Some financial rules to live by—never run up your credit cards, never borrow money from a friend, and never, ever stiff your produce supplier. Thanks to the trust provision of the Perishable Agricultural Commodities Act (PACA), avoiding the latter is more than a sound business practice for dealing in fresh produce, it’s part of the survival process.
The PACA trust was prompted not only by the perishable nature of fruits and vegetables, but the prevalence of produce sellers left unpaid when a buyer went bankrupt. If there was anything left after banks and other creditors secured their due, produce sellers might see some of their money, but the product was long gone. Congress saw this as a direct threat to the industry’s financial stability, so the PACA trust was created.
California attorney Marion Quesenbery characterizes the trust as “fabulous” for produce dealers. “If you file a lawsuit under PACA trust provisions, you have top priority of payment ahead of everyone. The idea is that the produce purchaser is supposed to hold assets in trust for you until you’re paid in full.”
Assuming the produce seller has followed proper requirements, including notice on every invoice that the buyer is subject to PACA trust laws, unpaid sellers have the right to file a PACA trust lawsuit if they are not paid. This means they can pursue payment from a company in default as well as other parties like banks that may have been paid with PACA trust assets.
“You can also go after the individual owners and operators of the produce company,” Quesenbery explains. “They’re personally liable for the debt. You can name the people who had control over the assets and didn’t pay you.” The action revolves around personal liability, something some buyers are not aware of.
Steven De Falco, attorney at Meuers Law Firm P.L. in Naples, FL, says the court ultimately determines who is personally liable and will be held responsible for amounts owing.
Filing Suit
The Pleading Stage
When demands for payment have failed and it’s time to engage an attorney, the process follows a standard pattern beginning with filing a complaint in the U.S. district court where the defendant is located. Next comes the process of locating the other party so it can be served with the complaint and a summons.
De Falco says this stage can be tricky if the defendant tries to avoid the summons. “It’s something we sometimes encounter,” he explains, when a defendant may adopt a ‘catch me if you can’ attitude, forcing the plaintiff to go to great lengths to serve a summons. Another option is to ask the court for a TRO, or temporary restraining order, to freeze the defendant’s PACA trust assets if there is reason to believe this money will go missing or be spent before a court date. The decision to take this route may depend on a defendant’s behavior in the case, including bounced checks, lack of communication, or an outright admission of being unable to pay.
Assuming a summons can be served, the defendant has 21 days to file an answer to the claim(s). At this point, the defendant can answer each complaint listed and/or file a counterclaim.
