“All assets are assumed to be part of the trust; the buyer must prove otherwise,” explains Larry Meuers of Meuers Law Firm PL in Naples, FL. “If [the buyer] takes cash from the sale of produce and buys a truck or inventory, it becomes part of the PACA trust. The whole account is tainted with produce.”
Claims Administration
Under a signed order, the court appoints a special PACA counsel to act as trustee. This can be the seller’s counsel, buyer’s counsel, or independent counsel. The company is ordered to turn over financial information to identify all assets and liabilities. The trustee then marshals and liquidates company assets. Several people may be assigned (and in some cases compensated) to handle various legal and collection tasks. These include sending demand letters to collect accounts receivable, selling inventory, and notifying creditors.
Potential PACA trust creditors are then mailed a notice of all dates and deadlines relevant to the claims procedure. “These creditors [with valid claims under the trust] all have the same beneficial rights to a single pool of limited assets,” states Amendola, and will share in the recovery.
Amendola stresses that companies owed money must join the lawsuit to secure their share. To do so, they must file a ‘complaint in intervention’ and a PACA proof of claim along with supporting documents by the PACA claims bar date or deadline. Generally, the court sets this deadline 60 days from the date the initial claims procedure order was established. A PACA supplier that fails to meet the filing deadline is forever barred from asserting any PACA claim against the buyer.
Anyone with an objection to the validity or amount of trust claims must file an objection by a specific deadline, usually 30 days after the bar date.
The deadline for responding to objections is often set within the following 20 days. Afterwards, counsel prepares a PACA Trust Distribution Chart, listing all claims filed in the case, amounts deemed valid (or invalid, due to claimants not filing a timely objection), any amount subject to a pending objection, and the amount of any objection already resolved by settlement.
The chart also lists the funds available for distribution, including the share held back pending dispute resolution. If funds are insufficient to cover all claims, PACA trust beneficiaries share the proceeds on a pro-rata basis.
Parties have a period of time to object to the distribution, after which undisputed claims are paid and the parties work to resolve the disputes. Those who settle receive their pro-rata share. If a disputed claim has been disallowed, the pro-rata share is distributed to the other claimants. When no agreement is reached, a motion to determine the validity of the claim is filed by either party with the court.
BENEFITS
The PACA trust claims procedure has several benefits. “The biggest benefit is efficiency, not only in administering all the claims but also what we call judicial economy, or efficiency in the courts,” Amendola observes. All suits are pooled together into one, rather than each creditor filing a lawsuit to collect money. He also points to control of assets—the order not only provides a freeze on the company’s assets but also assets in a third party’s hands, like a bank.
