Fleming Companies v. United States Department of Agriculture

322 F. Supp. 2d 744, 2004 U.S. Dist. LEXIS 15949, 2004 WL 1401185
CourtDistrict Court, E.D. Texas
DecidedJune 4, 2004
Docket4:03-cv-00380
StatusPublished
Cited by10 cases

This text of 322 F. Supp. 2d 744 (Fleming Companies v. United States Department of Agriculture) is published on Counsel Stack Legal Research, covering District Court, E.D. Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Fleming Companies v. United States Department of Agriculture, 322 F. Supp. 2d 744, 2004 U.S. Dist. LEXIS 15949, 2004 WL 1401185 (E.D. Tex. 2004).

Opinion

ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING FLEMING COMPANIES, INC. S MOTION FOR SUMMARY JUDGMENT

SCHELL, District Judge.

I. INTRODUCTION

Before the court are the following written submissions:

*749 a) “Defendant’s Motion to Dismiss or Alternatively, for Summary Judgment” (Dkt.#6), filed on December 16, 2003; b) “Fleming Companies, Inc.’s Opposition to the USDA’s Motion to Dismiss or Alternatively, for Summary Judgment” (Dkt. #10), filed on January 13, 2004; c) “Fleming Companies, Inc.’s Motion for Summary Judgment” (Dkt. #11), filed on January 14, 2004;

d) “Memorandum of the Frozen Potato Products Institute as Amicus Curiae in Support of Defendant’s Opposition to Plaintiffs Motion for Summary Judgment” (Dkt. #16), filed on February 12, 2004;

e) “Defendant’s Reply in Support of Defendant’s Motion to Dismiss or Alternatively, for Summary Judgment, and Defendant’s Opposition to Fleming Companies, Inc.’s Motion for Summary Judgment” (Dkt. #18), filed on February 12, 2004;

f) “Fleming Companies, Ine.’s Reply in Support of Its Motion for Summary Judgment” (Dkt. #24), filed on March 2, 2004;

g) “Defendant’s Sur-Reply in Support of Its Motion to Dismiss or Alternatively, for Summary Judgment” (Dkt. #25), filed on March 4, 2004; and

h) “Fleming Companies, Inc.’s Response to the USDA’s Sur-Reply” (Dkt. #26), filed on March 9, 2004.

On May 2, 2003, the United States Department of Agriculture (“USDA”) promulgated a new administrative rule establishing that battered and coated potato products are “fresh vegetables” under the Perishable Agricultural Commodities Act (“PACA”), 7 U.S.C. §§ 499a-499s (1996). Perishable Agricultural Commodities Act (PACA): Amending Regulations to Extend PACA Coverage to Fresh and Frozen Fruits and Vegetables That Are Coated or Battered, 68 Fed.Reg. 23,377, 23,377-78 (May 2, 2003) (to be codified at 7 C.F.R. pt. 46). In the event that a buyer of perishable agricultural commodities files for bankruptcy, PACA imposes a statutory trust in favor of unpaid sellers or suppliers of perishable agricultural commodities. § 499e(e). In that situation, sellers or shippers of perishable agricultural commodities are entitled to payment of their PACA trust claims before secured and unsecured creditors. Id.

Fleming Companies, Inc. (“Fleming”), an Oklahoma corporation with its principal place of business in Texas, is a grocery wholesaler and distributor. Pl.’s Compl., ¶ 3 (Dkt. #1). Fleming frequently buys and sells food products such as battered and coated french fries. Id. Fleming filed a bankruptcy petition under Chapter 11 on April 1, 2003. Id., ¶ 4. Concerned that the USDA’s new rule would force it to pay PACA trust claims and suffer severe financial hardship, Fleming sued the USDA on October 15, 2003. Id., ¶ 6. Fleming seeks to invalidate the USDA’s new rule. Id. ¶¶ 6, 7.

Neither Fleming nor the USDA argues that there exists a genuine issue of material fact in this case. See Fleming Companies, Inc.’s Mot. for Summ. J. at 17 (Dkt. #24). Thus, the court must decide whether the USDA’s new rule is legally valid. Id. After careful consideration, the court is of the opinion that the USDA.’s motion for summary judgment should be GRANTED and Fleming Companies, Inc.’s motion for summary judgment should be DENIED.

II. BACKGROUND

A. PACA

In 1930, Congress passed PACA in order to regulate the conduct of those who buy perishable agricultural products. Per *750 ishable Agricultural Commodities Act, ch. 436, 46 Stat. 531 (1930) (current version at 7 U.S.C. § 499a-499s (1996)). PACA requires buyers of perishable agricultural commodities to obtain a license from the Secretary of Agriculture. § 499c(a)-(b). Should a buyer unjustly refuse a shipment of perishable agricultural commodities or engage in fraudulent or unfair business practices, id. § 499b(1)-(4), that buyer "will be liable for the seller’s damages. Id. § 499e(a)-(b). Moreover, the Secretary of Agriculture may revoke the buyer’s license. Id. §§ 499h(a). PACA also imposes a statutory trust in favor of unpaid sellers or suppliers of perishable agricultural commodities. Id. § 499e(c). If a buyer files for bankruptcy, sellers of perishable agricultural commodities are entitled to full payment of their PACA trust claims Id.

PACA defines the term “perishable agricultural commodities” as follows: “[A]ny of the following, whether or not frozen or packed in ice: Fresh fruits and vegetables of every kind and character.” Id. § 499a(b)(4)(A). PACA does not elaborate further on the meaning of the term “fresh fruits and vegetables.” Id. Congress has, however, given the Secretary of Agriculture authority to “make such rules, regulations, and orders as may be necessary to carry out the provisions of [PACA].” Id. § 499o.

B. USDA Regulations Regarding PACA

Since 1940, the USDA has promulgated administrative regulations concerning the question of which agricultural products qualify as “fresh fruits and vegetables.” See, e.g., Regulations (Other Than Rules of Practice) Under the Perishable Agricultural Commodities Act, 1930, 6 Fed.Reg. 3,496, 3,496 (July 17, 1941) (to be codified at 7 C.F.R. pt. 46). For many years, the USDA defined that term as follows:

“Fresh fruits and fresh vegetables include all products in fresh form generally considered as perishable fruits and vegetables, whether or not packed in ice or held in common or cold storage.” 7 C.F.R. § 46.2(u) (2002). That term does not, however, “include those perishable fruits and vegetables which have been manufactured into articles of food of a different kind or character.” Id. Until recently, the USDA stated that the following operations did not change an agricultural product into a food of a different kind or character:

Water, steam, or oil blanching, chopping, color adding, curing, cutting, dicing, drying for the removal of surface moisture; fumigating, gassing, heating for insect control, ripening and coloring; removal of seed, pits, stems, calyx, husk, pods rind, skin, peel, et cetera; polishing, precooling, refrigerating, shredding, slicing, trimming, washing without or without chemicals; waxing, adding of sugar or other sweetening agents; adding ascorbic acid or other agents to retard oxidation; mixing of several kinds of sliced, chopped, or diced fruit or vegetables for packaging in any type of containers; or comparable methods of preparation.

Id.

C. Battered and Coated Potato Products and the Ameriserve Bankruptcy Litigation

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322 F. Supp. 2d 744, 2004 U.S. Dist. LEXIS 15949, 2004 WL 1401185, Counsel Stack Legal Research, https://law.counselstack.com/opinion/fleming-companies-v-united-states-department-of-agriculture-txed-2004.