19-3540-cv S. Katzman Produce Inc. v. Yadid
1 UNITED STATES COURT OF APPEALS 2 3 FOR THE SECOND CIRCUIT 4 5 ------ 6 7 August Term, 2020
8 (Argued: January 19, 2021 Decided: June 9, 2021) 9 10 Docket No. 19-3540-cv 11 _________________________________________________________
12 S. KATZMAN PRODUCE INC., and KATZMAN BERRY CORP., 13 Plaintiffs-Appellees, 14 - v. - 15 ELIRAN YADID, 16 Defendant-Appellant, 17 OREL PRODUCE, INC. t/a MOSES, and MOSHE YADID,
18 Defendants.* 19 _________________________________________________________
20 Before: KEARSE, LEVAL, and LOHIER, Circuit Judges.
*
The Clerk of Court is instructed to amend the official caption to conform with the above.
1 Appeal by defendant Eliran Yadid from so much of a judgment of the 2 United States District Court for the Southern District of New York, Paul A. Crotty, 3 Judge, as orders him, jointly and severally with his codefendants Orel Produce, Inc. 4 t/a Moses ("Orel"), et al., to pay plaintiffs, suppliers of perishable goods, a total of 5 $606,664.87, including principal amounts totaling $473,268.82, plus interest and 6 attorneys' fees, by reason of Orel's failure to pay plaintiffs for goods purchased, and 7 the dissipation of the statutory trust imposed on Orel's assets for the benefit of 8 unpaid suppliers, in violation of the Perishable Agricultural Commodities Act 9 ("PACA"), 7 U.S.C. § 499a et seq. The court granted plaintiffs' motion for summary 10 judgment holding Eliran liable on the ground that he was a person in control of the 11 trust assets. See S. Katzman Produce, Inc. v. Orel Produce, Inc., 18 Civ. 6947, 2019 WL 12 4303423, *3-*4 (S.D.N.Y. Sept. 11, 2019). On appeal, Eliran, who was neither an 13 owner nor an officer of Orel, contends that summary judgment was inappropriate 14 because there are genuine issues as to whether he had such control. We conclude 15 that partial summary judgment was appropriate with respect to $40,000 of PACA 16 trust assets that were placed in Eliran's personal bank account, but that whether he 17 had the necessary degree of control over other assets could not be resolved as a
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1 matter of law. Accordingly, we vacate the judgment in part and remand for trial of 2 the issue of Eliran's control over other Orel assets. 3 Affirmed in part, vacated in part, and remanded.
4 GREGORY A. BROWN, Melville, New York (McCarron & Diess, 5 Melville, New York, on the brief), for Plaintiffs-Appellees.
6 MARK F. HEINZE, Hackensack, New Jersey (Ofeck & Heinze, 7 Hackensack, New Jersey, on the brief), for Defendant-Appellant.
8 KEARSE, Circuit Judge: 9 Defendant Eliran Yadid ("Eliran" or "E. Yadid") appeals from so much 10 of a judgment of the United States District Court for the Southern District of New 11 York, Paul A. Crotty, Judge, as orders him, jointly and severally with his 12 codefendants Orel Produce, Inc. t/a Moses ("Orel"), and Moshe Yadid ("Moshe" or 13 "M. Yadid"), to pay plaintiffs, suppliers of perishable goods, a total of $606,664.87, 14 including principal unpaid amounts totaling $473,268.82, plus interest and attorneys' 15 fees, by reason of Orel's failure to pay plaintiffs for goods purchased, and 16 defendants' dissipation of the statutory trust imposed on Orel's assets for the benefit 17 of unpaid suppliers, in violation of the Perishable Agricultural Commodities Act 18 ("PACA"), 7 U.S.C. § 499a et seq. The court granted plaintiffs' motion for summary 19 judgment holding Eliran liable on the ground that he was a person in control of the
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1 trust assets. On appeal, Eliran, who was neither an owner nor an officer of Orel, 2 contends that summary judgment was inappropriate because there exist genuine 3 issues of fact as to whether he had such control. We conclude that partial summary 4 judgment was appropriate with respect to $40,000 of PACA trust assets that were 5 placed in Eliran's personal bank account, but that whether he had the necessary 6 degree of control over other assets could not be resolved as a matter of law. 7 Accordingly, we vacate so much of the judgment as held Eliran liable for an amount 8 in excess of $40,000, and remand for trial of the issue of his control over other Orel 9 assets.
10 I. BACKGROUND
11 Most of the facts leading to this lawsuit are not in dispute. Plaintiffs 12 S. Katzman Produce Inc. et al. (collectively the "Katzman Companies" or "Katzman") 13 are licensed interstate suppliers of perishable fruits and vegetables. Orel, until it 14 ceased operations in the summer of 2018, was a wholesale distributor of fruits and 15 vegetables, subject to license under PACA. Orel was wholly owned by Moshe, who 16 was its only officer. Eliran is Moshe's son.
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1 In February-July 2018, Orel purchased from the Katzman Companies 2 wholesale quantities of produce worth more than $516,000, for most of which Orel 3 failed to pay. In August 2018, Katzman, having previously preserved rights in 4 accordance with PACA, commenced the present action against Orel, Moshe, and 5 Eliran, principally alleging violations of PACA, which, in pertinent part (see Part 6 II.A. below), requires dealers in perishable agricultural commodities to make full 7 payment to their suppliers promptly, or to maintain the proceeds or receivables 8 from such commodities in trust for the suppliers until full payment has been made. 9 Following a period of discovery, in which neither side conducted 10 depositions, Katzman moved for summary judgment. Defendants conceded Orel's 11 liability; and an initial dispute as to the amount Orel owed was resolved. See 12 S. Katzman Produce, Inc. v. Orel Produce, Inc., 18 Civ. 6947, 2019 WL 4303423, *1 & n.1, 13 *3, *5 (S.D.N.Y. Sept. 11, 2019) ("S. Katzman"). It was also "[n]ot disputed" that "[a]t 14 all relevant times, defendant Moshe Yadid is and was the sole shareholder and officer of 15 [Orel], and is and was in a position of control over the PACA trust assets belonging 16 to Plaintiffs." (Plaintiffs' and Defendants' Rule 56.1 Statements ¶ 15 (emphases 17 ours).) Accordingly, neither the district court's grant of summary judgment against 18 Orel and Moshe nor the amount of the judgment is at issue here.
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1 A. Katzman's Motion for Summary Judgment Against Eliran 2 Notwithstanding plaintiffs' assertion that "[a]t all relevant times . . . 3 Moshe" was Orel's "sole shareholder and officer" (Plaintiffs' Rule 56.1 Statement ¶ 15 4 (emphasis added))--which defendants did not dispute--plaintiffs sought judgment 5 against Eliran on the ground that "[a]t all relevant times . . . Eliran . . . is and was an 6 officer, director and/or shareholder of [Orel]" (id. ¶ 12 (emphases added)), contending 7 that "Eliran" was thus "in a position of control over the PACA trust assets belonging 8 to Plaintiffs" (id.). Eliran denied the ¶ 12 assertions. (See Defendants' Rule 56.1 9 Statement ¶ 12.) Evidence was adduced on both sides.
10 1. Plaintiffs' Evidence 11 In support of their motion for summary judgment against Eliran, 12 plaintiffs submitted, inter alia, documents received in discovery from Orel's bank (see 13 Declaration of Gregory Brown, counsel for Katzman, dated February 1, 2019 14 ("Brown Declaration"), ¶ 3), including the following:
15 a. The bank signature cards for [Orel] which identifies 16 [sic] M. Yadid and E. Yadid as signatories on [Orel's] bank 17 account . . . . The bank signature cards indicate that M. Yadid 18 has been a signatory on the account since September 13, 2016 and 19 E. Yadid has had signing authority since December 7, 2016;
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1 ....
2 c. Checks drawn on [Orel's] bank account signed by E. 3 Yadid as payment to [Orel's] produce suppliers including 4 Katzman Produce, Fierman Produce Exchange Inc., 5 D'Arrigo Bros. of NY Co., Inc. and Fruitco Corp. . . .; 6 7 d. Checks drawn on [Orel's] bank account signed by 8 E. Yadid and payable to E. Yadid on a semi-weekly basis, 9 presumably as salary. . . . ; 10 11 e. Cash withdrawal receipts reflecting withdrawals 12 made by E. Yadid from [Orel's] bank account. . . . ;
13 f. Bank statements reflecting all transactions into 14 and out of [Orel's] account. . . . The statement reflects an 15 electronic transfer to an account held by E. Yadid on July 27, 16 2018 in the amount of $40,000.00. Plaintiffs filed this action 17 on August 2, 2018.
18 (Brown Declaration ¶¶ 3(b) and 3(c)-(f) (emphases added), attaching Exhibits H and 19 J-M.) 20 In addition, the Brown Declaration stated that counsel's investigation 21 had "revealed other documents and things which reflect the role E. Yadid . . . had in 22 controlling the operations of [Orel]," including
23 [a]n equipment financing agreement entered into between Orel 24 Produce Inc. and Phoenix Rising Corp. which identifies E. Yadid 25 as [Orel's] owner and in connection with which both E. Yadid and 26 M. Yadid guaranty [sic] the debt incurred in [Orel's] name.
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1 (Id. ¶ 4(b) (emphasis added), attaching Exhibit O.)
2 2. Eliran's Response 3 In opposition to plaintiffs' motion insofar as it related to him, Eliran 4 submitted a sworn declaration stating, inter alia, that his father Moshe "was the 5 owner and the boss" of Orel and that Moshe "controlled the company." (Declaration 6 of Eliran Yadid dated March 6, 2019 ("Eliran Decl."), ¶ 18). He cited to Orel's tax 7 returns for 2016 and 2017, excerpts of which were produced by defendants, 8 "show[ing] that Moshe was the 100% shareholder of the company." (Id. ¶ 10.) 9 Describing his own role in the company, Eliran stated
10 I was never an owner of [Orel], I did not manage or operate the 11 company, and I had no authority or control over its assets and 12 finances, including the products purchased by [Orel] from the 13 plaintiffs.
14 4. I did not ever receive any share of the profits or 15 losses of the company, or any dividends or distributions. 16 I only received salary . . . .
17 (Id. ¶¶ 3-4.) Eliran stated that, in 2011, he reached the age of 21 and received his 18 GED, and Moshe asked him to help in the business; Eliran then worked for "[his]
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1 father on-and-off from 2011 until the business closed in the summer of 2018." (Id. 2 ¶¶ 15-16, 21.) As to how Orel was run, Eliran stated that his own
3 work was part-time, and generally involved running errands 4 and simple administrative tasks, such as opening the mail, 5 making deposits and the like.
6 17. I was not given any authority to make decisions for the 7 business, and I took my instructions from Moshe.
8 18. He was the owner and the boss, and he controlled the 9 company.
10 19. He was the only buyer of produce from Katzman (and 11 any other suppliers) and he was the primary point of contact 12 with the customers.
13 20. He made all decisions about the company's inventory 14 and finances.
15 (Id. ¶¶ 16-20 (emphasis added).) 16 Eliran said that for about a two-year period from late 2014 until late 17 2016, he had mental health problems and other interests and did not work for Orel. 18 (See id. ¶¶ 22-28.) He stated that he had suffered "clinical depression," for a time 19 "was refusing treatment," and for three weeks was hospitalized for "a psychiatric 20 episode." (Id. ¶¶ 25, 27.) He stated that, from prior to 2011 through the present, he
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1 has been "under the continuous treatment of a physician" and is "regularly taking 2 psychiatric medication." (Id. ¶ 22.) 3 Eliran resumed working for his father at Orel in late 2016. He stated 4 that
5 [a]s before, I worked under the direction of Moshe. He continued to 6 make all decisions and he had total control over the company and 7 its property.
8 31. During this last period of my employment at [Orel], 9 my father directed that I be added as a signatory to the [Orel] 10 checking account at JP Morgan Chase.
11 32. There was no benefit to me for doing this, and it was my 12 father's decision.
13 33. He told me that he wanted me to be available to sign 14 checks, in case he was not around and check [sic] needed to be 15 signed right away.
16 (Id. ¶¶ 30-33 (emphases added).) 17 Eliran said that he has no memory of specific transactions in which he 18 signed checks, but that the checks he reviewed from the pretrial discovery 19 documents were in relatively small amounts, ranging from $105 to $1,525, and were 20 "routine payments to suppliers" that Moshe "would have told [Eliran] to pay, 21 probably because [Moshe] was not available to sign at the time." (Id. ¶¶ 34-35.)
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1 Eliran said, "[t]he decision to make these payments was not mine"; that Moshe 2 "continued to be the signer of the large majority of checks, including all checks to 3 Katzman"; and that Moshe "always took care of this, deciding when and how much 4 to pay. This was none of my business." (Id. ¶¶ 35-37.) Eliran said he signed his own 5 salary checks--$569.12 a week--as instructed by his "father Moshe," who "determined 6 how much [Eliran] would be paid," and that Eliran
7 never received profits, dividends or other distributions based on 8 the financial performance of the company.
9 41. I was not permitted to make any financial decisions, and I 10 did not do so.
11 (Id. ¶¶ 39-41 (emphasis added).) 12 Eliran said he attended some meetings with his father, including 13 meetings with Katzman to discuss the account, because "Moshe has limited ability 14 with the English language." (Id. ¶ 13; see id. ¶ 52.) But he said his role in those 15 meetings was to "assist[ his] father with translation, . . . not [to be] a principal or a 16 decision-maker at these meetings." (Id. ¶ 53.) 17 As to the documents discovered by plaintiffs showing that Eliran had 18 signed an Orel truck lease document stating that he "was an 'owner' of Orel," Eliran 19 stated:
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1 I realize now that I should not have done this. It was not 2 accurate for me to say that I was an "owner", when I was not.
3 (Id. ¶¶ 42-43.) 4 And as to the $40,000 that in late July 2018 "was wired from the Orel 5 account to [Eliran's] personal account," Eliran said:
6 [t]his was my father's decision and not mine. The funds were 7 wired to my account because my father does not have his own 8 bank account.
9 47. I did not receive any personal benefit from these 10 funds, including several salary payments still owed to me.
11 48. My father determined how this money would be used. 12 He directed me to make payments for his rent, car payments and 13 other expenses, and for certain payment [sic] due from [Orel], 14 including truck payments.
15 (Id. ¶¶ 45-48.) 16 3. Plaintiffs' Reply 17 In reply to Eliran's denial of any managerial role in the operations of 18 Orel, plaintiffs submitted a declaration from Katzman comptroller Gary Allen 19 attaching copies of text messages exchanged between himself and Eliran from April 20 27 through July 30, 2018, with regard to payments Orel was to make to Katzman. 21 Allen stated that the messages from Eliran did not suggest that Moshe was the sole
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1 decisionmaker but rather referred to Orel's actions or decisions in terms of "'we'" or 2 "'I'" (Reply Declaration of Gary Allen dated March 21, 2019 ("Allen Reply Decl."), 3 ¶ 5); that Eliran arranged a May 22, 2018 meeting with Katzman that was not 4 attended by Moshe (see id. ¶ 7); that Eliran himself made requests that Katzman 5 delay depositing certain checks Orel had sent (see id. ¶ 6); that Eliran requested that 6 Katzman send its bills directly to Eliran (see id. ¶ 9); that Eliran could access Orel's 7 bank account and do transactions on his own phone (see id.); and that Eliran himself 8 was attempting to negotiate a loan for Orel (see id. ¶ 8).
9 B. The District Court's Ruling as to Eliran's PACA Liability 10 The district court ruled that plaintiffs were entitled to summary 11 judgment with regard to Eliran's liability under PACA, finding that the "evidence 12 submitted by Plaintiffs demonstrating E. Yadid's authority to direct control of Orel's 13 assets" was "overwhelming." S. Katzman, 2019 WL 4303423, at *3. The court found 14 that the
15 record establishes that E. Yadid had check signing authority for 16 Orel, signed checks payable to Orel'[s] produce suppliers, paid 17 himself a weekly salary, withdrew cash from Orel'[s] bank accounts, 18 made distributions to himself using PACA trust funds in Orel'[s] 19 bank accounts, . . . described himself as an "owner" of Orel on a truck 20 loan application[,] . . . personally guaranteed the truck loan debt[,] . . . .
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1 [and] for at least three months in 2018, presumably as Orel's 2 debts began to mount, . . . maintained near-daily text message 3 contact with [the Katzman Companies'] controller as he attempted to 4 work out Orel's debts.
5 Beyond their frequency, E. Yadid's messages with 6 Plaintiff's controller also reveal his intimate knowledge and 7 decision-making authority regarding Orel's finances. E. Yadid 8 knew when checks drawn on Orel's accounts were likely to clear 9 and when funds received by Orel would become available. . . . 10 He also participated in meetings on behalf of Orel, without his 11 father present, to make financial arrangements for the Company, 12 and applied for a loan on behalf of Orel, overseeing the distribution of 13 the loan proceeds . . . . The messages further show E. Yadid 14 seeking copies of Plaintiffs' invoices (which contained the PACA 15 trust language), taking part in the collection of Orel's accounts' 16 receivable, and regularly conducting financial transactions from 17 Orel's bank accounts, including over his mobile phone.
18 Id. at *3-*4 (record citations omitted; emphases ours). 19 The court stated that the evidence proffered by defendants, "a sworn 20 declaration by E. Yadid and two incomplete portions of Orel's tax returns from 2016 21 and 2017," failed "[t]o rebut this overwhelming showing of E. Yadid's authority and 22 control." Id. at *4.
23 Although the 2016 and 2017 tax returns demonstrate that 24 E. Yadid did not have stock or formal interest in Orel, this fact is 25 not material to the PACA control inquiry. . . .
26 E. Yadid's declaration, riddled with conclusory allegations 27 or unsubstantiated speculation, . . . fares no better. E. Yadid's
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1 conclusory statement that he "was not permitted to make any financial 2 decisions, and [] did not do so" does not rebut the overwhelming 3 contrary evidence showing his near-daily management of Orel's bank 4 accounts and finances, dating back to at least April 2018. Similarly, 5 although E. Yadid states that he was only present at meetings 6 with Plaintiffs in his capacity as his father's interpreter, this 7 statement is contradicted by text messages he sent on May 21, 8 2018 and May 22, 2018 which show him coordinating to meet 9 with Plaintiffs on his own. E. Yadid's effort to justify calling himself 10 Orel's owner on a truck leasing agreement as erroneous and "not 11 accurate," is similarly unsupported by anything in the record.
12 Id. (footnote, record citations, and other internal quotation marks omitted (emphases 13 ours)). 14 After dismissing Eliran's descriptions of his past mental health 15 problems as mere "[d]istractions" from the issues, the court stated that the 16 "uncontested" "key facts demonstrat[ed] E. Yadid's control over the PACA assets," 17 pointing to the evidence that Eliran "received a salary from Orel, had check signing 18 authority on Orel's bank accounts, authorized cash withdrawals and electronic 19 transfers from those accounts, [and] described himself as Orel's owner and 20 personally guaranteed Orel's debt." Id. (record citations omitted). 21 The court concluded that Eliran was liable under PACA and entered 22 judgment holding him jointly and severally liable with Orel and Moshe for the 23 $606,664.87 awarded to plaintiffs.
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1 II. DISCUSSION
2 On appeal, Eliran contends that there were genuine issues of fact to be 3 tried as to whether he had sufficient control of Orel's assets to make him liable for 4 misuse of PACA trust assets, and that summary judgment was thus inappropriate. 5 Except to the extent that the court's ruling applied to the transfer from Orel to 6 Eliran's bank account of $40,000, we agree.
7 A. PACA 8 As discussed in several of our prior decisions, see, e.g., Coosemans 9 Specialties, Inc. v. Gargiulo, 485 F.3d 701, 705 (2d Cir. 2007) ("Coosemans"); "R" Best 10 Produce, Inc. v. Shulman-Rabin Mktg. Corp., 467 F.3d 238, 241-42 (2d Cir. 2006) (""R" 11 Best v. Shulman"); D.M. Rothman & Co. v. Korea Commercial Bank of New York, 411 F.3d 12 90, 93-94 (2d Cir. 2005) ("D.M. Rothman"); American Banana Co. v. Republic Nat'l Bank, 13 362 F.3d 33, 36-38 (2d Cir. 2004) ("Am. Banana"), Endico Potatoes, Inc. v. CIT 14 Grp./Factoring, Inc., 67 F.3d 1063, 1066-67 (2d Cir. 1995) ("Endico Potatoes"), PACA was 15 enacted in 1930 "to regulate the interstate sale and marketing of perishable 16 agricultural commodities," with a view to protecting growers and sellers of
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1 agricultural produce "against the abnormal risk of losses resulting from slow-pay 2 and no-pay practices by buyers or receivers of fruits and vegetables," Coosemans, 485 3 F.3d at 705 (internal quotation marks omitted).
4 1. The PACA Trust
5 In the early 1980s, Congress reexamined PACA in the 6 wake of a sharp increase in defaults among buyers, and decided 7 that sellers needed additional protection. See H.R.Rep. No. 8 98-543, at 3 (1983), reprinted in 1984 U.S.C.C.A.N. 405, 406. 9 Because of the perishable nature of the goods being sold, sellers 10 often found themselves in the position of unsecured creditors of 11 buyers whose creditworthiness could not be verified. If defaults 12 occurred, sellers could look only to the commodities, which would have 13 already perished. As unsecured creditors, they typically stood in 14 line behind banks and other lenders who had obtained security 15 interests in the defaulting purchaser's inventories and 16 receivables. See Am. Banana, 362 F.3d at 37.
17 To relieve the burden on sellers, Congress amended PACA 18 in 1984 by adding § 499e(c), which requires dealers . . . to hold sales 19 proceeds "in trust for the benefit of all unpaid suppliers or sellers of 20 such commodities[,]" 7 U.S.C. § 499e(c)(2)[,] . . . . "until full payment 21 of the sums owing in connection with such transactions has been 22 received by such unpaid suppliers [or] sellers." Id.; see Am. Banana, 23 362 F.3d at 37-38.
24 "R" Best v. Shulman, 467 F.3d at 241 (emphases ours). The added § 499e(c) "defines 25 the corpus of the trust as all produce received from sellers, including 'all inventories
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1 of food or other products derived from' the produce, 'and any receivables or 2 proceeds from the sale of such' produce or its derivative products." "R" Best v. 3 Shulman, 467 F.3d at 241 (quoting 7 U.S.C. § 499e(c)(2)). However, PACA trust assets 4 may be commingled with the dealer's other assets "without defeating the trust." 5 Endico Potatoes, 67 F.3d at 1067:
6 Trust assets are to be preserved as a nonsegregated "floating" 7 trust. Commingling of trust assets is contemplated.
8 7 C.F.R. § 46.46(b). 9 Suppliers who have given the required "notice of intent to preserve trust 10 benefits," id. § 46.46(f); see 7 U.S.C. § 499e(c)(3)-(4), "may file trust actions against 11 licensees and persons operating subject to license," for "dissipation of [PACA] trust 12 assets," 7 C.F.R. § 46.46(d)(1). "Dissipation" is defined as "any act or failure to act 13 which could result in the diversion of trust assets or which could prejudice or impair 14 the ability of unpaid suppliers, sellers, or agents to recover money owed in 15 connection with produce transactions." Id. § 46.46(a)(2). We interpret dissipation 16 to include the use of "'the trust assets for any purpose other than repayment of the 17 supplier,' including the use of trust assets for 'legitimate business expenditures, such 18 as the payment of rent, payroll, or utilities,'" Coosemans, 485 F.3d at 707 (quoting
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1 Morris Okun, Inc. v. Harry Zimmerman, Inc., 814 F.Supp. 346, 348 (S.D.N.Y. 1993) 2 ("Okun") (emphasis in Coosemans)). Accord Bear Mountain Orchards, Inc. v. Mich-Kim, 3 Inc., 623 F.3d 163, 167-68 (3d Cir. 2010) ("Bear Mountain"); Nickey Gregory Co., LLC v. 4 AgriCap, LLC, 597 F.3d 591, 594-95 (4th Cir. 2010) ("Nickey Gregory"); Hiller Cranberry 5 Prod., Inc. v. Koplovsky, 165 F.3d 1, 7-9 (1st Cir. 1999) ("Hiller Cranberry"); Sunkist 6 Growers, Inc. v. Fisher, 104 F.3d 280, 282 (9th Cir. 1997) ("Sunkist Growers"); Six L's 7 Packing Co. v. Beale, 524 F. App'x 148, 152 (6th Cir. 2013) ("Six L's").
8 2. Individual Liability 9 Although PACA does not expressly provide that an individual may be 10 held liable for a dissipation of PACA trust assets, we and other courts have held that 11 the trust created by PACA is governed by general trust principles, unless those 12 principles directly "conflict[] with the PACA statute," D.M. Rothman, 411 F.3d at 94; 13 Nickey Gregory, 597 F.3d at 595 (same); see, e.g., Endico Potatoes, 67 F.3d at 1067; Bear 14 Mountain, 623 F.3d at 167-68; Sunkist Growers, 104 F.3d at 282-83; Hiller Cranberry, 165 15 F.3d at 8-9; Six L's, 524 F. App'x at 156. Under traditional trust principles,
16 "[a]n individual who is in the position to control the trust 17 assets and who does not preserve them for the beneficiaries has 18 breached a fiduciary duty, and is personally liable for that
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1 tortious act. . . . [A] PACA trust in effect imposes liability on a 2 trustee, whether a corporation or a controlling person of that 3 corporation, who uses the trust assets for any purpose other than 4 repayment of the supplier."
5 Sunkist Growers, 104 F.3d at 283 (quoting Okun, 814 F.Supp. at 348); see also D.M. 6 Rothman, 411 F.3d at 94 (noting that PACA's allowed commingling of PACA trust 7 assets with other company assets is a deviation from general trust principles). 8 Given the applicability of traditional trust principles, under PACA "[a]n 9 individual who is in a position to control the assets of the PACA trust and fails to 10 preserve them, may be held personally liable to the trust beneficiaries for breach of 11 fiduciary duty." Coosemans, 485 F.3d at 705; see, e.g., Hiller Cranberry, 165 F.3d at 8-9 12 ("An individual who is in the position to control the trust assets and who does not 13 preserve them for the beneficiaries has breached a fiduciary duty, and is personally 14 liable for that tortious act." (internal quotation marks omitted)); Sunkist Growers, 104 15 F.3d at 283. 16 Although in most of the cases to address such a personal liability claim 17 the individual defendants have in fact been the shareholders or officers of the dealer, 18 the dispositive focus has generally been on whether the individual had control over 19 the preservation or disposition of the dealer's assets. See, e.g., Coosemans, 485 F.3d
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1 at 709 (affirming summary judgment on PACA claim against the president, sole 2 shareholder, and sole director of the seller "because [he] was in a position of control 3 over the PACA trust assets and dissipated those assets"); Sunkist Growers, 104 F.3d 4 at 283 ("If the seller's assets are insufficient to satisfy the liability, others may be 5 found secondarily liable if they had some role in causing the corporate trustee to 6 commit the breach of trust." (internal quotation marks omitted)); Golman-Hayden Co. 7 v. Fresh Source Produce Inc., 217 F.3d 348, 351 (5th Cir. 2000) ("Golman") ("individual 8 shareholders, officers, or directors of a corporation who are in a position to control trust 9 assets, and who breach their fiduciary duty to preserve those assets, may be held 10 personally liable under PACA" (emphasis added)); Hiller Cranberry, 165 F.3d at 9 11 (reversing district court's finding that suppliers were not likely to succeed on PACA 12 claims against the dealers' sole owner who "exercise[d] pervasive control" over the 13 dealers). 14 While this Court has not previously confronted directly the question of 15 whether secondary PACA liability could be imposed on an individual who was not 16 an owner, officer, or director of the PACA dealer, we have at least suggested that 17 that possibility exists, see "R" Best Produce, Inc. v. DiSapio, 540 F.3d 115, 125 & n.8 (2d 18 Cir. 2008) ("DiSapio"). DiSapio came to us on appeal from the denial of
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1 reconsideration of a refusal to vacate a default judgment entered against the son of 2 two owners of PACA dealers; the appeal directly presented only questions of 3 appellate jurisdiction, default judgments, and personal jurisdiction. However, we 4 concluded that the claim that the default judgment should have been vacated for 5 lack of personal jurisdiction raised unresolved factual issues as to the relationship 6 of the son to the corporations. 7 The suppliers contended that the son was an officer and director of the 8 dealer corporations and had ordered produce from them and assured them that they 9 would be paid. The son submitted an affidavit stating that at all relevant times he 10 had been merely a salaried employee of the corporations, earning $900 a week; that 11 he had never been an officer, director, or stockholder of the corporations, nor signed 12 checks for the corporations; and that he had never undertaken to be personally 13 responsible to pay the invoices of the plaintiff or any other supplier. We remanded 14 for resolution of the conflicting factual assertions, while noting that "cases in which 15 an individual defendant has been subjected to PACA liability . . . have involved a 16 sole shareholder or an officer/director." DiSapio, 540 F.3d at 125 n.8 (citing 17 Coosemans, Golman, and Okun). We "assume[d], for purposes of" the appeal before 18 us, that the corporation's consent to personal jurisdiction could be imputed to the
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1 son "if the facts, properly found, show that the son is personally liable under the 2 PACA." DiSapio, 540 F.3d at 125; see also Six L's, 524 F. App'x at 156 ("[n]othing in 3 . . . previous [Sixth Circuit] decisions suggests that we should extend PACA-liability 4 to individuals who are not shareholders, officers, or directors of a corporation"). 5 The proposition that one who is not an owner, officer, or director of the 6 dealer may nonetheless have secondary PACA liability if he had control over the 7 dealer's dissipated assets is consistent with the general principle applied in the cases 8 discussed above, and Eliran does not argue that the standard is or should be 9 different. Rather, he contends merely that, as to whether he had sufficient control 10 of Orel to impose PACA liability on him personally, the record revealed genuine 11 issues of fact to be tried and thus was insufficient to warrant summary judgment.
12 B. Summary Judgment Principles 13 A motion for summary judgment may not be granted unless the court 14 determines that there is no genuine issue of material fact to be tried, and that the 15 facts as to which there is no such issue warrant judgment for the moving party as 16 a matter of law. See Fed. R. Civ. P. 56(a). In determining whether the moving party 17 is entitled to judgment as a matter of law--whether by summary judgment, or by a
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1 motion for judgment as a matter of law during or after trial, see, e.g., Reeves v. 2 Sanderson Plumbing Products, Inc., 530 U.S. 133, 150 (2000) ("Reeves") ("the standard 3 for granting summary judgment 'mirrors' the standard for judgment as a matter of 4 law, such that 'the inquiry under each is the same'" (quoting Anderson v. Liberty 5 Lobby, Inc., 477 U.S. 242, 250-51 (1986) ("Liberty Lobby"))--the district court may not 6 properly consider the record in piecemeal fashion; rather, it must "review all of the 7 evidence in the record," Reeves, 530 U.S. at 150. And in reviewing the evidence, the 8 court must resolve all ambiguities in favor of the nonmoving party, see, e.g., Liberty 9 Lobby, 477 U.S. at 250; "[t]he evidence of the non-movant is to be believed, and all 10 justifiable inferences are to be drawn in his favor," id. at 255, "even though contrary 11 inferences might reasonably be drawn," Continental Ore Co. v. Union Carbide & Carbon 12 Corp., 370 U.S. 690, 696 (1962)). 13 In addition, in reviewing the evidence and considering what inferences 14 may reasonably be drawn, the court "may not make credibility determinations or 15 weigh the evidence. . . . 'Credibility determinations, the weighing of the evidence, 16 and the drawing of legitimate inferences from the facts are jury functions, not those 17 of a judge.'" Reeves, 530 U.S. at 150 (quoting Liberty Lobby, 477 U.S. at 255).
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1 An affidavit or declaration submitted to oppose a motion for summary 2 judgment "must be made on personal knowledge, set out facts that would be 3 admissible in evidence, and show that the affiant or declarant is competent to testify 4 on the matters stated." Fed. R. Civ. P. 56(c)(4). A party opposing summary 5 judgment normally does not show the existence of a genuine issue of fact to be tried 6 merely by making assertions that are based on speculation or are conclusory. See, 7 e.g., ITC Ltd. v. Punchgini, Inc., 482 F.3d 135, 151 (2d Cir.), cert. denied, 552 U.S. 8 827 (2007); McPherson v. New York City Department of Education, 457 F.3d 211, 215 n.4 9 (2d Cir. 2006); Kulak v. City of New York, 88 F.3d 63, 71 (2d Cir. 1996). However, "it 10 is ordinarily impossible to state all of the facts that show that an event never 11 occurred," and "an attempt to give a detailed recitation of what did happen, without 12 a conclusory denial, may well leave a negative pregnant," United States v. Mathurin, 13 148 F.3d 68, 69 (2d Cir. 1998). Thus, a conclusory statement that an event has not 14 occurred, from a party having personal knowledge, may be sufficient to forestall 15 summary judgment. See, e.g., SCR Joint Venture L.P. v. Warshawsky, 559 F.3d 133, 16 138-40 (2d Cir. 2009) (affidavit stating that, to the affiant's knowledge, a particular 17 debt had not been paid, although conclusory, was sufficient to create "a genuine 18 issue of material fact as to whether" that debt "had been paid in full"); Bellamy v. City
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1 of New York, 914 F.3d 727, 745-47 (2d Cir. 2019) (the plaintiff's deposition testimony 2 that "he never made the statement" that the defendant attributed to him was 3 "sufficient to raise a genuine issue of material fact"); cf. United States v. Mathurin, 148 4 F.3d at 70 ("although conclusory, [the accused's affidavit] stat[ing] that he was never 5 given Miranda warnings was sufficiently factual and specific to require an 6 evidentiary hearing"). 7 "We review the district court's grant of summary judgment de novo, 8 applying the same standards that govern the district court's consideration of the 9 motion." Kaytor v. Electric Boat Corp., 609 F.3d 537, 546 (2d Cir. 2010); see, e.g., 10 Aulicino v. New York City Department of Homeless Services, 580 F.3d 73, 79 (2d Cir. 11 2009); Dillon v. Morano, 497 F.3d 247, 251 (2d Cir. 2007).
12 C. Eliran 13 With these principles in mind, we conclude that the district court's 14 granting of summary judgment against Eliran was appropriate only with respect to 15 the $40,000 transferred to his account shortly before Orel ceased business.
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1 1. The $40,000 2 There is no dispute that on July 27, 2018, near the end of defendants' 3 negotiations with Katzman about Katzman's unpaid invoices, $40,000 was wired 4 from Orel's account to Eliran's personal bank account. Eliran's explanations that that 5 transfer was made on the instruction of Moshe and that Moshe gave directions for 6 the money's use, cannot alter the fact that upon the arrival of the $40,000 in Eliran's 7 account, those funds--whether or not he had any control of them earlier--were under 8 Eliran's control. Indeed, the record does not suggest that anyone other than Eliran 9 could make payments from his account. 10 Eliran's representation that he did not personally benefit from those 11 funds does not spare him from PACA liability. The money had automatically 12 become part of the PACA trust held by Orel. Even if the money, after transfer to 13 Eliran's account, had been entirely used for "[Orel's]" own expenses including its 14 "truck payments" (Eliran Decl. ¶ 48)--and by Eliran's own statement its use was not 15 so limited (see id. (the money was to be used in part "for [Moshe's] rent, car 16 payments, and other expenses"))--so long as Katzman had not been fully paid, 17 disbursement of that money to any other entity constituted, as a matter of law (see 18 Part II.A.1. above), a dissipation of PACA trust assets.
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1 As Eliran indisputably had control of Orel's $40,000 after it was wired 2 to his personal account, we conclude that judgment against Eliran was proper to the 3 extent of $40,000.
4 2. The Remainder of Orel's Assets 5 As to the remainder of the sums due Katzman, the record presents fact 6 issues as to whether Eliran had control of Orel's other assets and operations. Despite 7 the principles discussed in Part II.B. above, the district court, in concluding that 8 Eliran had such control, disregarded or discredited some of Eliran's sworn 9 statements of fact, refused to draw permissible inferences in his favor, and engaged 10 in a weighing of the evidence. 11 First, we think it clear that the court engaged in a weighing of the 12 evidence. It stated that "E. Yadid's conclusory statement that he 'was not permitted 13 to make any financial decisions, and [] did not do so' . . . does not rebut the 14 overwhelming contrary evidence showing his near-daily management of Orel's bank 15 accounts and finances, dating back to at least April 2018," S. Katzman, 2019 WL 16 4303423, at *4 (quoting Eliran Decl. ¶ 41 (emphasis ours)).
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1 Second, in disparaging this statement by Eliran as conclusory, the court 2 ignored both its content and its context. A truly conclusory assertion would have 3 been simply an unexplained "I did not have control over [Orel's] assets." Eliran, 4 however, specified the type of authority he was not given, i.e., making "financial" 5 decisions (Eliran Decl. ¶ 41; see also id. ¶¶ 3, 17, 20, 30). And Eliran set out 6 affirmative factual context for that denial, stating, inter alia, that Moshe was Orel's 7 owner, that Moshe was the boss, and that all of the decisions were made by Moshe; 8 that Moshe was the primary point of contact with Orel's customers and that Moshe 9 made all of the decisions about Orel's inventory and finances; and that Moshe was 10 Orel's only buyer, that "95% or more" of the produce Orel sold was bought from 11 Katzman, that Moshe decided how much to pay Katzman and decided when to pay 12 it, and that all checks to Katzman were signed by Moshe (id. ¶¶ 6, 17-20, 35-37). 13 Eliran stated that he worked under the direction of Moshe, was given authority to 14 sign Orel checks for the convenience of Moshe, and performed the duties given him 15 by Moshe as directed by Moshe. (See id. ¶¶ 17, 30-33, 35.) 16 Thus, while Eliran's statement in ¶ 41 as to his lack of authority was to 17 an extent conclusory in form, it was specific as to the type of decisions he was not 18 permitted to make and was accompanied by affirmative statements as to who had
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1 the authority to make those decisions and how it was exercised with respect to at 2 least 95% of Orel's business. Viewed in context, Eliran's statements, based on his 3 own personal experience, were sufficiently factual and specific. The district court, 4 in ruling on a motion for summary judgment, could not properly reject Eliran's 5 contention that he did not have control of Orel's assets by considering his ¶ 41 6 statement in isolation; the court was required to consider Eliran's related factual 7 assertions, and was required to draw in Eliran's favor all reasonable inferences that 8 a jury would be permitted to draw. 9 Further, while the district court acknowledged that it was required to 10 resolve all ambiguities in favor of Eliran as the party against whom summary 11 judgment was being sought, it plainly did not do so. The court found that Eliran 12 had control of Orel's assets because it found certain "key" facts "uncontested." 13 S. Katzman, 2019 WL 4303423, at *4. The very first "key" fact cited by the court was 14 that Eliran "received a salary." Id. But receiving a salary is at best ambiguous as to 15 whether the salaried person is in control of the company. Yet the district court 16 impermissibly drew from this at-best ambiguous fact an inference against Eliran. 17 The court perhaps decided that there was no ambiguity because the court found that 18 Eliran "paid himself" the salary, S. Katzman, 2019 WL 4303423, at *3. But that
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1 characterization of the record is contrary to Eliran's sworn statements that Moshe 2 determined what salary Eliran would be paid and that Moshe authorized Eliran to 3 sign his own salary checks as a matter of convenience (see Eliran Decl. ¶¶ 38, 39). 4 The court did not acknowledge Eliran's statements that his salary was determined 5 by his father and that his father permitted him to sign the salary checks as a matter 6 of convenience. Similarly, other "key" facts cited by the district court as 7 "uncontested" and as demonstrating Eliran's control over Orel's assets, e.g., that 8 Eliran "had check signing authority on Orel's bank accounts . . . and authorized cash 9 withdrawals and electronic transfers from those accounts," S. Katzman, 2019 WL 10 4303423, at *4, were also relied on by the court without reference to Eliran's 11 explanations that his authority to perform those functions was limited by Moshe, 12 from whom he took instructions. It is not clear whether the court found Eliran's 13 statements insufficiently persuasive or instead simply did not believe them; but 14 either was inappropriate, as assessments of credibility and choices between 15 conflicting versions of the facts are matters for the jury, not for the court on a motion 16 for summary judgment. 17 With respect to the aspects of Eliran's performance of his duties that the 18 district court termed "key" and "uncontested" facts showing Eliran's control of Orel,
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1 the district court stated that "[c]ourts in this Circuit have consistently found such 2 evidence sufficient to impose individual liability under PACA," S. Katzman, 2019 WL 3 4303423, at *4 (emphasis added). However, on a motion for summary judgment-- 4 and especially as to issues on which, as here, the movant has the burden of proof-- 5 the question is not whether the movant's evidence is "sufficient" but rather whether 6 there are material factual disputes that prevent the grant of judgment to the movant 7 as a matter of law and instead require a trial. None of the three cases relied on by 8 the district court resembles the grant of summary judgment against Eliran on the 9 record in this case: In A & J Produce Corp. v. Borough Park Food Mart LLC, No. 10 17-CV-2337, 2018 WL 566458 (S.D.N.Y. Jan. 25, 2018), summary judgment was 11 granted against defendants who did not oppose the plaintiff's motion, see id. at *1, *3. 12 In Mid-Valley Produce Corp. v. 4-XXX Produce Corp., 819 F. Supp. 209 (E.D.N.Y. 1993), 13 the court granted summary judgment in favor of suppliers that were owed 14 $185,012.32 for purchases in 1991 on uncontested facts quite different from those 15 here, in that the individual defendant held liable did not dispute, inter alia, that he 16 had been the president of the retailer since at least June 1991; that he was paid salary 17 and commissions totaling approximately $150,000 in 1991; and that in 1991 he 18 signed checks totaling $113,000 payable to a corporation wholly owned by himself
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1 and his sister, see id. at 210-13. And in DiMare Homestead, Inc. v. Alphas Co. of New 2 York, No. 09 CIV. 6644 PKC, 2012 WL 1155133, at *1 (S.D.N.Y. Apr. 5, 2012), aff'd, 547 3 F. App'x 68 (2d Cir. 2013), the court found defendants individually liable only after 4 a trial. 5 The strongest facial evidence that Eliran had control of Orel's assets is 6 the fact that in signing a truck lease for Orel in 2017 Eliran listed himself as Orel's 7 "owner," and the district court listed this among its "key" facts showing Eliran's 8 control. Eliran stated in his declaration that he "should not have" called himself an 9 "owner . . . . It was not accurate for me to say that I was an 'owner', when I was not." 10 (Eliran Decl. ¶¶ 42-43 (emphasis added).) The district court apparently rejected 11 even this assertion, stating that Eliran's attempt "to justify calling himself Orel's 12 owner," S. Katzman, 2019 WL 4303423, at *4, was "unsupported by anything in the 13 record," id. But Eliran did not attempt to "justify" calling himself Orel's "owner"; he 14 stated expressly that that was not accurate; and its inaccuracy is in fact supported 15 throughout the record: by the 2016 and 2017 tax returns showing that Moshe was 16 Orel's 100% owner, by both sides' Rule 56.1 Statements ¶ 15 stating that at all 17 relevant times, Moshe was Orel's sole shareholder, and by the district court's own
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1 finding that "Moshe Yadid . . . was, at all times relevant to this action, the 2 Company's sole . . . shareholder," id. at *1. 3 The only statements by Eliran that the district court expressly stated 4 that it accepted "as true" were Eliran's descriptions (see Eliran Decl. ¶¶ 22-29) of his 5 past and continuing problems with his mental health, S. Katzman, 2019 WL 4303423, 6 at *4 n.2. However, the court found these problems to be "immaterial," because it 7 found that Eliran's authority at Orel "during the relevant time period . . . appeare[d] 8 to have increased substantially." Id. We have difficulties with both of these views. 9 First, in inferring that Eliran's control of Orel had increased, the court 10 referred principally to Eliran's "near-daily text message contact with [Katzman's] 11 controller as he attempted to work out Orel's debts," S. Katzman, 2019 WL 4303423, 12 at *3. But while those messages showed that Eliran deposited incoming checks into 13 Orel's bank account and wired money to Katzman, and that he was closely tracking 14 the pace of customer deposits into Orel's account and attempting to slow the 15 depositing of checks against that account, the texts themselves are susceptible to 16 competing inferences as to whether Eliran was acting on his own authority or 17 whether Moshe remained in full control and Eliran was simply following 18 instructions from his father. For example, some texts from Allen to Eliran included
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1 references to decisions that Allen and Moshe had made with respect to depositing 2 or replacing checks, decisions of which Eliran appeared to be unaware. And the 3 texts reveal Allen's insistence on talking to Moshe. (See, e.g., Allen Reply Decl. 4 Exhibit A (June 12: "When are you and your dad coming in"; June 20 [#1]: "When can 5 u and ur dad come in tonight"; June 20 [#2]: "Ur father must be here also"; June 20 [#3]: 6 "Both u and ur father will be here tonight at 4:30?"; and June 20 [#4], after Eliran reports 7 that his father cannot meet that day and they agree to meet on June 25, with Eliran 8 asking at what time, Allen's response is "Whenever both of u can attend." (emphases 9 added)).) And on July 30, Allen texted Eliran: "Have ur father call me now." (Id. 10 (emphasis added).) Allen's persistent requests for Moshe's presence lend support 11 to Eliran's statements that Eliran himself "was not given any authority to make 12 decisions for the business" (Eliran Decl. ¶ 17; see id. ¶ 30) and that all such decisions 13 were made by Moshe. The district court's finding that Eliran had control of Orel's 14 assets during the relevant period based on his constant contacts with Allen did not 15 draw permissible inferences that favored Eliran. 16 Finally, we cannot agree with the district court that Eliran's accepted-as- 17 true evidence as to his mental health problems, which he stated were continuing, 18 was immaterial to the factual issue of whether Eliran had control of Orel's assets. A
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1 jury would be entitled to credit Eliran's testimony that he was not authorized to 2 make any business decisions, and to find that plaintiffs had not carried their burden 3 of proving it more likely than not that Moshe gave his mentally troubled son control 4 of his business. 5 We conclude that with respect to the bulk of Orel's assets, the issue of 6 control by Eliran could not be decided as a matter of law.
7 CONCLUSION
8 We have considered all of the parties' arguments in support of their 9 respective positions on this appeal and, except to the extent indicated above, have 10 found them to be without merit. The district court's ruling that Eliran as a matter 11 of law is responsible for dissipation of $40,000 of Orel's assets is affirmed. To the 12 extent that the court granted summary judgment against Eliran and found him 13 jointly and severally liable on the judgment in favor of plaintiffs beyond that $40,000 14 amount, the judgment is vacated, and the matter is remanded to the district court 15 for trial of the issues as to whether Eliran had sufficient control of Orel's assets to 1 impose on him secondary liability under PACA.