Weis-Buy Farms, Inc. v. Quality Sales LLC et al

Filing 131

ORDER denying 110 the Motion of Defendant Bauchiero to Dismiss the complaint of Intervening Plaintiff Forlizzi & Bimber, Inc. for the reasons set forth in the attached ruling. Signed by Judge William I. Garfinkel on 6/15/2012. (Smith, M.)

UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
WEIS-BUY FARMS, INC.,
Plaintiff,
vs.
QUALITY SALES LLC,
MIKE GIANATTI,
LARRY GIANATTI III,
JERI FRASER,
RANDY DOUGAN,
and LARRY GIANATTI II,

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Defendants.
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FORLIZZI & BIMBER, INC., and
MASTRONARDI PRODUCE LTD.,

No. 3:11cv02011(WIG)

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Intervening Plaintiffs,
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vs.
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QUALITY SALES LLC,
MIKE GIANATTI,
LARRY GIANATTI III,
JERI FRASER,
RANDY DOUGAN,
LARRY GIANATTI II, and
FRANK BAUCHIERO,

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Defendants.
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RULING ON MOTION TO DISMISS [DOC. # 110] OF DEFENDANT FRANK BAUCHIERO
Pursuant to Rule 12(b)(6), Fed. R. Civ. P., Defendant, Frank Bauchiero, has moved to
dismiss the Amended Complaint of Intervening Plaintiff, Forlizzi & Bimber, Inc.,1 dated
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Bauchiero has not been named as a defendant by Plaintiff Weis-Buy Farms, Inc.
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February 22, 2012 [Doc. # 88] on the ground that the complaint fails to state a claim against him
upon which relief may be granted.
Motion to Dismiss Standard
Rule 8(a)(2), Fed. R. Civ. P., requires only “a short and plain statement of the claim
showing that the pleader is entitled to relief in order to give the defendant fair notice of what the
. . . claim is and the grounds upon which it rests.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544,
555 (2007) (internal citations and quotation marks omitted). A complaint that falls short of the
Rule 8(a)(2) standard may therefore be dismissed under Rule 12(b)(6), Fed. R. Civ. P., if it fails
to state a claim upon which relief can be granted. The function of a motion to dismiss for failure
to state a claim is “merely to assess the legal feasibility of a complaint, not to assay the weight of
the evidence which might be offered in support thereof.” Ryder Energy Distribution Corp. v.
Merrill Lynch Commodities, Inc., 748 F.2d 774, 779 (2d Cir. 1984). “Moreover, the district
court should not be swayed into granting the motion because the possibility of ultimate recovery
is remote.” Id. “Finally, the district court must limit itself to a consideration of the facts that
appear on the face of the complaint.” Id. When considering such a motion, the district court
must accept all facts alleged in the complaint as true and draw all reasonable inferences in the
plaintiff’s favor. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974); Famous Horse, Inc. v. 5th
Avenue Photo Inc., 624 F.3d 106, 108 (2d Cir. 2010).
To survive a Rule 12(b)(6) motion to dismiss, the complaint must plead “enough facts to
state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570; see also Ashcroft v.
Iqbal, 556 U.S. 662, 678, 697 (2009). A claim will have “facial plausibility when the plaintiff
pleads factual content that allows the court to draw the reasonable inference that the defendant is
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liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Two working
principles underlie the plausibility standard. “First, although ‘a court must accept as true all of
the allegations contained in a complaint,’ that ‘tenet’ ‘is inapplicable to legal conclusions’ and
‘threadbare recitals of the elements of a cause of action, supported by mere conclusory
statements, do not suffice.’” Harris v. Mills, 572 F.3d 66, 67 (2d Cir. 2009) (quoting Iqbal, 556
U.S. at 678). “‘Second, only a complaint that states a plausible claim for relief survives a motion
to dismiss;’ and ‘[d]etermining whether a complaint states a plausible claim for relief will . . . be
a context-specific task that requires the reviewing court to draw on its judicial experience and
common sense.’” Id. (quoting Iqbal, 556 U.S. at 679).
Discussion
Forlizzi & Bimber brought this suit under the Perishable Agricultural Commodities Act,
1930, as amended (“PACA”), 7 U.S.C. § 499e, against Bauchiero, seeking to hold him
individually liable as a PACA trustee for $305,938.50 in unpaid invoices for produce sold to
Quality Sales LLC. The amended complaint contains two counts, one entitled “PACA Trust
Enforcement and Dissipation of PACA Trust Assets by Responsible Individuals,” and the other
entitled “Recoupment/Disgorgement of PACA Trust Proceeds.”
As in Twombly and Iqbal, the Court begins by taking note of the elements a plaintiff must
plead to state a cause of action against an individual for dissipation of PACA trust assets and for
disgorgement of PACA trust proceeds. In its Ruling on Plaintiff’s Motion for Preliminary
Injunction, this Court held that an individual who is in a position to control the assets of a PACA
trust and fails to preserve those assets may be held personally liable to the trust beneficiaries for
breach of fiduciary duty. Weis-Buy Farms, Inc. v. Quality Sales LLC, No. 3:11cv2011, 2012 WL
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280617, at *10 (D. Conn. Jan. 31, 2012); see also Golman-Hayden Co. v. Fresh Source Produce,
Inc., 217 F.3d 348, 351 (5th Cir. 2000); Morris Okun, Inc. v. Harry Zimmerman, Inc., 814 F.
Supp. 346, 348 (S.D.N.Y. 1993). While the corporation will be held liable in the first instance
for the debt owed, individuals in a position to control trust assets, who breached their fiduciary
duties, may be held secondarily liable for whatever amount of the debt is not recoverable from
the corporation. Weis-Buy, 2012 WL 280617, at *10 (citing Morris Okun, 814 F. Supp. at 34950). The courts have held that individual liability turns not on whether the individual nominally
held an officer position nor even the size of his or her shareholding, but whether he or she had
the authority to direct the control of the PACA trust assets. Weis-Buy, 2012 WL 280617, at *10
(citing Bear Mountain Orchards, Inc. v. Mich-Kim, Inc., 623 F.3d 163, 169 (3d Cir. 2010);
Grimmway Enters., Inc. v. PIC Fresh Global, Inc., 548 F. Supp. 2d 840, 849 (E.D. Cal. 2008);
Shepard v. K.B. Fruit & Vegetable, Inc., 868 F. Supp. 703, 706 (E.D. Pa. 1994)). “The test for
individual liability continues un-brightlined, as each case depends on facts found by the trier at
trial.” Bear Mountain, 623 F.3d at 169.
The factual allegations of the Amended Complaint,2 which are deemed to be true for

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Forlizzi & Bimber also alleges that Bauchiero was at all times pertinent a “responsibly
connected” person under PACA, 7 U.S.C. § 499a(b)(9) (Am. Comp. ¶ 32). That characterization
is a legal conclusion, and one that the Court is not required to accept as true. Moreover, the
“reasonably connected” standard is different than the “control” standard applicable to individual
liability for dissipation of PACA trust assets in actions brought under 7 U.S.C. § 499e. The
“reasonably connected” standard is applicable to PACA administrative licensing and license
revocations proceedings and to whom PACA licensees may employ. See 7 U.S.C. §§ 499d(c),
499h(b). The only relevance that this term has to these proceedings is that Bauchiero would have
to have been a partner in a partnership or an officer, director or holder of more than 10% of the
outstanding stock of the corporation or association to be a “responsibly connected” person. See 7
U.S.C. § 499a(b)(9); Norinsberg v. United States Department of Agriculture, 162 F.3d 1194,
1197 (D.C. Cir. 1998).
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purposes of this motion, are that Bauchiero at all relevant times controlled the operations of
Quality Sales (Am. Comp. ¶ 33); that Bauchiero had the right and authority to control the
operations of Quality Sales (Am. Comp. ¶ 34); that Bauchiero failed to preserve the PACA trust
assets and failed to make full payment promptly to Forlizzi & Bimber for the produce it sold to
Quality Sales (Am. Comp. ¶¶ 35, 36); and that, as a result of his acts and omissions, Forlizzi &
Bimber was not paid and has suffered damages (Am. Comp. ¶ 37). In the second count, Forlizzi
& Bimber alleges that Bauchiero received proceeds from the PACA trust at a time when Quality
Sales was indebted to one or more of the PACA trust beneficiaries (Am. Comp. ¶ 41) and at a
time when the indebtedness was overdue (Am. Comp. ¶ 42), and that Bauchiero knew or should
have known of this overdue indebtedness (Am. Comp. ¶¶ 43, 44).
In his motion to dismiss, Bauchiero maintains that the complaint does not contain any
facts demonstrating that he had the authority to direct control of the PACA trust assets. The
amended complaint, however, did plainly allege that he was in control of the operations of
Quality Sales and that he had the right and authority to control the operations. These are not
conclusions of law. They are factual statements that the Court must accept as true at this
juncture. While Bauchiero may dispute these factual allegations and may even prevail at the
summary judgment stage when the facts supporting his alleged lack of control are before the
Court, for purposes of this motion to dismiss the Court must accept these factual allegations as
true. As the district court held in Partner’s Produce, Inc. v. Newport Int’l of Tierra Verde, Inc.,
No. 09-82404-CIV-MARRA, 2010 WL 2950005, at *3 (S.D. Fla. July 26, 2010), “given that the
Complaint alleges that the officers and directors were in a position to control [the corporation] ‘at
all relevant times,’ the Complaint has satisfied the required pleading standard. . . . To the extent
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that Defendants claim that [the movant] was not in a position of control of [the corporation’s]
finances at all relevant times, such an inquiry is fact-specific and cannot be resolved on a motion
to dismiss.” See also Fresh Logistics, LLC v. Atlantis Foods, Inc., No. 08-81239-CIV, 2009 WL
2242608, at *4 (S.D. Fla. July 27, 2009); Harvest Food Group, Inc. v. Newport Int’l of Tierra
Verde, Inc., No. 08-80681-CIV, 2008 WL 4927006, at *3 (S.D. Fla. Nov. 17, 2008). But cf.
Avanti Enterprises, Inc. v. AT&T Produce, Inc., No. CV-09-1185(NGG), 2010 WL 3924771, at
*5 (E.D.N.Y. July 21, 2010) (granting a motion to dismiss claims against individual defendants,
who were officers, directors, shareholders and the alleged “conscious moving force concerning
the operations of th[e] corporation,” where the complaint failed to allege that the individual
defendants were in a position to control the PACA trust), report and recommendation adopted by
2010 WL 3909243 (E.D.N.Y. Sept. 30, 2010); Andrew Smith Co. v. Paul’s Pak, Inc., No. C-0804802, 2009 WL 765687, at *5 (N. D. Cal. Mar. 20, 2009) (granting dismissal of PACA claims
against individual defendants where the complaint alleged they were in a position to control
PACA trust assets but this allegation was contradicted by other, more specific allegations in the
complaint about who controlled the corporations).
Notably, Forlizzi & Bimber’s claims are not subject to the heightened pleading
requirement of Rule 9(b), Fed. R. Civ. P. “Stated differently, this is an ordinary notice pleading
case, subject to the ‘short and plain statement’ requirements of Federal Rule of Civil Procedure
8(a).” Litwin v. Blackstone Group, L.P., 634 F.3d 706, 715 (2d Cir. 2011). Moreover, as
Forlizzi & Bimber points out, plaintiffs in cases such as this one are often not in a position to
know the inner workings of a corporation with which they do business many miles away and,
thus, are not in a position to include specific facts about an individual’s control of the corporation
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at this stage of the litigation.
Conclusion
The Court finds that Forlizzi & Bimber has pled sufficient facts to put Bauchiero on
notice of the claim against him and to state a claim for relief that is plausible on its face. See
Twombly, 550 U.S. at 570. Accordingly, Bauchiero’s Motion to Dismiss [D oc. # 110] is
denied.3
SO ORDERED at Bridgeport, Connecticut, this

15th day of June, 2012.

/s/ William I. Garfinkel
WILLIAM I. GARFINKEL
United States Magistrate Judge

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On the same day this ruling was drafted, Bauchiero filed a reply in support of his
motion to dismiss. The reply was untimely. See D. Conn. L. Civ. R. 7(d). Nevertheless, the
Court has reviewed the reply brief prior to issuing this ruling and finds that it does not change the
result. Bauchiero is correct that matters outside of the complaint cannot be considered in ruling
on a motion to dismiss. See DiFolco v. MSNBC Cable LLC, 622 F.3d 104, 111 (2d Cir. 2010).
The Court did not consider any of the extraneous matters cited by Forlizzi & Bimber, and did not
rely on any of the evidence presented at the hearing on the Motion for Preliminary Injunction, to
which Bauchiero was not a party. Thus, the Court adheres to its original ruling.
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