Summary of a Recent
Judicial Development in
Perishable Agricultural Commodities

PACA Not Applicable to Parties'
Commercial Arrangement

Gaby R. Jabbour
National AgLaw Center Research Assistant

Summary of Decision

In Calavo Growers, Inc. v. Anthony Gagliano Co., Inc., 294 F.Supp.2d 1021 (E.D. Wis. 2003), the United States District Court for the Eastern District of Wisconsin held that the Perishable Agricultural Commodities Act (PACA), 7 U.S.C. §§ 499a-499t, did not apply to a business arrangement entered into between a producer seller and an alleged produce buyer.

Background

Plaintiff Calavo Growers, Inc. (Calavo), was a produce seller who had a business arrangement with defendant Anthony Gagliano & Co., Inc. (Gagliano) to store avocados at Gagliano's facility. Calavo, 294 F.Supp.2d at 1024 (citation omitted). Under the arrangement, Gagliano stored Calavo's avocados until Gagliano received instructions from Calavo to ship them to another destination. See id. (citation omitted). In 2002, Calavo was unable to account for a certain number of avocados and contacted Gagliano about the matter. See id. (citation omitted). Calavo subsequently sent invoices to Gagliano for the unaccounted for avocados, claiming that Gagliano had purchased them. See id. (citation omitted). After Gagliano refused to pay for the avocados, Calavo brought an action against Gagliano under PACA seeking a judgment for the price of the unaccounted for avocados, as well as interest, costs, and attorneys' fees. See id. at 1022.

Arguments

Calavo argued that it sold the avocados to Gagliano, that Gagliano never paid for them, and that the PACA statutory trust provisions allowed it to be compensated for the avocados for which Gagliano failed to pay. See id. Gagliano argued that the PACA did not apply because the commercial arrangement between it and Calavo was one of bailment and therefore no sale of perishable agricultural commodities ever occurred. See id.

Analysis and Holding

The court explained that PACA "'grants the sellers of [perishable agricultural] commodities the right to recover against the purchasers and puts the sellers in a position superior to all other creditors.'" Id. at 1024 (citation omitted). It also explained that the PACA statutory trust creates "immediately upon delivery, a nonsegregated 'floating' trust in favor of sellers on the . . . commodities sold and the products and proceeds derived from the commodities" and that in the event a buyer fails to pay promptly for commodities delivered by a seller "the trust assets must be preserved and the seller's claims prime those of other . . . creditors for the full amount of the claim." Id.

After examining Gagliano's assertions, the court stated that "[t]he bottom line is that . . . [Gagliano's] proposed findings of fact are uncontradicted. This includes the findings that 'Gagliano did not purchase the avocados in question from [Calavo]' and that '[t]here never was a sale agreement between [Calavo] and [Gagliano].'" Id. It held that "the undisputed evidence [was] that Calavo did not sell any avocados to Gagliano" but that "[i]nstead, Gagliano served as a bailee for Calavo's avocados" and that "Calavo cannot seek relief as a seller of perishable commodities under the PACA against . . . [Gagliano]." Id.

The case was decided on December 3, 2003; this summary was posted Mar. 17, 2004.