United States District Court, S.D. New York
OPINION AND ORDER
EDGARDO RAMOS, District Judge.
Plaintiff New V & J Produce Corp. ("New V & J" or the "Plaintiff") commenced this action against Defendants NYCCaterers Inc., d/b/a Buzzeo's Catering ("Buzzeo's"), d/b/a Culinary Concepts Services, Inc., and Joseph S. Palma (collectively, "Defendants" or "NYCCaterers") for, inter alia, failure to pay for deliveries of wholesale quantities of produce under the Perishable Agricultural Commodities Act, 7 U.S.C. § 499e(c) (1930) ("PACA" or the "Act"). On December 9, 2013, Plaintiff voluntarily dismissed the case pursuant to Fed.R.Civ.P. 41(a)(1)(A)(i). On the same day, Defendants brought the instant motion for sanctions under Rule 11 of the Federal Rules of Civil Procedure against Plaintiff and its counsel, Cynthia Attard ("Attard"), Doc. 19. Defendants argue that Plaintiff's improper assertion of federal jurisdiction entitles them to monetary sanctions under Rule 11(c)(1).
For the reasons discussed below, while the Court finds that Plaintiff's counsel violated Rule 11, Defendants' motion for monetary sanctions is DENIED.
A. Background on PACA
PACA is a federal law that regulates the sale of perishable agricultural commodities, which are defined as, "whether or not frozen or packed in ice: [f]resh fruits and fresh vegetables of every kind and character.'" Endico Potatoes, Inc. v. CITGroup/Factoring, Inc., 67 F.3d 1063, 1066, 1070 (2d Cir. 1995) (quoting 7 U.S.C. § 499a(b)(4)(A)). Congress enacted PACA "in order to provide growers and sellers of agricultural commodities with a self-help tool... enabl[ing] them to protect themselves against the abnormal risk of losses resulting from slow-pay or no-pay practices by buyers or receivers of fruits and vegetables.'" D.M. Rothman & Co. v. Korea Comm. Bank of N.Y., 411 F.3d 90, 93 (2d Cir. 2005) (quoting Regulations Under the Perishable Agricultural Commodities Act; Addition of Provisions to Effect a Statutory Trust, Final Rule, 49 Fed. Reg. 45735, 45737 (USDA Nov. 20, 1984)).
PACA applies to any merchant, dealer or broker of produce in all transactions, "not simply to the ones that have secured licenses.'" A & J Produce Corp. v. Chang, 385 F.Supp.2d 354, 359 (S.D.N.Y. 2005) (quoting A & J Produce Corp. v. Foodways, Inc., No. 88 Civ. 0754 (MBM), 1988 WL 120159, at *1 (S.D.N.Y. Nov. 2, 1988)). Under PACA, a "dealer" is defined as "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). However, no person that buys produce solely for sale at retail is considered a dealer unless: (1) the invoice cost of his purchases in any calendar year exceed $230, 000, see 7 U.S.C. § 499e(b)(6)(B); or (2) he ships, receives, or contracts to ship or receive produce totaling one ton (2, 000 pounds) or more in weight in any day. 7 C.F.R. § 46.2(x).
B. The Litigation
Plaintiff, a wholesale buyer and seller of produce and a licensed PACA dealer, commenced the instant action on July 12, 2013. Compl. ¶¶ 1, 3. Plaintiff claimed that it sold $9, 314.75 worth of produce to Defendant NYCCaterers during the period January 1 through August 2, 2012, and that NYCCaterers failed to pay for the produce. See id. ¶¶ 10-14. In the Complaint, Plaintiff alleged that NYCCaterers was a PACA dealer and therefore asserted federal question jurisdiction under PACA. Id. ¶¶ 1, 4. According to Defendants, however, NYCCaterers is not subject to PACA because it has never purchased $230, 000 or more of produce in any year and has never had 2, 000 pounds or more of produce delivered or shipped in one day. See 7 U.S.C. § 499a(b)(6)(B); 7 C.F.R. § 46.2(x). The Complaint also asserts diversity jurisdiction pursuant to 28 U.S.C. § 1332. Id. ¶ 1. However, the Complaint plainly acknowledges that both Plaintiff and NYCCaterers are domiciled in New York. Id. ¶¶ 3-4.
In a September 25, 2013 letter to the Court, Perry Dean Freedman, counsel for Defendants, requested a pre-motion conference to seek leave to dismiss the Complaint for lack of subject matter jurisdiction and failure to state a claim. Letter from Perry Dean Freedman (Sept. 25, 2013), Doc. 8. Mr. Freedman argued that Plaintiff could not achieve jurisdiction on either ground set forth in the Complaint. Id. On September 26, 2013, the Court scheduled a pre-motion conference for October 16, 2013, and directed Plaintiff to submit a written response to Defendants' letter by October 9, 2013. Doc. 9.
Ms. Attard did not respond by October 9. Instead, by letter to the Court dated October 10, 2013, which did not address the merits of Defendants' letter, Ms. Attard requested the following documentation from Defendants: (i) an affidavit from NYCCaterers demonstrating, inter alia, that Defendants never purchased $230, 000 or more of commodities in one year, never had 2, 000 pounds of commodities delivered on one day, and has never "been engaged in the business of receiving commodities for sale, on commission, on behalf of another"; (ii) a copy of NYCCaterers' sales tax returns for the year 2012; and (iii) copies of all invoices relating to NYCCaterers' produce-related purchases for the year 2012. Letter from Cynthia Attard (Oct. 10, 2013), Doc. 10. Plaintiff's counsel noted that "[u]pon receipt of the above requested items, strong consideration in withdrawing the action to avoid further appearances or motion practice shall take place." Id.
Mr. Freedman submitted a letter to the Court that same day in which he argued that Ms. Attard's letter should be rejected as untimely, and advised the Court that he "reject[s] plaintiff's counsel's offer" to withdraw the action upon receipt of the specified documents. Letter from Perry Dean Freedman (Oct. 10, 2013), Doc. 11.
At the pre-motion conference held on October 16, 2013, the Court directed Defendants to submit to Plaintiff an affidavit and other documents relevant to the applicability of PACA by October 30, 2013. See Dkt. 13 Civ. 4861 (ER) (Minute Entry 10/16/2013). The Court also granted Defendants leave to file a motion to dismiss in the event that Plaintiff did not voluntarily withdraw the action upon receipt of such documentation. Id.
In response to the Court's direction, on October 18, 2013, Defendant Palma submitted an affidavit in which he stated that he is an officer of NYCCaterers, which operates for the sole purposes of running the "My Kitchen" restaurant in Forest Hills, New York, and "doing some in-house catering." Palma Aff. ¶¶ 1-3, Doc. 15. Palma attests that in 2012, NYCCaterers purchased produce solely from New V & J, and that such transactions totaled $9, 487.90. Id. ¶¶ 4, 5. According to Palma, NYCCaterers has never ...