A&J Produce Corp v. Watermelon Express LLC et al

Filing 109

ORDER granting 97 Plaintiff's Motion for Summary Judgment; granting 101 Intervening Plaintiff's Motion for Summary Judgment. See the attached Memorandum of Decision. The Clerk is directed to enter judgment for Plaintiff A&J Produce Corp oration in the amount of $81,880.50 plus interest, reasonable attorneys' fees, and costs, and for Intervening Plaintiff Vegpro International, Inc. in the amount of $138,585.75 plus interest, reasonable attorneys' fees, and costs, and to close this case. The Plaintiff and Intervening Plaintiff are each directed to file a motion with accompanying affidavits in support of interest, attorneys' fees, and costs by 1/13/11. Signed by Judge Vanessa L. Bryant on 12/23/10. (Engel, J.)

A&J Produce Corp v. Watermelon Express LLC et al

Doc. 109

UNITED STATES DISTRICT COURT D IS T R IC T OF CONNECTICUT

A & J PRODUCE CORPORATION, P la in tiff, v. W A T E R M E L O N EXPRESS, LLC et al., D e fe n d a n ts .

: : : : : : :

VEGPRO INTERNATIONAL, INC., In te rv e n in g Plaintiff, v. W A T E R M E L O N EXPRESS, LLC et al., D e fe n d a n ts .

: : : : : : :

C IV IL ACTION NO. 3 :0 8 -c v -1 8 5 0 (VLB)

D e c e m b e r 23, 2010

M E M O R A N D U M OF DECISION GRANTING PLAINTIFFS' M O T IO N S FOR SUMMARY JUDGMENT [Doc. ##97, 101] T h e plaintiff, A&J Produce Corp. ("A&J"), and the intervening plaintiff, V e g P ro International, Inc. ("VegPro") (collectively the "Plaintiffs") brought this a c tio n to enforce the trust provisions of Section 5(c) of the Perishable Agricultural C o m m o d itie s Act ("PACA"), 7 U.S.C. § 499e, against the defendants, Watermelon E x p re s s , L.L.C. ("Watermelon Express"), Kathleen Annicelli, and Charles Annicelli (c o lle c tiv e ly the "Defendants"). This case arises out of the Defendants' alleged fa ilu re to pay for wholesale quantities of produce sold and delivered to them by the P la in tiffs . The Plaintiffs seek damages, plus contractual and statutory interest, re a s o n a b le attorneys' fees, and costs.

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Presently pending before the are A&J and VegPro's respective motions for s u m m a ry judgment. [Doc. ##97, 101]. For the reasons that follow, the motions are GRANTED. I. FACTUAL AND PROCEDURAL BACKGROUND A & J filed its complaint on December 5, 2008, invoking this Court's ju ris d ic tio n pursuant to Section 5(c)(5) of the PACA, 7 U.S.C. § 499e(c)(5), and 28 U .S .C . § 1331. [Doc. #1]. Subsequently, on December 18, 2008, VegPro filed a m o tio n to intervene pursuant to Rule 24 of the Federal Rules of Civil Procedure, w h ic h was granted by the Court absent objection on January 12, 2009. [Doc. #22]. VegPro filed its complaint in intervention on the same date. [Doc. #23]. A&J and V e g P ro filed their motions for summary judgment on June 15, 2010 and June 18, 2 0 1 0 , respectively. [Doc. ##97, 101]. Pursuant to Local Rule 7(a), the Defendants' re s p o n s e s to these motions were due on July 6, 2010 and July 9, 2010, re s p e c tiv e ly . On July 8, 2010, the Defendants filed a motion for extension of time u n til July 22, 2010 to object to the motions. [Doc. #106]. The Court granted the m o tio n the following day. [Doc. #107]. However, the Defendants failed to file an o b je c tio n by July 22, 2010 or seek an additional extension of time within which to d o so. Accordingly, on September 23, 2010, the Court issued a Notice informing th e Defendants that their failure to respond may result in the sanction of deeming th e assertions in the Plaintiffs' Rule 56(a)(1) Statements as admitted by the D e fe n d a n ts , or in the entry of default judgment in favor of the Plaintiffs pursuant to R u le 55 of the Federal Rules of Civil Procedure. [Doc. #108] (citing LeSane v. Hal's S e c u rity Analyst, Inc., 239 F.3d 206, 210-11 (2d Cir. 2001); U.S. v. Cirami, 535 F.2d

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736, 739 (2d Cir. 1976)). The Court allowed the Defendants until October 1, 2010 to re s p o n d to the motions for summary judgment. Id. Nevertheless, to date the D e fe n d a n ts have failed to respond to the motions for summary judgment or seek a n additional extension of time in which to do so. Accordingly, the Court deems th e assertions made in the Plaintiffs' 56(a)(1) Statements as true, which set forth th e following facts. Facts Pertaining to A&J A & J , located in Bronx, New York, is engaged in the business of selling w h o le s a le quantities of produce. A&J is and was licensed as a dealer under the P A C A at all times relevant to this action. Between July 23, 2008 and August 8, 2 0 0 8 , A&J sold to the Defendants various wholesale lots of produce, which had b e e n moved in interstate commence, worth a total of $81,880.50. The Defendants a c c e p te d the produce received from A&J, but never provided payment for the p ro d u c e . Watermelon Express, located in Higganum, Connecticut, was a dealer of w h o le s a le quantities of produce subject to and licensed under the PACA at all tim e s relevant to this action. Kathleen Annicelli is a member and principal of W a te rm e lo n Express, and is a signatory on Watermelon Express' bank accounts. Charles Annicelli is a signatory on Watermelon Express' bank accounts, and is d e s c rib e d as the owner of Watermelon Express on the signature card for the c o m p a n y 's Suntrust Bank account. Thomas Tramutola, Secretary Treasurer of A&J, has known Charles Annicelli fo r approximately 30 years. A&J began doing business with Charles Annicelli

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during the summer of 2006. Since that time, Tramutola has known Charles A n n ic e lli as a watermelon shipper and the owner of Watermelon Express. Over the c o u rs e of A&J's relationship with Watermelon Express, Tramutola dealt exclusively w ith Charles Annicelli and understood Charles Annicelli to be Watermelon Express' o w n e r. Tramutola never dealt with Kathleen Annicelli. In 2007, Charles Annicelli contacted Tramutola and told him that his brother, D e n n is Annicelli, wanted to buy produce, and asked if A&J would sell produce to h im . Dennis Annicelli operated a company called Top Notch Produce, LLC ("Top N o tc h " ), which is located in New Haven, Connecticut. A&J agreed to sell produce to Watermelon Express, and deliver the produce to Top Notch and Dennis Annicelli, o n the condition that Watermelon Express agree that it would be responsible for p a y in g for the produce. A&J's invoices show that the produce was sold to W a te rm e lo n Express. The invoices, which were mailed to Watermelon Express, a ls o included the trust preservation language required by the PACA Amendments o f 1995. See 7 U.S.C. § 499e(c)(4).1 Because A&J used different invoice forms over th e course of its sales to the Defendants, certain invoices do not include a p ro v is io n for interest, whereas other invoices include a provision for interest at a ra te of 16% per annum on past due accounts and payment of attorneys fees and

The required language is as follows: "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 a 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."
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costs. No one from Watermelon Express ever contacted A&J to dispute that W a te rm e lo n Express is responsible for the amounts due. A & J 's representatives contacted Charles Annicelli many times to discuss the a m o u n t due to A&J. Charles Annicelli acknowledged that Watermelon Express was re s p o n s ib le for the amount due, and indicated that he would get A&J paid the a m o u n t it was owed. At no time did Charles Annicelli deny that Watermelon E x p re s s owed the amount due. However, A&J has not been paid for the produce it d e liv e r e d . Facts Pertaining to VegPro V e g P ro , loacted in Quebec, Canada, sells wholesale quantities of produce in in te rs ta te commerce. Between August 29, 2008 and November 16, 2008, VegPro s o ld and delivered produce to Watermelon Express, which Watermelon Express a c c e p te d , having an invoice value in the total amount of $131,585.75. VegPro is s u e d written notice of its intent to preserve PACA trust benefits to Watermelon E x p re s s in accordance with the PACA Amendments of 1995 by including on each o f its invoices the trust preservation language required under the statute. See 7 U .S .C . § 499e(c)(4). However, Watermelon Express has not paid the invoices in a c c o rd a n c e with the payment terms.

II. DISCUSSION A . Standard of Review S u m m a ry judgment is appropriate only when "the pleadings, the discovery a n d disclosure materials on file, and any affidavits show that there is no genuine

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issue as to any material fact and that the movant is entitled to a judgment as a m a tte r of law." Fed. R. Civ. P. 56(c). "The substantive law governing the case will id e n tify those facts that are material, and `[o]nly disputes over facts that might a ffe c t the outcome of the suit under the governing law will properly preclude the e n try of summary judgment.'" Bouboulis v. Transp. Workers Union of Am., 442 F .3 d 55, 59 (2d Cir. 2006) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1 9 8 6 )). The moving party bears the burden of showing that no genuine issues exist a s to any material facts. See Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986). If th e moving party meets its burden, "an opposing party may not rely merely on a lle g a tio n s or denials in its own pleading; rather, its response must - by affidavits o r as otherwise provided in this rule - set out specific facts showing a genuine is s u e for trial." Fed. R. Civ. P. 56(e). "If the party moving for summary judgment d e m o n s tra te s the absence of any genuine issue as to all material facts, the n o n m o v in g party must, to defeat summary judgment, come forward with evidence th a t would be sufficient to support a jury verdict in its favor." Burt Rigid Box, Inc. v . Travelers Prop. Cas. Corp., 302 F.3d 83, 91 (2d Cir. 2002). "The non-movant c a n n o t escape summary judgment merely by vaguely asserting the existence of s o m e unspecified disputed material facts, or defeat the motion through mere s p e c u la tio n or conjecture." Western World Ins. Co. v. Stack Oil, Inc., 922 F.2d 118, 1 2 1 (2d Cir.1990) (internal quotations and citations omitted). A party also may not re ly on conclusory statements or unsupported allegations that the evidence in

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support of the motion for summary judgment is not credible. Ying Jing Gan v. City o f New York, 996 F.2d 522, 532 (2d Cir. 1993). T h e Court "construe[s] the evidence in the light most favorable to the n o n -m o v in g party and . . . draw[s] all reasonable inferences in its favor." Huminski v . Corsones, 396 F.3d 53, 69-70 (2d Cir. 2004). "[I]f there is any evidence in the re c o rd that could reasonably support a jury's verdict for the non-moving party, s u m m a ry judgment must be denied." Am. Home Assurance Co. v. Hapag Lloyd C o n ta in e r Linie, GmbH, 446 F.3d 313, 315 (2d Cir. 2006). B . Analysis 1 . Liability of Watermelon Express C o n g re s s enacted the PACA in 1930 "to suppress unfair and fraudulent p ra c tic e s in the marketing of fruits and vegetables in interstate and foreign c o m m e rc e ." Regulations under the Perishable Agricultural Commodities Act; A d d itio n of Provisions to Effect a Statutory Trust, 49 Fed. Reg. 45737 (Nov. 20, 1 9 8 4 ). The PACA requires produce dealers to make "full payment promptly" for a n y produce they purchase. 7 U.S.C. § 499b(4). In 1984, Congress amended the PACA to "increase the legal protection for u n p a id sellers and suppliers of perishable agricultural commodities until full p a y m e n t of sums due have been received by them." H. Rep. No. 543, 98th Cong., 1 s t Sess. (1983), reprinted in 1984 U.S.C.C.A.N. 405, 406; see also Frio Ice, S.A. v. S u n fru it, Inc., 918 F.2d 154, 159 (11th Cir. 1990) ("[T]he central purpose of Section 4 9 9 e (c ) is to ensure payment to trust beneficiaries.").

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To carry out this intent, Section 499e(c) imposes a statutory trust on all p ro d u c e -re la te d assets, including the produce itself, other products derived th e re fro m , and any receivables or proceeds from the sale thereof, held by a g ric u ltu ra l merchants, dealers, and brokers which must be maintained for the b e n e fit of all unpaid suppliers and sellers of the produce until full payment has b e e n made. 7 U.S.C. § 499e(c)(2). The trust arises upon the commencement of the p ro d u c e purchaser's business and is continually in existence throughout the life of th e purchaser's business. See In re Kornblum & Co., Inc., 81 F.3d 280, 285-86 (2d C ir. 1996). T h e trust is a non-segregated "floating" trust that applies to all of the buyer's p ro d u c e in inventory and all proceeds from the sale of produce. 7 U.S.C. § 4 9 9 e (c )(2 ). While commingling of trust assets is contemplated, the burden of tra c in g the origin of any disputed assets is on the PACA debtor. In re Kornblum & C o ., Inc., 81 F.3d at 287; see also Six L's Packing Co. v. West Des Moines State B a n k , 967 F.2d 256, (8th Cir. 1992) ("[T]he burden is on the PACA debtor . . . to s h o w that the disputed [asset] is from a non-trust source."). The PACA requires produce suppliers to provide notice to the buyer of their in te n t to preserve trust benefits. Produce suppliers can preserve their trust b e n e fits in one of two ways. First, a produce supplier licensed by the United States D e p a rtm e n t of Agriculture may include the requisite trust language on its invoices o r other billing statements sent to the produce purchaser at or near the time of d e liv e ry . 7 U.S.C. § 499e(c)(4). Second, a produce supplier may send a Notice of

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Intent to Preserve PACA Trust Rights within thirty days from the date payment is d u e . 7 U.S.C. § 499e(c)(3); 7 C.F.R. § 46.46(f)(2). Failure to maintain the trust and make full payment promptly to the trust b e n e fic ia ry is unlawful. 7 U.S.C. § 499b(4). Furthermore, agricultural merchants a n d dealers "are required to maintain trust assets in a manner that such assets are fre e ly available to satisfy outstanding obligations to sellers of perishable a g ric u ltu ra l commodities." 7 C.F.R. § 46.46(d)(1). "Any act or omission which is in c o n s is te n t with this responsibility, including dissipation of trust assets, is u n la w fu l and in violation of [7 U.S.C. § 499b]." Id. A merchant or dealer that v io la te s the provisions of Section 499b is liable to the person injured for the full a m o u n t of damages sustained as a consequence. 7 U.S.C. § 499e(a). Based upon the undisputed facts of this case, there is no genuine dispute th a t the Plaintiffs each had a contractual relationship with Watermelon Express, a n d that Watermelon Express received and accepted all of the produce in question in d ic a te d on the Plaintiffs' invoices. Similarly, there is no genuine dispute that the P la in tiffs preserved their interest under the trust provisions of the PACA by s e n d in g invoices to the Defendants which contained the language required by 7 U .S .C . § 499e(c)(4). There is no genuine dispute that, at all times pertinent to this c a s e , Watermelon Express was a dealer licensed under the PACA and therefore s u b je c t to its provisions. Nevertheless, despite accepting the produce delivered by th e Plaintiffs, Watermelon Express failed to pay for it as required, thereby violating 7 U.S.C. § 499b(4). Accordingly, the Court holds that the Plaintiffs are entitled to s u m m a ry judgment as a matter of law against Watermelon Express.

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2. Liability of Individual Defendants A n individual who is in a position to oversee the proper application of the P A C A trust assets, and who does not preserve the trust assets for the PACA trust b e n e fic ia rie s , for whatever reason, has breached a fiduciary duty and is personally lia b le for that tortious act. See Coosemans Specialties, Inc. v. Gargiulo, 485 F.3d 7 0 1 , 705-06 (2d Cir. 2007) (holding sole director and shareholder liable because he w a s in a position to control PACA trust assets); Bronia, Inc. v. Ho., 873 F. Supp. 8 5 4 , 861 (S.D.N.Y. 1995) (holding the "primary actor responsible for [the c o rp o ra tio n 's ] failure to live up to its fiduciary responsibilities under PACA" p e rs o n a lly responsible for the corporation's breach of trust); Morris Okun, Inc. v. H a rry Zimmerman, Inc., 814 F. Supp. 346, 348 (S.D.N.Y. 1993) ("An individual who is in the position to control the trust assets and who does not preserve them for the b e n e fic ia rie s has breached a fiduciary duty, and is personally liable for that tortious a c t" ); Mid-Valley Produce Corp. v. 4-XXX Produce Corp., 819 F. Supp. 209, 212 (E .D .N .Y . 1993) ("[A]n officer who causes a corporate trustee to commit a breach of tru s t which causes a loss to the trust is personally liable to beneficiaries for that lo s s " ). F a ilu re to turn over the trust assets when payment is due to the produce s u p p lie rs breaches the fiduciary duty to make the trust assets "freely available" to th e PACA trust beneficiary. See Morris Okun, Inc., 814 F. Supp. at 348 ("[A] PACA tru s t in effect imposes liability on a trustee, whether a corporation or a controlling p e rs o n of that corporation, who uses the trust assets for any purpose other than re p a y m e n t of the supplier."); Reds Market v. Cape Canaveral Cruise Line, Inc., 181

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F. Supp. 2d 1339, 1344 (M.D. Fla. 2002) (stating that a simple finding that individual d e fe n d a n ts who were in total control of PACA trust assets failed to account for th o s e assets is sufficient to impose personal liability under PACA). Courts have repeatedly held that persons, such as Kathleen and Charles A n n ic e lli, who are in "position[s] of control" over the PACA trust assets are p e rs o n a lly liable for the breach of the PACA trust regardless of whether they p e rs o n a lly dissipated the assets. Coosemans Specialties, 485 F.3d at 705-06; G o lm a n -H a y d e n Co., Inc. v. Fresh Source Produce, Inc., 217 F.3d 348, 351 (5th Cir. 2 0 0 0 ); Sunkist Growers, Inc. v. Fisher, 104 F.3d 280, 283 (9th Cir. 1997); Morris O k u n , Inc., 814 F. Supp. at 348. This holding is based upon the trust law principle th a t "a corporation can act only through its agents and can thus fulfill fiduciary o b lig a tio n s only through its agents," Morris Okun, 814 F. Supp. at 349, and is in te n d e d to ensure the enforcement of Congress' goals in establishing the PACA s ta tu to ry trust. Reds Market, 181 F. Supp. 2d at 1343. As one court has explained, " [i]f liability were limited to corporate dealers, the intent of the federal statute to p ro te c t consumers and sellers of produce would be easily frustrated." Id. Kathleen Annicelli has admitted that she was a "member and principal of W a te rm e lo n Express, or a person in a position to control Watermelon Express, at a ll times relevant to this action." Def. A&J's 56(a)(1) Statement ¶ 6. Records of the S ta te of Connecticut indicate that she is the principal of Watermelon Express, and s h e is listed on the PACA license for Watermelon Express. In addition, Watermelon E x p re s s ' banking records show that Kathleen Annicelli was in a position to control th e assets of Watermelon Express, and that she actually exercised control over

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such assets. Kathleen Annicelli is a signatory on Watermelon Express' bank a c c o u n ts , and she signed numerous checks on these bank accounts during the tim e period relevant to this case. Similarly, Watermelon Express' banking records also show that Charles A n n ic e lli was in position of control over the company's PACA trust assets, and that h e actually exercised such control. Charles Annicelli had check writing authority o n Watermelon Express' bank accounts, and he wrote checks on those accounts to a number of parties. In addition, he is the sole signatory on Watermelon Express' a c c o u n ts at Suntrust Bank. Finally, Thomas Tramulota, Secretary/Treasurer of A & J , has known and dealt with Charles Annicelli as the owner of Watermelon E x p re s s since 2006. Based upon these facts, the Court holds that Kathleen and Charles Annicelli w e re in positions of control over the trust assets of Watermelon Express at all tim e s relevant to this case. Their failure to preserve the trust assets for the P la in tiffs constitutes a breach of their fiduciary duties for which they are personally lia b le . Accordingly, the Plaintiffs are entitled to summary judgment as a matter of la w against Kathleen and Charles Annicelli. 3. Damages, Interest, and Attorneys' Fees B e c a u s e there is no genuine issue of material fact in dispute, both Plaintiffs' m o tio n s for summary judgment are granted. Watermelon Express must pay the p rin c ip a l amount due of $81,880.50 to A&J, and must pay the principal amount due o f $131,585.75 to VegPro. Any amount which is not recoverable from Watermelon E x p re s s must be paid by Kathleen and Charles Annicelli, personally. See Morris

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Okun, 814 F. Supp. at 349-50 (corporation is liable for PACA debt in the first in s ta n c e , and corporate fiduciaries are secondarily liable for whatever shortfall may e x is t). The Plaintiffs are also entitled attorneys' fees and prejudgment interest as " s u m s owing in connection" with the subject produce sales at issue in this case. Coosemans Specialties, Inc., 485 F.3d at 709; see also E. Armata, Inc. v. Platinum F u n d in g , 887 F. Supp. 590, 594-95 (S.D.N.Y. 1995) (although a third party lender was n o t a party to a contract providing for the payment of attorneys' fees in the event a c o lle c tio n action was necessary, it is liable to the PACA trust beneficiary because th e fees incurred to collect the past due amounts constitute "sums owing in c o n n e c tio n with such transactions"). A&J has indicated that it used different invoice forms over the course of its s a le s to the Defendants. Certain invoices in the total amount of $30,026.00 do not in c lu d e a provision for interest. A&J is entitled to prejudgment interest at the s ta tu to ry rate set forth in 28 U.S.C. § 1961 on this amount, running from the date of p a y m e n t default. See E. Armata, Inc., 887 F. Supp. at 595 (courts have discretion to a w a rd prejudgment interest under the PACA based on congressional intent to p ro te c t agricultural sellers). Other A&J invoices in the total amount of $51,854.50 in c lu d e a provision for interest at a rate of 16% per annum. The invoices that V e g P ro issued to the Defendants did not provide for a specific rate of interest, and th e re fo re VegPro is entitled to prejudgment interest pursuant to 28 U.S.C. § 1961 on th e principal amount due to it, running from the date of payment default. The P la in tiffs are each directed to file a motion with accompanying affidavits in support o f interest, attorneys' fees, and costs within 21 days of the date of this decision.

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III. CONCLUSION B a s e d upon the above reasoning, the Plaintiffs' motions for summary ju d g m e n t [Doc. ##97, 101] are GRANTED. The Clerk is directed to enter judgment fo r A&J in the amount of $81,880.50 plus interest, reasonable attorneys' fees, and c o s ts , and for VegPro in the amount of $131,585.75 plus interest, reasonable a tto rn e y s ' fees, and costs, and to close this case. The Plaintiffs are each directed to file a motion with accompanying affidavits in support of interest, attorneys' fees, a n d costs within 21 days of the date of this decision.

IT IS SO ORDERED. /s/ Vanessa L. Bryant U n ite d States District Judge Dated at Hartford, Connecticut: December 23, 2010.

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