In an interesting recent case, Abraham Produce Corp. v. MBS Brothers, Inc., et al., (March 20, 2020, United States District Court for the Northern District of New York, Case No. 19-CV-2638), the Court, by Judge Nicholas G. Garaufis, reminded parties litigating under the Perishable Agricultural Commodities Act (“PACA”), 7 U.S.C. § 499a, et. al., that even in default situations, where the defendants do nothing to contest the litigation in court, recovery of a judgment for the plaintiff is not automatic or a mere formality. The plaintiff still has the obligation to prove to the court that PACA is applicable and that the defendants do not fall within the statutory exception for establishing PACA liability.
In this case, Abraham alleged that it sold perishable agricultural commodities to defendants MBS Brothers, Inc., trading as Big Tree Market, and Young Chul Ahn. Abraham alleged that from June to November, 2018, it sold produce to the defendants in the amount of $180,000. Defendants failed to make full payment, and ended up owing Abraham $26,104.02. Plaintiff further alleged that the defendants failed to hold the produce, and the proceeds from the sale thereof, in trust for the benefit of the seller (Abraham), as required by section 499e(e)(2) of PACA, and therefore were liable to plaintiff for such amount.
The court noted that after summons had been served on both defendants, they did nothing with respect to defending themselves in the lawsuit. Accordingly, the court entered an order of default against them. Observing that an order of default is not the same thing as a default judgment, the court, on its own, examined the pleadings and supporting declarations and documents to see if the PACA requirements for a judgment were fully met.
The court noted that under PACA, a party, in order to be held liable as a “dealer” (the court determined that the defendants were not “brokers” under PACA), must have engaged in the business of buying or selling perishable agricultural produce in “wholesale jobbing quantities,” defined as aggregate quantities of all types of produce totaling more than one ton in any single day.
Assuming that the “wholesale jobbing quantities” qualification had been must, a court must then consider whether the statutory exception for unlicensed dealers, i.e., that a dealer must have had total purchases in an amount equal to or in excess of $230,000 for a single year, applies.
In both instances, said the court, the plaintiff Abraham failed to make the required showings. Therefore, the court dismissed plaintiff’s PACA claims, and, because the rest of plaintiff’s claims were state law claims over which the court did not have independent jurisdiction, it dismissed those claims as well, but without prejudice to the plaintiff re-filing such claims in state court. So, despite failing in its PACA claims, the plaintiff in Abraham was not left entirely without a remedy.
This leads one to consider how the “wholesale jobbing quantities” requirement, and the “under $230,000 exception” of PACA can be satisfied by a plaintiff. First, the prospective plaintiff should be sure that the one-ton a day requirement is met. If so, then second, the prospective plaintiff should check with the United States Department of Agriculture to see if the proposed defendants, or any of them, are licensed under PACA. If so, no problem. PACA apples to such licensed persons even if the $230,000 annual threshold is not met, as long as the “wholesale jobbing quantities” requirement has been satisfied.
If, however, the proposed defendants are unlicensed, then both such requirements must be met. With respect to the one ton a day requirement, in most cases meeting it should be pretty easy. If, as in Abraham, the plaintiff is a seller of produce, it presumably should be able to state, under oath of its own knowledge, whether the sum of any one day’s sale of its produce exceeded one ton. Furthermore, in the wholesale produce industry, one ton of produce in any one day is not an enormous or exceptional amount.
The second requirement, the $230,000 exception for unlicensed dealers, is more problematic. Of course, if the course of dealing between the parties themselves includes an amount equal to or in excess of $230,000 for one year, the burden is met. On the other hand, if, as in Abraham, the amount of one year’s dealing is less than $230,000 (in Abraham it was $180,000), then the prospective plaintiff must be able to show proof that the defendant’s dealings in any one year exceeded $230,000.
This can present a daunting challenge. Presumably, it would not be sufficient for a plaintiff to state in his pleadings that the defendant is a big company that operates nation-wide, therefore its produce dealings must be more than $230,000 for one year. Something more, for example, industry research based on the defendant’s fact-specific situation, will likely be required to satisfy the court that the under $230,000 exception does not apply because the requisite amount has been shown to exist.
Therefore, it behooves a prospective plaintiff in a PACA case to make sure that it can prove, to a court’s satisfaction, that the above tonnage and dollar amount (as to unlicensed dealers) requirements have been fully satisfied, and that the plaintiff can prove such satisfaction in a court of law under oath.