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Dimare Homestead, Inc. and Dimare Ruskin, Inc v. the Alphas Company of New York

April 5, 2012

DIMARE HOMESTEAD, INC. AND DIMARE RUSKIN, INC., PLAINTIFFS,
v.
THE ALPHAS COMPANY OF NEW YORK, INC., PETER ALPHAS AND YANNI ALPHAS A/K/A JOHN ALPHAS, DEFENDANTS.



The opinion of the court was delivered by: P. Kevin Castel, District Judge:

REVISED FINDINGS OF FACT AND CONCLUSIONS OF LAW

Plaintiffs DiMare Homestead, Inc. and DiMare Ruskin, Inc. (the "DiMare Companies" or "DiMare") bring this action against the Alphas Company of New York ("Alphas"), Peter Alphas, and John "Yanni" Alphas. DiMare alleges that Alphas failed to pay for tomatoes in violation of the Perishable Agricultural Commodities Act, 7 U.S.C. § 499a et seq. ("PACA"). DiMare seeks $164,159.00 in damages pursuant to a series of unpaid invoices, plus interest and attorneys' fees.

This case was tried before the Court without a jury on November 14 and 15, 2011. At trial, both parties called live witnesses and offered documents into evidence. Thereafter, the Court received post-trial memoranda from the parties. This Opinion sets forth the Court's Finding of Facts and Conclusions of Law pursuant to Rule 52(a), FED. R. CIV. P.*fn1

DiMare brings claims under PACA and New York common law theories of quantum meruit and account stated. It also asserts a claim for failure to pay for goods received pursuant to Article 2 of the New York Uniform Commercial Code ("UCC").

The Court concludes that DiMare did not preserve its PACA trust rights for all but one of the unpaid invoices at issue in this case. Addressing DiMare's common law claims, the Court concludes that DiMare is entitled to the reasonable value of all tomatoes delivered to Alphas under its quantum meruit theory.

FINDINGS OF FACT

I. The Parties

1. The DiMare Companies are Florida corporations engaged in the business of buying and selling wholesale quantities of perishable agricultural commodities (or "produce") in interstate commerce. (PTO Stip. ¶ 1[a].)*fn2 The DiMare Companies were licensed dealers under PACA at all times relevant to this action. (Id.; PX-1.) James DiMare was sales manager and marketing manager for the DiMare Companies at all times relevant to this action. (Tr. 1 at 6.)

2. Alphas is a New York corporation engaged in the business of buying and selling wholesale quantities of produce, including tomatoes, at Hunts Point Terminal Market in Bronx, New York ("Hunts Point"). (Tr. 2 at 51--52.) Alphas was a licensed dealer under PACA at all times relevant to this action. (PTO Stip. ¶ 1[d].)

3. Defendants Peter Alphas and Yanni Alphas are officers and principal owners of Alphas, and have been signatories on Alphas' bank accounts since July 13, 2001. (Id.) Yanni Alphas negotiated prices and purchased produce, including tomatoes, on behalf of Alphas. (Tr. 2 at 51.) Peter Alphas received incoming produce from Alphas's wholesalers, including DiMare, at Hunts Point where he then resold the produce to retailers. (Tr. 2 at 87--89.)

II. General Business Practices and Course of Dealing

4. The DiMare Companies sell two "labels" of green tomatoes: DiMare and Diamond D. Each label corresponds to a quality grade established by the U.S. Department of Agriculture ("USDA"). Green tomatoes bearing the DiMare label are USDA Number 1 grade ("U.S. No. 1"), indicating that 85% or more of the load is free from defects. (Tr. 1 at 7--10; PX-2.) Green tomatoes bearing the Diamond D label are USDA Number 2 grade ("U.S. No. 2"), indicating that 60% or more of the load is free from defects. (Tr. 1 at 7--10.)

5. DiMare's practice was to ship tomatoes to a buyer before agreeing on price. (Tr. 1 at 25.) As sales manager, James DiMare would contact the buyer within three days after shipping the tomatoes to determine how many tomatoes the buyer was able to resell, and at what price. (Tr. 1 at 28--30.) DiMare and the buyer would continue those discussions for several days until the buyer sold the entire load. (Tr. 1 at 151--52; Tr. 2 at 38.) DiMare employed this general practice with Alphas at all times relevant to this action. (Tr. 1 at 61--62; Tr. 2 at 22--23, 38--39,53.)

6. As sales manager for the DiMare Companies, James DiMare also maintained a practice of adjusting the price for a shipment based upon prior dealings with a particular buyer. (Tr. 1 at 124--46.) During the relevant time period, DiMare sold freeze-damaged tomatoes to certain customers from tomato crops collected and harvested in January 2009, and in turn provided discounted prices to those buyers on later shipments. (Tr. 1 at 139--46; Tr. 2 at 39--47.)

7. Alphas began regularly purchasing green tomatoes from the DiMare Companies in October 2001. (Tr. 1 at 33--35; Tr. 2 at 52--54.) Alphas purchased tomatoes bearing both the DiMare and Diamond D labels. Tomatoes are the only type of perishable produce Alphas has ever purchased or received from DiMare. (Tr. 2 at 53--54.)

8. The parties used F.O.B. shipping points of Homestead, Florida, and Ruskin, Florida for all tomato deliveries during the relevant time period. (PTO Stip. ¶ 1[i]; PX-4.) The acronym F.O.B. refers to "Free On Board." A sales contract containing F.O.B. shipping terms indicates that transportation expenses and the risk of loss for the goods passes from the seller to the buyer at the specified location. (Tr. 1 at 13--14.) See, e.g., Taylor Devices, Inc. v. Walbridge Aldinger Co., 538 F. Supp. 2d 560, 566 n.3 (W.D.N.Y. 2008) (citing U.C.C. § 2-319(1) (2004)).

9. For all deliveries relevant to this action, DiMare sold its tomatoes to Alphas on a price-after-sale basis. A "price after sale" transaction is one in which the seller provides the buyer with goods and the parties do not agree on price until after the buyer has resold the goods. The seller and buyer then agree on a price "in light of the profits realized by the receiver." Tom Lange Co. v. A. Gagliano Co., Inc., 61 F.3d 1305, 1306 n.1 (7th Cir. 1995) (quoting La Verne Co-Operative Citrus Ass'n v. Mendelson-Zeller Co., 46 Agric. Dec. 1673 (1987)); see also M. Offutt Co. v. Caruso Produce, Inc., 49 Agric. Dec. 596 (1990) ("[P]rice after sale . . . [refers to an] agreement upon a price after completion of resales of the produce.").

10. The USDA's Agricultural Marketing Service generates a daily Tomato Fax Report. (PTO Stip. ¶ 1[h]; Tr. 1 at 14--15.) The Tomato Fax Report contains F.O.B. shipping point prices for tomatoes by geographic sales market. (Tr. 1 at 14--18; PX-2.) Each report contains F.O.B. market prices from the prior day. (Tr. 1 at 14--18; 106--07.) The report pertaining to the New York market includes daily tomato prices for both U.S. No. 1 and No. 2 grade tomatoes. (PX-2 at 3.) James DiMare generally consulted the Tomato Fax Report prior to negotiating prices with his customers. (Tr. 1 at 107.)

11. Regardless of the price agreed to by the parties, DiMare charged all buyers, including Alphas, an up-front charge of $1.95 per unit (twenty-five-pound carton) for ripening and loading the tomatoes onto trucks prior to shipping. (Tr. 1 at 13--14, 31; see, e.g., PX-4 at 2.) DiMare would deduct this up-front loading charge from the buyer's resale price when negotiating its wholesale price to the buyer. (Tr. 1 at 30--32.) In addition to the $1.95 per carton charge, DiMare also billed Alphas $23.50 per load for the temperature recording equipment used to ship the tomatoes. (PX-4.)

12. With the exception of three loads, Alphas arranged for transportation and shipping of each load of tomatoes it purchased from DiMare during the relevant time period. (Tr. 1 at 40-- 41, 67--69.)

13. DiMare billed its customers, including Alphas, with invoices. Each invoice corresponded to a specific shipment of tomatoes. (See, e.g., PX-4.) DiMare would prepare and mail an invoice only after agreeing on price with the buyer after reselling the tomatoes. (Tr. 1 at 27--29, 32--33; Tr. 2 at 23.) In general, DiMare would mail its invoice to the customer within one day after generating the invoice. This date was reflected as the "invoice date" on the face of each invoice. (Tr. 1 at 33; see, e.g., PX-4.)

14. The invoices that DiMare generated for each shipment to Alphas contained the shipment date, the date the invoice was created, the quantity of tomatoes shipped, the label of tomatoes shipped, and the price per carton for the tomatoes. (PX-4.) Each invoice noted the $1.95 per unit loading surcharge as "ENVIRONMENTAL/HANDLING" and the additional $23.50 charge for "TEMPERATURE RECORDER." (Id.)

15. All invoices also stated: "All sales due 10 days from acceptance." (Id.) Both parties understood this remark as requiring payment within ten days following an agreement on price. James DiMare included this statement on the face of each invoice to indicate that he "expect[ed] a check in ten days." (Tr. 1 at 55.) As purchaser for Alphas, Yanni Alphas also understood the payment terms with DiMare to be due ten days after an oral agreement on price for the tomatoes delivered. (Tr. 2 at 85.)

16. The face of each invoice DiMare sent to Alphas also included the following: "The perishable agricultural commodities listed on this invoice are sold subject to the statutory trust authorized by section 5(c) of the Perishable Agricultural Commodities Act, 1930 (7 U.S.C. 499e(c)). The seller of these commodities retains a trust claim over these commodities, all inventories of food or other products derived from these commodities, and any receivable or proceeds from the sale of these commodities until full payment is received."

(PX-4; Tr. 1 at 57.) James DiMare included this language on each invoice in order to notify customers of its intent to invoke PACA's statutory trust protections, described more fully in the Court's Conclusions of Law.

17. Each invoice DiMare sent to Alphas also stated on its face: "Interest at 1.5% a month added to unpaid balance. Interest and attorneys [sic] fees necessary to collect payment are sums owing in connection with the transaction." (PTO Stip. ¶ 1[g]; see, e.g., PX-4 at 2.)

18. During the relevant time period, Alphas never provided DiMare with a written purchase order or other document prior to shipment from DiMare. (Tr. 1 at 51.) The parties also had no prior written agreement governing their relationship. (Tr. 1 at 36--37; Tr. 2 at 53--57.)

III. Tomato Shipments at Issue

19. The events at issue concern tomatoes shipments made from DiMare to Alphas between February and June 2009. (PX-4 at 1.) The record reflects that the DiMare Companies generated a total of twenty-eight invoices for shipments to Alphas from February 10, 2009 through May 13, 2009. (PTO Stip. Ex. B; PX-4.) Twenty-three invoices were for shipments by DiMare Homestead, Inc., and five were for shipments by DiMare Ruskin, Inc. (PX-4 at 1, 25.)

20. The twenty-eight loads and corresponding invoices at issue are as follows: Invoice number Shipping date Invoice date Product Quantity (in delivered cartons) 317 2/10/09 2/13/09 DiMare 720 Diamond D 880 543 2/21/09 5/4/09 DiMare 1,200 Diamond D 320 677 3/1/09 5/4/09 Diamond D 1,574 730 3/5/09 5/4/09 DiMare 960 DiMare 240 Diamond D 388 Diamond D 12 751 3/9/09 5/4/09 Diamond D 1,600 777 3/23/09 5/4/09 Diamond D 1,600 813 3/12/09 5/4/09 DiMare 1,600 932 3/19/09 5/4/09 Diamond D 1,600 1026 3/24/09 5/13/09 DiMare 1,600 1345 3/30/09 5/20/09 DiMare 1,600 1394 4/2/09 5/20/09 DiMare 1,600 1422 4/3/09 5/20/09 Diamond D 1,600 1451 4/7/09 5/20/09 Diamond D 1,600 1477 4/3/09 5/20/09 DiMare 1,600 1587 4/6/09 5/20/09 DiMare 1,600 1608 4/11/09 5/20/09 DiMare 1,600 1711 4/14/09 5/21/09 Diamond D 1,600 1736 4/14/09 5/21/09 DiMare 1,600 1803 4/21/09 5/22/09 Diamond D 1,600 1843 4/20/09 6/1/09 DiMare 1,600 1907 4/29/09 6/1/09 DiMare 1,600 1931 5/2/09 5/22/09 Diamond D 1,60068692 4/21/09 6/18/09 Vine (XL) 400 Vine (M) 400 24 5/6/09 6/18/09 Diamond D 1,600 62 5/6/09 6/18/09 DiMare 1,600 99 5/9/09 6/18/09 Diamond D 1,600 213 5/13/09 6/19/09 Diamond D 1,600 346 5/9/09 6/30/09 Diamond D 640

21. Each invoice represents shipments only of tomatoes, and only to Alphas at its Hunts Point location in Bronx, New York. (Tr. 1 at 41, 46.)

22. For all shipments at issue, Peter or Yanni Alphas accepted delivery of the tomatoes on behalf of Alphas at the Hunts Point market. (Tr. 1 at 35--37; Tr. 2 at 78--80.)

23. The USDA employs produce inspectors. If a buyer receives a shipment of produce and believes it to be defective or of poor quality, he may request a USDA inspection of the produce. Following the inspection, the USDA officer prepares an inspection certificate that states whether the produce passes under the applicable grading scale. (Tr. 1 at 70; PX-5.) USDA inspectors were frequently present at Hunts Point during the events at issue. (Tr. 2 at 67.)

24. In January 2009, a substantial number of Florida tomato crops suffered frost and freeze-related damage because of unusually cold weather. (Tr. 1 at 37--39; Tr. 2 at 58--59.) Neither of the DiMare companies shipped tomatoes to Alphas in January 2009. (Id.)

25. Alphas disputed the quality and salability of the tomatoes it received from DiMare. Yanni Alphas testified that because of the January freeze, there were "tremendous quality issues" and "tremendous problems" with the tomatoes Alphas received from DiMare. (Tr. 2 at 58.) In a fax dated March 30, 2009, Yanni Alphas wrote to James DiMare that the tomatoes shipped in lot 777 were "100% worthless." (DX-3 at 1.)

26. Alphas applied for and obtained USDA inspection reports on four shipments of DiMare tomatoes during the relevant time period. (PX-5; Tr. 1 at 45, 69--84; Tr. 2 at 71--73.) Alphas requested two inspections of DiMare-shipped tomatoes on March 4, 2009. (PX-5 at 1, 2.) Both inspections were for DiMare's Diamond D, U.S. No. 2 grade tomatoes. (Id.; Tr. 1 at 69--78.) Both shipments received a passing grade. Neither the certificates nor the parties can confirm the DiMare-assigned lot number of the tomatoes subject to these two inspections. (Id.)

27. Alphas requested and obtained two additional USDA inspections of DiMare-shipped tomatoes during the events at issue. (PX-5 at 3, 4; Tr. 1 at 78--84.) An inspection report dated March 26, 2009 assigned a twenty-five-pound carton of Diamond D tomatoes a failing grade by erroneously applying the USDA standard for U.S. No. 1 grade tomatoes. (Tr. 1 at 78-- 80.) This error notwithstanding, James DiMare admitted that the load still failed to meet the applicable USDA standard because of excess decay. (Id. at 82.) The last inspection report obtained by Alphas, dated May 4, 2009, erroneously assigned a failing grade to a shipment of DiMare U.S. No. 2 grade tomatoes. According to the inspection report, only 13% of the tomatoes suffered serious damage, within the 40% threshold under the U.S. No. 2 standard. (PX-5 at 4; Tr. 2 at 83--84.)

28. Additionally, Alphas dumped four loads (twenty pallets) of tomatoes at a pig farm in Massachusetts during the relevant time period. (Tr. 2 at 59--61, 68.) Alphas was charged $2,700 in dumping charges by the pig farm. (PX-12.) The pig farm's invoice to Alphas does not state or otherwise indicate that the dumped tomatoes came from DiMare. (See id.)

29. In a fax to DiMare dated March 30, 2009, Yanni Alphas sought to recover from DiMare the $2,700 in dumping charges Alphas incurred. (DX-3 at 1.) Referring to DiMare load 777, Yanni Alphas also requested reimbursement for its freight charges and its $151.00 expense obtaining a USDA inspection of load 777. (Id.; Tr. 2 at 7--9.) The fax did not include or cite to a USDA dumping certificate, or offer any other documents showing Alphas's dumping-related expenses.

30. Despite contending that "most of the product [it] received from DiMare had significant problems" and that "every load" had "rotten tomatoes" between February and May 2009 (Tr. 2 at 59), Alphas never rejected or refused to accept any of the tomato shipments at issue. (Tr. 1 at 84; Tr. 2 at 79.)

31. Alphas also did not obtain or provide to DiMare a USDA dumping certificate for any of the tomatoes claimed as defective. (Tr. 1 at 84.) Yanni Alphas testified that Alphas "tried to sell" DiMare tomatoes that were "rotten" from the January freeze, but "just discarded" those it was not able to sell. (Tr. 2 at 58--59.)

IV. Disputed Invoices

32. DiMare's claims against Alphas arise from Alphas's failure to fully pay DiMare's invoices billing Alphas for the tomato shipments described above.

33. Following each shipment, James DiMare and Yanni Alphas engaged in telephone discussions attempting to agree on price, but were unable to do so. (Tr. 1 at 61--62, 87, 94--95.)

34. The parties also exchanged a series of faxes attempting to agree on price for several of the disputed shipments. (Tr. 1 at 64--65; 97; Tr. 2 at 6--32.; see, e.g., DX-3.) In a fax to Yanni Alphas dated May 13, 2009, James DiMare requested pricing for lot numbers 1345, 1422, 1451, 1477, 1587, 1608, 1711, 1736, 1803, 1843, 1907, and 1931. (DX-3 at 2.)*fn3 Alphas replied by faxing back suggested prices handwritten on the same document. (Tr. 2 at 10--15.) James DiMare called Yanni Alphas after receiving the response fax and rejected the proposed prices as inadequate. (DX-3 at 2; Tr. 2 at 14--17.) DiMare then proposed counter-prices for the open invoices listed above, to which neither Yanni Alphas nor any other representative of the Alphas Company responded. (Id.)

35. DiMare sent three additional faxes to Alphas in May and June 2009 attempting to establish prices for the unpaid shipments. (DX-5 at 3--5.) James DiMare sent a fax dated May 22, 2009 requesting a price of at least $2.95 for lot number 1803, to which he received no response from Alphas. (DX-5 at 3; Tr. 2 at 18--21.) In two additional faxes dated June 3 and June 10, DiMare requested payment for lot numbers 24, 62, 99, 213, and 346. (DX-5 at 4, 5; Tr. 2 at 24--31.) Alphas replied to DiMare's fax dated June 3, 2009 with suggested prices for these five lots, which DiMare rejected in a subsequent telephone call to Yanni Alphas. (Tr. 2 at 26-- 28.) In response to DiMare's June 10, 2009 fax (DX-5 at 5), Yanni Alphas handwrote suggested prices on the same document. (Id.; Tr. 2 at 29--30.) James DiMare never accepted Yanni Alphas's suggested prices for these lots, orally or otherwise. (Tr. 2 at 30.)

36. Despite these communications, the parties never manifested an agreement, oral or written, to prices for any of the loads DiMare delivered to Alphas from February 10, 2009 through May 13, 2009. (Tr. 2 at 6--32.)

37. Ultimately, James DiMare himself assigned a price to each load and generated invoices reflecting these amounts. (Tr. 1 at 64--65; Tr. 2 at 23--32.) He generally did so by adding one dollar to the prices had Yanni Alphas suggested in the faxes described above. For all but one invoice, DiMare added one dollar per unit for shipments of DiMare tomatoes (U.S. No. 1 grade) and charged a flat rate of $2.95 per unit for shipments of its Diamond D tomatoes (U.S. No. 2 grade). (Tr. 1 at 66--67; Tr. 2 at 18--22.) For invoice 1345, dated May 20, 2009, Mr. DiMare charged Alphas $3.00 per carton for 1,600 DiMare tomatoes (U.S. No. 1 grade), plus the $1.95 transportation fee. (Tr. 1 at 66; PX-4 at 12.)

38. For three of the disputed loads-99, 213, and 346-James DiMare calculated a per-unit price that accounted for DiMare's transportation costs in shipping the tomatoes to Alphas. (Tr. 1 at 67--69; PX-4 at 29--31.)

39. James DiMare did not rely on the USDA Tomato Fax Report in assigning prices to these loads. (Tr. 1 at 64--65.)

40. James DiMare admitted to having mistakenly overcharged Alphas on two of the disputed shipments, reflected in invoices 751 and 1803. Invoice 751, dated May 4, 2009, and invoice 1803, dated May 22, 2009, each purports to bill Alphas for a shipment of 1,600 Diamond D (U.S. No. 2 grade) tomatoes at $2.00 per carton. (PX-4 at 7, 21.) DiMare erred in charging a $2.00 per carton ...


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