Classic Harvest LLC v. Freshworks LLC et al
Filing
436
OPINION AND ORDER denying as moot AgriFact's first Motion to Sustain its Objections to Pacific Sales Company's PACA Proof of Claim 352 , first Motion to Sustain its Objection to the Remaining Claimants 356 , and Motion to Sustain its Obje ctions to Beaumont Juice's PACA Proof of Claim 355 . AgriFact's Motion to Sustain its Objections to Market Express's PACA Proof of Claim 346 is granted in part and denied in part. AgriFact's objections to recognition, as payabl e out of the PACA Trust, of Market Express;s (1) invoices billed to the Fresh Roots SHORTS account, based on failure to disclosure modified payment terms, and (2) Invoice Nos. 1706, 1713, and 1715, based on failure to show that Produce was received, require further proceedings. AgriFact's remaining objections to Market Expresss Proof of Claim are overruled. AgriFact's Amended and Restated Motion to Sustain its Objections to the Claims of DArrigo Bros. Co. of California, Tanimura & Ant le Fresh Foods, Mann Packing, Church Brothers, West Pak Avocado, Eureka Specialties, Global Tranz, Railex and Calvo Growers 357 , is granted in part and denied in part. AgriFact's objections to Calavo's and Railex's Proofs of Claim ar e sustained. AgriFact's objection to Global Tranz's Proof of Claim is denied as moot. AgriFact's remaining objections in this Motion are overruled. AgriFact's Motions to Sustain its Objections to Williams' Farms Proof of Cla im 347 , Classic Harvest's PACA Proof of Claim 348 , Sunkist's Proof of Claim 354 , Vaughans Proof of Claim 349 , Taylor Farms' Proof of Claim 350 , Bengard Ranch's Proof of Claim 351 , and Pacific Sales' Proof of Claim 353 , are denied. AgriFact's objections in these Motions are overruled. It is further ordered that, on or before June 6, 2017, Counsel for Crisp shall submit to the Court an updated PACA Claims Chart, incorporating the Court's rulings contained in this Order. Signed by Judge William S. Duffey, Jr on 5/31/17. (ddm)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
CLASSIC HARVEST LLC,
Plaintiff,
v.
1:15-cv-2988-WSD
FRESHWORKS LLC, et al.,
Defendants.
OPINION AND ORDER
This matter is before the Court to evaluate claims filed in this action under
the Perishable Agricultural Commodities Act (“PACA”), 7 U.S.C. §§ 499a, et seq.,
by creditors of Crisp Holdings, LLC d/b/a Fresh Roots (“Crisp”), who claim that
they delivered, but were not paid for, produce they sold to Crisp.
The following sixteen (16) creditors have filed Proofs of Claim in this
action: Market Express, Inc. (“Market Express”) [158]; Williams Farms [157];
Classic Harvest, LLC (“Classic Harvest”) [168]; Sunkist [169], [170]; Vaughn
Foods [181]; Taylor Farms California, Inc. (“Taylor Farms”) [175]; Bengard
Ranch [177]; Pacific Sales Company (“Pacific Sales”) [173]; D’Arrigo Brothers
Company of California (“D’Arrigo”) [179]; Tanimura & Antle Fresh Foods
(“Tanimura”) [174]; Mann Packing [176]; Church Brothers [178]; West Pak
Avocado (“West Pak”) [176]; Eureka Specialties (“Eureka”) [172]; Calvo Growers
[80]; and Railex [182], [184].1 Defendant AgriFact Capital, LLC (“AgriFact”)
filed Objections [226], [227], [234]-[237], [244], [245], [256]-[258], [260], [261],
[264]-[266], and Motions to Sustain its Objections [346]-[351], [353], [357], to
each Proof of Claim.2
I.
BACKGROUND
When perishable agricultural commodities (“Produce”) are sold, PACA
imposes a nonsegregated, “floating” trust, in favor of Produce sellers, on the
Produce sold, products derived from the Produce, “and any receivables or proceeds
from the sale of such” Produce or product derived from it. 7 U.S.C. § 499e(c)(2).
PACA requires the buyer to hold trust assets, including funds a buyer receives
from the sale of Produce, “in trust for the benefit of all unpaid suppliers or sellers
1
Proofs of Claim were filed, but later withdrawn, by Trademark Trans,
Eclipse Berry Farm, Grimmway Enterprises, Inc., Taylor Farms Texas, Beaumont
Juice, Inc. d/b/a Perricone Juices, and Global Tranz.
2
In view of AgriFact’s amended motions [353], [357], AgriFact’s first
Motion to Sustain its Objections to Pacific Sales Company’s PACA Proof of Claim
[352], and first Motion to Sustain its Objection to the Remaining Claimants’ Proofs
of Claim [356] are denied as moot.
Beaumont Juice, Inc. d/b/a Perricone Juices withdrew its Proof of Claim and
complaint in intervention [359], and AgriFact’s Motion to Sustain its Objections to
Beaumont Juice’s PACA Proof of Claim [355] is denied as moot.
Global Tranz withdrew its Proof of Claim, and AgriFact’s motion to sustain
its objection to Global Tranz’s Proof of Claim, contained in its Motion to Sustain
its Objections to the Remaining Claimants’ Proofs of Claim [357], is denied as
moot.
2
of such [Produce],” “until full payment of the sums owing in connection with such
transactions has been received by such unpaid suppliers . . . .” Id. A trust
beneficiary may bring an action in federal court “to enforce payment from the
trust.” 7 U.S.C. § 499e(c)(5).
Crisp bought Produce on credit from wholesale Produce suppliers, including
Plaintiff Classic Harvest. Under PACA, Crisp was required to hold in trust (the
“PACA Trust”) the Produce, products derived from the Produce, and the proceeds
from the sale of the Produce (the “Trust Assets”). These Trust Assets were
required to be held for the benefit of Crisp’s unpaid Produce suppliers, including
Classic Harvest (all together, the “PACA creditors”).
From June 15, 2015, to August 14, 2015, Classic Harvest sold Produce to
Crisp, for which Classic Harvest has not been paid. To collect the amounts owed
to it, on August 25, 2015, Classic Harvest filed its Complaint [1] asserting claims
against Crisp and its principals for breach of their duties under PACA and to
enforce the PACA Trust. Plaintiff also asserted a claim against AgriFact for
conversion and unlawful retention of PACA Trust Assets.3
3
On December 3, 2015, Classic Harvest filed its Amended Complaint, adding
claims against AgriFact for aiding and abetting Crisp’s principals’ breach of
fiduciary duty, unjust enrichment and replevin, and a claim against all Defendants
for attorneys’ fees and costs.
3
On September 4, 2015, the Court entered the “Consent Injunction and
Agreed Order Establishing PACA Claims Procedure” [24] (the “September 4th
Order”). The September 4th Order provides for the Court to exercise exclusive
in rem jurisdiction over Crisp’s PACA Trust Assets, and further provides that any
creditor who seeks to assert a claim to the Trust Assets must assert its claim in this
action.
On January 14, 2016, the Court confirmed the PACA claims procedure
proposed in the September 4th Order, as modified by the Court’s
October 23, 2015, Scheduling Order. ([115]). The Court’s September 4th Order
sets out the procedure for (i) submitting claims in this litigation and (ii) objecting
to the claims submitted:
27. Each creditor of [Crisp] holding a claim and alleging rights
under the PACA trust, shall file with the Clerk of Court . . . on or
before [March 1, 2016], a PACA Proof of Claim . . . together with any
and all documents supporting its claim.
...
31. Any objections to any PACA claims must be filed with the
Clerk of Court. Any and all such objections must be filed and served
on or before [April 11, 2016]. The Objection must set forth in detail
all legal and factual grounds in support of . . . the objection.
32. On or before [June 13, 2016], any PACA claimant whose claim
is subject to an objection may file with the Court a detailed response
to any objection received. The response may include rebuttal
evidence that the responding party wishes the Court to consider, if
4
any. A claim, or any portion subject to an objection, will be
disallowed if a valid objection is timely filed and the claimant fails to
file a timely response.
33. The claimant and the objecting party shall thereafter exercise
best efforts to resolve any Objections. In the event the claimant and
the objecting party are unable to resolve such dispute or the objection
is not withdrawn, the parties shall submit such dispute to the Court for
summary resolution, on or before [September 8, 2016].
(September 4th Order ¶¶ 27, 31-32; October 23rd Scheduling Order [42] at 1-2;
August 8, 2016, Order [329] granting motion for extension of time).
As of the date of this Order, the total principal amount of alleged PACA
claims asserted in this case is $1,819,639.88. (See PACA Trust Chart [321];
Withdrawal of Claim by Eclipse Berry Farm [333]; Stipulation of Dismissal by
Beaumont Juice, Inc. d/b/a Perricone Juices [359]).
Additional facts related to the parties’ claims and objections are set out
below.
II.
LEGAL STANDARD
The parties requested, and the Court permitted, limited discovery on the
PACA creditors’ Proofs of Claim. The Court thus applies the summary judgment
standard to evaluate AgriFact’s objections and whether each PACA creditor has a
valid PACA claim and may recover the amount of its claim from the PACA Trust
Assets. (See September 4th Order at ¶ 33).
5
Summary judgment is appropriate where the pleadings, the discovery and
disclosure materials on file, and any affidavits show that there is no genuine issue
as to any material fact and that the moving party is entitled to judgment as a matter
of law. See Fed. R. Civ. P. 56. The party seeking summary judgment bears the
burden of demonstrating the absence of a genuine dispute as to any material fact.
Herzog v. Castle Rock Entm’t, 193 F.3d 1241, 1246 (11th Cir. 1999). Once the
moving party has met this burden, the nonmoving party must demonstrate that
summary judgment is inappropriate by designating specific facts showing a
genuine issue for trial. Graham v. State Farm Mut. Ins. Co., 193 F.3d 1274, 1282
(11th Cir. 1999). The nonmoving party “need not present evidence in a form
necessary for admission at trial; however, he may not merely rest on his
pleadings.” Id.
“At the summary judgment stage, facts must be viewed in the light most
favorable to the nonmoving party only if there is a ‘genuine’ dispute as to those
facts.” Scott v. Harris, 550 U.S. 372, 380 (2007). Where the record tells two
different stories, one blatantly contradicted by the evidence, the Court is not
required to adopt that version of the facts when ruling on summary judgment. Id.
“[C]redibility determinations, the weighing of evidence, and the drawing of
inferences from the facts are the function of the jury . . . .” Graham, 193 F.3d at
6
1282. “If the record presents factual issues, the court must not decide them; it must
deny the motion and proceed to trial.” Herzog, 193 F.3d at 1246. The party
opposing summary judgment “‘must do more than simply show that there is some
metaphysical doubt as to the material facts . . . . Where the record taken as a whole
could not lead a rational trier of fact to find for the nonmoving party, there is no
genuine issue for trial.’” Scott, 550 U.S. at 380 (quoting Matsushita Elec. Indus.
Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986)). A party is entitled
to summary judgment if “the facts and inferences point overwhelmingly in favor of
the moving party, such that reasonable people could not arrive at a contrary
verdict.” Miller v. Kenworth of Dothan, Inc., 277 F.3d 1269, 1275 (11th Cir.
2002) (quotations omitted).
III.
AGRIFACT’S OBJECTIONS
A.
Failure to Comply with the September 4th Order
1.
Calavo Growers
On November 24, 2015, Calavo Growers (“Calavo”) filed its Declaration in
Support of the PACA Trust [80]. Calavo asserts that the current total amount past
due and unpaid from Crisp is $373.50. (Id.). Calavo attaches an invoice, dated
7
August 13, 2015, for “UHP F/S CHUNKY PULP DEL PASADO,” in the amount
of $373.50. (Id. at 7).4
On April 11, 2016, AgriFact objected to Calavo’s claim, including because
“depending on the processing activities involved, this produce may not [be] subject
to the PACA.” (Obj. [227] at 8) (citing 7 U.S.C. § 499a(b)(4)(A) and 7 C.F.R.
§ 46.2(u)).5 Calavo did not respond to AgriFact’s objection.
On September 9, 2016, AgriFact moved to sustain its objection to Calavo’s
claim [357]. Calavo did not respond to AgriFact’s motion, and the motion is thus
deemed unopposed. See LR 7.1B, NDGa.
Calavo has not shown on the record here that the product sold—“ UHP F/S
CHUNKY PULP DEL PASADO”—is a “perishable agricultural commodity” the
sale of which qualifies for PACA trust protection. See 7 U.S.C. § 499a(b)(4)(A)
(defining “perishable agricultural commodity” as “fresh fruits and fresh vegetables
of every kind and character”); 7 C.F.R. § 46.2(u) (excluding from “fresh fruits and
fresh vegetables” “those perishable fruits and vegetables which have been
manufactured into articles of food of a different kind of character”); Endico
4
An attached email appears to place an order for “Avocado Pulp Chunky.”
([80] at 9).
5
The invoice terms state “NET 30 DAYS.” ([80] at 7). The statement in the
declaration that the transaction was on “31-day written payment terms” appears to
be a typographical error. (Id. at 2).
8
Potatoes, Inc. v. CIT Group/Factoring, Inc., 67 F.3d 1063 (2d Cir. 1995) (PACA
covers fresh fruits and fresh vegetables “that are in their natural form or are subject
to a change in form which does not change the essential nature of the item, such as
slicing, or a change which is meant only to temporarily preserve the fruit or
vegetable, such as freezing or adding a preservative chemical;” frozen onion rings,
breaded cauliflower, zucchini sticks, pickles, coleslaw, potato salad and other
salads that contained less than 90% fresh ingredients did not qualify as “perishable
agricultural commodities” under PACA; potatoes that were steam peeled, sliced
and blanched to prevent discoloration qualified for PACA protection, but lost trust
protection when they were sprayed with oil to prepare them for certain types of
cooking, thus changing their character). Calavo failed to respond to the objection
or submit any facts showing that the product that is the subject of its claim
qualifies for PACA Trust protection and AgriFact’s objection is sustained. (See
Sept. 4th Order at ¶ 32) (“A claim, or any portion subject to an objection, will be
disallowed if a valid objection is timely filed and the claimant fails to file a timely
response.”). Calavo’s claim is denied.
9
2.
Railex
On March 1, 2016,6 Railex filed its Proof of Claim [182], using Official
Bankruptcy Form 410. Railex states that the amount of its claim is $16,000, the
basis for which is “services performed.” (Id.). On March 2, 2016, Railex
supplemented its Proof of Claim with a copy of the Stipulated Judgment that it
asserts is the basis for its claim. ([184]). The Stipulated Judgment was entered on
November 25, 2015, by the Superior Court of California, in Railex, LLC v. Fresh
Roots, LLC, No. M130351. (Id.).7 Railex does not provide any other information
regarding that action, or the “services performed.”
On April 11, 2016, AgriFact filed its Objection [236] to Railex’s claim.
AgriFact argues, among others, that “[u]pon information and belief, [Railex] is in
the business of providing transportation services. However, such services do not
qualify for PACA trust protection.” (Obj. [236] at 2) (citing “R” Best Produce,
Inc. v. Shulman-Rabin Mktg. Corp., 467 F.3d 238, 243 (2d Cir. 2005) & 7 U.S.C.
§ 499e(c)(2)). Railex did not respond to AgriFact’s objection.
6
Although Railex’s claim was delivered to the Court on March 1, 2016, it was
not docketed until March 2, 2016.
7
The Stipulated Judgment is signed by David Gattis, a member of Fresh
Roots, LLC. Both Gattis and Fresh Roots, LLC, are defendants in this action,
although their specific relationship to Crisp is not clear.
10
On September 9, 2016, AgriFact moved to sustain its objection to Railex’s
claim [357]. Railex did not respond to AgriFact’s motion, and the motion is
deemed unopposed. See LR 7.1B, NDGa.
Railex does not assert, and there is no evidence to support, that Railex sold
Produce to Crisp.8 Accordingly, Railex does not have a right to recover under
PACA in this action. See, e.g., Pacific Intern. Mktg. v. A & B Produce, 462 F.3d
279 (3d Cir. 2006) (denying transportation company’s claim for costs incurred in
arranging shipment of Produce to buyer; transportation company did not have a
right to recover its freight charges under PACA, including because it was not a
“seller, supplier or agent” who qualified for trust protection, and transaction with
Produce buyer for transportation of Produce was not made “in connection with” a
covered Produce transaction). Under Paragraph 32 of the Court’s September 4th
Order, and in the absence of any facts to show that Railex’s claim is a qualified
PACA claim, AgriFact’s objection is sustained. (See Sept. 4th Order at ¶ 32) (“A
claim, or any portion subject to an objection, will be disallowed if a valid objection
is timely filed and the claimant fails to file a timely response.”). Railex’s claim is
denied.
8
The Court agrees with AgriFact that it appears that Railex is a transportation
provider. See http://railex.com/ (last visited May 25, 2017).
11
B.
Extension of Payment Terms
PACA makes it unlawful for any Produce buyer “to fail or refuse truly and
correctly to account and make full payment promptly in respect of any transaction
in [Produce] to the person with whom such transaction is had . . . .” 7 U.S.C.
§ 499b(4). “Full payment promptly” means payment within ten (10) days after the
buyer accepts the Produce, unless the parties agreed to extend the time for
payment. 7 C.F.R. § 46.2(aa). Under 7 C.F.R. § 46.2(aa)(11),
Parties who elect to use different times of payment . . . must reduce
their agreement to writing before entering into the transaction and
maintain a copy of the agreement in their records. If they have so
agreed, then payment within the agreed upon time shall constitute
“full payment promptly”: Provided, That the party claiming the
existence of such an agreement for time of payment shall have the
burden of proving it.
7 C.F.R. § 46.2(aa)(11); see also 7 C.F.R. § 46.46(e)(1) (“The times for prompt
accounting and prompt payment are set out in § 46.2(z) and (aa). Parties who elect
to use different times for payment must reduce their agreement to writing before
entering into the transaction and maintain a copy of their agreement in their
records, and the times of payment must be disclosed on invoices, accountings, and
other documents relating to the transaction.”).9 However, “[t]he maximum time for
9
Cf. 7 U.S.C. § 499e(c)(3) (seller must give the buyer written notice of the
seller’s intention to preserve its trust benefits within 30 calendar days “(i) after
expiration of the time prescribed by which payment must be made, as set forth in
12
payment for a shipment to which a seller, supplier, or agent can agree, prior to the
transaction, and still be eligible for benefits under the trust is 30 days after receipt
and acceptance of the [Produce] . . . .” 7 C.F.R. § 46.46(e)(2). After the
transaction, a seller who “has met the eligibility requirements . . . will not forfeit
eligibility under the trust by agreeing in any manner to a schedule for payment of
the past due amount or by accepting a partial payment.” 7 C.F.R. § 46.46(e)(3).
“Strict compliance with PACA is required to preserve one’s rights in a
PACA statutory trust.” Paris Foods Corp. v. Foresite Foods, Inc., 278 F. App’x
873, 874 n.1 (2008) (citing Am. Banana Co., Inc. v. Rep. Nat’l Bank of New York,
N.A., 362 F.3d 33, 42 (2d Cir. 2004)). Sellers who offer, prior to the transaction,
payment periods longer than thirty days, are not entitled to PACA trust protection.
“If the supplier extends more generous payment terms, the underlying debt may
not be affected, but the security interest in the buyer’s assets is lost.” Id.
In summary, PACA and its regulations “require a buyer to pay the seller
within ten days after the buyer accepts the Produce, but permit the parties to agree
in writing before the transaction to other payment periods that do not exceed thirty
regulations issued by the Secretary; (ii) after expiration of such other time by
which payment must be made, as the parties have expressly agreed to in writing
before entering into the transaction; or (iii) after the time the supplier . . . has
received notice that the payment instrument promptly presented for payment has
been dishonored.”) (emphasis added).
13
days. Sellers who offer payment periods longer than thirty days are not entitled to
PACA trust protection.” Am. Banana, 362 F.3d at 43.
AgriFact argues that certain of the PACA creditors are not entitled to trust
protection because, based on their pre-default course of dealing, they agreed to
extend payment terms beyond the 30-day limit. The Court disagrees. The
regulations clearly state that “[p]arties who elect to use different times for payment
must reduce their agreement to writing before entering into the transaction.”
7 C.F.R. §§ 46.2(aa)(11), 46.46(e)(1); cf. 7 U.S.C. § 499e(c)(3). In Hull Co.
v. Hauser’s Foods, Inc., 924 F.2d 777, 781 (8th Cir. 1991), the Eighth Circuit held
that, based on the clear language of the regulations, only written extensions of
payment terms, and not oral agreements, could extend payment terms beyond those
specified in the parties’ written agreement. The Court stated: “oral agreements
have no effect on produce sellers’ trust protection.” Id.
In In re Lombardo Fruit & Produce, 12 F.3d 806 (8th Cir. 1993), the Eighth
Circuit, applying Hull, held that the parties’ course of dealing is not relevant in
determining PACA trust eligibility. The Court reasoned that “[i]f an express, oral
agreement cannot be deemed to extend payment terms, we fail to see how
something less than an express oral agreement—namely, the parties’ course of
dealing—can.” Lombardo, 12 F.3d at 811. In Lombardo, the buyer argued that the
14
parties’ written agreement requiring payment within thirty days was a sham
because, throughout their relationship, the buyer paid within the thirty day period
only once. Id. at 810. The Court found that the parties’ agreement met the
requirements of PACA and it was valid and enforceable under contract law. That
the seller did not demand payment on time did not invalidate the contract. The
Court noted that, “[i]f [the buyer] sued [the seller] for making a late payment, [the
buyer’s] past failures to insist upon its rights under the contract would not be a
defense to late payment. Similarly, PACA does not impose an obligation on the
seller to diligently enforce the agreement by, for instance, filing suit, filing for trust
protection, or terminating business relations.” Id.
The Third, Fifth and Seventh Circuits have also held that oral agreements or
the parties’ course of dealing are not effective to extend payment terms under
PACA. Patterson Frozen Foods, Inc. v. Crown Foods Int’l, Inc., 307 F.3d 666, 671
(7th Cir. 2002) (“[A]n oral agreement for an extension or a course of dealing
allowing more than 30 days for payment will not abrogate a PACA trust.”)
(citations omitted); Bocchi Ams. Assocs., Inc. v. Commerce Fresh Mktg., Inc.,
515 F.3d 383, 390 (5th Cir. 2008) (“We agree with the majority of circuits and
adopt the rule that waiver or forfeiture of PACA trust rights by entering into an
extension agreement requires an agreement in writing;” holding that “an oral
15
agreement will not suffice.”) (citations omitted); Idahoan Fresh v. Advantage
Produce, Inc., 157 F.3d 197, 204-205 (3d Cir. 1998) (The parties’ “failure to
reduce their oral agreements with respect to the payment term to writing does not
disqualify them, and they therefore are entitled to share in a pro-rata distribution of
the statutory trust res until they receive payment in full.”); see also Sutherland
Produce Sales, Inc. v. High Country Distr. LLC, 2017 WL 782281, *6-9 (PACA
and its regulations “go out of their way to make clear that a seller will be eligible
for trust protection only if it uses the 10-day default term or modifies that term in
writing to some other term of 30 days or fewer. . . . Because [buyer] has provided
no evidence of a written agreement to extend the payment term beyond the 30-day
limit, it has not raised a triable issue of fact on [seller’s] PACA eligibility.”).10
10
AgriFact relies on American Banana to support that a seller who agrees,
orally or in writing, to a payment period beyond 30 days forfeits its PACA trust
protection. AgriFact’s reliance is misplaced. In American Banana, the seller and
the buyer entered into an oral post-default agreement to extend payment beyond 30
days. The Second Circuit “found nothing in the text of PACA or its regulations
which requires that a provable post-default agreement extending a payment period
beyond thirty days must, without exception, be reduced to writing before it will
disqualify a seller from PACA’s trust protection.” Am. Banana, 362 F.3d at 46.
The court thus turned to legislative history, and observed that, “[i]n view of
Congress’s clearly expressed intention to extend trust protection solely to cash and
short-term credit transactions, we cannot interpret [the writing requirement in
7 C.F.R. § 46.46(e)(1)] to mean that parties are free to enter into agreements that
violate PACA’s prompt payment rules as long as they do not reduce their
agreements to writing. Rather, we conclude that a failure to reduce to writing an
agreement that violates PACA, should not result in the preservation of the trust,
16
The Eleventh Circuit has not considered if a pre-transaction oral agreement
or the parties’ course of dealing affects PACA trust eligibility. In In re Gotham
Provision Co., 669 F.2d 1000 (5th Cir. Unit B 1982),11 our Circuit considered the
issue under the Packers and Stockyards Act (“PSA”), 7 U.S.C. § 181, et seq. “The
PACA trust provisions were modeled after those in the PSA, and Congress
specifically intended that established precedents under the PSA be used to interpret
PACA.” C.H. Robinson Co. v. Trust Co. Bank, N.A., 952 F.2d 1311, 1315 & n.2
(citing In re Fresh Approach, 48 B.R. 926, 931 (Bankr. N.D. Tex. 1985)). Gotham
is instructive here.
where the same agreement, if memorialized, would have resulted in forfeiture of
such protection.” Id. at 46-47.
Where, as here, it is argued that the parties entered into a pre-transaction
agreement to extend payment terms beyond the permissible 30 day period, PACA
and its regulations are clear that “[p]arties who elect to use different times for
payment must reduce their agreement to writing before entering into the
transaction.” 7 C.F.R. §§ 46.2(aa)(11), 46.46(e)(1); cf. 7 U.S.C. § 499e(c)(3); see
also United States v. Gayle, 342 F.3d 89, 93-94 (2d Cir. 2003) (“Resort to
authoritative legislative history may be justified where there is an open question as
to the meaning of a word or phrase in a statute, or where a statute is silent on an
issue of fundamental importance to its correct application.”). American Banana
simply does not apply.
The Court notes that, in 2011, after American Banana was decided, the
PACA regulations were amended to provide that, after the transaction, a seller who
has otherwise met the PACA eligibility requirements “will not forfeit eligibility
under the trust by agreeing in any manner to a schedule for payment of the past due
amount or by accepting a partial payment.” 7 U.S.C. § 46.46(e)(3).
11
The Eleventh Circuit adopted, as precedent, decisions of the former Fifth
Circuit, Unit B, rendered after September 30, 1981. Stein v. Reynolds Securities,
Inc., 667 F.2d 33 (11th Cir. 1982).
17
In Gotham, the Court rejected the appellant’s reliance on the parties’ course
of dealing and held that a livestock purchase is not exempt from the trust
provisions of the PSA unless the buyer obtains from the seller a writing which
clearly indicates that the seller has extended credit to the buyer and thereby waived
trust protection. Gotham, 669 F.2d at 1007. Under the PSA, a livestock buyer is
required to hold in trust for the benefit of unpaid cash sellers any livestock
purchased in cash sales, inventories of meat or other products derived from such
livestock, and accounts receivable or proceeds obtained through the sale of those
items. Id. at 1004 (citing 7 U.S.C. § 196). Trust protection is limited to “cash
sale” transactions, which the PSA defines as sales “in which the seller does not
expressly extend credit to the buyer.” Id. Because the PSA does not define an
“express extension of credit,” the Court looked to the prompt payment
requirements in Section 409 of the PSA, 7 U.S.C. § 228b. Id. at 1004-1005.
Under Section 409, buyers are required to pay the seller the full amount of the
purchase price before the close of the next business day following the purchase and
transfer of possession of livestock, unless the parties “expressly agree in writing,
before such purchase or sale, to effect payment in a[nother] manner . . . .” Id.
Based on the plain language of Section 409, the Court concluded that the PSA
presumes that all livestock sales are cash sales unless the parties expressly agree in
18
writing to make the transaction a credit sale. Id. at 1005. The Court rejected the
appellant’s argument that the cash or credit nature of a sale could be determined
based on the parties’ course of dealing, including where the parties expected that
payment would occur after the end of the two-day period established by
Section 409. Id. at 1007. The Court reasoned that, “[a]lthough in the abstract such
a rule might have some appeal, it is not the rule that Congress selected. To adopt
the [appellant’s] view would do violence to the wording of the statute.” Id.
In view of Gotham, and the well-reasoned decisions of the Fifth, Seventh
and Eighth Circuits, the Court concludes an agreement to extend time for payment
beyond ten days is required to be in writing and entered into before the transaction.
See 7 U.S.C. §§ 46.2(aa)(11), 46.46(e)(1), (2); cf. 7 U.S.C. § 499e(c)(3). In other
words, an agreement to extend payment terms, even if to extend payment terms
beyond the allowed 30-day period, is only effective if it is in writing.12 Oral
agreements and the parties’ course of dealing are not sufficient to modify payment
terms. To the extent AgriFact argues that certain PACA creditors are not entitled
12
The Court recognizes that the writing requirement seems to penalize
otherwise good business practices: the seller who agrees in writing to extend
payment terms beyond 30 days forfeits his PACA trust eligibility, while the seller
who makes the same agreement orally but fails to memorialize it in writing retains
his PACA trust eligibility. It makes practical business sense, however, to impose
such a bright line rule to promote certainty and avoid the fact, and time, intensive
oral agreement or course of dealing analysis AgriFact proposes.
19
to trust protection because they agreed, orally or based on their course of dealing,
to extend payment terms beyond the permitted 30-day limit, AgriFact’s objection
to the claims asserted by Classic Harvest, Market Express, Williams Farms,
Vaughan Foods, Taylor Farms, Bengard Ranch, Pacific Sales and West Pak is
overruled.
The Court next considers AgriFact’s objections to the PACA creditors’
claims based upon having agreed, in writing and before the transaction, to extend
payment terms beyond the permissible 30-day period under PACA. AgriFact
contends a claim is not PACA protected if a PACA creditor entered into an
impermissible agreement.
1.
Classic Harvest
AgriFact relies on a March 26, 2015, email conversation between Crisp and
Classic Harvest to meet its burden to show an impermissible pre-transaction
written agreement between Crisp and Classic Harvest to modify payment terms.
([348] at 12). In the email, the parties discussed amounts owed by Crisp to
Classic Harvest. Linda Cunningham, President of Classic Harvest, told Crisp:
We applied the check for $71k
Attached is a summary outstanding – please note your credit limit is
set to $200k.
We need you to please stay under $200k and within 35 days
20
We need $94,007.70 next week to get you on track – this will still put
you over limits, but will get it [sic] you closer
$52,294.30 by next Monday
$41,713.40 by next Wednesday
This follows the same payment schedule you did this week
If this plan doesn’t work, please let me know what will
([346.3] at 16-17) (emphasis added). Crisp responded that they are “working on a
strategy” and “not sure we can hit those numbers you are suggesting but we will
get close and continue to get closer.” (Id.). Cunningham responded that she
“realize[s] we won’t hit those numbers right away, we [sic] needed to give you an
idea of where the goal is.” (Id.).
The parties dispute whether the March 26, 2015, emails relate to past-due
amounts or constitute an agreement to extend payment terms for future purchases
beyond 30 days. AgriFact claims that, in this email, the parties “essentially
adopted a revolving line of credit with a maximum credit facility [of]
approximately $200,000.” ([348] at 12). Classic Harvest asserts that, in the
emails, it merely “sought to provide payment terms for past-due amounts from
Crisp,” which does not affect Classic Harvest’s right to payment from the PACA
Trust Assets. ([368] at 13-14).
21
Even if, as AgriFact argues, the emails relate to payment terms for future
purchases, the March 26, 2015, emails, are not an enforceable agreement to modify
payment terms because there is no evidence that Crisp accepted Classic Harvest’s
“offer” of a credit limit of $200,000 and payment terms within 35 days.
Assuming that the emails evidence an agreement—a conclusion unsupported
by the record—AgriFact argues that the March 26, 2015, emails would be
enforceable under O.C.G.A. § 11-2-201(2), an exception to the Georgia Statute of
Frauds.
Under PACA, “a formal written agreement is not required to waive the
seller’s rights . . . . [A]ll that is needed to evidence an agreement are writings
sufficient to satisfy the applicable statute of frauds.” Bocchi, 515 F.3d at 391
(citing Patterson, 307 F.3d at 671). In Georgia,
(1) Except as otherwise provided in this Code section a contract for
the sale of goods for the price of $500.00 or more is not enforceable
. . . unless there is some writing sufficient to indicate that a contract
for sale has been made between the parties and signed by the party
against whom enforcement is sought or by his authorized agent . . . .
(2) Between merchants if within a reasonable time a writing in
confirmation of the contract and sufficient against the sender is
received and the party receiving it had reason to know its contents, it
satisfies the requirements of subsection (1) of this Code section
against such party unless written notice of objection to its contents is
given within ten days after it is received.
O.C.G.A. § 11-2-201 (emphasis added).
22
The evidence in the record shows that Crisp objected, in writing, to
Classic Harvest’s “offer” of a credit limit of $200,000 and payment terms within
35 days. Crisp responded, the same day, to Cunningham’s email and stated that
they “are working on a strategy” and are “not sure we can hit those numbers you
are suggesting but we will get close and continue to get closer.” ([346.3] at 16).
That Crisp did not accept Classic Harvest’s offer is further supported by the
Declaration of Phillip Coleman, Crisp’s Chief Financial Officer. In his
Declaration, Coleman stated:
I understood Cunningham to be proposing that Crisp attempt to keep
its payable obligations below a $200,000 credit limit, doing so by
paying the approximate $139,000 that was over 40 days overdue.
Dave Gattis and I discussed this concept, but advised Cunningham
that we needed the longer payment period (and corresponding higher
credit limit) and therefore advised that we “were not sure we can hit
those numbers you are suggesting but we will get close and continue
to get closer [to the 35 day terms].”
([346.3] at 4) (alteration in original). Coleman does not recall any other
discussions about payment terms, and states that “over time our discussions
focused almost exclusively on moving the amount owed to below the $200,000
credit limit.” (Id. at 6).13
13
The Court notes that, where both parties are merchants, invoices for goods
sold constitute written confirmation of the parties’ agreement, under O.C.G.A.
§ 11-2-201(2). See, e.g., Dalesso v. Reliable-Trible Cee of North Jersey, Inc.,
306 S.E.2d 415, 416 (Ga. Ct. App. 1983) (“[T]he trial court was justified in relying
23
Because Crisp objected to the credit limit and payment terms Cunningham
proposed, the March 26, 2015, emails are not enforceable under O.C.G.A.
§ 11-2-201(2). Compare Brooks Peanut Co., Inc. v. Great Southern Peanut, LLC,
746 S.E.2d 272, 278 (Ga. Ct. App. 2013) (Agreement satisfied Georgia statute of
frauds where GSP received written confirmation the same day oral agreement was
reached, GSP had reason to know of the confirmation’s contents, and it was
undisputed that GSP failed to object to the confirmation in writing within 10 days).
AgriFact fails to show that Crisp and Classic Harvest agreed, in writing, to pay
future invoices beyond 30 days, and its objection to Classic Harvest’s claim is
overruled.
2.
Market Express
AgriFact relies on an April 12, 2015, email from Crisp to Market Express to
support that Crisp and Market Express entered into a written agreement to modify
Market Express’s payment terms. ([347] at 6-7 n.2). In the email, ([346.1] at 2),
Crisp states that three of its oldest invoices were “skipped” by Market Express,
thus making them more than 40 days past due. Crisp ends the email by asking to
upon the invoices as written confirmation of the contract between Reliable and
appellants within the meaning of O.C.G.A. § 11-2-201(2) as no written notice of
objection was given to Reliable within 10 days of receipt by appellants.”).
Classic Harvest’s invoices state that payment terms are “Net 10,” and there is no
evidence to support that Crisp objected, within ten (10) days of receiving an
invoice, to the payment terms listed on the invoice.
24
“set up a call[.]” (Id.). This email is insufficient to show a pre-transaction
agreement between the parties to alter the time for payment. There is no response
from Market Express indicating “acceptance” of any agreement to alter the time
for payment. Because the email pertains to past-due invoices, it also is not a
pre-transaction agreement between Market Express and Crisp. See 7 C.F.R.
§ 46.2(aa)(11). AgriFact does not present sufficient evidence to establish a written
agreement between Crisp and Market Express, and its objection to Market
Express’s claim is overruled.
3.
Williams Farms
AgriFact argues that the course of dealing between Williams Farms and
Crisp supports that there was an agreement between them for Crisp to pay beyond
30 days. (See, e.g., [347] at 11) (“[B]y at least May 25, 2015, Crisp understood
that Williams Farms was not expecting payment on produce shipped after that date
within 30 days of acceptance of the produce. . . . Therefore, it cannot be disputed
that [for] the seven (7) June 2015 invoices that are included in Williams’
claim, . . . Williams had no expectation that it was going to be paid within 30
days.”). AgriFact fails to identify any pre-transaction written agreement to extend
payment terms beyond 30 days, and AgriFact’s objection to Williams Farms’ claim
is overruled.
25
4.
Vaughan Foods
AgriFact argues that there is a written agreement between Crisp and
Vaughan to modify payment terms based on emails between Crisp and Vaughan
during the period of March 3, 2016, through April 25, 2016. ([349] at 13). The
emails, ([349.1] at 55-61), show that Crisp had “cash flow issues” and was trying
to pay off debts owed to Vaughan. Crisp agreed to pay $75,000 of a past-due debt
by a certain date and, when it missed that deadline, Vaughan stated “I thought we
had an agreement here. What is the hold up?” (Id. at 56). AgriFact claims that
“[t]his evidence demonstrates an actual agreement between Vaughan and Crisp to
accept payments on 30 to 60 day terms.” ([349] at 13). The emails, even assuming
they constitute an agreement between Crisp and Vaughan Foods, is at most an
agreement for payment of past-due debts and is not a pre-transaction written
agreement between Vaughan and Crisp to extend payment terms as required under
7 C.F.R. § 46.2(aa)(11). AgriFact does not present any other evidence to support a
pre-transaction written agreement between Crisp and Vaughan, and AgriFact’s
objection to Vaughan Foods’ claim is overruled.
5.
Taylor Farms
AgriFact argues that the course of dealing between Taylor Farms and Crisp
evidences an “agreement” to extent terms of payment. (See, e.g., [350] at 11
26
(“Although the invoices showed 21 day terms . . . [Taylor Farm] confirmed, from
at least mid-2014 to [the] end of relationship Crisp did not pay Taylor Farms
within 30 days.”). AgriFact does not identify a pre-transaction written agreement
to extend payment terms beyond 30 days and in absence of one, AgriFact’s
objection to Taylor Farms’ claim is overruled.
6.
Bengard Ranch
AgriFact argues that the course of dealing between Bengard Ranch and
Crisp is sufficient to show a pre-transaction extension of the time for payment.
(See, e.g., [351] at 10 (“[Bengard] acknowledged that Crisp never paid within the
credit terms . . . set forth on the invoice.”). AgriFact again does not identify a
pre-transaction written agreement to extend payment terms beyond 30 days and
AgriFact’s objection to Bengard Ranch’s claim is overruled.
7.
Pacific Sales
AgriFact argues that the course of dealing between Pacific Sales and Crisp
supports a pre-transaction agreement to extend payment terms. (See, e.g., [353] at
11 (“Crisp did not pay on 10 day terms, and instead Pacific Sales and Crisp
developed a course of conduct allowing for sales that exceeded 30 days terms[.]”).
AgriFact does not identify a pre-transaction written agreement to extend payment
terms beyond 30 days, and its objection to Pacific Sales’ claim is overruled.
27
8.
West Pak
AgriFact claims that West Pak and Crisp entered into a pre-transaction
written agreement to extend payment terms beyond 30 days. ([357] at 3-4).
AgriFact relies on a June 5, 2015, email, (see [346.3] at 54), between Crisp and
AgriFact. In it, West Pak and Crisp discussed that Crisp was past due on certain
invoices, and that West Pak needed to receive $33,105.60 for payments that were
past due “over 36 days.” (Id.). Crisp claims the email shows that Crisp
“understood that West Pak was not expecting payment on produce shipped after
that date within 30 days of acceptance of the produce.” (Id. ¶ 20). Based on the
email, AgriFact concludes that West Pak and Crisp “entered into a written
agreement . . . for payment terms beyond 30 days . . . .” ([357] at 3-4) (footnote
omitted). The Court disagrees. The email AgriFact identifies concerns payment of
past-due debts and it is not a pre-transaction written agreement between West Pak
and Crisp to extend payment terms for future transactions. See 7 C.F.R.
§ 46.2(aa)(11). The email does not evidence a pre-transaction agreement to allow
payment after 30 days, and AgriFact’s objection to West Pak’s claim is overruled.
C.
Failure to disclose modified payment terms
“Where ‘the parties expressly agree to a payment time period different from
that established by [default],’ [PACA] mandates that ‘the terms of payment shall
28
be disclosed on invoices, accountings, and other documents relating to the
transaction.’” Bowlin & Son, Inc. v. San Joaquin Food Serv., Inc., 958 F.2d 938,
940 (9th Cir. 1992) (quoting 7 U.S.C. § 499e(c)(3)). “Failure to include [these
modified] payment terms in invoices divests the seller of trust benefits.” Id.; see
also In re Atlanta Egg & Produce, Inc., 321 B.R. 746, 753 (N.D. Ga. 2005).
1.
Market Express
AgriFact argues that Market Express cannot recover under PACA for
invoices billed to the “Fresh Roots SHORTS” account because the payment terms
listed on these invoices state “Net 15,” which conflicts with the parties’ written
agreement (the “May 12, 2015, Memorandum”) that states “payment terms to
[Market Express] are 21 days.” ([346.4] at 3). Even if, as AgriFact argues, the
May 12, 2015, Memorandum is valid and enforceable,14 there is an issue of fact
whether it applies to invoices issued to the Fresh Roots SHORTS account. Robert
Hoch testified at his deposition that, although the payment terms on most invoices
from Market Express were 21 days, some of Market Express’s later invoices show
14
The parties dispute whether the May 12, 2015, Memorandum is valid,
including whether it satisfied the Georgia Statute of Frauds. If the May 12, 2015,
Memorandum is not valid, “the listing of payment terms other than 10 days has no
legal relevance.” See Atlanta Egg, 321 B.R. at 755. “No provision of [PACA]
disqualifies a seller from PACA trust benefits simply because the seller unilaterally
changed the payment term on the invoice to a period other than the standard
10-day period, but in no circumstance greater than 30 days.” Id.
29
15-day payment terms “due to the shorts, because . . . [Market Express] started
buying shorts for [Crisp] . . . [and] when that happened . . . [Hoch] had a meeting
with Tim Harris [sic] [from Crisp] . . . [and] told him [that Market Express] had to
be paid faster on those invoices because [Market Express] was paying cash.”
(Hoch Dep. at 20-21). Hoch stated that Harrison “said, let’s earmark those, and
[Crisp] will pay those in 15.” (Id. at 21). The Court notes that Market Express
continued issuing invoices, still containing the 21-day payment terms, to Crisp on
other accounts. There is an issue of fact whether the May 12, 2015, Memorandum
applies to invoices issued to the Fresh Roots SHORTS account. AgriFact’s
objection to recognition of these invoices as payable out of the PACA Trust
requires further proceedings.
2.
Taylor Farms
It is undisputed that Taylor Farms agreed to a 21-day payment term. It is
also undisputed that Taylor Farms’ invoices all state that the payment terms are 21
days. AgriFact argues, however, that Taylor Farms is denied the benefit of the
PACA Trust because it failed to include the 21-day payment terms also on its bills
of lading. The Court disagrees.
Under PACA, “[w]hen the parties expressly agree to a payment time period
different from that established [by default], a copy of such agreement shall be filed
30
in the records of each party to the transaction and the terms of payment shall be
disclosed on invoices, accountings, and other documents relating to the
transaction.” 7 U.S.C. § 499e(c)(3) (emphasis added); see also 7 C.F.R.
§ 46.46(e)(1) (“Parties who elect to use different times for payment must reduce
their agreement to writing before entering in to the transaction and maintain a copy
of their agreement in their records, and the times of payment must be disclosed on
invoices, accountings, and other documents relating to the transaction.”). PACA
does not define “other documents,” and at least one district court has held the
phrase “other documents” is ambiguous. See Nature Quality Vine Ripe Tomatoes
v. Rawls Brokerage, Inc., 536 F. Supp. 2d 1259, 1266 (N.D. Ala. 2005); cf. San
Joaquin, 958 F.2d at 940-41 (suggesting, but not deciding, that “other documents
relating to the transaction” is ambiguous). The court in Nature Quality held that
the phrase “‘other documents relating to the transaction’ refers only to other
documents which, like invoices and accountings, seek payment for delivered
produce.” Id. The court found that “it seems reasonable that by using the phrase
‘other documents relating to the transaction,’ Congress sought only to prevent a
produce seller from circumventing the reach of the statute by [demanding
payment] using a document with a title other than ‘invoice’ or ‘accounting.’” Id.
31
The Court finds this reasoning persuasive. Taylor Farms’ bills of lading do
not seek payment but simply contain the order number, destination address,
shipping information, and the type and quantity of Produce sold. That the bills of
lading did not recite payment terms does not violate the requirements of 7 U.S.C.
§ 499e(c)(3). See Nature Quality, 536 F. Supp. 2d at 1266. The documents that
did seek payment did contain the terms of payment. AgriFact’s objection based on
some shortcoming in the bills of lading is overruled.
D.
Charges for non-Produce items
Under PACA, the scope of a seller’s right to recover from the PACA trust is
defined as including “sums owing in connection with [Produce] transactions.”
7 U.S.C. § 499e(c)(2). Courts have routinely found that “[h]andling, pallet, and
freight charges are a necessary part of the produce transaction and therefore are
deemed as included within the phrase ‘sums owing in connection with’ the sale of
fresh fruit and produce.” Lincoln Diversified, Inc. v. Mangos Plus, Inc.,
No. 98 CIV. 5593 RWS, 2000 WL 890198, at *2 (S.D.N.Y. July 5, 2000); Prestige
Produce, Inc. v. Silver Creek, Inc., No. CV 04-491 S EJL, 2006 WL 581262, at *3
(D. Idaho Mar. 9, 2006); accord Fishgold v. OneBank & Trust Co., 43 F. Supp. 2d
346, 350 (W.D.N.Y.1999) (“[H]andling fee . . . was included on an invoice for the
32
shipment of produce, and appears to be related to the produce charges noted on the
bill. As such, this charge is recoverable from the PACA trust.”).
1.
Pacific Sales
AgriFact argues that Pacific Sales’ invoices must be reduced because they
include charges for non-Produce items. Many of Pacific Sales’ invoices include
charges for temperature recorders and “air bags,” in addition to the Produce
purchased. These charges are a necessary part of the Produce transaction, Pacific
Sales incurred these charges “in connection with” the Produce transaction, and
these charges are permitted to be recovered from the PACA Trust Assets. See
7 U.S.C. § 499e(c)(2); Lincoln, 2000 WL 890198, at *2; Quail Valley Mktg., Inc.,
60 Agric. Dec. 314 (U.S.D.A. Dec. 4, 2000) (permitting charges for temperature
recorders and air bags with Produce purchased). AgriFact’s objection is overruled.
2.
Taylor Farms
Crisp and AgriFact argue that Taylor Farms is not entitled to recover from
the PACA Trust Assets for Invoice Nos. 706045 and 707452, because they are for
pallets only. ([212] at 3). There is no evidence in the record to support that these
invoices for pallets are related to a Produce transaction. The invoices, accordingly,
are not for amounts incurred “in connection with” a Produce transaction, and they
cannot be paid using PACA Trust Assets. See 7 U.S.C. § 499e(c)(2); Pacific Int’l,
33
462 F.2d at 286 (transportation company could not recover under PACA because
transaction with Produce buyer was not made “in connection with” any other
transaction with buyer for the sale of Produce; transaction was for transportation
charges only). AgriFact’s objection to Invoice Nos. 706045 and 707452 is
sustained, and these claims are not allowed.
To the extent AgriFact objects to Invoice No. 710782, that invoice is for
broccoli and “spring mix,” and does not include a charge for pallets. AgriFact’s
objection to Invoice No. 710782 is overruled.
E.
Produce not received (Market Express and Classic Harvest)15
1.
Market Express
Crisp16 and AgriFact argue that Crisp did not receive the Produce at issue in
the following three (3) invoices for which Market Express seeks payment:
Invoice No. 1706, in the principal amount of $2,950.50; Invoice No. 1713, in the
15
AgriFact withdrew its objection to Sunkist Invoice Nos. 1505-84-01 and
154371-01. ([373] at 2 n.1).
16
Although Crisp objected to these Proofs of Claim, Crisp did not file a
motion to sustain its objections. Rather, AgriFact adopted and incorporated
Crisp’s objections in its Motions. The Court notes that several of AgriFact’s
Motions reference the wrong invoice numbers, most likely a result of AgriFact’s
pattern of reasserting the same conclusory objection, with little to no factual or
legal support, in each of its Motions and Replies. This conduct has increased the
burden on the Court to sift through the voluminous filings in this case.
34
principal amount of $6,468.20;17 and Invoice No. 1715, in the principal amount of
$9,623.25.18 Crisp and AgriFact argue that Crisp did not receive the Produce for
which Invoice Nos. 1706, 1713, and 1715 were issued. They rely upon the
Declaration of Phillip Coleman, Chief Financial Officer of Crisp, to support that
Invoice Nos. 1706, 1713, and 1715, and the Produce for which they were issued,
“were not received by Crisp or any of Crisp’s customers,” “were not received into
the Crisp produce management software,” and “cannot be tied to any Crisp billings
. . . .” (Coleman Decl. [212.1]). Coleman states further that “the proofs of delivery
do not bear the signature of any Crisp employee or any individual authorized to
accept such produce on behalf of Crisp.” (Id.).
To support that Crisp received the Produce at issue, Market Express relies
upon the “initial invoice” or “manifest” for each corresponding invoice. ([367.5]
at 1-6). When Market Express delivered Produce to Crisp, Crisp signed a
manifest, which the delivery driver returned to Market Express. Market Express
then sent an invoice to Crisp, based on the information contained in the manifest.
17
The Court notes that the manifest supporting Invoice No. 1713 has a total
amount of $6,462.30. ([367.5] at 4).
18
Market Express voluntarily withdrew Invoice Nos. 1707 and 1709. ([367] at
16). AgriFact’s objection to Invoice No. 2046, which was not part of Market
Express’s PACA Proof of Claim, appears to have been a typographical error.
([367] at 16-17; [375] at 12 n.6). AgriFact’s objections to Invoice Nos. 1707,
1709, and 2046, are denied as moot.
35
(See Hoch Dep. [367.6] at 93). The manifests for Invoices 1706, 1713, and 1715
are signed, albeit illegibly, to indicate receipt. Hoch testified that he was “pretty
sure” these manifests were signed by “Ben,” one of three or four “receivers” at the
delivery location. (Id. at 93-96).
The Court finds there is a genuine issue of material fact whether the Produce
indicated in Invoice Nos. 1706, 1713, and 1715 was received by Crisp. Whether
this Produce was received is an issue of fact. AgriFact’s objection to recognition
of Invoice Nos. 1706, 1713, and 1715 as payable out of the PACA Trust requires
further proceedings.
2.
Classic Harvest
Crisp and AgriFact argue that Crisp did not receive the Produce evidenced
by the following twelve (12) invoices for which Classic Harvest seeks payment:
Invoice No.
Principal Amount
540797
$24,328.80
540809
$27,258.00
540846
$29,682.90
540888
$3,897.90
560607
$1,636.20
560609
$1,690.20
560618
$2,295.60
560621
$11,197.50
560629
$2,976.15
560630
$473.85
560631
$166.50
560636
$3,869.10
Total:
$109,472.70
36
([212] at 9; [348] at 20-21). To support that Crisp did not receive this Produce,
Crisp and AgriFact rely on Coleman’s assertions in his Declaration that the
invoices “were not received by Crisp or any of Crisp’s customers. The invoices
were not received into the Crisp produce management software, the invoices
cannot be tied to any Crisp billings and the proofs of delivery do not bear the
signature of any Crisp employee or any individual authorized to accept such
produce on behalf of Crisp.” (Coleman Decl. [212.1]).
The invoices at issue indicate that the “sale terms” are “FOB.” The bill of
lading that corresponds to each invoice is signed by the driver, who indicates that
he received the Produce described and verified the count. (See [168.4] at 15-16,
33-34, 51, 77, 84, 86, 89-94). It is well-settled that, “in an FOB place of shipment
contract, delivery occurs at the point where the goods are placed in the hands of the
carrier, acting as the agent or bailee of the buyer.” See 18 Williston on Contracts
§ 52:11 (4th ed.); U.C.C. § 2-319. The Court finds the delivery of the Produce for
which the above invoices were issued occurred when the driver received the
Produce listed in the invoices. AgriFact’s objection to Classic Harvest Invoice
Nos. 540797, 540809, 540846, 540888, 560607, 560609, 560618, 560621, 560629,
560630, 560631, and 560636, is overruled.
37
F.
Failure to Include Proofs of Delivery (Pacific Sales, Williams Farms,
Vaughan Foods, Classic Harvest, Taylor Farms and Church Brothers)
AgriFact argues that Pacific Sales, Williams Farms, Vaughan Foods,
Classic Harvest, Taylor Farms and Church Brothers are not entitled to recover
from the PACA Trust the amount evidenced by the following invoices:
Pacific Sales Company
Invoice Nos. 2623, 2766, 3001, 3066, 3075,
3075A, 4025, 4067, 4068, 4058A and 4099
Williams Farms
Invoice Nos. 52600, 52616, 52618, 52628,
52654, 52672, 52720, and 52735
Vaughan Foods
Invoice Nos. 186246, 185773, 186928,
187517, 189228, 185961 and 186332
Classic Harvest
Invoice Nos. 560499, 560506, 560541,
540840, and 560585
Taylor Farms
Invoice Nos. 701208, 701222, and 701225
Church Brothers
Invoice No. 78740
([212] at 5-6).
Crisp does not claim that it, or its customers, failed to receive the Produce
billed in the invoices stated above. Crisp instead conclusorily asserts that their
Proofs of Claim “do not appear to contain complete and correct invoices and
proofs of delivery to Crisp or its customers.” ([212] at 5-6).19 AgriFact fails to
19
In contrast, Crisp provided a declaration in which Coleman unequivocally
and affirmatively states that Crisp did not receive the Produce billed in
Market Express Invoice Nos. 1706, 1713, and 1715, and Classic Harvest Invoice
38
provide any authority to support that the PACA creditors are required to submit
proof of delivery in the absence of a claim that the Produce was not delivered or
the invoice is inaccurate.20 Crisp does not allege, and there is no evidence to
support, that the Produce billed in Pacific Sales Invoice Nos. 2623, 2766, 3001,
3066, 3075, 3075A, 4025, 4067, 4068, 4058A and 4099; Williams Farms Invoice
Nos. 52600, 52616, 52618, 52628, 52654, 52672, 52720, and 52735; Vaughan
Foods Invoice Nos. 186246, 185773, 186928, 187517, 189228, 185961 and
186332; Classic Harvest Invoice Nos. 560499, 560506, 560541, 540840, and
560585; Taylor Farms Invoice Nos. 701208, 701222, and 701225; or Church
Brothers Invoice No 78740, was not received by Crisp or its customers. AgriFact’s
objection is overruled.
G.
Objections under Georgia Law to the R&J Group’s Proofs of Claim
AgriFact asserts several objections, based on Georgia law, to the Proofs of
Claim filed by Eureka, Tanimura, West Pak, Church Brothers, Bengard Ranch,
Nos. 540797, 540809, 540846, 540888, 560607, 560609, 560618, 560621, 560629,
560630, 560631 and 560636. (Coleman Decl. [212.1]; see infra. § E.1-E.2).
20
AgriFact’s reliance on C & G Farms, Inc. v. Capstone Bus. Credit, LLC,
2011 WL 677487 (E.D. Cal. Feb. 17, 2011), is misplaced. In C & G Farms, there
was evidence supporting that a report confirming receipt of Produce was always
generated by the buyer upon delivery. The C & G Farms court found that, because
the report was not submitted for certain transactions, there was an inference the
Produce was not delivered. Here, there is no evidence to support a similar
inference that the Produce was not delivered to Crisp or its customers. C & G
Farms does not apply.
39
D’Arrigo, Pacific Sales and Vaughan (collectively, the “R&J Group”). AgriFact’s
objections are based on failure to comply with the following Georgia statutes:
O.C.G.A. § 2-9-2, requiring a license to deal in agricultural products (Bengard
Ranch and Pacific Sales); O.C.G.A. § 13-1-11, requiring notice to recover
attorneys’ fees (Vaughan, D’Arrigo, Tanimura, Church Brothers, West Pak, and
Eureka); and O.C.G.A. § 7-4-2, limiting the rate of prejudgment interest (Vaughan,
D’Arrigo, Eureka and West Pak).21 The R&J Group argues that Georgia law does
not apply to their claims because they seek recovery under PACA, and their
transactions with Crisp did not occur in Georgia.
Where, as here, the Court’s jurisdiction is based on federal question, and
“disposition of a federal question requires reference to state law, federal courts are
not bound by the forum state’s choice of law rules, but are free to apply the law
considered relevant to the pending controversy.” In re Crist, 632 F.2d 1226, 1229
(5th Cir. 1980) (citing 1A Moore’s Federal Practice P 0.325 (2d ed. 1979)) (noting
Florida contacts regarding alimony agreement in bankruptcy action); see also
FDIC v. Lattimore Land Corp., 656 F.2d 139, 148 n.16 (5th Cir. Unit B 1981)
21
AgriFact also argues that, under O.C.G.A. § 13-7-1, Crisp is entitled to set
off any amounts Vaughan owes to Crisp against amounts Crisp owes to Vaughan.
Even if Georgia law applies here, AgriFact fails to show that, where PACA trust
assets must be made available for all trust beneficiaries to share, pro rata, that they
may be set off.
40
(“Because it is such a federal question case where substantive law is to some extent
applicable, this federal court is not necessarily compelled by prior diversity action
precedent to apply the choice of law rules of the forum state . . . .”); compare
Klaxon, 313 U.S. 487 (In an action based on diversity of citizenship jurisdiction,
substantive legal issues must be resolved by the forum state’s conflict of law
rules.). To determine the relevant law “requires the exercise of an informed
judgment in the balancing of all of the interests of the states with the most
significant contacts in order to best accommodate the equities among the parties to
the policies of those states.” Vanston Bondholders Prot. Comm. v. Green,
329 U.S. 156, 162 (1946). This “need not mean that the federal rule is always
applied” and our Circuit has “recognized that there may be issues which should be
resolved by application of the forum state’s choice of law rules even where a
federal court, in a federal question case, is free to do otherwise.” Lattimore,
656 F.2d at 148 n.16.
The parties’ invoices do not identify the state law governing their
transactions. The R&J Group argues that California choice-of-law rules should
apply because California has the most significant contacts with the transactions at
issue. Georgia and California both apply the traditional choice-of-law rules for
contracts—lex loci contractus. See Convergys Corp. v. Keener, 582 S.E.2d 84, 87
41
(Ga. 2003) (Georgia adheres to the traditional choice-of-law rules for contract—lex
loci contractus.); Cal. Civ. Code § 1646 (“A contract is to be interpreted according
to the law and usage of the place where it is to be performed; or, if it does not
indicate a place of performance, according to the law and usage of the place where
it is made.”); Frontier Oil Corp. v. RLI Ins. Co., 153 Cal. App. 4th 1436, 1450
(Cal. Ct. App. 2007) (discussing the history of California Civil Code § 1646 and
the rule that the law of the place a contract is to be performed should govern;
noting that “numerous contemporary judicial opinions followed this rule based on
the parties’ presumed intention,” and citing, among others, Vanzant, Jones & Co.
v. Arnold, Hamilton & Johnson, 31 Ga. 210 (Ga. 1860)).22 “Under the rule of lex
loci contractus, the validity, nature, construction, and interpretation of a contract
are governed by the substantive law of the state where the contract was made,
except that where the contract is made in one state and is to be performed in
another state, the substantive law of the state where the contract is to be performed
will apply.” Fed. Ins. Co. v. Nat’l Distrib. Co., 417 S.E.2d 671, 673 (Ga. Ct. App.
1992). “[T]he determinative location is not where the contract is entered into or
executed but where the last act essential to its completion is located . . . .” Hayes
22
In Frontier Oil, the California Court of Appeals held that “the choice-of-law
rule in Civil Code section 1646 determines the law governing the interpretation of
a contract, notwithstanding the application of the governmental interest analysis to
other choice-of-law issues.” 153 Cal. App. 4th at 1459.
42
v. Irwin, 541 F. Supp. 397, 414 (N.D. Ga. 1982); see also Monarch Brewing Co.
v. George J. Meyer Mfg. Co, 130 F.2d 582, 585 (9th Cir. 1942) (applying
California choice-of-law rules, finding that contract was made and performed in
Wisconsin, and thus Wisconsin substantive law applied; contract was signed by
buyer in California and signed by seller in Wisconsin, and machinery was sold
FOB in Wisconsin, and delivered by seller to carrier in Wisconsin for transport to
California).
Crisp is organized under Delaware law, with locations in California,
Arkansas and Georgia. The companies in the R&J Group are in California, their
contracts were entered into in California, and the Produce they sold originated in
California. ([300] at 28-29). The invoices state that the Produce was “sold to”
Crisp, at its California or Arkansas address. (Id.; see generally R&J Group
invoices [172]-[181]). In most cases, the Produce was sold to Crisp on “F.O.B.”
(“free on board”) terms, meaning that title transferred to Crisp, and delivery
occurred, when the Produce was loaded onto the shipper’s trucks in California.23
23
Although some of Bengard Ranch’s invoices show a delivery address in
Georgia, the Produce was sold F.O.B. and delivered to Crisp’s carrier in California.
See 7 C.F.R. § 46.43(i) (if Produce is shipped “F.O.B.,” the produce sold “is to be
placed free on board the boat, car, or other agency of the through land
transportation at shipping point, in suitable shipping condition . . . and that buyer
assumes all risk of damage and delay in transit not caused by the seller irrespective
of how the shipment is billed. The buyer shall have the right of inspection at
43
(Id.); see 18 Williston on Contracts § 52:11 (4th ed.) (“[I]n an FOB place of
shipment contract, delivery occurs at the point where the goods are placed in the
hands of the carrier, acting as the agent or bailee of the buyer.”). In some
instances, the Produce was delivered to Crisp’s customers directly, at addresses
outside of Georgia. (Id.). There simply is no record evidence that Georgia
substantive law applies to the contracts at issue in this litigation between Crisp and
the R&J Group. See McGow, 412 F.3d at 1216; Hayes, 541 F. Supp. at 414;
Monarch, 130 F.2d at 585. AgriFact’s objections, based on Georgia law, to the
claims filed by Eureka, Tanimura, West Pak, Church Brothers, Bengard Ranch,
D’Arrigo and Vaughan, are overruled.24
destination before the goods are paid for to determine if the produce shipped
complied with the terms of the contract at time of shipment, subject to the
provisions covering suitable shipping condition.”); U.C.C. § 2-319(1)(a) (“when
the term is F.O.B. the place of shipment, the seller must at that place ship the
goods in the manner provided . . . and bear the expense and risk of putting them
into the possession of the carrier”); see also 18 Williston on Contracts § 52:11
(4th ed.); Calif. Fruit Exchange v. Henry, 89 F. Supp. 580, 586 (W.D. Pa. 1950) (in
FOB contract, title and risk pass to the buyer at the point of shipment; any normal
deterioration losses which arise in transit would fall upon the buyer).
24
AgriFact failed to address the R&J Group’s argument, raised in their
response to AgriFact’s objections [300], and their response to AgriFact’s motions
to sustain its objections [369], that Georgia law does not apply to their contracts
with Crisp. Under the Court’s September 4th Order, AgriFact has waived any
objections to the R&J Group’s Proofs of Claim that it did not assert on or before
April 11, 2016. (See Sept. 4th Order at ¶¶ 31, 34).
44
H.
Illegality under Georgia Law (Market Express, Williams Farms and
Classic Harvest)
AgriFact contends that because Market Express, Williams Farms and Classic
Harvest did not hold a valid Georgia Dealer in Agricultural Products license, their
contracts with Crisp are illegal and unenforceable, and they cannot recover under
PACA.25 Even if they were required, but failed, to obtain a Georgia Dealer in
Agricultural Products license, and even if this failure rendered their contracts with
Crisp unenforceable under Georgia law, a claim to enforce the PACA trust does
not depend on whether the parties have an enforceable contract claim under state
law. The elements of a PACA trust claim are:
25
O.C.G.A. § 2-9-2 provides: “It shall be unlawful for any dealer in
agricultural products who comes within the terms of this article to engage in such
business in this state without a state license issued by the Commissioner.” Under
O.C.G.A. § 2-9-1, a “dealer in agricultural products” means “any person . . . or
corporation engaged in the business of buying, receiving, selling, exchanging,
negotiating, or soliciting the sale, resale, exchange, transfer of any agricultural
products purchased from the producer or his or her agent or representative . . . .”
In Georgia, “where a statute provides that persons proposing to engage in a
certain business shall procure a license before being authorized to do so, and where
it appears from the terms of the statute that it was enacted not merely as a revenue
measure but was intended as a regulation of such business in the interest of the
public, contracts made in violation of such statute are void and unenforceable.”
Bowers v. Howell, 417 S.E.2d 392, 393 (Ga. Ct. App. 1992). AgriFact has not
shown that contracts made in violation of O.C.G.A. § 2-9-2 are void and
unenforceable. The cases on which AgriFact relies involve contracts by an
unlicensed plumber and electrician, id., an unlicensed private employment agency,
Mgmt. Search, Inc. v. Kinard, 199 S.E.2d 899 (Ga. 1973), and an unlicensed liquor
merchant, Bernstein v. Peters, 22 S.E.2d 614 (Ga. Ct. App. 1942).
45
(1) plaintiff is a PACA licensee; (2) plaintiff sold [Produce]; (3) the
buyer was subject to the trust provisions of PACA; (4) the [Produce]
traveled through interstate commerce; (5) plaintiff preserved their
PACA trust rights by providing requisite notice to the buyer; and the
buyer has not made full payment on at least some of the produce
provided by plaintiff.
Spada Properties, Inc. v. Unified Grocers, Inc., 121 F. Supp. 3d 1070, 1077 n.2
(D. Or. 2015) (citing 7 C.F.R. 46.46; Belleza Fruit, Inc. v. Suffolk Banana Co.,
2012 WL 2675066, at *8 (E.D.N.Y. July 5, 2012)).
It is well-settled that remedies under PACA are in addition to other remedies
available under state law. 7 U.S.C. § 499e(b) provides that a claim for violation of
PACA may be brought:
(1) by complaint to the Secretary . . . or (2) by suit in any court of
competent jurisdiction; but this section shall not in any way abridge
or alter the remedies now existing at common law or by statute, and
the provisions of this chapter are in addition to such remedies.
7 U.S.C. § 499e(b) (emphasis added). The Eleventh Circuit has held that breach of
contract, as a “common law remedy, is expressly referenced in PACA as being
separate, and in addition to, a remedy under PACA.” Paris Foods, 278 F. App’x at
875 (where sellers’ complaint asserted only PACA claim and they litigated only
PACA claim, holding that sellers could not raise common law breach of contract
claim for the first time on appeal); cf. Rothenberg v. H. Rothstein & Sons,
183 F.2d 524, 528 (3d Cir. 1950) (in appeal of reparation order, where state statute
46
of frauds would preclude enforcement of contract in state court but contract was
otherwise valid, state statute had no effect on PACA claim; stating that PACA
“intends to grant a new remedy which is not dependent upon but in addition to
such other remedies as may be available to the parties at common law or by the
statutes of any state”); Krueger v. Acme Fruit Co., 75 F.2d 67, 68 (5th Cir. 1935)
(describing PACA generally, stating that PACA “does not propose to provide an
exclusive remedy for producers who sell only the agricultural commodities they
raise. On the contrary, it leaves them free to sue in any court, state or federal, of
competent jurisdiction; it merely gives them the right, regardless of the amount in
controversy or of the lack of diversity of citizenship, to pursue an additional
remedy by securing a reparation order entered by the Secretary of Agriculture.”).
AgriFact fails to provide authority to support that Market Express,
Williams Farms or Classic Harvest is barred from recovery from the PACA Trust
Assets because they did not obtain a Georgia Dealer in Agricultural Products
license and fails to otherwise show their contracts with Crisp are illegal and
unenforceable. AgriFact’s objections to Market Express’s, Williams Farms’ and
Classic Harvest’s claims are overruled.26
26
Even if Georgia law applies to Bengard Ranch’s and Pacific Sales’
transactions with Crisp, AgriFact’s objection to their claims based on illegality
would be overruled for this same reason.
47
I.
Attorneys’ Fees (Market Express and Williams Farms)27
AgriFact argues that Market Express and Williams Farms are not entitled to
recover their attorneys’ fees because they failed to provide notice required by
O.C.G.A.§ 13-1-11. O.C.G.A. § 13-1-11(a)(3) provides:
The holder of the note or other evidence of indebtedness . . . shall,
after maturity of the obligation, notify in writing the maker, endorser,
or party sought to be held on said obligation that the provisions
relative to payment of attorney’s fees in addition to the principal and
interest shall be enforced and that such maker, endorser, or party
sought to be held on said obligation has ten days from the receipt of
such notice to pay the principal and interest with the attorney’s fees.
If the maker, endorser, or party sought to be held on any such
obligation shall pay the principal and interest in full before the
expiration of such time, then the obligation to pay the attorney’s fees
shall be void and no court shall enforce the agreement.
O.C.G.A. § 13-1-11(a)(3). It is well-settled that notice under O.C.G.A.
§ 13-1-11(a)(3) “may be given any time between maturity of the obligation and ten
days prior to judgment.” Lockwood v. FDIC., 767 S.E.2d 829, 832-33 & 833 n.10
(Ga. Ct. App. 2014) (collecting cases).
On February 18, 2016, Market Express and Williams Farms sent to Crisp a
letter which states the total amount of principal and interest due to Market Express
and Williams Farms under their invoices, and states that “you have ten (10) days
from the receipt of this Notice to pay principal and interest only, thereby avoiding
27
AgriFact withdrew its objection to Sunkist’s claim for attorneys’ fees.
([373] at 2 n.1).
48
all attorneys’ fees . . . .” (February 18, 2016, Notice [367.7] at 1-2). The Court
finds that the February 18, 2016, Notice complies with O.C.G.A. § 13-1-11(a)(3).
AgriFact’s objection on this ground is overruled.28
J.
Excessive Interest under Georgia Law (Market Express)
Under the terms printed on its invoices, Market Express claims interest at a
rate of 1.5% per month, or 18% annually, on the principal amount due on all of its
unpaid invoices. AgriFact argues that, under O.C.G.A. § 7-4-2(a)(2), the
maximum allowable interest rate for any invoice the principal amount of which is
less than $3,000, is 16% per annum. To the extent AgriFact argues that Market
Express is required to forfeit the entire amount of interest claimed on its invoices
28
To the extent AgriFact argues that Market Express’s and Williams Farms’
claims for attorneys’ fees must be denied because “there is no information in the
records that show Crisp was given an ‘opportunity to tender the amount due’ so as
to avoid the attorney fee obligation at least ten days in advance of the Claimant’s
filing suit,” the current version of O.C.G.A. § 13-1-11(a)(3) does not require notice
ten days before filing suit. See O.C.G.A. § 13-1-11(a)(3); Lockwood, 767 S.E.2d
at 832-833; Gen. Elec. Credit Corp. v. Brooks, 249 S.E.2d 596, 600 (Ga. 1978)
(discussing history of statute, noting that, although early version required notice be
given 10 days before suit “to save the creditor the necessity and expense of
bringing suit at all,” statute was amended in 1953 and provided “the debtor was
given the full opportunity to avoid the obligation [to pay attorneys’ fees] by paying
principal and interest within 10 days of receipt of notice”).
Even if Georgia law applies to the R&J Group’s PACA claims, to the extent
AgriFact argues that they are not entitled to attorneys’ fees because they failed to
give notice as required under O.C.G.A. § 13-1-11, judgment has not been entered
in this case and AgriFact’s argument is premature. See Lockwood, 767 S.E.2d at
832-33 & 833 n.10. AgriFact’s objection to the R&J Group’s claims for attorneys’
fees is overruled for this additional reason.
49
which, AgriFact asserts, violates O.C.G.A. § 7-4-2(a)(2), Market Express has
agreed to reduce to 16% the amount of interest it seeks on invoices the principal
amount of which is less than $3,000. AgriFact’s objection is denied as moot.
K.
Interest not stated in Contract (Pacific Sales)
AgriFact argues that there is no basis for awarding interest to Pacific Sales
because Pacific Sales’ invoices do not state that it will charge interest on amounts
past due. AgriFact fails to provide any authority to support its argument that
“[i]nterest is only part of the PACA trust if the invoice’s language includes the
interest.” ([353] at 18).
Although PACA does not specifically provide for the award of interest, it
does not preclude it. Courts that have addressed whether prejudgment interest may
be awarded under PACA absent a contractual right have uniformly agreed that a
district court has broad discretion to award prejudgment interest to PACA trust
beneficiaries, as “sums owing in connection with [the Produce] transaction,” under
7 U.S.C. § 499e(c)(2). See Middle Mtn. Land & Produce Inc. v. Sound
Commodities Inc., 307 F.3d 1220, 1225-1226 (9th Cir. 2002); Endico Potatoes,
67 F.3d at 1071-1072 (district court has broad discretion to fashion prejudgment
interest award to PACA claimants); Morris v. Okun, Inc., 814 F. Supp. 346, 351
(S.D.N.Y. 1993) (although “there is no [fees and interest] contractual provision in
50
the contract, and the award of prejudgment interest and attorney’s fees is therefore
within the discretion of the court,” prejudgment interest awarded on overdue
accounts based on congressional intent in PACA); Tomato Mgmt., Corp. v. CM
Produce LLC, 2014 WL 2893368, at *3 (“Congress’s intent to ensure prompt
payment and protect sellers of produce weighs in favor of awarding [prejudgment]
interest”); cf. Rodgers v. United States, 332 U.S. 371, 373 (1947) (failure to
mention interest in a federal statute permits the courts to fashion such rules in light
of congressional purposes); Country Best v. Christopher Ranch, LLC, 361 F.3d
629, 632 (11th Cir. 2004) (prejudgment interest and attorneys fees for which
Produce seller and buyer had bargained for under terms of their contract were
recoverable under PACA as “sums owing in connection with [Produce]
transaction,” including because PACA was designed to give produce sellers a
meaningful opportunity to recover full payment of the amounts due for their sales”
and permitting prejudgment interest was not “contrary to the statute’s purpose,
absurd, or ‘demonstrably at odds with the intentions of the drafters’”) (citing
Middle Mtn., 307 F.3d at 1223-24).
The Court finds that an award of reasonable prejudgment interest, even in
the absence of a contract provision requiring it, is consistent with Congress’s intent
to ensure prompt payment and to give Produce sellers a meaningful opportunity to
51
recover full payment of the amounts due for their sales under PACA. See Rodgers,
332 U.S. at 373; Country Best, 361 F.3d at 632. AgriFact’s objection on this
ground is overruled.
L.
Remaining Affirmative Defenses
AgriFact asserts that its affirmative defenses, including laches, consent and
estoppel, affirmance and ratification, and failure to mitigate damages, “raise factual
issues that cannot be resolved at this stage of the proceedings.” (See, e.g., [348] at
21). The PACA claimants contend that AgriFact’s affirmative defenses are not
relevant to the issues currently before the Court—specifically, whether each PACA
creditor has a valid PACA claim. (See, e.g., [368] at 25; [367] at 20). Because the
parties have not fully briefed the issues, including by citing to specific facts to
support their conclusory assertions, the Court does not consider AgriFact’s
affirmative defenses.
IV.
CONCLUSION
For the foregoing reasons,
IT IS HEREBY ORDERED that AgriFact’s first Motion to Sustain its
Objections to Pacific Sales Company’s PACA Proof of Claim [352], first Motion
to Sustain its Objection to the Remaining Claimants [356], and Motion to Sustain
52
its Objections to Beaumont Juice’s PACA Proof of Claim [355], are DENIED AS
MOOT.
IT IS FURTHER ORDERED that AgriFact’s Motion to Sustain its
Objections to Market Express’s PACA Proof of Claim [346] is GRANTED IN
PART and DENIED IN PART. AgriFact’s objections to recognition, as payable
out of the PACA Trust, of Market Express’s (1) invoices billed to the “Fresh Roots
SHORTS” account, based on failure to disclosure modified payment terms, and
(2) Invoice Nos. 1706, 1713, and 1715, based on failure to show that Produce was
received, require further proceedings. AgriFact’s remaining objections to
Market Express’s Proof of Claim are OVERRULED.
IT IS FURTHER ORDERED that AgriFact’s Amended and Restated
Motion to Sustain its Objections to the Claims of D’Arrigo Bros. Co. of California,
Tanimura & Antle Fresh Foods, Mann Packing, Church Brothers, West Pak
Avocado, Eureka Specialties, Global Tranz, Railex and Calvo Growers [357], is
GRANTED IN PART and DENIED IN PART. AgriFact’s objections to
Calavo’s and Railex’s Proofs of Claim are SUSTAINED. AgriFact’s objection to
Global Tranz’s Proof of Claim is DENIED AS MOOT. AgriFact’s remaining
objections in this Motion are OVERRULED.
53
IT IS FURTHER ORDERED that AgriFact’s Motions to Sustain its
Objections to Williams’ Farms Proof of Claim [347], Classic Harvest’s PACA
Proof of Claim [348], Sunkist’s Proof of Claim [354], Vaughan’s Proof of Claim
[349], Taylor Farms’ Proof of Claim [350], Bengard Ranch’s Proof of Claim [351],
and Pacific Sales’ Proof of Claim [353], are DENIED. AgriFact’s objections in
these Motions are OVERRULED.
IT IS FURTHER ORDERED that, on or before June 6, 2017, Counsel for
Crisp shall submit to the Court an updated PACA Claims Chart, incorporating the
Court’s rulings contained in this Order.
SO ORDERED this 31st day of May, 2017.
54
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