CIRCUS FRUITS WHOLESALE CORP. v. FARMER JOEN PRODUCE CORP. et al

Filing 16

OPINION. Signed by Judge John Michael Vazquez on 4/18/17. (rg, )

Not for Publication
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

CIRCUS FRUITS WHOLESALE CORP.,

Plainttff
Civil Action No. 17-18 12
V.

FARMER JOEN PRODUCE CORP. and
JU GIL JOEN,

OPINION

Defendants.

John Michael Vazguez, U.S.D.J.
This matter comes before the Court by way of the Motion for Temporary Restraining Order
or Preliminary Injunction filed by Plaintiff Circus Fruits Wholesale Corporation (“Circus Fruits”).
D.E. 3. The Court reviewed Circus Fruits’ submissions (D.E. 1, 3, 4) and heard oral argument on
the motion on April 18, 2017. Although Defendants did not make any submissions in opposition
to the Motion, counsel appeared at oral argument on behalf of Farmer Joen Produce Corporation
(“Fanner Joen”) and Ju Gil Joen. For the reasons set forth below, Plaintiffs application for the
issuance of a Preliminary Injunction is GRANTED.
I.

FACTUAL BACKGROUND

Circus Fruits brings suit pursuant to the Perishable Agricultural Commodities Act
(“PACA”), 7 U.S.C.

§ 499a, et al. Circus fruits is “a shipper of perishable agricultural

commodities in interstate

.

.

.

commerce,” and is licensed under PACA by the United States

Department of Agriculture. Compl ¶ 3, D.E. 1. fanner Joen buys and sells wholesale quantities
of agricultural produce in interstate commerce and was also a licensed under PACA. Id.

¶ 4;

Motion Ex. B. Joen is the principal of Farmer Joen according to the PACA license and is the
sole shareholder and president of Farmer Joen. Id.; Declaration of Silvestre Lo Verde (“Lo
Verde Deci.”), D.E. 3-1. Circus Fruits’ principal place of business is located in New York and
Farmer Joen is located in New Jersey. Compl.

¶J 3-4.

Circus Fruits alleges that through a series of transactions in February 2017, it sold,
shipped and delivered produce, or agricultural commodities, to Farmer Joen. Farmer Joen
accepted the produce from Circus Fruits, however, it has not paid for these commodities, leaving
an outstanding balance of $85,663.1 Compl.

¶ 9-10. Circus Fruits provided Farmer Joen with

invoices for each transaction that set forth the amount Farmer Joen owed to Circus Fruits, and
that also contained written notice as required by 7 U.S.C.

§ 499e(c)(4).

Id.

¶

15. When Circus

Fruits attempted to get payment, Joen informed Circus Fruits that Farmer Joen “continues to
operate but is short of funds and cannot pay the invoices due to Circus [fruits].” Lo Verde Decl.
In addition, Farmer Joen transmitted three checks to Circus Fruits for payment but the checks,
which totaled $20,453, were returned due to insufficient funds. Lo Verde DecI. Ex. B.
II.

LEGAL STANDARD

PACA provides that the perishable agricultural commodities, and any receivables or
proceeds from the sale of such commodities are held in a non-segregated floating trust for the
benefit of unpaid sellers. Tanimura & Antic, Inc. v. Packed fresh Produce, Inc., 222 f.3d 132,

Circus Fruits’ papers in support of the preliminary injunction state that Farmer Joen has an
outstanding balance of $111,117. Compl. ¶ 9. At oral argument, Plaintiff clarified that $85,663
is the principal amount due and owing, and that Circus Fruits also seeks additional amounts in
attorneys’ fees and interest.
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136 (3d Cir. 2000). “This trust is created by operation of law upon purchase of such goods, and
the produce buyer is the statutory trustee.” Id. (citing 7 U.S.C.

§ 499e(c)(3)). To protect the

assets of the trust, an unpaid supplier or seller must give written notice to the buyer of the
benefits of the trust. An unpaid licensee may give this notice through its ordinary and usual
billing or invoice statements. Id. If the licensee gives notice through statements, the statements
must include the following language:
The perishable agricultural commodities listed on this invoice are sold subject to
the statutory trust authorized by section 5(c) of the Perishable Agricultural
Commodities Act, 1930 (7 U.S.C. 499e(c)). The seller of these commodities
retains a trust claim over these commodities, all inventories of food or other
products derived from these commodities, and any receivables or proceeds from
the sale of these commodities until full payment is received.
7 U.S.C.

§ 499e(c)(4). finally, PACA provides a private right of action for unpaid licensees to

enforce their rights under the statute. Id.

§ 499e(c)(5).

To obtain a preliminary injunction, the moving party must show: (1) a likelihood of
success on the merits; (2) that it will suffer irreparable harm if the injunction is denied; (3) that
granting preliminary relief will not result in even greater harm to the nonmoving party; and (4)
that the public interest favors such relief. Mit/er v. i’vlitchett, 598 F.3d 139, 147 (3d Cir. 2010).
III.

ANALYSIS

The four elements required for a preliminary injunction are satisfied here. first, Circus
fruits is likely to succeed on the merits. The evidence establishes that Farmer Joen accepted

produce from Circus Fruits and owes Circus Fruits $85,663 in principal. See Lo Verde Decl.
Ex. A. There is no dispute that this debt is overdue and owing. Moreover, Plaintiffs evidence
meets the requirements of PACA.

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Plaintiff also seeks to enjoin Joen personally. P1? s Br. at 8-9. An officer or shareholder
may be individually liable for breaching his fiduciary duties under PACA based on common law
breach of trust principles. Food Team Int’l, Ltd.

i’.

Unilink, LLC, 595 F. App’x 146, 149 (3d

Cir. 2014). In determining whether an individual is liable, a court must
(1) “determine whether an individual holds a position that
suggests a possible fiduciary duty to preserve the PACA trust
assets (e.g., officer, director, and/or controlling shareholder)”; and
(2) “assess whether that individual’s involvement with the
corporation establishes that she was actually able to control the
PACA trust assets at issue.”
Id. (quoting Bear Mountain Orchards, Inc. v. Much-Kim, Inc., 623 F.3d 163, 172 (3d Cir. 2010)).

In addition, a court must determine that the individual actually failed to preserve trust assets for
the beneficiaries. Id. (quoting Weis-Buy $ervs., Inc. v. Faglia, 411 F.3d 415, 421 (3d Cir. 2005)).
Joen is the reported principal on fanner Joen’s PACA license. Lo Verde Decl. Ex. B. At oral
argument, Plaintiffs counsel explained that to obtain a PACA license a corporation must include
the name of every individual in a position of control over an entity. Because Joen is the only
individual listed on farmer Joen’s license, this establishes that Joen holds a position that
suggests a possible fiduciary duty. Moreover, at oral argument, Circus Fruits established that
Joen likely did control and dissipate the trust assets. Specifically, Joen signed the checks that
were provided to Circus Fruits, placed the orders with Circus Fruits, and was the only individual
that Circus Fruits had conversations with. Defendants’ counsel admitted that he had no facts to
the contrary. Consequently, Plaintiff establishes a likelihood of success on the merits as to the
personal liability of Joen.
Second, Circus Fruits will be irreparably harmed if a preliminary injunction is not issued.
There is a likelihood that the PACA trust funds will be further dissipated if this relief is not put

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in place. Joen informed Circus Fruits that Fanner Joen is short of funds and three checks issued
by Farmer Joen were returned for insufficient funds. See Tanimura & Antic, Inc., 222 F.3d at
140-4 1 (concluding that PACA trust dissipation constituted irreparable harm and that
“Appellants suffered irreparable injury when the trust was depleted and payment was not readily
forthcoming or available”).
Third, granting preliminary relief will not result in greater harm to Defendants. Although
Defendants raised a concern at oral argument as to Farmer Joen’s ability to stay in business if it
is enjoined, Fanner Joen has no right to use the PACA trust fund for any purpose other than to
pay Circus Fruits. Moreover, there is no dispute that the amount is due and owing. Finally, the
“issuance of a preliminary injunction here is in the public interest, as the statutory purpose [of
PACA] explicitly encapsulates this.” Id. at 140 (citing 7 U.S.C.

§ 499e(c)(1)).

In addition, no security or bond is required under Federal Rule of Civil Procedure 65(c)
because it appears that Defendants presently hold $85,663 of assets in trust that belong to Circus
Fruits pursuant to PACA. Defendants do not dispute that this amount (or a very near amount)
is due to Plaintiff. Moreover, Defendants’ counsel stated, during oral argument, that there was
no need for a bond in this case. Consequently, the Court finds that the bond requirement is
unnecessary here.
IV.

CONCLUSION

For these reasons, the Court is satisfied that the issuance of a Preliminary Injunction
pursuant to Federal Rule of Civil Procedure 65 is appropriate under these facts. Accordingly, a
Preliminary Injunction will be entered, enjoining Defendants, their customers, agents, officers,
subsidiaries, assigns, and banking institutions from alienating, dissipating, paying over or
signing any assets of Defendants Farmer Joen Corp. and Ju Gil Joen, their subsidiaries or related

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companies up to the sum of $85,633.00, except for payment to Plaintiff up to the sum of
$85,633.00 or until further order of this Court. An appropriate Order accompanies this Opinion.

Dated: April 18, 2017
John’Michael Vazqtkz’

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D.J.