Nature Quality Vine Ripe Tomatoes v. Rawls Brokerage, Inc.

536 F. Supp. 2d 1259, 2005 U.S. Dist. LEXIS 46310, 2005 WL 6082698
CourtDistrict Court, N.D. Alabama
DecidedJuly 26, 2005
Docket2:04-mj-00016
StatusPublished
Cited by2 cases

This text of 536 F. Supp. 2d 1259 (Nature Quality Vine Ripe Tomatoes v. Rawls Brokerage, Inc.) is published on Counsel Stack Legal Research, covering District Court, N.D. Alabama primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Nature Quality Vine Ripe Tomatoes v. Rawls Brokerage, Inc., 536 F. Supp. 2d 1259, 2005 U.S. Dist. LEXIS 46310, 2005 WL 6082698 (N.D. Ala. 2005).

Opinion

OPINION & ORDER

VIRGINIA EMERSON HOPKINS, District Judge.

This cause comes before the court on the Motion for Summary Judgment (doc. 282), filed by the plaintiffs Nature Quality Ripe Tomatoes, James L. Suttles, proprietor, et al. (“Plaintiffs”). The motion seeks a ruling on the validity of the claims for PACA 1 trust benefits filed by five intervening plaintiffs, Frieda’s, Inc., Grimmway Enterprises, Inc., Kingston & Associates Marketing, LLC, Potandon Produce, LLC, and Seald-Sweet, LLC (“Intervening Plaintiffs”).

The plaintiffs’ objections call upon the court to harmonize the requirements of several provisions of the PACA and the regulations promulgated by the United States Department of Agricultural (USDA). For that reason, some background regarding the PACA is in order.

I.

Background on PACA

Congress created the PACA trust to address burdens of the nation’s produce trade that would occur when commodities dealers would fail to pay produce suppliers for produce shipments and simultaneously give security interests in the same produce to the commodities dealer’s other lenders. See 7 U.S.C.A. § 499e(e)(l). To remedy this problem, “PACA establishes a nonsegregated trust in which a produce dealer holds produce-related assets as a fiduciary until full payment is made to the produce seller. The trust automatically arises in favor of a produce seller upon delivery of produce and is for the benefit of all unpaid suppliers or sellers involved in the transaction until full payment of the sums owing has been received.” See Bowlin & Son, Inc. v. San Joaquin Food Serv., Inc. (In re San Joaquin Food Serv., Inc.), 958 F.2d 938, 939 (9th Cir.1992) (citations omitted). By establishing this statutory trust, PACA *1261 helps guarantee that produce suppliers will receive payments on the goods they sell.

To establish their right to trust benefits, however, PACA requires that produce sellers comply with certain specific requirements. Among those requirements, PACA requires that produce sellers receive payment on their goods within ten days of delivery, unless the parties expressly agree to a payment term in excess of ten days. If the parties agree to a payment term in excess of ten days, PACA requires that they make certain disclosures on the documentation related to their transactions. To resolve the instant motion, the court must determine exactly how demanding those disclosure obligations are.

Playing a central role in this dispute are sections 499e(c)(3) and (4) of PACA. Those sections provide as follows:

(3) The unpaid supplier, seller, or agent shall lose the benefits of such trust unless such person has given written notice of intent to preserve the benefits of the trust to the commission merchant, dealer, or broker within thirty calendar days (i) after expiration of [ten days], 2 (ii) after expiration of such other time by which payment must be made, as the parties have expressly agreed to in writing before entering into the transaction, or (iii) after the time the supplier, seller, or agent has received notice that the payment instrument promptly presented for payment has been dishonored. The written notice to the commission merchant, dealer, or broker shall set forth information in sufficient detail to identify the transaction subject to the trust. When the parties expressly agree to a payment time period different from [ten days], 3 a copy of any such agreement shall be filed in the records of each party to the transaction and the terms of payment shall be disclosed on invoices, accountings, and other documents relating to the transaction.
(4) In addition to the method of preserving the benefits of the trust specified in paragraph (3), a licensee may use ordinary and usual billing or invoice statements to provide notice of the licensee’s intent to preserve the trust. The bill or invoice statement must include the information required by the last sentence of paragraph (3), and contain on the face of the statement the following: “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.A. § 499e(c)(3)-(4).

In the regulations implementing these provisions, the Secretary of Agriculture has interpreted these sections as establishing two separate steps that produce sellers who use extended payment term contracts must take to be entitled to trust benefits. First, the produce seller must establish its eligibility to receive trust benefits. Second, the produce seller must preserve its trust benefits.

Section 46.46(e), title 7 of the CFR, contains the eligibility requirements, which, in relevant part, are as follows:

*1262 (e) Prompt payment and eligibility for trust benefits
(1) The times for prompt accounting and payment are set out in § 46.2(z) and (aa). Parties who elect to use different times for payment must reduce their agreement to writing before entering into the transaction and maintain a copy of their agreement in their records, and the times of payment must be disclosed on invoices, accountings, and other documents relating to the transaction.
(2) The maximum coverage under the trust is 30 days after receipt and acceptance of the commodities as defined in 46.2(dd) and paragraph (a)(1) of this section.

7 C.F.R. § 46.46(e)(l)-(2).

Section 46.46(f), title 7 of the CFR, provides the requirements for a produce seller to preserve its entitlement to trust benefits. The section sets out two separate methods for trust preservation. The first method is contained in § 46.46(f)(l)-(2), and reiterates the method of trust preservation contained in 7 U.S.C.A. § 499e(e)(3). The second method implements the method of trust preservation found in 7 U.S.C.A. § 499e(e)(4), and provides as follows:

(3) Licensees may chose an alternate method of preserving trust benefits from the requirements described in paragraphs (f)(1) and (2) of this section. Licensees may use their invoice or other billing statement to preserve trust benefits. The alternative method requires that the licensee’s invoice or other billing statement, given to the debtor, contain:
(i) The statement: “The perishable agricultural commodities listed on this invoice are sold subject to the statutory trust authorized by

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Cite This Page — Counsel Stack

Bluebook (online)
536 F. Supp. 2d 1259, 2005 U.S. Dist. LEXIS 46310, 2005 WL 6082698, Counsel Stack Legal Research, https://law.counselstack.com/opinion/nature-quality-vine-ripe-tomatoes-v-rawls-brokerage-inc-alnd-2005.