PACA, Poor Recordkeeping & Personal Liability

Earlier this year Judge William H. Pauley III of the United States District Court for the Southern District of New York issued an opinion in a case involving claims under the Perishable Agricultural Commodities Act (“PACA”) by a produce wholesaler (“Moza”) against another wholesaler (“Tumi”) and several of Tumi’s officers and agents.

Moza claimed it was owed $222,709.93 for unpaid bills for produce shipped to Tumi and for certain freight charges. Moza also contended it was entitled to prejudgment interest on the amounts claimed.

The court noted that neither party was “adept at recordkeeping, and the evidence at trial was disorganized.” Much of the oral testimony was contradictory, so the judge had his hands full trying to determine who was right and who was wrong.

Without getting into the details of each particular claim, which involved about two dozen separate shipments and sales, the primary issues before the court were:

  1. Whether Moza, the seller, received full payment, and was entitled to reimbursement for freight charges.
  2. Whether Moza preserved its PACA trust rights.
  3. Whether the individual defendants, and a successor corporate defendant, were liable under PACA.
  4. Whether Moza was entitled to pre-judgment interest.

As to (1) above, the court concluded, contrary to Tumi’s arguments, that as to shipments that were allegedly inspected by the USDA and found wanting, Tumi failed to prove its case that Moza either agreed to accept lesser amounts for such shipments, or that according to industry custom and usage payment of lesser amounts was warranted.

With respect to transactions paid with cash, the court found that the invoices which provided that Moza would accept lesser amounts were not reliable, particularly in the face of the testimony of Moza’s agent that his signature on such invoices had been forged.

With respect to transactions involving revised invoices for increased amounts of produce shipped, the court found that Moza had met its burden of showing that such transactions had in fact occurred and that Moza was entitled to full payments of such revised invoices.

The court also found that where Tumi had failed to offer any evidence of payment of certain invoices, all of those invoices remained due.

However, as to Moza’s claim for freight charges, the court found that because Tumi never agreed to the payment of freight charges with respect to its transactions with Moza, Moza could not recover for the same.

As to (2) above, the court found that Moza had preserved its PACA trust rights by including on its invoices the requisite PACA language. The judge rejected Tumi’s argument that Moza failed to prove that it protected its PACA rights because it did not prove at trial when the invoices were created and when they were served on Tumi. The judge noted that Moza ”was not required to show delivery of the invoices beyond a metaphysical doubt.” The testimony of Moza’a agent that the invoices were delivered to Tumi normally within a day after the produce was shipped was sufficient.

Regarding (3) above, the court found that the company’s principal, who conceded that she controlled Tumi’s finances, and who signed payment checks to Moza, was personally liable as a person who was in the position to control the assets of the PACA trust and who failed to preserve them.
As to another person, “Mike,” who was not on the PACA license as a principal, and who was not an officer or director of Tumi, and who did not have authority to write checks or make withdrawals from the corporate bank account, and who described himself as only a salesman, the court nonetheless held him to be personally liable. The court noted that the evidence showed that Mike was the person who had almost all of the contact with Moza. It also did not help his case when Moza’s agent testified that Tumi’s principal told him, with respect to his inquiries about short payment checks, that he should “talk to Mike, that’s between you and Mike; I just write the check.” The court also noted that a string of text messages corroborated that testimony.

As to a third individual, “William,” the judge found him not to be personally liable, even though his name was on the PACA license, and he had been a majority shareholder of the company, where Moza had presented only “conclusory and undetailed evidence” of his involvement and control over PACA trust assets.

Finally, the court concluded that a successor company that assumed and continued Tumi’s business after Tumi’s dissolution, was not liable where Moza failed to present any evidence of the “hallmarks of continuation,” especially evidence of continuity of ownership of the two companies.

As to (4) above, the judge, exercising his discretion, declined to award prejudgment interest to Moza, noting that PACA does not provide for prejudgment interest, and the contract between the parties (the invoices and documents of shipment) does not provide for it.

In conclusion, in what must be seen as a substantial victory for Moza, even though it did not get everything it wanted, the court entered judgment against Tumi and the above two individual defendants in the amount of $218,921.73, which was approximately 98% of Moza’s total claim, less interest.

Moza, LLC v. Tumi Produce Int’l Corp., et al., 17 cv 1331 (S.D.N.Y. 2019)