Sutherland Produce Sales v. High Country Distribution et al

Filing 87

MEMORANDUM DECISION AND ORDER denying 74 High Countrys Motion for Partial Summary Judgment; granting in part and denying in part 75 Sutherlands Motion for Partial Summary Judgment. Its Motion for Summary Judgment on Claims One, Tw o, and Three (the PACA and breach of contract claims) is granted. Its Motion for Summary Judgment on Claim Four (the breach of fiduciary duty claim) is denied. Sutherlands request to include in the judgment interest and costs, as prescribed in its invoices, is granted. Its request to include attorney fees is denied. Signed by Judge Robert J. Shelby on 2/28/2017. (jds)

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH
CENTRAL DIVISION
SUTHERLAND PRODUCE SALES, INC.,
Plaintiff,

MEMORANDUM DECISION
AND ORDER

v.
HIGH COUNTRY DISTRIBUTION LLC, D
& R FOODS LLC dba MOUNTAIN
VALLEY DISTRIBUTION and ROY V.
COOK, JASON HENDERSON and DANIEL
WEBSTER, each individually,

Case No. 2:14-cv-00795-RJS
Judge Robert J. Shelby

Defendants.

This case involves a dispute over the sale of produce. Plaintiff Sutherland Produce Sales
is a seller of fresh fruits and vegetables, and Defendant High Country Distribution is a buyer.
Sutherland contends that over a several-month period in 2014, it sold produce to High Country,
but was never paid for it. Sutherland brought various claims against High Country, and now
moves for summary judgment on its claims for breach of the Perishable Agricultural
Commodities Act (PACA), breach of contract, and breach of fiduciary duty. High Country also
seeks summary judgment on Sutherland’s PACA claims and its breach of contract claim. For the
reasons below, the court grants in part and denies in part Sutherland’s Motion for Summary
Judgment and denies High Country’s Motion for Summary Judgment.
BACKGROUND
Sutherland is a California-based wholesale seller of produce. It sells various fruits and
vegetables, including tomatoes, avocados, limes, cabbage, jalapenos, and tomatillos. High

Country is a Utah-based buyer and dealer of wholesale produce. It buys produce from suppliers
like Sutherland and then sells the produce to retailers.
Beginning around April 2014, High Country entered into several contracts with
Sutherland to buy produce. Typically, Roy Cook, the owner of High Country and a defendant in
this case, would initiate the transactions by calling, texting, or emailing an order to Brent Batali,
a Sutherland employee. Batali would procure the requested produce, and a third party would
deliver it to High Country or to some other agreed-upon location. Daniel Webster, a High
Country employee and defendant in this case, would generally receive the shipments to High
Country at one of High Country’s loading docks. If Webster was unavailable, one of two
delivery drivers would sign for the shipments. According to the invoices provided by
Sutherland, High Country then had ten days from delivery to pay for the produce.
Seemingly, all went smoothly for several months. According to High Country,
Sutherland delivered and High Country paid for nearly 50 produce orders between April and July
2014. But beginning in July, High Country stopped paying for its orders. Sutherland contends
that for two months between July 9, 2014, and September 9, 2014, High Country placed 48
orders that Sutherland fulfilled and High Country received, but for which High Country never
paid Sutherland.1 During this time High Country repeatedly assured Sutherland that payment
was forthcoming.
In November 2014, having received no payment, Sutherland filed the Complaint in this
case. In it, Sutherland asserts claims for breach of PACA, breach of contract, breach of fiduciary
duty, and interference with trust assets. It also seeks an order piercing the corporate veil of D&R

Sutherland admits it did receive partial payment on the initial July 9 order in the amount
of $1,230.92, but contends that $17,649.08 is still outstanding on that order.
1

2

Foods, a company owned in part by Cook. After discovery, both parties filed motions for partial
summary judgment.
BURDENS AND STANDARD OF REVIEW
Summary judgment is used to decide pure issues of law and “to isolate and dispose of
factually unsupported claims or defenses.”2 The court will grant summary judgment only if there
is “no genuine dispute as to any material fact” and the movant is “entitled to judgment as a
matter of law.”3 Thus, a disputed fact issue will not itself preclude summary judgment if it is
either nonmaterial or nongenuine.
Materiality is governed by the legal elements of the parties’ claims; a factual dispute is
“material” if its resolution is necessary to decide an element of a legal claim.4 If a fact is
“irrelevant or unnecessary” to decide a claim, any dispute about that fact is not “material” and
will not preclude summary judgment.5 By contrast, genuineness focuses on the evidence in the
record; a factual dispute is “genuine” if there is “sufficient evidence favoring the nonmoving
party for a jury to return a verdict for that party.”6 Thus, if the strength of the evidence on both
sides is such that the dispute “may reasonably be resolved in favor of either party,” summary
judgment must be denied.7 But when the evidence, even if material, is “so one-sided” in favor of

2

Celotex Corp. v. Catrett, 477 U.S. 317, 323–24 (1986).

3

Fed. R. Civ. P. 56(a).

4

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

5

Id.

6

Id. at 249.

7

Id. at 250.
3

the moving party, or where a nonmoving party’s evidence is “merely colorable” or “not
significantly probative,” summary judgment may be granted.8
The moving party carries the initial burden of demonstrating the absence of any genuine
dispute of material fact and its entitlement to judgment as a matter of law.9 For any material fact,
the moving party must show there is no genuine dispute by citing to record evidence, including
“depositions, documents, electronically stored information, affidavits or declarations,
stipulations . . ., admissions, interrogatory answers, or other materials.”10 A movant that will
bear the burden of persuasion at trial must come forward with sufficient evidence to support
every element of every claim, but a movant who will not bear the burden of persuasion need only
point out a lack of evidence on an essential element of a claim.11
If the moving party makes its initial showing, the burden shifts to the nonmovant, who
must set forth specific, admissible evidence from which a rational jury could find for the
nonmovant.12 The nonmovant “must do more than simply show that there is some metaphysical
doubt as to the material facts”; rather, it must come forward with persuasive evidence to support
its position.13 The court will draw any reasonable inferences from the evidence in the light most
favorable to the nonmovant.14

8

Id. at 249, 252.

9

Celotex, 477 U.S. at 323.

10

Fed. R. Civ. P. 56(c)(1).

11

Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 671 (10th Cir. 1998).

12

Id.

13

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586–87 (1986).

14

Lopez v. LeMaster, 172 F.3d 756, 759 (10th Cir. 1999).
4

ANALYSIS
Sutherland moves for summary judgment on its PACA claims, its breach of contract
claim, and its breach of fiduciary duty claim. High Country moves for summary judgment on
Sutherland’s PACA claims and its breach of contract claim. The court will first address the
PACA claims, followed by the breach of contract and breach of fiduciary duty claims. The court
will then address Sutherland’s contention that it is entitled to attorney’s fees, costs, and interest.
I.

PACA Claims
PACA was enacted in 1930 to regulate the sale of produce in interstate commerce.15 The

statute imposes strict requirements on buyers and sellers, including regulating the terms on which
sellers can sell produce and the time within which buyers must pay.16 For sellers who meet
PACA’s eligibility requirements, the statute provides a cause of action against any buyer who
does not make “full payment promptly” upon receipt of goods.
In the early 1980’s, after a rising incidence of default among produce buyers, Congress
amended PACA to provide even stronger protection for sellers.17 It recognized that because of
the perishable nature of produce, sellers had to unload their goods quickly and often had no
choice but to sell to buyers whose creditworthiness could not be verified.18 As unsecured
creditors, sellers were often left with no recourse if the buyer defaulted; to the extent the goods

15

Am. Banana Co., Inc. v. Republic Nat’l Bank of NY, 362 F.3d 33, 36 (2nd Cir. 2004).

16

7 U.S.C. § 499b(4).

Am. Banana Co., 362 F.3d at 37 (citing H.R. Rep. No. 98-543, at 3 (1983), reprinted in
1984 U.S.C.C.A.N. 405, 406).
17

18

Id.
5

themselves were still in the buyer’s possession, they were likely spoiled, and banks and other
creditors stood before sellers in line to recover any of the defaulting buyer’s other assets.19
To remedy this situation, Congress provided sellers with a powerful tool: a first-in-line
security interest in their produce, superior to claims of buyers’ other secured creditors.20 It did so
by adding Section 499e(c), which establishes a trust upon delivery of goods. Under this
provision, the buyer becomes trustee of any delivered goods and must satisfy its debt to the seller
with funds from resale of those goods before expending the funds elsewhere.21 Importantly, this
amended trust provision applies only to sellers dealing in cash or extending short term credit; any
seller who extends credit to a buyer for more than 30 days from the date of delivery is not
eligible for PACA protection.22 Sellers also face other strict eligibility requirements, including
providing timely notice of intent to preserve trust benefits.23 Those who comply, however, are
rewarded with a “highly unusual trust beneficiary status.”24
It is this highly unusual status as trust beneficiary that Sutherland seeks here. Sutherland
contends that High Country failed to “make full payment promptly” on 48 orders, and argues that
it has met the eligibility criteria necessary to recover under PACA’s trust provisions. These
provisions require that Sutherland prove: (1) Sutherland is a PACA licensee; (2) Sutherland sold
perishable agricultural commodities; (3) High Country was subject to the PACA trust provisions;
(4) the commodities traveled in interstate commerce; (5) Sutherland properly preserved its PACA

19

Id.

20

Id.

21

§ 499e(c).

22

7 C.F.R. § 46.46(e)(2).

23

Id. § 46.46(f).

24

Am. Banana Co., 362 F.3d at 38.
6

trust rights by providing requisite notice to High Country; and (6) High Country failed to make
full payment on at least some of the produce provided by plaintiff.25
Sutherland has carried its initial burden of providing evidence to support its entitlement
to recover under PACA. Namely, it has provided the court with the PACA registrations of both
parties, copies of invoices, purchase orders, and bills of lading for every order it contends
remains unpaid, and copies of correspondence between the parties demonstrating that High
Country was receiving produce during the relevant period but was not paying Sutherland. Thus,
the burden shifts to High Country to provide evidence to dispute one or more elements of
Sutherland’s claims.
High Country argues that Sutherland cannot recover under PACA for two reasons:
(1) some or all of the produce from the 48 disputed invoices was never delivered or was listed at
a higher price than agreed upon; and (2) even if the produce was delivered, Sutherland is not
eligible for PACA trust protection because it extended payment terms beyond the 30-day
regulatory limit.26 The court will address each argument in turn.
A. Delivery & Price Terms
High Country first argues that Sutherland hasn’t established that all 48 disputed orders
were actually delivered, and it contends that the invoices for orders that were delivered
improperly state the price terms agreed upon by the parties. As to delivery, this element is
certainly material, as PACA protection applies only to “[p]erishable agricultural commodities

See Spada Props., Inc. v. Unified Grocers, Inc., 38 F. Supp. 3d 1223, 1230 n.2 (D. Or.
2014) (citing § 46.46).
25

High Country initially argued in the alternative that Sutherland forfeited entitlement to
PACA protection by failing to provide a prompt accounting within 24 hours, but it later
“conced[ed] that the 24 hour accounting requirement is only applicable to buying brokerage
transactions.” Dkt. 81 at iii.
26

7

received by a . . . dealer.”27 But the parties dispute what evidence is necessary to prove delivery.
Sutherland contends that the evidence it has provided—invoices, bills of lading, and purchase
orders for all 48 disputed orders—is sufficient to prove delivery. Indeed, it argues that where, as
here, there is no evidence the buyer ever objected to the invoices, the invoices alone are
sufficient, even absent the attendant purchase orders and bills of lading. High Country disagrees.
According to High Country, only signed bills of lading will suffice. Because some of
Sutherland’s bills of lading are unsigned, it argues, Sutherland has not demonstrated delivery of
all disputed orders.
It is conceivable that in some cases, the lack of a signed bill of lading for every invoice
could create a genuine dispute on the element of delivery. But given the dearth of evidence High
Country has provided to defeat summary judgment, the court concludes that in this case, the 48
invoices, combined with the lack of any contemporaneous objection to the invoices by High
Country, satisfy Sutherland’s burden to demonstrate delivery of the disputed goods. High
Country’s evidence disputing delivery consists primarily of the affidavits of Roy Cook (the
owner of High Country) and Daniel Webster (an employee of High Country). The two affidavits
are nearly identical, and in relevant part, state only that:


“High Country did not receive delivery of some or all of the produce reflected on
the invoices.”28



“High Country has been unable to verify its receipt of the items that plaintiff
purports to have sold or delivered.”29

27

7 U.S.C. § 499e(c)(2) (emphasis added).

28

Dkt. 77-1 at 2.

29

Id. at 3.
8

High Country makes no effort in its affidavits or in its briefing to point to any one of the
48 orders it contends were not delivered. Indeed, the most specific of High Country’s
representations is a general reference to one instance when it contends goods weren’t delivered
and one instance where goods were delivered but improperly billed:


“Plaintiff’s delivery driver was involved in a serious accident on I-15. The
shipment was lost or destroyed. It was never delivered to High Country.
Nevertheless, plaintiff issued an Invoice to High Country demanding payment for
the undelivered load.”30



“With respect to a few deliveries under the Tomato Contract, Sutherland . . .
provided to High Country medium size tomatoes rather than extra large romas,
subject to the express agreement that High Country’s price would be $1.00 per
case less. . . . [But] plaintiff overcharged High Country for deliveries of roma
tomatoes.”31

It’s unclear what orders High Country is referring to because nowhere in its briefing does it cite
an invoice number, or even a date for that matter.
By contrast, in support of its argument that the goods were delivered, Sutherland
provided a chart listing the invoice number and date of all 48 invoices it contends remain
unpaid.32 It also provided a copy of each invoice and of the emails forwarding each invoice to
High Country. As discussed, given the state of the record, this is likely sufficient to demonstrate
delivery.
But that’s not all Sutherland provided. For every invoice, it also provided a bill of lading
showing the date of delivery and what goods were delivered.33 As High Country points out, not
all of the bills of lading are signed by a High Country representative. But the import of that is

30

Dkt. 74 at xv.

31

Dkt. 81 at xii.

32

Dkt. 76-7.

33

Dkts. 76-6, 76-9, 76-10, 76-11.
9

not entirely clear; apparently, High Country asked that many of the orders be delivered to a thirdparty warehouse, or to a retailer directly, in which case a High Country employee might never
see the goods, much less sign for them on delivery. Regardless, the fact that Sutherland has
provided a bill of lading drafted by a third party for every disputed invoice, signed or not, is
further evidence of delivery.
Additionally, for each invoice Sutherland has provided corresponding purchase orders
that were drafted by High Country after delivery of the goods, which suggests that the purchase
orders accurately reflect what was actually delivered. High Country now contends that the
purchase orders it drafted “are erroneous and do not reflect actual contract terms.” It argues that
Cook’s daughter, Mary Ruiz, prepared the purchase orders at Batali’s direction based on the
invoices High Country received from Sutherland, and that Ruiz never verified with Cook that the
items were actually delivered. Perhaps if the purchase orders were Sutherland’s only evidence of
delivery, that allegation would be sufficient to create a genuine issue of material fact. But the
trifecta of the invoices (drafted by Sutherland), the purchase orders (drafted by High Country),
and the bills of lading (drafted by third parties), the terms and dates of which all match up,
provides such compelling evidence that High Country’s bare assertion that the purchase orders
“are erroneous and do not reflect actual contract terms,” without any explanation or supporting
evidence, is insufficient to create a genuine issue of fact for trial. No reasonable jury could rely
on High Country’s unsupported, general statements to find against Sutherland on the delivery
element of Sutherland’s claim.
This conclusion is further bolstered by the running record of the parties’ dealings, as
memorialized in several months of text messages between Cook and Batali. That record
provides evidence of High Country’s continuous placement of orders, its repeated promises that

10

payment was forthcoming, and an utter lack of any mention that the invoices Sutherland was
regularly sending to High Country reflected goods that weren’t actually delivered. High
Country’s “failure promptly to complain as to the terms set forth in [the] invoice[s] is considered
strong evidence that they were correctly stated,” and similarly, that the goods were actually
delivered.34 Given this evidence, High Country has failed to raise a genuine issue of fact on the
issue of delivery.
High Country’s second argument—that Sutherland has not established that the invoice
price terms were correct—fails to raise a genuine issue of fact for the same reason. The purchase
orders that High Country itself drafted match the pricing on the invoices provided by Sutherland.
High Country again argues, in essence, that the purchase orders were being drafted by Ruiz
without Cook’s oversight, so they don’t reflect the actual terms Cook agreed to. But as
discussed, the months of text messages between Cook and Batali demonstrate that Cook was
well aware of the debt that was accruing, and at no point did he question the prices or quantities
of produce Sutherland was delivering, which “is considered strong evidence that they were
correctly stated” on the invoices.35 And the notion that Cook placed the orders but never saw the
invoices is not supported by the record. Webster admitted in his deposition that “a lot of th[e]
invoices are sent . . . directly to [Cook].”36 Indeed, every invoice from Sutherland was emailed
to Cook’s personal email address.37 In light of this evidence, the generalized assertion in Cook’s
and Webster’s declarations that “the Invoices often reflected price terms different than those

34

Pemberton Produce, Inc. v. Tom Lange Co., Inc., 42 Agric. Dec. 1630, 1636 (USDA

1983).
35

George W. Haxton & Son v. Adler Egg Co., 19 Agric. Dec. 218, 224–25 (USDA 1960).

36

Dkt. 76-1 at 22.

37

Id. at 68; Dkt. 76-10.
11

agreed among High Country and Plaintiff,” without reference to any particular invoice or
shipment, is not sufficient to raise a triable issue of fact about whether the invoices properly state
the price and quantity terms.
B. 30-Day Payment Term
High Country also contends that even if the goods were delivered and the price terms
properly stated on the invoices, Sutherland has not met PACA’s requirement that a seller must
sell goods only on a cash or short-term credit basis.38 During PACA’s enactment, Congress
expressed a desire that the statute apply only to sellers who extend credit on a short-term basis.39
This was in part because PACA was targeted at “protect[ing] small dealers who require prompt
payment to survive,” and in part with an eye toward quickly weeding out defaulting buyers and
suspending their license so as to minimize the greater financial impact of any eventual
bankruptcy.40 The Secretary of Agriculture addressed these goals by promulgating regulations
establishing a default payment term of 10-days after delivery.41 The regulations allow the parties
to extend the default term, but only up to 30 days after delivery.42 High Country contends that
Sutherland disqualified itself from PACA protection by agreeing to extend the payment term up
to 60 days, beyond the 30-day regulatory maximum.
In response, Sutherland points to another provision in the regulations: the requirement
that any extension of the default payment term be put in “writing before entering into the

38

See 7 C.F.R. § 46.46(e).

Patterson Frozen Foods, Inc. v. Crown Foods Int’l, Inc., 307 F.3d 666, 669 (7th Cir.
2002); see also H.R. REP. NO. 98–543, at *6–7 (1983), reprinted in 1984 U.S.C.C.A.N. 405,
410.
39

40

Patterson Frozen Foods, 307 F.3d at 669.

41

§ 46.2(z).

42

Id. § 46.46(e)(2).
12

transaction.”43 Neither party contends there was any written agreement to extend the default
payment term. Indeed, the only written reference to a payment term is the statement on the face
of every invoice representing that the payment term was “10 days.” Rather, High Country
contends the parties “orally agreed that High Country would have sixty days from delivery to
make payment.”44 Alternatively, it argues that even if there was no oral agreement, the parties’
course of dealing demonstrates an implied agreement to extend the payment term beyond the 30day limit.
Sutherland argues that even if this is true, it is of no import because extensions to the
default payment term must be in writing. Because any alleged extension between the parties was
not in writing, Sutherland contends, the default 10-day term appearing on the face of the invoices
governs. High Country responds by arguing that the writing requirement does not apply in this
instance. According to High Country, it would be contrary to the intent of the statute to invoke
the writing requirement here to save a seller who has otherwise disqualified itself from PACA
protection by extending payment terms (albeit orally or impliedly) beyond the 30-day deadline.
The resolution of this issue comes down to determining the reach of the writing
requirement. It’s fairly clear that the requirement can be invoked by a buyer as a defense against
a charge of late payment.45 That is, if parties orally agree to a 7-day payment term and a seller
sues for late payment on day eight, the buyer can invoke the writing requirement as a defense—
because the 7-day term wasn’t reduced to writing, the default 10-day term still governs.

43

Id. § 46.46(e)(1).

44

Dkt. 74 at viii.

See, e.g., In re: The Caito Produce Co., 48 Agric. Dec. 602, 610 (USDA 1989) (Because
agreement to extend payment term was not in writing, default term applied and buyer therefore
did not make “full payment promptly.”).
45

13

Less clear is whether a seller may invoke the writing requirement as a defense against a
charge that it disqualified itself from PACA protection by orally (or impliedly) agreeing to a
payment term of greater than 30 days. On the one hand, as discussed, the regulations state that
any departure from the default 10-day term must be put “in writing before entering into the
transaction,” suggesting that an oral agreement to accept payment more than 30 days after
delivery would have no effect under PACA and would not disqualify a seller from PACA
protection. But on the other hand, this interpretation would be in tension with Congress’s goal of
extending PACA protection only to sellers issuing short term credit: a seller could orally agree to
issue credit well beyond the thirty-day limit but retain PACA protection so long as it never
reduced the agreement to writing.
The question of how to resolve this tension has been a matter of some dispute in the
courts. The Tenth Circuit has not addressed the issue, and the circuits that have are split. The
majority of courts have adopted a broad view of the writing requirement, holding that a nonwritten extension of the default payment term has no effect under PACA. Under this
interpretation, a buyer who is in default of an orally-agreed-upon term can use the writing
requirement as a shield against a charge that the buyer did not promptly pay, as explained above,
but so can a seller use the requirement as a shield against PACA disqualification when it orally
extends the payment term beyond the 30-day maximum.
The Eighth Circuit endorsed this interpretation in the early ‘90s in Hauser’s Foods,
reasoning that “[t]he statute and regulations clearly contemplate that the parties must set forth
such agreements [extending the default payment term] in writing to be effective.”46 The court
noted that “it would be incongruous to disregard oral agreements for purposes of enforcing

46

Hull Co. v. Hauser’s Foods, Inc., 924 F.2d 777, 781 (8th Cir. 1991).
14

PACA” against a defaulting buyer, but then to “recognize them for the purpose of voiding the
sellers’ protection under the trust.”47 The Fifth and Seventh Circuits have adopted this approach
as well.48
A minority of courts have adopted a narrower view of the writing requirement, holding
that the requirement exists as a shield for defaulting buyers but not for disqualified sellers. In
other words, to return to the example previously discussed, under this interpretation, a seller who
enters into an oral agreement to a 7-day payment term still cannot sue a buyer for failure to
promptly pay on day eight because any agreement to alter the 10-day default must be in writing.
But the writing requirement would not save a seller from PACA disqualification if the seller
orally agreed to extend the payment term, for example, to 40 days, beyond the 30-day regulatory
maximum.
This was the interpretation adopted by the Second Circuit in 2004 in American Banana.49
The court there recognized the requirement that “[p]arties who elect to use different times of
payment . . . must reduce their agreement to writing before entering into the transaction,” but
declined to “interpret [that] regulation 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.”50 Citing Congress’s generalized statement that it “does not intend the trust to apply to
any credit transaction that extends beyond a reasonable period,” the court concluded that where

47

Id. at 782.

Bocchi Ams. Assocs., Inc. v. Commerce Fresh Mktg., Inc., 515 F.3d 383, 390 (5th Cir.
2008); Patterson Frozen Foods, Inc., 307 F.3d at 671.
48

49

See Am. Banana Co., 362 F.3d at 46–47.

50

Id. at 46.
15

“a seller agrees—orally or in writing—to a payment period exceeding thirty days, it forfeits trust
protection.”51
At least two recent district court decisions have taken this a step further, concluding that a
party’s course of dealings—even absent evidence of a written or oral agreement—could
constitute evidence of an implied agreement to extend payment terms beyond thirty days that
results in trust protection forfeiture. In 2011, the Southern District of New York found a triable
issue of fact about whether a seller had forfeited PACA protection by improperly extending
payment terms based on evidence showing that over the course of 1,139 orders between the
parties, the seller paid the buyer within 30 days less than 3% of the time.52 The court determined
that “[a] reasonable fact finder could conclude that there was an established course of dealings
between the parties by which plaintiff agreed to accept payment more than 30 days after receipt
of the produce,” which would “remove plaintiff from the protections afforded by a PACA
trust.”53
A few years later the District of Oregon came to a similar conclusion.54 There, the buyer
defaulted and the parties agreed to a repayment plan by which the parties would continue doing
business and any future payments would go to the oldest outstanding debt.55 The court

Id. at 44, 47. The court also determined that a post-default agreement to enter into a debtrepayment plan that extended beyond 30-days forfeited PACA protection. Id. at 45. The UDSA
in 2011 amended the regulations to clarify that this type of plan would not forfeit a seller’s PACA
rights. 7 C.F.R. § 46.46(e)(3).
51

A & J Produce Corp. v. City Produce Operating Corp., No. 10 Civ. 5610(PKC), 2011 WL
6780614, at *4 (S.D.N.Y. Dec. 23, 2011).
52

53

Id. at *5.

54

See Spada Props., Inc. v. Unified Grocers, Inc., 121 F. Supp. 3d 1070, 1087 (D. Or.

2015).
55

Id. at 1076.
16

concluded that the arrangement “virtually guaranteed that the buyer [could not] meet PACA
compliant net-10 or net-30 payment terms as to subsequent shipments,” because any payment by
the buyer would go first toward already-outstanding debt.56 According to the court, this
“constitutes a credit arrangement permitting a buyer to make payments that are not considered
prompt by Congress and the USDA.”57
Thus, the circuits are split on whether an oral agreement to extend payment terms beyond
thirty days forfeits PACA protection for sellers; the Second Circuit says it does, the Fifth,
Seventh and Eighth Circuits say it does not. And some district courts have taken the Second
Circuit’s holding even further by concluding that course of dealing alone can forfeit PACA
protection. High Country argues both that the parties orally agreed to extend the payment terms
beyond 30 days, and, alternatively, that they implicitly agreed to extend the terms because their
course of dealing demonstrates that early in the engagement High Country routinely paid
Sutherland beyond 30 days and Sutherland nonetheless continued doing business with High
Country. These agreements, if proven, would likely forfeit PACA protection under recent New
York and Oregon district court decisions (because under these decisions, course of dealing alone
is sufficient) and under existing Second Circuit Precedent (as American Banana held that oral
agreements may forfeit PACA protection). But under the Fifth, Seventh, and Eighth Circuits’
precedents, they would not (because those circuits require a written payment extension before the
trust protection is forfeited).
In the court’s view, the Fifth, Seventh, and Eighth Circuits have the better interpretation.
Both the statute and the applicable regulations go out of their way to make clear that a seller will

56

Id. at 1087.

57

Id.
17

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.58 And the regulations frame these requirements
as “eligibility requirements,” suggesting they apply not only in the context of determining
whether payment was prompt, but also in the context of determining, on the front end, whether a
seller is eligible for PACA protection.
The court concedes that PACA’s legislative history reveals a reluctance to provide trust
protection to “any credit transaction that extends beyond a reasonable period,” and that a
decision to recognize only written agreements to extend the payment term could run contrary to
this intent by granting trust protection to a seller who has agreed orally or impliedly to extend
credit beyond the 30-day maximum.59 But the parties aren’t bound by PACA’s legislative
history, they are bound by its statutory and regulatory language. And that language makes clear
that to be “eligible for trust benefits,” a seller must elect to use the default 10-day term or must
“reduce . . . to writing” an agreement to a term of not more than “30 days after receipt and
acceptance of the commodities.”60 Because High Country 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 Sutherland’s PACA eligibility.

See 7 U.S.C. § 499e(3) (tying notice deadline to either the ten-day default term or “such
other time by which payment must be made, as the parties have expressly agreed to in writing”);
7 C.F.R. § 46.46(e) (noting that to be “eligibl[e] for trust benefits,” parties must use default 10day term or “must reduce their agreement [to another payment term] to writing before entering
into the transaction”). The regulations do recognize oral or implied agreements in the context of
post-default agreements. 7 C.F.R. § 46.46(e)(3) (allowing a seller to “agree[] in any manner to a
schedule for payment of the past due amount” (emphasis added)). But this demonstrates only
that the Secretary of Agriculture knows how to allow oral or implied agreements when it pleases,
and it has made clear that agreements made “before entering into the transaction” must be
“reduce[d] . . . to writing.” Id. § 46.46(e)(1) (emphasis added).
58

59

H.R. Rep. No. 98-542, at 6–7 (1983), reprinted in 1984 U.S.C.C.A.N. 405, 410.

60

7 C.F.R. § 46.46(e).
18

II.

Breach of Contract Claim
Sutherland also moves for summary judgment on its breach of contract claim. In Utah, a

breach of contract claim requires a plaintiff to show: (1) the existence of a contract;
(2) performance by the party seeking recovery; (3) breach of the contract by the other party; and
(4) damages.61 As with its PACA claim, Sutherland has met its initial burden of demonstrating
the absence of any genuine dispute of material fact and its entitlement to judgment as a matter of
law on this claim; it has provided invoices, purchase orders, and bills of lading, among other
evidence, demonstrating that over the course of several months High Country ordered produce
from Sutherland, Sutherland fulfilled those orders, and High Country failed to pay Sutherland.
Thus, the burden shifts to High Country to demonstrate the existence of a genuine issue
of a material fact on this claim, or if no such issue exists, to show that Sutherland is not entitled
to judgment as a matter of law based on the undisputed facts. High Country contends that
summary judgment in Sutherland’s favor is inappropriate for three reasons: (1) Sutherland cannot
show delivery and acceptance of all the goods; (2) the prices and quantities on Sutherland’s
invoices are incorrect; and (3) prior breaches by Sutherland excuse High Country’s obligation to
pay. The court will address each in turn.
High Country’s first and second arguments—that Sutherland did not prove delivery of the
goods or accuracy of the invoices—were addressed in the previous section related to
Sutherland’s PACA claim and will not be rehashed here. In short, the invoices, as well as the
bills of lading and purchase orders, satisfy Sutherland’s initial burden. And High Country’s
vague and conclusory allegations, coupled with its failure to cite any instance where it objected
to nondelivery or improper price terms, do not raise a triable fact issue on these elements.

61

Blair v. Axiom Design, L.L.C., 20 P.3d 388, 392 (Utah 2001).
19

High Country’s third argument is that prior breaches by Sutherland excuse performance
of the contract by High Country. The notion that prior breach can excuse performance is correct
as a matter of law. But High Country’s briefing on this point is altogether lacking in detail. The
entirety of High Country’s argument is:
Plaintiff breached its contract with High Country by, among other things, (a) failing to send
bills of lading or invoices with shipments, (b) sending its invoices unreasonably late,
(c) seeking to collect prices greater than those agreed prior to delivery, (d) failing to
promptly account to High Country, (e) seeking to collect from High Country for goods
never delivered, including the shipment dumped on I-15, (f) seeking to collect from High
Country for goods High Country did not order, but merely accepted on an “open contract”
as a favor to Batali, (g) failing to afford High Country the agreed credit terms, and
(h) otherwise acting in a manner inconsistent with High Country’s justified expectations.
Notably, this argument is unsupported by any citation to record evidence, which is
expressly required in order to create a genuine issue of material fact.62 Moreover, High Country
has the burden of providing specific, admissible evidence from which a rational jury could find
in its favor.63 Nothing within High Country’s argument is specific, and no reasonable jury could
rely on it to find for High Country. Indeed, High Country’s argument does nothing more than
create “some metaphysical doubt as to the material facts,” which is insufficient at this stage.64
Even construing all evidence in the light most favorable to High Country, as the court must, High
Country simply has not sufficiently fleshed out its argument or provided adequate evidence to
create a genuine issue of fact on the question of whether Sutherland breached the contract.
Sutherland is therefore entitled to summary judgment on its breach of contract claim.

Fed. R. Civ. P. 56(c)(1)(A) (“A party asserting that a fact cannot be or is genuinely
disputed must support the assertion by . . . citing to particular parts of material in the record.”).
62

63

Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 671 (10th Cir. 1998).

64

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586–87 (1986).
20

III.

Breach of Fiduciary Duty Claim
Sutherland also seeks summary judgment on its claim for breach of fiduciary duty. It

contends not only that High Country is liable to Sutherland for the entire outstanding balance,
but that Cook and Webster are personally liable as well. According to Sutherland, PACA
imposed on Cook and Webster a fiduciary duty over any money High Country received from
resale of Sutherland goods, and they breached their duty by not using that money to pay the
amounts owed to Sutherland.
PACA does not explicitly impose a fiduciary duty on a buyer’s employees, but because it
creates a “trust,” courts have routinely turned to general trust principles to conclude that certain
employees of a buyer can become trustees with fiduciary duties.65 Under these principles,
liability attaches first to the corporation itself, but where the assets of the corporation are
insufficient to satisfy PACA liability, individuals may be personally liable to the extent they had
a role in causing the corporate trustee to breach the trust.66 Thus, the issue of personal liability
under PACA boils down to two questions: (1) whether an individual was in a “position to control
trust assets”; and (2) whether he breached his fiduciary duty to preserve those assets.67
The court need not address the first question because the second is dispositive of this
claim. Even assuming Cook and Webster were in a position to control trust assets, to show they
breached a fiduciary duty to preserve those assets Sutherland must demonstrate that “the assets

See Skyline Potato Co., Inc. v. Hi-Land Potato Co., Inc., 188 F. Supp. 3d 1097, 1110
(D.N.M. 2016) (collecting cases).
65

66

Goldman-Hayden Co., Inc. v. Fresh Source Produce Inc., 217 F.3d 348, 351 (5th Cir.

2000).
See Fed. Fruit & Produce Co. v. Liborio Mkts. No. 9, Inc., No. 12-cv-1145-WJM-BNB,
2013 WL 4838914, at *3 (D. Colo. Sept. 10, 2013). There is no 10th Circuit authority on the
issue of personal liability under PACA. But several other circuits have adopted this two-part test,
as have district courts in this circuit. Id. (listing cases). The court therefore follows that lead.
67

21

of the licensed . . . dealer . . . are insufficient to satisfy the PACA liability.”68 Sutherland
provided evidence that High Country failed to pay its bills, but it has provided no evidence that
High Country is unable to pay its bills. Indeed, there is no evidence in the record demonstrating
High Country’s insolvency. Thus, whether High Country has assets sufficient to satisfy its PACA
liability is a genuine issue of fact that precludes summary judgment on Sutherland’s breach of
fiduciary duty claim.
IV.

Attorney’s Fees, Interest, and Costs
Sutherland asserts in its complaint and briefly in its summary judgment papers that it is

entitled to attorney’s fees, interest, and costs. PACA itself does not provide for fees, interest, or
costs, but it does provide for recovery of “sums owing in connection with” the sale of produce,
which courts have construed to include fees, interest, and costs if the underlying contract
provides for such relief.69 Sutherland contends that the parties’ contracts included a right to fees,
interest, and costs because the following fine print was included at the bottom of each invoice:
“Delinquent accounts are subject to finance charges of 1.5% per month. In the event legal
actions is commenced to collect the sums due under this invoice, the prevailing party shall be
enabled to recover all court costs and reasonable attorney fees incurred thereby as damages, in
addition to any principal balance then remaining due.”
It is undisputed that Sutherland’s invoices were sent after delivery, and High Country
seizes on this fact to argue that the aforementioned language never became part of the parties’
contracts. Before Utah’s adoption of the Uniform Commercial Code (UCC), courts facing this

Coosemans Specialties, Inc. v. Gargiulo, 485 F.3d 701, 707 (2d Cir. 2007) (quoting
Golman-Hayden Co., Inc. v. Fresh Source Produce Inc., 217 F.3d 348, 351 (5th Cir. 2000)).
68

See, e.g., Middle Mountain Land & Produce Inc. v. Sound Commodities Inc., 307 F.3d
1220, 1222 (9th Cir. 2002); Coosemans Specialties, 485 F.3d at 709.
69

22

situation applied common law to determine whether there had been a meeting of the minds on
provisions included only in invoices delivered after the fact.70 The UCC, however, “departs from
the common law . . . in that it construes additional or different terms contained in the acceptance
as proposals to modify the contract which, as between merchants, become part of the contract
unless . . . they materially alter it.”71 An additional term materially alters a contract if it “results
in surprise or hardship if incorporated without the express awareness by the other party.”72
“Surprise” is more than “raised eyebrows”; it must be established that a reasonable merchant
would not have consented to the additional term.73 “Hardship,” on the other hand, can be shown
when the term “creates or allocates an open-ended and prolonged liability.”74 The nonassenting
party carries the burden of proving surprise or hardship, as the presumption under the UCC is
that non-objected-to clauses are included in contracts absent a showing of material alteration.75
Thus, under Utah law, High Country has the burden of showing that the interest, fees, and costs
provisions in Sutherland’s invoices were surprising—i.e. a reasonable merchant wouldn’t have
approved—or they caused hardship—i.e. they created an open-ended and prolonged liability.
Concerning interest provisions, the UCC commentary expressly indicates that “a clause
providing for interest on overdue invoices” is an example of a term that does not materially alter

70

See, e.g., B & R Supply Co. v. Bringhurst, 503 P.2d 1216, 1217 (Utah 1972).

71

Johnson Tire Serv., Inc. v. Thorn, Inc., 613 P.2d 521, 523 (Utah 1980).

72

Am. Ins. Co. v. El Paso Pipe & Supply Co., 978 F.2d 1185, 1189 (10th Cir. 1992).

73

Bayway Ref. Co. v. Oxygenated Mktg. & Trading A.G., 215 F.3d 219, 224 (2d Cir. 2000).

74

Id. at 226.

75

Am. Ins. Co., 978 F.2d at 1192 n.9.
23

a contract and is therefore incorporated absent timely objection.76 Courts are in accord.77 None
of the facts of this case suggest that this interest provision would be so surprising or induce such
hardship as to warrant departure from the UCC commentary and weight of prior authority.
The same cannot be said of attorney fees. In Johnson Tire Service, the Utah Supreme
Court concluded that “the addition of a provision for attorneys’ fees alters the offer materially
and thus does not fall within the ‘additional or different terms’ which the statute renders
acceptable by mere silence on the part of the offeror.”78 This on-point authority might seem to
end the matter, but the Tenth Circuit has cautioned against blindly applying another court’s
holding as to what might constitute a material alteration because determining whether a term
would result in surprise or hardship “depends on the unique facts of every case.”79 To that end,
the court does not see any material difference between Johnson Tire Service and this case that
would render an attorney fee modification surprising there, but not here. As such, the attorney
fee provision did materially alter the contracts and therefore did not become a part of them.
As to the cost provision, there does not appear to be Tenth Circuit or Utah state court
authority on point, nor does the UCC commentary address such a provision. Thus, the court
relies solely on the parties’ arguments about why the provision does or does not constitute a
surprising or hardship-inducing material alteration. High Country has not expressly argued why
this provision should not be included in the contracts, and because High Country bears the

76

Utah Code Ann. § 70A-2-207 cmt. n.5 (West).

See Monarch Nutritional Laboratories, Inc. v. Maximum Human Performance, Inc., No.
2:03CV474TC, 2005 WL 1683734, at *7 (D. Utah July 18, 2005) (listing cases).
77

78

Johnson Tire Serv., 613 P.2d at 523.

79

Am. Ins. Co., 978 F.2d at 1189.
24

burden of proving a new term constitutes a material change, the court construes the cost
provision as a nonmaterial change that was incorporated into the contracts.80
In conclusion, the court finds that the interest and cost provisions in Sutherland’s invoices
did not materially alter the parties’ agreement, and were therefore adopted when High Country
failed to object, but it determines that the attorney fee provision did materially alter the
agreement and thus is not enforceable.
CONCLUSION
High Country’s Motion for Summary Judgment81 is denied. Sutherland’s Motion for
Summary Judgment82 is granted in part and denied in part. Its Motion for Summary Judgment
on Claims One, Two, and Three (the PACA and breach of contract claims) is granted. Its Motion
for Summary Judgment on Claim Four (the breach of fiduciary duty claim) is denied.
Sutherland’s request to include in the judgment interest and costs, as prescribed in its invoices, is
granted. Its request to include attorney fees is denied.
SO ORDERED this 28th day of February, 2017.
BY THE COURT:

__________________________
ROBERT J. SHELBY
United States District Judge

See, e.g., Ruby Robinson Co., Inc. v. Kalil Fresh Mktg., Inc., No. H-08-199, 2009 WL
3378419, at *2 (S.D. Tex. Oct. 16, 2009) (Where “[d]efendants ha[d] not claimed any of the[]
exceptions[,] . . . claimants ha[d] established a contractual right to attorneys’ fees based on the
language of the invoices.”).
80

81

Dkt. 74.

82

Dkt. 75.
25