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EASTSIDE FOOD PLAZA, INC. v. "R" BEST PRODUCE

July 21, 2003

EASTSIDE FOOD PLAZA, INC. AS ASSIGNEE OF TALPA SALES, INC., PLAINTIFF,
v.
"R" BEST PRODUCE, INC., DEFENDANT.



The opinion of the court was delivered by: Shira Scheindlin, District Judge

OPINION AND ORDER

Eastside Food Plaza, Inc. ("Eastside"), as the assignee of Talpa Sales, Inc. ("Talpa"), brings this action against "R" Best Produce, Inc. ("`R' Best") asserting three claims under multiple theories of recovery: violations of the unfair conduct provision under the Perishable Agricultural Commodities Act ("PACA") of 1930, amended in 1984, 7 U.S.C. § 499b, breach of contract, account stated, monies due and owing, and unjust enrichment. "R" Best now moves to dismiss the Amended Complaint for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(1) and for failure to state a claim pursuant to Rule 12(b)(6). "R" Best further moves for reasonable attorney's fees and costs to be imposed against the plaintiff for bringing claims without legal basis. For the reasons stated below, "R" Best's motions are denied in part and granted in part.

I. BACKGROUND

A. Facts

Talpa, a broker of fresh fruit and vegetables, is incorporated in and has its principal place of business in New York. Amended Complaint ("Am. Compl.") ¶ 4. "R" Best is a dealer*fn1 of produce, also incorporated and having its principal place of business in New York. Id. ¶¶ 5, 6. In July 1994, "R" Best hired Talpa as its broker in the sale of produce. Id. ¶ 9. According to their agreement, "R" Best was to pay Talpa brokerage commissions based on completed sales. Id. ¶ 10. In July 1995, "R" Best hired Larry Schembri and Schembri Produce, Inc. ("Schembri") as a broker in the sale of produce. Id. ¶ 11. "R" Best appointed Talpa to train, oversee and manage Schembri's produce sales. Id. ¶ 12. In return, "R" Best agreed to pay Talpa commissions based on the number of sales completed by Schembri. Id. ¶ 13.

Between July 1995 and March 2002, Schembri completed produce sales on behalf of "R" Best ("Schembri sales") for which Talpa earned commissions totaling $877,500.00, but which "R" Best failed to pay. Id. ¶¶ 15, 17, 19. Between July 1, 2000, and December 31, 2000, Talpa completed produce sales on behalf of "R" Best ("Talpa sales") for which it earned commissions totaling $25,240.80, but which "R" Best again failed to pay. Id. ¶¶ 24, 26, 28. Talpa also submitted to "R" Best periodic statements of account for brokerage commissions earned on the Talpa sales, to which "R" Best never objected, protested or made any claim of error. Id. SI 33-34. Between July 1, 2000, and December 31, 2000, Talpa overpaid "R" Best for debts due and owing in relation to its completed sales in the amount of $28,174.00, which "R" Best failed to return.*fn2 Id. 11 39-41.

B. Procedural History

Talpa brought this action on January 8, 2003, for the unpaid commissions on the sales completed by Schembri, the unpaid commissions on its own sales, and for the overpayment on its debt. The three claims were raised under various theories of recovery: unfair conduct under PACA, breach of contract, action on account stated, monies due and owing and unjust enrichment. The case was first assigned to the Honorable Denise L. Cote as possibly related to another pending action. On February 28, 2003, "R" Best filed a motion for an order staying this action during the pendency of the same action between the same parties in state court. See Motion for Order Staying This Action. On April 8, 2003, Judge Cote denied the motion for a stay. See Talpa Sales, Inc. v. "R" Best Produce, Inc., No. 03 Civ. 106, 2003 WL 1845234, at *1 (S.D.N.Y. Apr. 8, 2003). On May 7, 2003, Talpa assigned to Eastside all of its rights, title and interest in the claims asserted in this action. See Am. Compl. ¶ 8. On June 13, 2003, Eastside filed an Amended Complaint, asserting identical claims as the original complaint. The case was found not to be related to Judge Cote's ongoing case and was reassigned to the undersigned on May 23, 2003. "R" Best now moves to dismiss the Amended Complaint and for reasonable attorney's fees and costs to be imposed on Eastside for bringing claims without legal basis.*fn3

II. MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION
A. Legal Standard

"A case is properly dismissed for lack of subject matter jurisdiction under Rule 12(b)(1) when the district court lacks the statutory or constitutional power to adjudicate it." Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000). Plaintiff bears the burden of proving that a court has subject matter jurisdiction over its case by a preponderance of the evidence. See id. When the defendant challenges the legal sufficiency of plaintiff's jurisdictional allegations, the court must take all facts alleged in the complaint as true and draw all reasonable inferences in favor of the plaintiff's. See Robinson v. Gov't of Malaysia, 269 F.3d 133, 140 (2d Cir. 2001) (internal quotation marks and citation omitted).

B. This Court Has Subject Matter Jurisdiction over This Dispute
Whether plaintiff as a broker of produce sales has standing to sue under PACA is a question of first impression. To determine whether this Court has jurisdiction, the terms of PACA must be examined.*fn4,*fn5 A plain reading of the statute reveals that an unpaid broker of produce sales may bring an unfair conduct claim under PACA. Section 2, the unfair conduct provision, provides, in relevant part:
It shall be unlawful . . . [f]or any commission merchant, dealer, or broker . . . to fail or refuse truly and correctly to account and make full payment promptly in respect of any transaction in any [perishable agricultural] commodity to the person with whom such transaction is had. . . .
7 U.S.C. § 499b (emphasis added). Defendant contends that PACA was enacted to protect unpaid sellers and suppliers of produce, and that because Talpa is merely an alleged unpaid broker of produce sales, plaintiff lacks standing to bring a claim under PACA and thereby divests this Court of jurisdiction.*fn6 See Defendant's Memorandum in Support of Motion to Dismiss ("Def. Mem.") at 2, 4-5. The constricted construction urged by the defendant cannot prevail over the plain meaning of the statute. Section 2 restricts those subject to liability to "commission merchant[s], dealer[s] or broker[s]" and defines these terms in great detail.*fn7 7 U.S.C. § 499b(4).

In contrast, Section 2 denotes the protected claimant very generally as "the person with whom such transaction is had." 7 U.S.C. § 499b(4). Subdivision (a) of Section 5 of PACA, which governs the amount of damages available under an unfair conduct claim, also refers to claimants as "persons": "If any commission merchant, dealer, or broker violates any provision of section 499b of this title he shall be liable to the person or persons injured thereby for the full amount of damages . . . sustained in consequence of such violation." 7 U.S.C. § 499e(a) (emphasis added). "Person" is defined broadly to include "individuals, partnerships, corporations and associations." 7 U.S.C. § 499a(b)(1). Talpa, as a corporation, is a "person."

Moreover, as a broker, plaintiff may pursue an unfair conduct claim in light of the definition of "full payment promptly." 7 U.S.C. § 499b(4). "Full payment promptly" is defined in part as "[p]ayment of brokerage earned and other expenses in connection with produce purchased or sold, within 10 days after the day on which the broker's invoice is received by the principal. . . ." 7 C.F.R. § 46.2(aa)(4). There is no question that the ...


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