In Great Lakes Packers v. P.K. Produce, Case No. 1:18-cv-2849, (N.D. Ohio Oct. 6, 2020), plaintiff Great Lakes filed a PACA case against defendant P.K. Produce, alleging that it sold produce to the defendant which then failed to pay for the same. The case was later consolidated with other cases, including one brought by C.H. Robinson Worldwide, Inc., against the same defendant plus some additional individual defendants (the purported owners and principals of P.K. Produce) for non-payment of produce supplied, delivered and accepted.
As to certain of the claims, the parties agreed to the entry of a preliminary injunction prohibiting the defendants from transferring, selling, or otherwise encumbering any of their real or personal assets derived or related to the PACA trust until further order of court, or unless all proceeds from the transfer or sale are immediately deposited, upon sale or transfer, to P.K. Produce’s operating account at its bank.
After the addition of additional parties and claims to the case, it was transferred to a Magistrate Judge for mediation. This attempt to settle the case, was, however, unsuccessful, and it was returned to the original judge for consideration of the defendants’ factual and legal defenses to various of the plaintiffs’ claims.
With respect to factual defenses, defendants contended that they had made certain payments of some of the plaintiffs’ invoices, but that these payments had not been properly credited. After examining the documents, including plaintiffs’ invoices and defendants’ cancelled checks and other evidence of payment, the Court concluded that such factual claims were without merit. The next legal defense, that plaintiffs failed to provide inspection reports relating to adjustments made as to certain invoices, was similarly rejected by the court.
Turning to the legal defenses, the first one was that the plaintiffs’ claims were invalid for “failure to submit a valid PACA license.” In response to this contention, the plaintiffs claimed that their PACA license had been submitted in the case, in one instance by attaching copies to a Reply Brief, and in others by producing documents in discovery. The plaintiffs also noted that PACA licenses are publicly available through and from the United States Department of Agriculture.
Perhaps more important, the Court observed that defendants cited no authority to the effect that plaintiffs in a PACA case are required to attach copies of their PACA licenses to, in this case, their Joint Motion for Entry of Order Determining Validity and Extent of PACA Trust Claims.
In this regard, it should be noted that there is no specific requirement in PACA itself that, in order to have standing to sue under the statute, an aggrieved party must have obtained a PACA license. In fact, section 499e of statute provides that, “if any commission merchant, dealer, or broker violates any provision of section 499b of this title, he shall liable to the person or persons injured,” etc., and that “[s]uch liability may be enforced … by … suit in any court of competent jurisdiction…”. There appears to be no requirement in PACA that the person suing be licensed. However, section 499c(a) directs that “no person shall at any time carry on the business of a commission merchant, dealer, or broker without a license valid and effective at such time.”
For practitioners bringing a PACA claim on behalf of a PACA licensee, it’s generally good practice to allege same in the complaint, and attach a copy of the license as an exhibit. For unlicensed market participants, confer with competent counsel regarding the benefits of obtaining a PACA license and, more importantly, whether your business may require a PACA license. Best to do this before you have a potential claim, and to avoid potential penalties!
The final section of the Great Lakes Packers opinion deals with the issue of the payment terms set forth on the aggrieved parties’ invoices. Because of the extreme importance of this section to farmers, growers, and suppliers of produce, with respect to preserving their rights to sue under the PACA statute, this part of the opinion will be discussed in a forthcoming separate blog entry.