United States District Court, S.D. New York
April 4, 2005.
A&J PRODUCE CORP., Plaintiffs,
SUNG L. CHANG d/b/a MC PARK, SUNG L. CHANG d/b/a MC PM, NATURAL FARMS, INC., JONG KIM, BERGEN FARMS MARKET, INC., JONG SOO LEE, UNION FARM, INC., KYU JIN SHON, WOODBRIDGE FARM, INC., SUNG SIK PARK, TEANECK RD. FARMS, INC., HEUK S. LEE, THERESA & JOSEPH CORP., and ONYI NAM, Defendants.
The opinion of the court was delivered by: HAROLD BAER, JR., District Judge[fn*] [fn*] Rachel Rubin, a spring 2005 intern in my Chambers, and currently a third-year law student at Brooklyn Law School, provided substantial assistance in the research and drafting of this Opinion.
OPINION & ORDER
Plaintiff, A&J Produce Corp. ("A&J"), filed the instant action
against Sung L. Chang d/b/a MC Park and MC PM (collectively,
"Chang"), Natural Farms, Inc. ("Natural"), Jong Kim ("Kim"),
Bergen Farms Market, Inc. ("Bergen"), Jong Soo Lee ("Jong Lee"),
Union Farm, Inc. ("Union"), Kyu Jin Shon ("Shon"), Woodbridge
Farm, Inc. ("Woodbridge"), Sung Sik Park ("Park"), Teaneck Rd.
Farms, Inc. ("Teaneck"), Heuk S. Lee ("Heuk Lee"), Theresa &
Joseph Corp. ("Theresa"), and Onyi Nam ("Nam") to recover payment
for unpaid produce sold pursuant to the Perishable Agricultural
Commodities Act ("PACA"), 7 U.S.C. § 499a et seq. Pursuant to
Fed.R.Civ.P. 56, Kim, Natural, Union, and Shon (collectively,
the "Kim Defendants"), joined by Woodbridge and Park
(collectively, the "Woodbridge Defendants") and Chang, move for
summary judgment.*fn1 For the reasons set forth below,
Defendants' motion for summary judgment is GRANTED.
A. Factual Background
1. The Parties
A&J is a wholesaler of fresh fruits and vegetables that
operated at 140 New York City Terminal Market, Hunts Point, New York. (Am. Compl. at ¶ 3.)
Chang was a deliveryman in the New York metropolitan area for
small green grocery retailers, including Defendants Kim and
Woodbridge (together, "Retailers").*fn2 (Chang Aff. at ¶ 6.)
The other defendants were allegedly dealers in perishable
agricultural commodities in the same area.*fn3 (Am. Compl.
at ¶¶ 6-17.)
2. The Transaction
The manner in which Chang conducted business is uncontested.
Chang was a produce deliveryman. (Alexander Park Aff. at ¶ 3.) In
the evenings, Retailers ordered their produce for the next day
through Chang. The following day, Chang drove his truck to Hunts
Point, filled the orders, and delivered the produce to the
Retailers. (Chang Aff. at ¶ 7.) Upon delivery of the produce,
Chang received payment for the produce from the Retailers. Chang
was to deliver the payment to the seller. The form of payment
varied; sometimes the Retailers provided cash, while other times
Retailers paid by checks made out to A&J. Chang delivered these
payments to the produce sellers at Hunts Point, including A&J.
(Chang Aff. at ¶ 8; Bonomolo Decl. at ¶ 3; Lacher Decl. at ¶ 3.)
Meanwhile, the Retailers paid Chang a flat fee for the delivery
service. (Chang Aff. at ¶ 5.)
B. Procedural History
In December 2003, A&J filed the instant action against Chang
for failure to pay for perishable agricultural commodities sold
and delivered to him. (Compl. at ¶¶ 8-11) (Dckt. 1.) A&J
simultaneously moved for a preliminary injunction to require
Chang to place in trust the amount of the unpaid invoices. (Dckt.
3.) As part of his opposition to Plaintiff's application for a
preliminary injunction, Chang included names and addresses of
Retailers who were customers of A&J. (Chang Aff. at ¶¶ 13, 15,
17.) Shortly thereafter, the motion for preliminary injunction
was withdrawn on consent. (Dckt. 8.) In May 2004, A&J filed an
Amended Complaint which added the Retailers named by Chang in his
Opposition to the Preliminary Injunction as defendants. (Am.
Compl.) (Dckt. 15.)
In September 2004, Woodbridge Defendants interposed an Answer
with Affirmative Defenses and Cross-Claims. (Woodbridge Ans.)
(Dckt. 32.) Woodbridge asserted a cross-claim that it paid Chang for all of A&J's produce delivered to it, and
that Chang failed to deliver the money to A&J. (Woodbridge Ans.,
Cross-Claims at ¶¶ 9-14.)
II. APPLICABLE STANDARD
A. Summary Judgment Standard Fed.R.Civ.P. 56(c)
A court will not grant a motion for summary judgment unless it
determines that there is no genuine issue of material fact and
the undisputed facts are sufficient to warrant judgment as a
matter of law. Fed.R.Civ.P. 56; Celotex Corp. v. Catrett,
477 U.S. 317, 322-23 (1986); Anderson v. Liberty Lobby Inc.,
477 U.S. 242, 250 (1986). The party opposing summary judgment
"may not rest upon the mere allegations or denials of the adverse
party's pleading, but . . . must set forth specific facts showing
that there is a genuine issue for trial." Fed.R.Civ.P. 56(e).
In determining whether there is a genuine issue of material fact,
the Court must resolve all ambiguities, and draw all inferences,
against the moving party. United States v. Diebold, Inc.,
369 U.S. 654, 655 (1962) (per curiam); Donahue v. Windsor Locks
Bd. of Fire Comm'rs, 834 F.2d 54, 57 (2d Cir. 1987). It is not
the court's role to resolve issues of fact; rather, the court may
only determine whether there are issues of fact to be tried.
Donahue, 834 F.2d at 58 (citations omitted). However, a
disputed issue of material fact alone is insufficient to deny a
motion for summary judgment, the disputed issue must be "material
to the outcome of the litigation," Knight v. U.S. Fire Ins.
Co., 804 F.2d 9, 11 (2d Cir. 1986), and must be backed by
evidence that would allow "a rational trier of fact to find for
the non-moving party." Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587 (1986).
Enacted in 1930, PACA was intended to:
[E]ncourage fair trading practices in the marketing
of perishable commodities by suppressing unfair and
fraudulent business practices in marketing of fresh
and frozen fruits and vegetables . . . and provid[e]
for collecting damages from any buyer or seller who
fails to live up to his contractual obligations.
Endico Potatoes v. CIT Group/Factoring, 67 F.3d 1063, 1066 (2d
Cir. 1995) (citation omitted). In 1984, PACA was amended to
require that certain purchasers create and maintain a statutory
trust to protect unpaid suppliers and sellers of covered
commodities. Id. at 1067. Congress was concerned that "as a
result of the exigencies of the perishable commodities business,
sellers were typically required to sell their produce quickly and
frequently found themselves in the position of unsecured
creditors of buyers whose creditworthiness could not be
verified." Am. Banana Co. v. Republic Nat'l Bank of N.Y., 362 F.3d 33
, 37 (2d Cir. 2004). In
particular, when buyers defaulted, sellers had difficulty
collecting money owed to them because the commodities perished
and other lenders often had priority over the assets of the
defaulting purchaser. Id. The Second Circuit noted Congress'
expressed intent to provide a remedy to sellers by ensuring that
"the sellers' interests in the commodities and sales proceeds
[were] superior to those of the buyers' creditors, including
secured creditors." Id. See also Albee Tomato Co., Inc. v. Korea
Comm'l Bank of N.Y., 282 F. Supp. 2d 6, 10 (S.D.N.Y. 2003).
Indeed, Section 499e(c)(2) of PACA provides:
Perishable agricultural commodities received by a
commission merchant, dealer, or broker in all
transactions, and all inventories of food or other
products derived from perishable agricultural
commodities, and any receivables or proceeds from the
sale of such commodities or products, shall be held
by such commission merchant, dealer, or broker in
trust for the benefit of all unpaid suppliers or
sellers of such commodities or agents involved in the
transaction, until full payment of the sums owing in
connection with such transactions has been received
by such unpaid suppliers, sellers, or agents.
7 U.S.C. § 499e(c)(2) (emphasis added); see also Am. Banana Co.,
Inc. v. Republic Nat'l. Bank of N.Y., 362 F.3d 33
, 37 (2d Cir.
2004). To recover the proceeds from a PACA created trust, a
plaintiff must demonstrate:
(1) the commodities sold were perishable agricultural
commodities; (2) the purchaser of the perishable
agricultural commodities was a commission merchant,
dealer or broker; (3) the transaction occurred in
interstate or foreign commerce; (4) the seller has
not received full payment on the transaction; and (5)
the seller preserved its trust rights by giving
written notice to the purchaser within the time
provided by the law.
7 U.S.C. § 499e; see Chiquita Fresh, N.A. v. Specialty Produce
Co., No. 02 Civ. 269, 2003 Lexis 24389, at *7 (E.D. Tenn. May 2,
2003); Reaves Brokerage Co. v. Fid. Factors, L.L.C., No. 99
Civ. 2848, 2001 WL 34111601, at *3 (N.D. Tex. Oct. 17, 2001)
Here, the parties do not dispute that the commodities sold were
perishable agricultural commodities or that the transaction
involved interstate or foreign commerce. In addition, A&J's
failure to receive full payment is sufficiently pled and not in
There are, however, two contested issues. First, was Chang a
"commission merchant, dealer or broker"? PACA "restricts those
subject to liability to `commission merchant[s], dealer[s] or broker[s]' and defines these terms in great detail."
Eastside Food Plaza, Inc. v. "R" Best Produce, Inc., No. 03
Civ. 106, 2003 WL 21727788, at *2 (S.D.N.Y. Jul. 23, 2003).
Second, whether A&J preserved its trust rights in accordance with
the PACA notice requirement. While PACA imposes a trust
requirement when perishable agricultural commodities are
delivered, "to preserve benefits under a PACA trust, the unpaid
produce seller must deliver written notice to the buyer." C.H.
Robinson Co. v. Alanco Corp., 239 F.3d 483, 486 (2d Cir. 2001).
A. Commission Merchant, Dealer or Broker
Chang maintains that a deliveryman fails to satisfy the PACA
definition of a "dealer" and, therefore, he is not subject to
PACA and, by extension, to this Court's jurisdiction.*fn4
See Magic Am. Café, Inc. v. Bowie Produce Co., No. 95 Civ.
376, 1999 Lexis 21045, at *5 (D. Del. Jan. 6, 1999) ("As a
prerequisite to recovery under PACA, the seller must establish
that the purchaser of perishable agricultural commodities
qualifies as a `commission merchant,' `dealer' or `broker' under
the Act."). As PACA "applies to any commission merchant, dealer
or broker in all transactions, not simply to the ones that have
secured licenses," A&J Produce Corp. v. Foodways, Inc., 88 Civ.
0754, 1988 WL 120159, at *1 (S.D.N.Y. Nov. 2, 1988), the court
must determine whether Chang's conduct satisfies the statutory
definition of a "dealer."
The term "dealer" "means any person engaged in the business of
buying or selling in wholesale or jobbing quantities, as defined
by the Secretary, any perishable agricultural commodity in
interstate or foreign commerce." 7 U.S.C. § 499a(b)(6) (emphasis
added).*fn5 As such, pursuant to PACA, subject matter jurisdiction over A&J's
claims against Chang is contingent upon whether Chang's
activities satisfy the two prong definition of "dealer": (1)
"engaged in the business of buying or selling," and (2) "in
wholesale or jobbing quantities." 7 U.S.C. § 499a(b)(6); see In
Re Magic Rest., 205 F.3d 108, 112-113 (3d. Cir. 2000).
1. Engaged in the Business of Buying or Selling
Pursuant to PACA, to be a "dealer," a "person"*fn6 must
buy or sell perishable agricultural commodities. See Royal Foods
Co. v. RJR Holdings Inc., 252 F.3d 1102, 1107 (9th Cir. 2001)
(The "`engaged in the business of' language speaks to the type of
business required to invoke jurisdiction under PACA"). The
statute also requires a person be "engaged in the business of
buying or selling," which contemplates somewhat more than a
single purchase or sale transaction. Indeed, dealers must buy and
sell agricultural commodities as part of their profitmaking
business. Id. ("An entity is engaged `in the business of' where
that entity buys or sells to further its commercial
Here, Chang did not purchase produce from A&J. He acted solely
as a deliveryman and at no point did he own produce. (Chang Aff.
at ¶ 19.) Chang was not engaged in the sale of PACA covered
commodities. He did not charge the Retailers a different price
than what appeared on the invoices he received from A&J. Chang
served merely as a conduit between Retailers and A&J, he
delivered produce to Retailers and delivered their payments back
to A&J. (Chang Aff. at ¶ 19.) Chang's profits, if any, arose from
the delivery service he provided and not from the purchase or
sale of any PACA commodities.
As Chang was engaged in the business of delivering orders, not
"the business of buying or selling," A&J's claims against Chang
must be dismissed for lack of subject matter jurisdiction and
Chang's motion for summary judgment is, therefore, GRANTED.
2. Wholesale or Jobbing Quantities
Assuming arguendo that Chang engaged in the "the business of
buying or selling," PACA also requires a person to conduct their
business in "wholesale or jobbing quantities."
7 U.S.C. § 499a(b)(6); Bandwagon Brokerage, Inc. v. Mafolie Foods Co.,
168 F. Supp. 2d 506, 510 (D.V.I. 2001) (". . . the `wholesale and
jobbing quantities' requirement is a separate condition necessary
to bring a transaction under PACA."). "Wholesale or jobbing
quantities" are "aggregate quantities of all types of produce
totaling one ton (2,000 pounds) or more in weight in any day shipped, received, or contracted to be shipped or
received." 7 C.F.R. § 46.2(x)(2005); In re Old Fashioned Enter.,
Inc. 236 F.3d 422, 424 (8th Cir. 2001) (same).
In Bandwagon Brokerage, for example, the defendant moved to
dismiss plaintiff's PACA claim for lack of subject matter
jurisdiction and argued that the defendant's conduct failed to
satisfy PACA's definition of a "dealer." Bandwagon Brokerage,
168 F. Supp. 2d 506. As is the case here, the plaintiff had the
burden to demonstrate that the disputed transactions met the
"wholesale or jobbing quantities" requirement even where the
defendant had obtained a PACA license. Id. at 510. The court
determined that while the defendant-buyer was engaged in the
business of buying and selling perishable agricultural
commodities, absent any evidence of "wholesale or jobbing
quantities," defendant's actions did not qualify him as a
"dealer." Id. As a result, the plaintiff failed to satisfy the
"wholesale or jobbing quantities" requirement, there was no PACA
trust and, consequently, the court lacked subject matter
Here, as in Bandwagon Brokerage, the plaintiff failed to
demonstrate that the transactions met the "wholesale or jobbing
quantities" requirement. A&J failed to offer a scintilla of
evidence that Chang handled "produce totaling one ton (2,000
pounds) or more in weight in any day shipped, received, or
contracted to be shipped or received." 7 C.F.R. § 46.2(x)(2005).
Akin to Bandwagon, Chang is not a dealer. See also Val-Land
Farms, Inc. v. Third Nat'l Bank, 937 F.2d 1110 (6th Cir. 1991)
(PACA claims dismissed because defendant was not a "dealer.")
Therefore, pursuant to 7 C.F.R. § 46.2(x)(2005), and since PACA
only imposes liability upon commission merchants, dealers, and
brokers, and since Chang is none of the above, this court lacks
subject matter jurisdiction over A&J's claims against Chang.
Accordingly, A&J's claims against Chang are dismissed for lack of
subject matter jurisdiction and Chang's motion for summary
judgment is GRANTED.
Second, A&J was required to provide Retailers with sufficient
notice of their intent to preserve their PACA trust rights. Under
PACA, A&J was authorized to provide notice in one of two forms:
(1) a written notice within thirty calendar days after payment
was due, 7 U.S.C. § 499e(c)(3) ("the written notice method"), or
(2) a printed statement on its regular invoices.
7 U.S.C. § 499e(c)(4) ("the invoice method").*fn7 Proper notice under the "invoice method" consists of three
independent requirements set forth in
7 U.S.C. § 499e(c)(4).*fn8 First, the bill or invoice statements must
be "ordinary and usual," meaning "communications customarily used
between parties to a transaction in perishable agricultural
commodities in whatever form, documentary or electronic, for
billing or invoicing purposes." 7 C.F.R. § 46.46(5)(2005). As
part of the "ordinary and usual" requirement, "PACA clearly
envisions that invoices presumptively indicate both the seller
and the buyer for the purpose of preserving the seller's right to
the trust assets received by the buyer." Horizon Mktg. v.
Kingdom Int'l Ltd., 244 F. Supp. 2d 131, 141 (E.D.N.Y. 2003).
Second, the payment period must appear on the bill or invoice if
it differs from the default payment period established by the
regulations. See 7 U.S.C.S. § 499e(c)(4).*fn9 Third,
sellers must print on the bill or invoice a statement of intent
to preserve the trust, the precise language of which is provided
in the statute. See 7 U.S.C. § 499e(c)(4); Nobles-Collier,
Inc. v. Hunts Point Tomato Co., No. 02 Civ. 5287, 2004 WL 102756
(S.D.N.Y. Jan. 22, 2004) (printed statement, "TERMS: PACA
PROMPT", on invoices provided insufficient PACA notice as
required by 7 U.S.C. § 499e(c)(4)).
Here, A&J relied exclusively on the invoice method of notice.
(Am. Compl. at ¶ 1.) Two of the statutory requirements appear to
be satisfied on the face of A&J's invoices. The payment
time-period does not appear, but where the default payment period
established by the regulations applies, it is not required. See
In re Atlanta Egg & Produce, Inc., No. 04 Civ. 730, 2005 WL
491481, at *2-3 (Bankr. N.D. Ga. Jan. 18, 2005). In addition, all
of the invoices submitted by A&J contained the required statutory statement of intent to
preserve the trust on their face. (Tramutola Aff., Ex. A & B.)
While the invoice method was the designated means by which A&J
provided Retailers with notice, the invoices submitted by A&J all
read "Sold To: MC Park" or "Sold To: MC PM." Although it appears
that A&J facially complied with the PACA invoice method
(Tramutola Aff. at ¶ 9, Exhibits A & B), there is no evidence
that the invoices were ever provided to Retailers. This omission
is significant because the invoices lack any evidentiary link to
any particular defendant. See Horizon Mktg.,
244 F. Supp. 2d at 142 ("PACA clearly assigns a vital function to the invoice used
by a seller precisely because the party named in such invoice
(which serves to give notice), is the PACA trustee to whom notice
must be given.").
Indeed, A&J was required to effectuate actual notice (i.e.
delivery of the invoices) to the Defendant Retailers and admits:
That no notice was ever given by plaintiff to
defendants HWAN C. KIM s/h/a/ JONG KIM, KYOO JIN SOHN
s/h/a KYU JIN SHON, NATURAL FARMS, INC. and UNION
FAMILY FARMS, INC. s/h/a UNION FARM, INC. by any
ordinary and usual billing or invoice statements by
specific language informing said defendants of
plaintiff's intention to preserve its rights to trust
proceeds under P.L. 98-273 § 5 of PACA, 7 U.S.C. ¶
(Cohen Aff., Ex. "5".)*fn10
For all intents and purposes,
A&J admits that the invoices were not "ordinary and usual"
because an "ordinary and usual" billing statement would include,
at the very least, the name of the purchaser of PACA covered
commodities. Without the name of the buyer, the invoices fail to
fulfill the invoice method's intent; i.e. notice. Accordingly,
A&J failed to provide notice to the defendants pursuant to the
invoice method and, therefore, A&J failed to preserve their trust
rights. See C.H. Robinson, 239 F.3d at 486 ("To preserve
benefits under a PACA trust, the unpaid produce seller must
deliver written notice to the buyer."); see also Nobles-Collier,
Inc. v. Hunts Point Tomato Co., Inc., No. 02 Civ. 4128, 2004 WL
102756 (S.D.N.Y. Jan. 22, 2004).
Therefore, as A&J failed to provide Retailers with sufficient
notice, its claims against Retailers must be dismissed for lack
of subject matter jurisdiction and Retailers motion for summary judgment is GRANTED.
For the reasons set forth above, the Defendants' motion for
summary judgment is hereby GRANTED. The Clerk of Court is Ordered
to close all open motions and remove this case from my docket.
IT IS SO ORDERED.