In Iscavo Avocados v. Pryor, 953 F.3d 916 (5th Cir. 2020), Iscavo Avocados and Villita Avocados sold produce (avocados) totaling over $70,000 in value, to Coram Deo Farms, Inc. According to defendant Adrian Pryor, an agent of Coram Deo, his sole business partner absconded with most of Coram Deo’s liquid assets, leaving the invoices for the purchase price of the aforementioned avocados unpaid. Iscavo and Villita then filed suit against Pryor, claiming that he was personally liable under PACA for the amounts that Coram Deo owed, plus interest. They argued that Pryor was personally liable because he “was in a position to control the PACA trust assets at issue and breached his fiduciary duty to preserve them.” Pryor did not contest that Coram Deo (now defunct) was liable for the invoices for the avocado sales. He only maintained that he was not personally liable for such debts.
The court noted that Pryor was an officer and the owner of 80% of Coram Deo. He was listed as the principal on Coram Deo’s PACA license, and had access to Coram Deo’s assets including its bank account. The Court then found that “[i]t is undisputed that…Pryor had the ability to control Coram Deo’s assets but failed to do so.” Therefore, the Fifth Circuit panel concluded, “[t]he district court did not…err in holding Pryor personally liable.”
The Court rejected Pryor’s argument that he was not personally liable because he was not involved in the day-to-day business operations and that his partner handled everything. The Court noted that, “[a]ctual involvement is not the standard,” that Pryor was personally liable precisely because he refused to exercise the authority that he possessed, i.e., to preserve the PACA trust assets for the benefit of the beneficiaries of the trust.
An unremarkable result, perhaps. But it may be that it is the Court’s ruling on the recovery of attorneys’ fees that is the most important part of the case.
In arguing that Iscavo and Villita were not entitled to their attorneys’ fees under PACA, or otherwise, Pryor noted that the claimants were relying on isolated, non-binding authorities, as precedent. The Court observed that while PACA does not expressly require an award of attorneys’ fees, it does state that PACA trust assets “must be held for the benefit of all unpaid sellers ‘until full payment of the sums owing in connection with such transactions has been received by the sellers.’” Citing cases from other jurisdictions (2nd, 3rd, 9th, and 11th Circuits), the Court stated that the phrase “sums owing in connection with” is broad, and that it “unambiguously encompasses not just the contract price …but also all the sums the buyer owes in connection with the transaction memorialized by the invoice.” Therefore, when the buyer [note: the opinion says, “seller,” but this may be a typographical error, perhaps it should be “buyer”) agrees to pay those fees in the same invoice, the fees are sums “‘owed in connection with’ the transaction.”
In its decision, the Court then awarded attorneys’ fees to plaintiff Villita because Villita’s sales invoice stated that, “Buyer also agrees to pay all costs of collection, including attorneys’ fees.” The Court therefore concluded that “[u]nder the PACA trust provision, Coram Deo was thus required to maintain trust assets sufficient to cover Villita’s attorneys fees incurred in its collection efforts. And because Pryor failed to exercise control over Coram Deo’s PACA assets to preserve them for Villita as a trust beneficiary, Pryor is personally liable for Villita’s attorneys’ fees.”
As for plaintiff Iscavo, the Court found that the record was unclear as to whether its invoices encompassed attorneys’ fees. Therefore, the Court remanded this issue back to the district court to explain its reasons for awarding fees to Iscavo, with further proceedings to follow.
The case is a good one for PACA sellers. As to personal liability, it emphasizes that it is the ability to control PACA trust assets, not the actual controlling, or non-controlling, of such assets, that counts. As to attorneys’ fees, the case serves as a reminder that sellers of perishable agricultural commodities (produce) should always, always, include on the invoices, in addition to PACA’s “magic words” requiring the preservation of PACA trust assets, some further magic words such as, “Buyer also agrees to pay all costs of collection, including attorneys’ fees.” Although not all of the federal appellate courts, and certainly not the Supreme Court, have spoken to this issue, those that have have ruled in favor of the claimants, so long as the right language appears on the invoices. The wording on the invoices is, quite simply, critical. Don’t ever overlook it.