Summary of a Recent
Judicial
Development in
Perishable Agricultural Commodities Act
Absence of Written Agreement for Payment
Period Not Fatal to PACA Trust
Craig RaysorNational AgLaw Center Graduate Assistant
In In re Atlanta Egg & Produce, Inc., 321 B.R. 746 (N.D. Ga. 2005), the United States District Court for the Northern District of Georgia held that the failure to obtain a written agreement regarding a payment term other than the default PACA trust payment period of "ten days, but less than 30 days" is not fatal to preservation of a PACA trust if there is a statement of intention to preserve the PACA trust on the invoice.
Pleasant Valley Group sold PACA qualifying products to Atlanta Egg & Produce, Inc. ("Atlanta Egg"), and with each transaction provided an invoice with a statement of intention to preserve Atlanta Egg's PACA trust rights. The invoice included a payment term that was less than 30 days pursuant to PACA requirements, but that deviated from the statutory default ten-day rule.. See id. at 751. There was no underlying written agreement between Pleasant Valley Group and Atlanta Egg regarding a different payment period. See id. Subsequently, Atlanta Egg filed for Chapter 7 bankruptcy. Id. at 749. The Pleasant Valley Group filed a "Motion for Turnover of PACA Trust Assets and Incorporated Memorandum of Law," and, in response, the trustee filed an objection to the allowance and asked the court to declare the PACA trust claims invalid. See id. The Bankruptcy Court declared the PACA trust were valid, but did not order the turnover. Id.
The District Court held that the failure of Pleasant Valley Group to obtain a written agreement concerning an alternative to the ten-day payment term was not fatal to the preservation of the PACA trust. See id. at 756. The court stated that PACA is a remedial statute, and a court should construe it to effectuate its purposes. Id. at 754. However, the court expressed that the absence of an underlying agreement to extend the term makes any reference to such an agreement on the invoice inapplicable and the court will fill the gap with the ten day statutory default rule. See id.
The case was decided on January 18, 2005; this summary was posted Feb. 21, 2006.