclude that Carmen exercised
the same level of control over the trust assets as did Mancini (CEO) and Allen (CFO).
As such, and at this time, the Court does not extend the preliminary injunction to cover
Defendant Carmen.
5.

Conclusion on Balancing

In sum, the Court finds that Plaintiff has satisfied the four factors with respect to:
(1) VM Operations; (2) VM Holding; (3) Savoy; (4) Samuel Mancini; and (5) Ronald
Allen. The Court also notes that Plaintiff has satisfied the modified and traditional
standard for the purposes of the merits with respect to these Defendants.7 However, in
applying these standards to (1) VM Wellington and (2) Alan Carmen, the Court finds
that Plaintiff has not shown a sufficient likelihood of success on the merits (including the
modified standard.) This, coupled with the fact that ‘balancing of the harms’ weigh in
favor of VM Wellington further precludes extension of the injunction to this Defendant.
As such, and at this stage of the proceedings, VM Wellington and Alan Carmen are not
bound by the Court’s Orders below. See Westar Energy, 552 F.3d at 1224.
B.

Ability Not to Pay
Defendants assert that any injunctive relief is unwarranted due to the fact that

Defendants do not have the ability to pay. (ECF No. 24 at 9.) The Court finds this

7

To the extent that the modified standard applies, the Court notes that it is relevant here
for two reasons. First, the other traditional factors “tip strongly” in Plaintiff's favor. Second, the
grant of injunctive relief preserves the status quo. See Davis 302 F.3d at 1111; Wells Fargo
Bank v. Louis Maynahonah 2011 WL 3876519 (W.D. Oklahoma Sept. 2, 2011.)

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argument of little relevance to whether injunctive relief should be granted against most
of the Defendants. If anything, Defendants argument on this point only reinforces the
need for injunctive relief against them, with the exception of VM Wellington.
C.

Chapter 11 Payment Plan
Defendants finally contend that any injunctive relief in favor of Plaintiff would be

moot because Plaintiff will soon receive payment via a Chapter 11 payment plan with
respect to the bankrupt entities. (ECF No. 24 at 4.) Further, Mancini represented to
the Court that the bankrupt parties are currently in the midst of a "reorganization plan,"
which should be finalized towards the end of January, 2013. While he did not agree to
extension of the TRO until such time, Mancini did assert that the outstanding amounts
of $74,705.95 would be paid to Plaintiff. As provided for in the Orders below, the parties
are to provide a status report regarding the reorganization on January 31, 2013.
III. CONCLUSION
For the reasons set forth above, Plaintiff’s request for preliminary injunctive relief
(ECF No. 1) is GRANTED with respect to named-Defendants below. The Court
therefore ORDERS as follows:
1.

Defendants (1) VM Operations LLC, (2) Village Markets Holding Ltd., LLC,

(3) Savoy Income Fund I LP, (4) Samuel J. Mancini, and (5) Ronald S. Allen, 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
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monies hereafter received, except for payment in full to Plaintiff’s counsel, until
compliance with ¶ 2, below;
2.

On or before January 11, 2013, Defendants shall deposit into an interest

bearing escrow account with a federally-insured financial institution the amount of
$74,705.95. No withdrawals from this account shall be made without Court
approval, except for payment to Plaintiff’s counsel;
3.

To the extent that it has not been already performed, not later than

January 11, 2013, Defendants shall provide Plaintiff’s counsel 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;
4.

The $74,705.95 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;
5.

Leave is granted to the parties to provide the Court with a Joint

Supplemental Status Report on January 31, 2013, which outlines the outcome of
the “reorganization plan” addressed by Defendant Mancini at the hearing on
December 20, 2012. This status report should indicate whether full payment to
Plaintiff of trust assets has been made by Defendants (or any other entity
bankrupt or otherwise);
6.

Leave is granted to Plaintiff to move for additional injunctive relief against

VM Wellington if (1) further discovery shows a closer relationship between VM
Wellington and the trust assets, or (2) evidence presents that another Defendant
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entity, which is bound by this injunctive relief Order, transfers trust assets to VM
Wellington following the issuance of the preliminary injunction; and
7.

This Order shall remain in full force and effect from the date of entry or

until further Order of Court.
Dated this 3rd day of January, 2013.
BY THE COURT:

William J. Martínez
United States District Judge

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