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Dimare Homestead, Inc., et al. v. Klayman Produce Co.

October 31, 2012

DIMARE HOMESTEAD, INC., ET AL.
v.
KLAYMAN PRODUCE CO., INC. ET AL.



The opinion of the court was delivered by: McLaughlin, J.

MEMORANDUM

The plaintiffs in this case, produce sellers DiMare Homestead, Inc. ("DiMare Homestead") and DiMare Ruskin, Inc. ("DiMare Ruskin"), instituted the present action against Klayman Produce Co., Inc. ("Klayman Produce") and Mark Klayman ("Klayman") to recover amounts allegedly owed to the plaintiffs as trust beneficiaries under the Perishable Agricultural Commodities Act ("PACA"). The plaintiffs seek recovery of the unpaid purchase price of agricultural commodities sold to Klayman Produce, as well as interest and attorneys' fees. Default has been entered against Klayman Produce and Klayman, and the plaintiffs now move for default judgment.

The Court will grant in part and deny without prejudice in part the plaintiffs' motion for default judgment.

I. Factual Background

DiMare Homestead and DiMare Ruskin are wholesale produce sellers subject to and licensed under PACA. Perez Decl. ¶ 3 & Ex. 1. Between January 7, 2012 and February 18, 2012, DiMare Homestead sold and delivered to Klayman Produce eleven shipments of tomatoes for which it has not been paid. Id. ¶ 8 & Ex. 3. Between December 27, 2011 and January 4, 2012, DiMare Ruskin also sold and delivered to Klayman Produce four shipments of plums and tomatoes. Id., Ex. 4. DiMare Ruskin has yet to be paid for these agricultural commodities, as well. Id. ¶ 9. DiMare Homestead and DiMare Ruskin have sued Klayman Produce and Mark Klayman, an officer of Klayman Produce, for the unpaid purchase price and other sums. See id. ¶ 4.

II. Analysis

The Court finds that Klayman Produce breached its

fiduciary obligations under PACA by failing to pay DiMare Homestead and DiMare Ruskin for the produce it purchased from them. The record presently before the Court does not demonstrate, however, that Klayman, an officer of Klayman Produce, should also be held personally liable for the company's breach owing to his position within the corporation. Nor does the current record permit the plaintiffs to recover the full scope of damages that they have requested. The plaintiffs have not shown that they are contractually entitled to interest or attorneys' fees related to the transactions at issue. They are, therefore, only entitled to recovery of the unpaid price of their agricultural commodities and related delivery charges.

A. DiMare Homestead and DiMare Ruskin PACA Trusts PACA was enacted in 1930 to "deter unfair business practices and promote financial responsibility in the perishable agricultural goods market." Weis-Buy Servs., Inc. v. Paglia, 411 F.3d 415, 419 (3d Cir. 2005). The Act, which has subsequently been amended, was "designed primarily for the protection of the producers of perishable agricultural products" and to ensure that they are paid for deliveries of those perishable goods. Id. at 419-20 (quotation marks and citation omitted). PACA imposes a statutory trust in favor of produce sellers on all produce-related assets. 7 U.S.C. § 499e(c)(2). When a produce seller conveys perishable agricultural commodities to a merchant, dealer, or broker, the recipient must maintain, among other things, the produce and any receivables or proceeds from the sale thereof for the benefit of the unpaid produce seller until full payment has been made. Id. The dealer is required to "make full payment promptly" to the agricultural seller. Id. § 499b(4).

To create a PACA trust, a produce seller must provide the buyer with notice of its intention to preserve trust benefits. Notice may appear on a merchant's invoices in the following form: "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 receivables or proceeds from the sale of these commodities until full payment is received." Id. § 499e(c)(4).

The plaintiffs here included the necessary language on each of their invoices to Klayman Produce, thereby creating a statutory trust under PACA in which their agricultural products are included as trust assets. See Perez Decl., Exs. 3-4.

B. Klayman Produce's PACA Liability As purchaser of the plaintiffs' produce, Klayman

Produce had an obligation to hold those agricultural commodities for the benefit of DiMare Homestead and DiMare Ruskin and to pay the plaintiffs promptly for their produce. The plaintiffs have submitted a declaration from DiMare Homestead's controller, Mark

A. Perez, attesting to the fact that Klayman Produce has not paid the plaintiffs for the produce. Perez Decl. ¶¶ 8-9, 15-16. This is a violation of Klayman Produce's fiduciary duties under PACA. 7 U.S.C. §§ 499b(4), 499e(c)(2). Entry of ...


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