Summary of a Recent
Judicial
Development in
Perishable Agricultural Commodities Act
Third-Party Financier of PACA Trust Funds Survives
Summary Judgment Motion
Eric H. FoyNational AgLaw Center Research Associate
Summary of Decision
In Nickey Gregory Co., LLC v. AgriCap, LLC, C.A. No. 6:07-3605-HMH, 2008 WL 4224613 (D.S.C. Sept. 2, 2008), the United States District Court for the District of South Carolina, Greenville Division, denied the plaintiffs' motion for summary judgment in an action brought by producers of perishable agricultural commodities against a AgriCap, a third-party financer, for breach of trust. Producers alleged that AgriCap breached the Robison Farms PACA trust, created to protect the producers, by unlawfully receiving and retaining trust assets. The court held that the producers failed to show that there were no genuine issues of material fact to be decided or that they were entitled to judgment as a matter of law.
Background
Robison Farms was a distributor of perishable agricultural commodities. Id. at *7. Due to lengthy delays between invoice and payment and other unfavorable payment specifications it entered into with its suppliers, Robison Farms contacted AgriCap, a financial corporation, to help restructure its financial practices. Id. Subsequently, AgriCap and Robison Farms entered into a financial relationship and formed several agreements giving AgriCap ownership of certain accounts receivable. Id. at *7-9. Despite the restructuring, Robison Farms was unable to pay its suppliers by May 2006. Id. at *9. On July 18, 2006, Robison Farms notified AgriCap that it would be ending its business operations. Id. Upon closing, fourteen of Robison Farms' suppliers had outstanding PACA trust account claims. Id. at *10. After assets were liquidated and fees and costs of collection were paid, the remaining monetary sum was disbursed pro rata among the Robison Farms PACA claimants. Id. The plaintiffs, Nickey Gregory Company and Poppell's Produce, two of Robison Farms' former suppliers, brought suit against AgriCap to recover unpaid amounts due, alleging that AgriCap unlawfully received and retained PACA trust assets. Id. On July 7, 2008, the plaintiffs motioned for summary judgment. Id.
Arguments
The plaintiffs' alleged that AgriCap unlawfully received and retained assets of Robison Farms' PACA trust. Id. at *12. For this reason, they argued that AgriCap should be held liable for the inability of Robison Farms to pay its suppliers. Id.
Analysis and Holdings
The court acknowledged that AgriCap could ultimately be held liable for the unpaid balance owed by Robison Farms to its suppliers; however, the court found that there were still genuine issues of material fact to be decided. For example, the court noted that: (1) the facts surrounding the financial agreement between Robison Farms and AgriCap needed to be further developed to determine the agreement's commercial reasonableness; (2) further evidence needed to be presented showing the propriety of holding AgriCap liable; and (3) AgriCap may be shielded from liability through the intervention of affirmative defenses. Id. at *16-17. For the foregoing reasons, the court denied the plaintiffs' motion for summary judgment. Id. at *17-18.
The case was decided on September 2, 2008.