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AFL Fresh & Frozen Fruits & Vegetables, Inc. v. De-Mar Food Services Inc.

December 7, 2007


The opinion of the court was delivered by: Gerard E. Lynch, District Judge


AFL Fresh & Frozen Fruits & Vegetables, Inc. ("AFL"), is engaged in the business of buying and selling wholesale quantities of perishable agricultural commodities. De-Mar Food Services Inc. ("De-Mar"), is a former customer of AFL, against whom AFL has brought suit for nonpayment of produce allegedly bought from AFL. AFL has moved for summary judgment against De-Mar and Spero Mentonis, an officer and director of De-Mar, contending that, under the Perishable Agricultural Commodities Act, 7 U.S.C. §§ 499a-499q ("PACA"), both are liable for nonpayment of the goods delivered by AFL to De-Mar. AFL contends that De-Mar is also liable for breach of contract and an account stated, and seeks prejudgment interest and attorney's fees against both defendants.

For the following reasons, summary judgment will be denied as to AFL's PACA claims against defendants, and granted as to its breach of contract, account stated, attorneys' fees, and prejudgment interest claims against De-Mar.


From October 2002 to January 2003, AFL alleges that De-Mar purchased fruits and vegetables from it totaling $62,827, for which it was never paid. (P. Memo 2.) In support, AFL submits 35 invoices detailing the contents of deliveries allegedly from AFL to De-Mar. (Declaration of Ronald A. MacDonald in Support of Motion for Summary Judgment, dated September 20, 2007 ("MacDonald Declaration"), ¶ 9, Ex. 2.) Each delivery, AFL alleges, was signed by an authorized agent of De-Mar on the date of the delivery. (Rule 56.1 Statement, ¶ 4, citing MacDonald Declaration, ¶ 10, Ex. 2.) In early 2003, AFL alleges that it issued, and DeMar received, an account statement summarizing the invoices reflecting the past deliveries to De-Mar totaling $62,827. (MacDonald Declaration, ¶¶ 11, 12, 14, Ex. B.) AFL further alleges that Spero Mentonis is and was an officer and director of De-Mar Food, and was in a position of control of the alleged trust assets. (Rule 56.1 Statement, ¶¶ 12, 13.)


1. Legal Standards

A. Summary Judgment

Summary judgment is appropriate where the "pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). Rule 56 "mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails 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 Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). The party moving for summary judgment bears the initial burden of explaining the basis for its motion and identifying those portions of the record which it believes "demonstrate the absence of a genuine issue of material fact." Id. at 323. The burden then shifts to the non-movant to produce evidence sufficient to create a genuine issue of material fact for trial. Fed. R. Civ. P. 56(e)(2) (When a summary judgment motion is "properly made and supported, an opposing party may not rely merely on allegations or denials in its own pleading; rather, its response must -- by affidavits or as otherwise provided in [Rule 56] -- set out specific facts showing a genuine issue for trial."); Matsushita v. Zenith Radio Corp., 475 U.S. 574, 586 (1986) ("When the moving party has carried its burden under [Rule 56], its opponent must do more than simply show that there is some metaphysical doubt as to the material facts."). The Court's responsibility is to determine if there is a genuine issue to be tried, and not to resolve disputed issues of fact. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). The Court must draw all reasonable inferences and resolve all ambiguities in the non-movant's favor, and construe the facts in the light most favorable to the non-movant. Id. at 255 ("The evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor."). However, the "mere existence of a scintilla of evidence in support of the [non-movant's] position will be insufficient" to withstand a motion for summary judgment. Id. at 252.

B. Supplemental Jurisdiction

Federal courts have original jurisdiction over questions of federal law. 28 U.S.C. § 1331. District courts also have supplemental jurisdiction over "all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution." 28 U.S.C. § 1367(a). "A state law claim forms part of the same controversy if it and the federal claim 'derive from a common nucleus of operative fact.'" Briarpatch Ltd., L.P. v. Phoenix Pictures, Inc., 373 F.3d 296, 308 (2d Cir. 2004), quoting Cicio v. Does, 321 F.3d 83, 97 (2d Cir. 2003), quoting City of Chicago v. Int'l Coll. of Surgeons, 522 U.S. 156, 165 (1997), quoting United Mine Workers v. Gibbs, 383 U.S. 715, 725 (1966).*fn1


PACA was enacted in 1930 to regulate the interstate sale and marketing of perishable agricultural commodities. Coosemans Specialties, Inc. v. Gargiulo, 485 F.3d 701, 705 (2d Cir. 2007). The statute "provides growers and sellers of agricultural products with 'a self-help tool enabling them to protect themselves against the abnormal risk of losses resulting from slow-pay and no-pay practices by buyers or receivers of fruits and vegetables.'" Id., quoting D.M. Rothman & Co. v. Korea Commercial Bank of N.Y., 411 F.3d 90, 93 (2d Cir. 2005). Under PACA, "perishable commodities or proceeds from the sale of those commodities are held in trust by the buyer for the benefit of the unpaid seller until full payment is made." Coosemans Specialties, 485 F.3d at 705. The statute provides, inter alia, that

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). PACA "affords produce sellers a 'highly unusual trust beneficiary status that permits them, in the case of defaults, to trump the buyers' other creditors, including secured ones.'" Coosemans Specialties, 485 F. 3d at 705, quoting Am. Banana Co. v. Republic Nat'l Bank of N.Y., 362 F.3d 33, 38 (2d Cir. 2004).

Perishable agricultural commodities governed by PACA include "[f]resh fruits and fresh vegetables of every kind and character." 7 U.S.C. § 499a(b)(4)(A). Generally speaking, a PACA dealer is a person "engaged in the business of buying or selling [covered agricultural commodities] in wholesale or jobbing quantities . . . in interstate or foreign commerce." 7 U.S.C. § 499a(b)(6). 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. There are three exceptions to the general rule that a person who engages in wholesale or jobbing quantities in interstate commerce is a PACA dealer. See 7 U.S.C. §§ 499a(b)(6)(A)-(C). The exception potentially relevant here provides that a person who deals in wholesale or jobbing quantities "solely for sale at retail" shall not be considered a dealer until "the cost of his purchases of perishable agricultural commodities in any calendar year are in excess of ...

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