GM Produce Sales LLC v. Sam Jin World Trading Inc. et al

Filing 35

MEMORANDUM & ORDER: Plaintiff's 28 motion for summary judgment against defendant Kyung Min is granted. This matter is hereby respectfully referred to Magistrate Judge Orenstein to (1) conduct an inquest on damages as to all defendants, and (2) address plaintiff's request for pre-judgment interest, costs and attorney's fees, if applicable. SO ORDERED by Judge Eric N. Vitaliano, on 11/15/2013. C/mailed. (Latka-Mucha, Wieslawa)

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'* NOV 20 2013

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK

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GM PRODUCE SALES LCC,

MEMORANDUM & ORDER
Plaintiff,
12-CV-4192 (ENV) (JO)
-against-

SAM JIN WORLD TRADING INC., JIN JO
LEE, and KYUNG MIN LEE,
Defendants.

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VIT ALIANO, D.J.
On August 22,2012, plaintiff GM Produce Sales LLC ("GM Produce")
commenced this action against defendants Sam Jin World Trading Inc. ("World
Trading"), Jin Jo Lee ("Jin Jo") and Kyung Min Lee ("Kyung Min"); seeking relief
under the Perishable Agricultural Commodities Act ("PACA"), 7 U.S.C. §§ 499a et
seq. Plaintiff now moves for summary judgment, pursuant to Federal Rule of Civil
Procedure 56, against pro se defendant Kyung Min, who has failed to oppose the
motion or respond in any other manner. For the reasons stated below, plaintiff's
motion is granted.
Background
The following facts are drawn from the complaint, answer, and the
submissions of plaintiff on its motion. The facts are construed, as they must be, in
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The individual defendants are brother and sister.
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the light most favorable to the nonmoving party. See Allstate Ins. Co. v. Hamilton
BeachlProctor Silex, Inc., 473 F.3d 450, 456 (2d Cir. 2007). The sUbmissions include
a statement of undisputed facts pursuant to Local Rule 56.1 submitted by plaintiff.2
Beginning on July 1, 2011 and continuing until August 11, 2011, plaintiff sold
and delivered agricultural commodities worth $19,970.30 to defendant World
Trading. The buyer accepted delivery, did not dispute the invoices, and never paid
plaintiff for the goods. About a year later, on August 22, 2012, GM Produce sued
defendants, seeking to enforce P ACA's trust provisions, which require produce
buyers to hold perishable agricultural commodities, along with receivables and
proceeds from the sale of those commodities, in trust for the benefit of unpaid sellers
until full payment has been made. 7 U.S.C. § 49ge(c)(2).
Plaintiff's complaint was served on defendant World Trading on or about
September 18, 2012, and on individual defendants Jin Jo and Kyung Min on or
about September 24, 2012. Defendants failed to answer or otherwise respond. A
certificate of default was entered by the Clerk of Court on October 2, 2012. Then,
plaintiff moved for entry of a default judgment on October 3, 2012, again without
response. On October 22,2012, Kyung Min Lee moved to set aside the notation of

Plaintiff served timely motion papers on Kyung Min on or about February 8, 2012. The notice
of motion stated, in capital letters: "The claims and defenses you assert in your answer may be
dismissed without a trial if you do not respond to this motion on time .... " Plaintiff also
submits that it served on defendant, in compliance with Local Rule 56.2: (1) a copy of Fed. R.
Civ. P. 56 and (2) a "Notice to Pro Se Litigant Who Opposes a Motion for Summary Judgment,"
explaining the potential consequences of not opposing a motion for summary judgment. (PI. Aff.
of Service, 1; Local Rule 56.2.)
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default and filed an answer to the complaint. By order, dated January 4, 2013, the
Court granted Kyung Min's motion, and entered a default judgment against
defendants World Trading and Jin Jo, with the amount of damages to be
determined after a trial on the merits of the claim against Kyung Min.
At a January 25, 2013 conference before Magistrate Judge James Orenstein,
Kyung Min provided sworn testimony concerning his involvement in the day-to-day
operations of World Trading. (PI. 56.1 Statement, Exhibit E, Transcript of Hearing
Before Magistrate Judge Orenstein ("Hrg Tr."), 9-18.) The parties agreed that no
further factual development was needed, and, as a result, Magistrate Judge
Orenstein declared discovery closed. The Court then granted plaintiff's request for
permission to file a motion for summary judgment, which was fully briefed and
docketed on ECF on March 13, 2013. Kyung Min failed to formally respond to the
motion, though he had effectively responded to the motion in his testimony before
Judge Orenstein.
Standard for Summary Judgment
Pursuant to Rule 56, a federal district court must grant summary judgment
upon motion and finding, based on the pleadings, depositions, interrogatory
answers, admissions, affidavits, and all other admissible evidence that "there is no
genuine issue as to any material fact and that the moving party is entitled to a
judgment as a matter oflaw." Fed. R. Civ. P. 56(c); Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 247 (1986). The initial burden is on the moving party to
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demonstrate the absence of a genuine issue of material fact. Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986); Feingold v. New York, 366 F.3d 138, 148 (2d Cir.
2004). In determining whether the moving party has met this burden, a court must
construe all evidence in a light most favorable to the nonmoving party, resolving all
ambiguities and inferences in its favor. Matsushita Elec. Indus. Co. v. Zenith Radio
Corp., 475 U.S. 574, 587 (1986); Gibbs-Alfano v. Burton, 281 F.3d 12, 18 (2d Cir.
2002). However, "the mere existence of some alleged factual dispute between the
parties will not defeat an otherwise properly supported motion for summary
judgment; the requirement is that there be no genuine issue of material fact."
Anderson, 477 U.S. at 247-48 (emphasis in original); Burt Rigid Box, Inc. v.
Travelers Prop. Cas. Corp., 302 F.3d 83, 90 (2d Cir. 2002). Material facts are those
which, given the substantive law, might affect the suit's outcome. Anderson, 477
U.S. at 248.
If the moving party makes a prima facie showing that there are no genuine

issues of material fact, the nonmoving party must go beyond the pleadings and put
forth "specific facts showing that there is a genuine issue for trial." Fed. R. Civ. P.
56(e); Davis v. New York, 316 F.3d 93,100 (2d Cir. 2002). In so doing, the
nonmoving party may not rely on conciusory allegations or speculation. Golden
Pac. Bancorp v. FDIC, 375 F.3d 196,200 (2d Cir. 2004) (citing D' Amico v. City of
New York, 132 F.3d 145, 149 (2d Cir. 1998»; Fed. R. Civ. P. 56(e) ("Supporting and
opposing affidavits shall be made on personal knowledge, shall set forth such facts
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as would be admissible in evidence, and shall show affirmatively that the affiant is
competent to testify to the matters stated therein.").
If the motion is unopposed, summary judgment, if appropriate, shall be

entered against the adverse party. Fed. R. Civ. P. 56(e). However, "[e]ven when a
motion for summary judgment is unopposed, the district court is not relieved of its
duty to decide whether the movant is entitled to judgment as a matter of law."
Vermont Teddy Bear Co. v. 1-800 Beargram Co., 373 F.3d 241, 242 (2d Cir. 2004).
See also Amaker v. Foley, 274 F.3d 677, 681 (2d Cir. 2001) ("[W]hen a nonmoving
party chooses the perilous path of failing to submit a response to a summary
judgment motion, the district court may not grant the motion without first
examining the moving party's submission to determine if it has met its burden of
demonstrating that no material issue of fact remains for trial.").
Mindful that defendant is proceeding pro se, the Court additionally reads his
papers liberally and interprets them as raising the strongest arguments they suggest.
See Weinstein v. Albright, 261 F.3d 127, 132 (2d Cir. 2001); Burgos v. Hopkins, 14
F.3d 787, 790 (2d Cir. 1994).
Discussion
PACA was enacted in 1930 to regulate the interstate sale and marketing of
perishable agricultural commodities. Cooseman Specialties, Inc. v. Gargiulo, 485
F.3d 701, 705 (2d Cir. 2007). It establishes a statutory trust for the benefit of sellers
and suppliers. Id.; see also 7 U.S.C. § 49ge(c)(2). As a PACA trustee, a buyer who
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purchases produce for re-sale is charged with a duty "to insure that it has sufficient
assets to assure prompt payment for produce and that any beneficiary under the
trust will receive full payment." D.M. Rothman & Co. v. Korea Commercial Bank
of N.Y., 411 F.3d 90, 94 (2d Cir. 2005) (internal quotation marks omitted). An
individual who is in the position to control trust assets and does not preserve them
has breached a fiduciary duty and can be held personally liable for that breach.
Cooseman, 485 F.3d at 705-06.
A. The Existence of a P ACA Trust
For a produce seller to recover proceeds from a P ACA trust under § 49ge, it
must establish the following:
(1) The commodities sold were perishable agricultural commodities; (2)
the purchaser of the perishable agricultural commodities was a
commission merchant, dealer or broker; (3) the transaction occurred
in interstate or foreign commerce; (4) the seller has not received full
payment on the transaction; and (5) the seller preserved its trust rights
by giving written notice to the purchaser within the time provided by
the law.
A & J Produce Co. v. Chang. 385 F. Supp. 2d 354, 358 (S.D.N.Y. 2005).
Here, all five elements are met. First, the goods sold-mangos--qualify as
perishable agricultural commodities under the statute. 3 Second, Kyung Min admits
that World Trading is a P ACA-licensed dealer "engaged in the business of buying
and selling wholesale quantities of produce in interstate commerce." (Def. Ans.

Perishable agricultural commodities governed by PACA include "[f]resh fruits and fresh
vegetables of every kind and character." 7 U.S.c. § 499a(b)(4)(A).
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4.)

Third, plaintiff contends-and the invoices and sworn testimony support its
contention-that defendants failed to pay GM Produce. (PI. 56.1 Statement, Exhibit
D, 1-3; PI. Shiba Aff. ~ 8.) And, finally, the billing statements that were sent to
World Trading properly preserved plaintiff's PACA trust rights. 4 (PI. 56.1
Statement, Exhibit D, 1-3.)
B. Individual Liability Under pACA
"An individual who is in a position to control the assets of the PACA trust
and fails to preserve them, may be held personally liable to the trust beneficiaries
for breach of fiduciary duty." Coosemans, 485 F.3d at 705-06. In cases involving
mUltiple officers or shareholders, such as this one, "courts have been reluctant to
impose individual liability absent clear uncontested allegations or proof that the
OM Produce's billing statements comply with all three independent requirements for proper
notice under the PAC A "invoice method" of notification. See A & J Produce Corp. v. Chang,
385 F. Supp. 2d 354, 361--62 (S.D.N.Y. 2005); 7 U.S.c. § 49ge(c)(4). First, the bills appear to
be "ordinary and usual," meaning they are "communications customarily used between parties to
a transaction in perishable agricultural commodities ... for billing or invoicing purposes" (7
C.F.R. § 46.46(a)(5)) that clearly and correctly identify both the seller and buyer. See Horizon
Mktg. v. Kingdom Int'l Ltd., 244 F. Supp. 2d 131, 141 (E.D.N.Y. 2003). Second, the parties
correctly invoked the default payment period established by PAC A regulations (7 C.F.R. §
46.2(aa)(5)), and therefore were not required to specify a particular payment period on the face
of the invoices. Third, the billing statements included, on their face, the following statutorilyrequired language:
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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. 49ge(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. § 49ge(c)(4).
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individual sued was in a position to assert control over PACA transactions." Avanti
Enterprises, Inc. v. A&T Produce, Inc., No. 09-CV-1l85, 2010 WL 3924771, at *4
(E.D.N.Y. July 21, 2010), report and recommendation adopted, 2010 WL 3909243
(E.D.N.Y. Sept. 30, 2010). However, "[e]ach case turns on its own facts," and as a
result, "there is no bright line litmus test" for individual liability under PACA.
Weis-Buy Farms, Inc. v. Quality Sales LLC, No. ll-CV-2011, 2012 WL 280617, at
*12 (D. Conn. Jan. 31, 2012).
The parties agree that Kyung Min, along with Jin Jo, was an officer and
shareholder of World Trading. (Def. Ans.

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17; Hrg. Tr. 10.) Kyung Min contends

in his answer, however, that he was not in a position of control over the day-to-day
operations of the company or trust assets. An independent review of the record,
made necessary by Kyung Min's failure to oppose the motion, reveals that there are
no material facts in dispute with regard to whether defendant was in a position of
control over PACA trust assets. By his own admission, Kyung Min had checkwriting authority, received a salary,S and played a role in company decision-making

Some cases suggest that receipt of a salary is a factor that goes against imposing personal
liability under PACA because it demonstrates that the individual was merely an employee, rather
than someone in a position of control. See,~, Weis-Buy Farms, No. ll-CV-2011, 2012 WL
280617, at * 14-15. In other cases, however, receiving a salary is a factor in favor of individual
liability. For example, where the individual in question was a one-third shareholder and vice
president, in addition to being a salaried employee, the court found that his salary was evidence
of his involvement in "the day-to-day functions of the business," and therefore a factor that
supported holding him personally liable. Anthony Marano Co. v. MS-Grand Bridgeview, Inc.,
No. 08-CV-4244, 2010 WL 5419057, at *11 (N.D. Ill. Dec. 23, 2010).
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and the management of World Trading employees. (Hrg. Tr. 9-13.) Although
defendant claims that he "[doesn't] do day-to-day operations of the company" (id. at
14), this conclusory statement is belied by his many other more specific admissions.
See Golden Pac. Bancorp, 375 F.3d at 200.
Kyung Min also attempts to disclaim individual responsibility by emphasizing
the leadership role of his sister, Jin Jo. But even accepting as true defendant's
contention that his sister was generally in charge of making business and financial
decisions for World Trading, Kyung Min can be found individually liable as well.
"More than one person can be in a position to control and affect [] trust assets."
Anthony Marano Co., No. 08-CV-4244, 2010 WL 5419057, at *10 (citin& Shepard v.
K.B. Fruit & Vegetable, Inc., 868 F. Supp. 703, 706 (E.D. Pa. 1994». Consequently,
a determination that Jin Jo was responsible for trust assets does not preclude a
finding of liability as to other similarly situated defendants. 6 On this record, the
Court finds that Kyung Min, as an officer and shareholder of World Trading with
check-signing authority/ who was involved, at least somewhat, in the day-to-day
operations of the business, was, like Jin Jo, indeed in a position to assert control
over PACA trust assets belonging to plaintiff. Accordingly, plaintiff's motion for
summary judgment against Kyung Min is granted.
The Court granted plaintiff s motion for default judgment with respect to defendants World
Trading and Jin Jo on January 4,2013.

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7 Kyung Min's concession that he had check-signing authority for World Trading is unlimited.
Consequently, he admits that he had check-signing authority over the account or accounts in
which P ACA trust assets were deposited.
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C. Damages
On January 4, 2013, the Court ruled that damages for all defendants would
be determined at Kyung Min's trial. Since a trial on the merits is no longer
necessary, the Court will refer the matter to Magistrate Judge Orenstein for an
inquest on damages, and to determine whether plaintiff is entitled to interest or
attorney's fees.
Conclusion
For all the foregoing reasons, plaintiff's motion for summary judgment
against defendant Kyung Min is granted. This matter is hereby respectfully
referred to Magistrate Judge Orenstein to (1) conduct an inquest on damages as to
all defendants, and (2) address plaintiff's request for pre-judgment interest, costs
and attorney's fees, if applicable.
SO ORDERED.
Dated: Brooklyn, New York
November 15, 2013

/S/ Judge Eric N. Vitaliano
ERIC N.-VITAL'iANO United States District Judge

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