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Sage Fruit Co., LLC v. Michail Nash Corp.

October 29, 2007


The opinion of the court was delivered by: Charles P. Sifton (electronically signed) United States District Judge


Plaintiff Sage Fruit Company brings this action against defendants Michail Nash Corp., d/b/a Nash Express Produce ("Nash Express"), Moris Michael Nashonov ("Nash"), Sergey Nashonov ("Sergey"), and Michael Nashonov ("Michael"). In the Complaint, plaintiff alleges that defendants have violated the provisions of the Perishable Agricultural Commodities Act of 1930 ("PACA"), 7 U.S.C. § 499a et seq. Specifically, plaintiff seeks a declaration that it is entitled to relief under 7 U.S.C. §§ 499e(c)(3) and (4)*fn1 , and enforcement of payment from PACA trust assets, pursuant to 7 U.S.C. § 499e(c)(5). Plaintiff also alleges (1) violations of PACA's requirement that Nash Express maintain PACA trust assets, 7 U.S.C. § 499b(4),*fn2 (2) PACA's requirement that Nash Express make full payment promptly, id., (3) breach of contract, (4) breach of fiduciary duty, (5) conversion and unlawful retention of PACA trust assets, and (6) fraudulent transfer. Plaintiff commenced this action on October 9, 2007, and on October 10, 2007, upon plaintiff's ex-parte submissions, I signed a Temporary Restraining Order. Now before this court is plaintiff's motion for a preliminary injunction, on which I held a hearing on October 29, 2007*fn3 . Plaintiff also seeks to consolidate the trial on the merits with the hearing on the preliminary injunction. Upon the findings of fact and conclusions of law set forth below, plaintiff's motion for a preliminary injunction is granted against defendants and its motion to consolidate is denied.


The following findings of facts are derived from the underlying allegations in plaintiff's Complaint, affidavits submitted by plaintiff in connection with this motion, and from the proceeding before the undersigned on October 29, 2007. There are no factual disputes between the parties requiring an evidentiary hearing. See Davis v. New York City Housing Authority, 166 F.3d 432, 437-38 (2d Cir. 1999).

Plaintiff is engaged in the business of buying and selling wholesale quantities of perishable agricultural commodities*fn4 in interstate commerce, and is a PACA licensee. Defendant Nash Express is a New York Corporation with its principal place of business in Brooklyn, New York. Defendant Nash is the President of Nash Express. Defendant Sergey is an officer, principal, and consultant of Nash Express. Defendant Michael is an officer and principal of Nash Express. Plaintiff has been doing business with Nash Express since November 2004.

Plaintiff alleges that Nash Express was a commission merchant, dealer or broker*fn5 operating subject to the provisions of PACA.*fn6 Chuck Yow, Eastern Regional Representative for plaintiff, by a supplemental declaration submitted in this matter, states that Nash Express's business consists of the buying and selling of perishable agricultural commodities. Yow has also attached exhibits to his supplemental declaration showing that Nash Express is a PACA licensee and that it specializes in various types of tomatoes, but also deals in grapes, apples, pears, oranges, and several other fruits.

Plaintiff further alleges that between February 26, 2007 and April 25, 2007, plaintiff sold to Nash Express apples, which plaintiff delivered and which Nash Express accepted.*fn7 Plaintiff alleges that $50,991.00 remains owing for the apples delivered during the period at issue.

Steve Black is a salesperson for plaintiff and was the salesperson who sold the produce at issue to Nash Express. He has also been involved in the process of attempting to recover the unpaid invoices from Nash Express. According to Black's declaration, when Nash Express's inability to satisfy its PACA trust obligations to plaintiff became apparent, he began investigating Nash Express's financial position on behalf of plaintiff. Prior to April, 2007, his primary contact at Nash Express was its President Nash. According to Black, when, in the past, Nash Express would become delinquent in payments owed to plaintiff, Black would contact Nash, who would usually bring the account to current or near current. However, in April 2007, plaintiff noticed that Nash Express became slower than usual in payment of its outstanding invoices.

Black thus began calling Nash on a weekly basis to discuss Nash Express's outstanding balance. Nash told Black on several occasions to fax an accounting of the outstanding invoices and that payment would be sent soon thereafter, but payment was never received. Chuck Yow, according to his declaration, was alerted to Nash Express's delinquency in July 2007, and, at that time, contacted Black to discuss the problem. Black apprised Yow of his efforts.

According to Black, he continued to make weekly calls to Nash from May through August 2007. Again, he was promised payment, but payment was never sent by Nash Express. In August 2007, Black called Nash to inform him that plaintiff would not sell any additional produce to Nash Express. Nash told Black that he needed to speak with his son, defendant Michael. Nash explained that he had moved to Chicago and no longer had a role with the company's current operations. Nash said Michael was out of the country but would return after two weeks. Yow also attempted to contact Nash in August 2007, by email, but Nash did not respond.

Yow followed up with a phone call in September 2007, which Nash returned. Nash told Yow essentially what he had told Black - that Yow should contact Michael, but Michael was out of the country for two weeks. According to Yow, Nash acknowledged the outstanding balance to plaintiff, but told Yow that Nash Express could not make payment as a result of losses the company suffered from damages to crops in foreign countries. Nash asked that plaintiff be patient as he needed to pay other vendors before payment could be made to plaintiff. Yow said such an arrangement was unacceptable and demanded full payment. Nash said he could not make full payment at that time.

When the two weeks had passed, both Black and Yow attempted to contact Michael, but their phone calls were not returned. Black tried Nash again, who reiterated that Black should speak to Michael, and informed Black that Michael had not yet returned. Yow also contacted Nash. According to Yow, Nash again admitted that Nash Express could not pay plaintiff for the invoices at issue. Nash explained that since his son, Michael, had taken over Nash Express many vendors had not received payment and that he was flying to New York to reorganize the company.

Following his last call with Nash, Black increased his calls to Michael, trying to reach him two or three times per week. Michael never returned Black's calls. Black made several additional attempts to contact both Nash and Michael towards the end of September and the beginning of October. Neither returned his calls.

On October 1, 2007, however, Michael called Yow concerning the outstanding invoices. Michael admitted that the company could not pay plaintiff and requested that plaintiff "work with" Nash Express so that he could stabilize the company. Michael guaranteed that payment would be made once Nash Express was profitable again. Yow said he could not commit to any agreement until he conferred with others at plaintiff. Michael then advised Yow that he intended to close Nash Express ...

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