Lester Altman Produce Company, Incorporated. v. Fruit Fresh Up, Incorporated. et al

Filing 14

DECISION AND ORDER declining to adopt Magistrate Judge Scott's Report and Recommendation. Plaintiff's motion for a temporary restraining order and preliminary injunction is denied on an ex parte basis. Plaintiff may proceed with its motion for a temporary restraining order and preliminary injunction after defendants have been provided notice as set forth in this Decision and Order. SO ORDERED. Signed by Hon. Richard J. Arcara on 3/8/2013. (JMB)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK

LESTER ALTMAN PRODUCE COMPANY
INCORPORATED,
Plaintiff,
v.

DECISION AND ORDER
13-CV–213

FRUIT FRESH UP,
INCORPORATED, et al.
Defendants.

INTRODUCTION
On February 26, 2013, plaintiff Lester Altman Produce Company, Inc.
(“Lester Altman” or “Plaintiff”) filed a complaint seeking relief from
defendants Fruit Fresh Up, Incorporated (“Fruit Fresh”) and Ronald
Santora (“Santora”) (collectively referred to as “Defendants”) under the
Perishable Agricultural Commodities Act (“PACA”), 7 U.S.C. §499 et seq.
On February 27, 2013, Plaintiff filed a request, before this Court, for an ex
parte temporary restraining order and then a preliminary injunction
requiring Fruit Fresh and Santora to preserve and maintain trust assets
under PACA, and to prevent any further dissipation of trust assets. The

case was then referred to Magistrate Judge Hugh B. Scott under 28 U.S.C.
§636(b).
On March 1, 2013, Magistrate Judge Scott recommended “granting
the pending motions in part to issue an immediate [ex parte] TRO to
preserve the status quo, and then deferring on the rest of the relief sought
pending further proceedings.” On March 4, 2013, Plaintiff, noting that no
objections to Magistrate Judge Scott’s Report and Recommendation had
been made, filed a Motion for Reduction of Objection Period and for
Immediate Entry of an Order Consistent with the Magistrate Judge’s
Report and Recommendation.
Pursuant to 28 U.S.C. §636(b)(1), this Court must make a de novo
determination of those portions of the Report and Recommendation to
which objections have been made. A district court may accept, reject, or
modify, in whole or in part, the findings or recommendations made by a
magistrate judge. See 28 U.S.C. §636(b)(1). “To accept the report and
recommendation of a magistrate, to which no objection has been made, a
district court need only satisfy itself that there is no clear error on the face
of the record.” Torres v. New York, 976 F. Supp. 249 (SDNY 1997).

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As explained below, this Court finds that although there is an
insufficient basis to deny Plaintiff’s request for a temporary restraining
order and preliminary injunction at this stage of the proceeding, it was clear
error for the Magistrate Judge to grant a temporary restraining order on an
ex parte basis, since Plaintiff has not set forth specific facts showing that
immediate and irreparable injury, loss, or damage will result to Plaintiff
before Defendants can be heard in opposition.
DISCUSSION
Under PACA, a trust is created in favor of suppliers to commission
merchants, dealers and brokers of perishable agricultural commodities in
the produce supplied and all proceeds derived from the sale of those
commodities. See 7 U.S.C. §499e(c)(2); In re Kornblum & Co., 81 F.3d
280, 285-86 (2d. Cir. 1996). This trust is in effect a “legal fiction” and
“consists of that portion of the debtor’s assets which may be traced to the
disposition of perishable agricultural commodities.” Driscoll Potatoes, Inc.
v. N.A. Produce Co., Inc., 765 F. Supp 174, 178 (D.N.J. 1991). Upon a
showing of actual or threatened dissipation, a debtor may be required to
escrow assets and each beneficiary would be entitled to a pro rata share of

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trust proceeds. Frio Inc, S.A. v. Sunfruit, Inc., 918 F.2d 154, 159 (11th Cir.
1990).
Section 499e(c)(5) of PACA authorizes United States district courts
to issue the injunctive relief sought by Plaintiff herein, and to order
Defendants to create segregated trust accounts to ensure payments to
trust beneficiaries. Frio Ice, 918 F.2d at 157-58. Trust beneficiaries, like
Plaintiff, seeking injunctive relief under PACA must still satisfy the usual
requirements for an injunction including: (1) a likelihood of success on the
merits; (2) the probability of irreparable harm if relief is not granted; (3) that
the balance of equities is in their favor; and (4) that the relief is consistent
with the public interest. JSG Trading Corp. v. Tray-Wrap, Inc., 917 F.2d
75, 79 (2d Cir. 1990).
Most importantly here, Plaintiff is seeking the relief ex parte. An ex
parte restraining order is extraordinary and may only issue when it clearly
appears “from specific facts shown by affidavit or by verified complaint
that immediate loss and irreparable injury, loss or damage will result to the
applicant before the adverse party or that party’s attorney can be heard in
opposition.” See Federal Rule of Civil Procedure 65(b) (emphasis added).
Magistrate Judge Scott determined that Plaintiff satisfied the irreparable

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harm requirement by raising the potential dissipation of trust assets.
Magistrate Judge Scott reasoned that “[a]lthough [Lester Altman] does not
provide details, his declaration suggests that communications with
defendants indicate that defendants have continued operations, raising the
possibility of a dissipation of trust funds.” (Dkt. No. 11).
The Report and Recommendation acknowledges that Plaintiff “does
not provide details” regarding the dissipation of trust assets. However,
Rule 65(b) requires “specific facts” before an ex parte temporary
restraining order can be granted. Thus, the Court finds that it was error to
grant the temporary restraining order on an ex parte basis.1

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In the cases relied on in the Report and Recommendation, the relief involved
was not granted on an ex parte basis. See Bonell Produce Co. Inc. v. Chloe Foods,
Inc., 2008 U.S. Dist. LEXIS 94476 (EDNY 2008) (granting plaintiff’s request for a
preliminary injunction after a hearing involving both parties, with footnote stating that the
relief was initially denied on ex parte basis); A. Ferlito Farms v. Empire Fresh Cuts,
LLC, 201 U.S. Dist. LEXIS 104648 (NDNY 2010) (ex parte request for relief denied
where, upon plaintiff’s filing of an ex parte motion for temporary restraining order, the
court immediately required that defendants be served and order to show cause issued
the next day as to why the temporary restraining order and injunction should not
granted); Bascani Foods Inc. v. Andrew & Williamson Sales, Inc., 2009 U.S. Dist.
LEXIS 102284 (EDNY 2009)(order to show cause issued and defendants properly
served before the preliminary injunctive relief was granted). The Court also notes that
contrary to the statement in the Report and Recommendation that motions for injunctive
relief under PACA are “typically” resolved by the District Court, this matter was properly
referred to the Magistrate Judge pursuant to this Court’s statutory authority under
Section 636(b) of Title 28 of the United States Code. See 28 U.S.C. §636(b) (stating
that a District Court judge may designate a magistrate judge to submit proposed
findings of fact and recommendations of law on any motion for injunctive relief).
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Specifically, in support of Plaintiff’s motion for an ex parte temporary
restraining order, Michael J. Altman, Chief Executive Officer of Lester
Altman Produce Co., Inc., submitted a two-page affidavit stating, in very
conclusory terms, the facts and circumstances supporting Plaintiff’s claim
for relief. With respect to a demonstration of irreparable harm, Mr. Altman
states only: “[t]hrough their continuing operations, All Defendants have
dissipated and will continue to dissipate PACA trust assets to which Lester
Altman is a perfected beneficiary...[d]espite our multiple demands, All
Defendants have refused to remit payment in full, and the proceeds All
Defendants received from reselling our Produce have not been held in
trust, but rather have been used to fund All Defendants’ continuing
operations.”
Plaintiff offers no specific facts or proof of any kind which would show
that Defendants are actually dissipating trust assets, or that the assets are
in real danger of dissipation, other than the fact that Plaintiff has not been
paid by Defendants. This is simply insufficient to warrant the extraordinary
relief of an ex parte temporary restraining order. See Zas International
Agriculture, B.V. v. Zas, USA, Inc., 1998 U.S. Dist. LEXIS 12330 (ED
Penn. 1998) (denying an ex parte temporary restraining order under PACA

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because “the mere failure to timely pay plaintiff does not demonstrate a
dissipation or misuse of trust assets”).
Upon the submission of additional information, Plaintiff may be able
to demonstrate that it is entitled to a temporary restraining order and
preliminary injunction. However, absent an actual, specific showing that
trust assets are being dissipated or threatened with dissipation, this Court
will not enter an order which could potentially endanger both Defendants’
business and the existing trust assets, without any notice to Defendants or
an opportunity to be heard.
CONCLUSION
For the foregoing reasons, this Court declines to adopt Magistrate
Judge Scott’s Report and Recommendation. Instead, Plaintiff’s motion for
a temporary restraining order and preliminary injunction is denied insofar
as it is requested on an ex parte basis. Plaintiff may proceed with its order
to show cause for a temporary restraining order and preliminary injunction
after Defendants have been provided notice and an opportunity to be
heard.
Plaintiff is instructed to serve Defendants with all docketed entries in
the instant case, including this Decision and Order, on or before March 12,

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2013. Defendants shall file a response to Plaintiff’s request for a
temporary restraining order and preliminary injunction on or before March
19, 2013 and Plaintiff may file a reply, or a notice of no reply, by March 26,
2013. A date for hearing will then be set by this Court.

SO ORDERED.
s/ Richard J. Arcara
HONORABLE RICHARD J. ARCARA
UNITED STATES DISTRICT JUDGE
DATED: March 8, 2013

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