Summary of a Recent
Judicial Development in
Perishable Agricultural Commodities Act

Legal Sufficiency of PACA Claims

Walt McCarter
National AgLaw Center Research Associate

Summary of Decision

In Costa Oro, LLC v. Evergreen International, Inc., No. 08-cv-3714, 2009 WL 765226 (N.D. Ill. Mar. 23, 2009), the United States District Court for the Northern District of Illinois held that the plaintiff produce retailer had sufficiently alleged its Perishable Agricultural Commodities Act (PACA) claims.

Background

The plaintiff, a produce wholesaler, brought this action against the defendant, a produce retailer, alleging violations of the prompt payment provision of § 499b(4) and the statutory trust provision of § 499e(c) of PACA, and also alleged that the individual officers of the defendant company breached their fiduciary duties as PACA trustees. Id. at *2.

Arguments

The defendants argued that the plaintiff's complaint was legally insufficient to support a claim under PACA, and moved to dismiss. Id. at *3-5.

Analysis and Holdings

PACA makes it unlawful for a produce dealer or broker to fail or refuse to promptly make full payment for a shipment of produce. Id. at *1 (citing 7 U.S.C. § 499b(4)). Under 7 U.S.C. § 499e(c)(2), when a wholesaler sells produce to a retailer, the law imposes a trust on the buyer, under which "the buyer holds the produce and any proceeds and receivables from the produce in trust for the benefit of the seller." Id. Under § 499e(c)(5)(i), a trust beneficiary can initiate an action in federal court "to enforce payment from the trust." Id. The court found that the plaintiff had sufficiently alleged the necessary factual elements in support of its PACA claims, including that the "[d]efendants failed to preserve sufficient amounts of the PACA Trust Assets to fully satisfy all qualified PACA trust claims," and therefore denied the defendants' motion to dismiss. Id. at *3-5.

The case was decided on March 23, 2009.