United States District Court, S.D. New York
May 18, 2004.
MEREX FOOD CORP., Plaintiff, -against- ALGIN IMPORT & EXPORT, INC. and CHARLES CERNARO, Defendants
The opinion of the court was delivered by: WILLIAM PAULEY, District Judge
Plaintiff Merex Food Corp. ("Merex") filed this action under the
Perishable Agricultural Commodities Act ("PACA"), 7 U.S.C. § 499e(c),
against Algin Import & Export, Inc. ("Algin") and Charles Cernaro
("Cernaro"), Algin's principal officer, director and shareholder
(collectively, "defendants"). Merex moves for summary judgment under PACA
pursuant to Rule 56 of the Federal Rules of Civil Procedure. For the
following reasons, Merex's motion for summary judgment is granted.
Merex is a dealer in perishable agricultural commodities in interstate
commerce. (Plaintiff's Rule 56.1 Statement ("Pl. Stmt. ") ¶ 2; Affidavit
of Robert Hauver, dated December 3, 2003 ("Hauver Aff.") ¶ 4.) In April
2002, Merex sold $30,430 worth of perishable fresh fruits and vegetables
to Algin. (Hauver Aff. ¶ 4, Ex. C.) Following oral argument on this
motion, the parties agreed that Algin's set-off for storage costs of the
perishable goods was $12,000. (Letter from Leonard Kreinces to the Hon. William H. Pauley III, dated January 12, 2004.) The
parties agree that defendants have neither paid the $18, 340 balance*fn1
nor escrowed the funds. (Pl. Stmt. ¶ 4; Hauver Aff. ¶ 4; Declaration
of Charles Cernaro, dated December 29, 2004 ("Cernaro Decl.") ¶ 5.)
Courts may grant summary judgment only if "there is no genuine issue as
to any material fact" and "the moving party is entitled to summary
judgment as a matter of law." Fed.R.Civ.P. 56(c). The movant bears the
burden of establishing that no genuine issues of material fact exist.
Celotex Corp. v. Catrett, 477 U.S. 317, 322-24 (1986); accord McLee v.
Chrysler Corp., 109 F.3d 130, 134 (2d Cir. 1997). Once the movant
satisfies this requirement, the burden shifts to the nonmoving party "to
make a showing sufficient to establish the existence of an element
essential to that party's case, and on which that party will bear the
burden of proof at trial." Celotex, 477 U.S. at 322. The court is
required to resolve any ambiguities and to make all reasonable inferences
in favor of the nonmoving party. Flanigan v. Gen. Elec. Co., 242 F.3d 78,
83 (2d Cir. 2001). A genuine issue of material fact exists when "a
reasonable jury could return a verdict for the nonmoving party." Anderson
V. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). PACA provides for a statutory trust to help sellers of agricultural goods
enforce buyers' payment obligations. 7 U.S.C. § 499e(c)(1). Merchants,
dealers and brokers of agricultural commodities must maintain such trusts
for sellers of agricultural goods until the sellers receive full
payment. 7 U.S.C. § 499e(c)(2); C.H. Robinson Co. v. Alanco Corp.,
239 F.3d 483, 486 (2d Cir. 2001). PACA's statutory trust addresses the
exigencies of the perishable goods industry by ensuring that sellers of
agricultural commodities can collect the monies that are owed to them.
See Am. Banana Co. v. Republic Nat'l Bank, 362 F.3d 33, 37 (2d Cir. 2004)
(noting that Congress viewed perishable commodities sellers' inability to
collect balances owed to them "as a burden on commerce and contrary to
the public interest."). Accordingly, Congress amended PACA in 1984 to
give sellers greater protection by adding Section 499e(c), which requires
licensed dealers to hold all perishable commodities in trust for the
benefit of unpaid sellers. See Am. Banana, 362 F.3d at 37.
It is undisputed that Algin neither made any payments for the
agricultural products it received from Merex in April 2002, nor
maintained a PACA trust for Merex's benefit. (Hauver Aff. ¶¶ 4-6; Cernaro
Decl. ¶ 5.) Merex's claim against Cernaro is predicated on his ability
to control the trust through Algin. See Compl. ¶ 5; see also Okun v.
Zimmerman, 814 F. Supp. 346, 348 (S.D.N.Y. 1993) ("An individual who is in the position to control the
trust assets and who does not preserve them for the beneficiaries has
breached a fiduciary duty, and is personally liable for the tortuous
Defendants assert as an affirmative defense that Merex waived its right
to pursue this action because it first elected to seek an administrative
remedy before the United States Department of Agriculture ("USDA"). The
PACA provision governing election of remedies provides: "Such liability
may be enforced either (1) by complaint to the Secretary [of Agriculture]
. . . or (2) by suit in any court of competent jurisdiction."
7 U.S.C. § 499e(b). Charged with the primary responsibility for
construing PACA, the USDA has interpreted Section 499e(b) to mean that
claimants are required to make an election of remedies between pursuit of
reparation in an administrative forum or in either state or federal
court. See, e.g., M.S. Thigpen Produce Co., Inc. v. The Park River
Growers, Inc., 48 Agric. Dec. 695, 697 (U.S.D.A. 1989) (discussing
election of remedies provision).
Defendants argue that because Merex filed a formal complaint with the
Secretary of Agriculture against Algin in April 2003, which Algin
answered in May 2003, Merex elected to pursue an administrative remedy
and is thus barred from proceeding with this action. However, Merex
voluntarily dismissed its USDA administrative proceeding in July 2003 when Algin
ceased doing business. (Hauver Reply Aff. ¶ 2.) No agency or court
decision has interpreted PACA's election of remedies provision as barring
a later-filed court action where there was a voluntary dismissal of a
pending agency action. See "R" Best Produce, Inc. v. Eastside Food Plaza,
Inc., No. 02 Civ. 6925 (DLC), 2003 WL 22231577, at *4 (S.D.N.Y. Sept.
30, 2003) ("[T] he USDA interprets the `election of remedies' provision
in the statute as simply barring two suits from the same transaction from
proceeding simultaneously before the agency and a court . . . No [PACA]
case has been found in which the filing of a formal [administrative]
complaint precluded a later election to file the same case in a court of
competent jurisdiction.") (emphasis added).
Because there is no threat of simultaneous proceedings, and the USDA
administrative proceeding did not result in a final adjudication, PACA's
election of remedies provision is not a bar to this action. See Kurt
Van Engel Comm'n Co., Inc. v. Schultz Sav-O Stores, Inc., 48 Agric.
Dec. 731, 733 (U.S.D.A. 1989) ("[W]here an apparent election has been
made, we would be warranted in asserting jurisdiction thereafter only if
the election were later determined for some good reason to have not been
final."), Accordingly, Merex's motion for summary judgment on defendants' liability
for failure to pay the $18,430 balance and to hold the funds in escrow is
granted. The Clerk of the Court is therefore directed to mark the case