Frio Ice, S.A. v. Sunfruit, Inc.

• Decision Date: 30 November 1990
• Docket Number: No. 89-6258,89-6258
• Citation: 918 F.2d 154
• Parties: FRIO ICE, S.A., Plaintiff-Appellant, v. SUNFRUIT, INC., John R. Plana, Jr., Oswaldo P. Rodriguez, Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 154

918 F.2d 154

FRIO ICE, S.A., Plaintiff-Appellant, v. SUNFRUIT, INC., John R. Plana, Jr., Oswaldo P. Rodriguez Defendants-Appellees.

No. 89-6258.

United States Court of Appeals Eleventh Circuit.

Nov. 30, 1990.

Stephen P. McCarron, Steven A. Rafkin, Silver Spring, Md., Guy Motzer, Miami, Fla., for plaintiff-appellant.

Ellen R. Hornstein, U.S. Dept. of Agriculture, Washington, D.C., amicus curiae, for plaintiff-appellant.

Howard M. Camerik, Glenn E. Goldstein, Miami, Fla., for defendants-appellees.

Appeal from the United States District Court for the Southern District of Florida.

Before FAY and JOHNSON, Circuit Judges, and ALLGOOD ^*, Senior District Judge.

JOHNSON, Circuit Judge:

Plaintiff Frio Ice, S.A. ("the plaintiff") appeals the district court's Memorandum Order holding that the court did not have jurisdiction under the Perishable Agricultural Commodities Act ("PACA") to entertain injunctive actions by private parties to enforce payment from a statutory trust established under Section 5(c) of PACA, 7 U.S.C.A. Sec. 499e(c) (West Supp.1990).

I. STATEMENT OF THE CASE

A. Background Facts

Congress enacted PACA in 1930 to encourage fair trading practices in the marketing of perishable commodities. H.R.Rep. No. 543, 98th Cong., 2d Sess. 3, reprinted in 1984 U.S.Code Cong. & Admin.News 405, 406. Under PACA, the Secretary of Agriculture ("the Secretary") must license all commission merchants, dealers, and brokers (hereinafter collectively "produce dealers") of perishable agricultural commodities placed in interstate or international commerce. 7 U.S.C.A. Sec. 499c (West 1980). PACA also requires produce dealers to make "full payment promptly" for any produce they purchase. 7 U.S.C.A. Sec. 499b(4) (West Supp.1990). ¹

In the early 1980s, Congress determined that the increase in non-payment and delinquent payment by produce dealers threatened the financial stability of produce growers. Congress was particularly troubled by the practice by which produce dealers granted their lenders security interests in the produce on which they had accepted delivery even though the dealers had not yet paid for these commodities. See 7 U.S.C.A. Sec. 499e(c)(1) (West Supp.1990).

In response, Congress amended PACA in 1984 to establish a nonsegregated statutory trust under which a produce dealer holds its produce-related assets as a fiduciary until full payment is made to the produce seller. 7 U.S.C.A. Sec. 499e(c) (West Supp.1990). The trust automatically arises in favor of a produce seller upon delivery of produce. 7 U.S.C.A. Sec. 499e(c)(2) (West Supp.1990). An unpaid seller loses the benefits of the trust unless it files written notice of its intent to preserve its rights with the United States Department of Agriculture and the produce dealer. 7 U.S.C.A. Sec. 499e(c)(3) (West Supp.1990). For produce sellers, a principal benefit of the trust is that they are placed first in line among creditors for all produce-related assets if the produce dealer declares bankruptcy.

During December 1988 and January 1989, the plaintiff supplied nineteen shipments of asparagus to the defendant, Sunfruit, Inc. ("Sunfruit"). The plaintiff served and filed the notices of intent required to preserve its trust benefits. Sunfruit failed to pay for the produce. ²

B. Procedural History

On June 16, 1989, the plaintiff filed a complaint against Sunfruit, John R. Plana, Jr., and Oswaldo P. Rodriguez to enforce payment of $229,831.13 from the trust. ³ The plaintiff filed a motion for a preliminary injunction requesting that Sunfruit segregate this amount in a court-supervised trust account pending resolution of the suit. The plaintiff also sought a court order requiring Plana and Rodriguez to fund any shortfall not funded by Sunfruit.

On July 7, 1989, after a hearing on the motion, the district court found that the plaintiff was a trust beneficiary of Sunfruit in the amount of $229,831.14. It ordered Sunfruit to segregate that amount in a bank account under court supervision during the pendency of the action. The court withheld its ruling on the plaintiff's motion that it order Plana and Rodriguez to fund the trust to the extent there was any shortfall not funded by Sunfruit until the parties briefed the issue.

On November 6, 1989, the district court, sua sponte, vacated its preliminary injunction. Frio Ice, S.A. v. Sunfruit, Inc., 724 F.Supp. 1373 (S.D.Fla.1989). The court concluded that it did not have jurisdiction under Section 499e(c) to entertain injunctive actions by private parties. Id. at 1378. It also decided that, even if it had such jurisdiction, it could not order Sunfruit to segregate trust assets through the establishment of a separate trust account under court supervision. Id. at 1376-77. The district court subsequently denied the plaintiff's motion to reinstate the injunction pending reconsideration, and this appeal followed. On this appeal, we consider the following three issues: (1) whether federal courts have jurisdiction to entertain injunctive actions by trust beneficiaries to prevent dissipation of a trust established pursuant to 7 U.S.C.A. Sec. 499e(c) (West Supp.1990); (2) if federal courts have such jurisdiction, whether they have the authority to order segregation of the assets in the trust to implement an injunction to prevent dissipation; and (3) assuming federal courts have such jurisdiction, whether the district court is precluded from issuing a preliminary injunction against Rodriguez.

II. ANALYSIS

The interpretation of a statute by a district court is subject to de novo review by this Court. Centel Cable Television Co. of Fla. v. Thos. J. White Development Corp., 902 F.2d 905, 908 (11th Cir.1990).

A. Jurisdiction Over Injunctive Actions by Private Parties

Absent a clear congressional command to the contrary, federal courts retain their authority to issue injunctive relief in actions over which they have jurisdiction. Califano v. Yamasaki, 442 U.S. 682, 705, 99 S.Ct. 2545, 2559, 61 L.Ed.2d 176 (1978); see also Porter v. Warner Holding Co., 328 U.S. 395, 398, 66 S.Ct. 1086, 1089, 90 L.Ed. 1332 (1946) ("Unless a statute in so many words, or by a necessary and inescapable inference, restricts the court's jurisdiction in equity, the full scope of that jurisdiction is to be recognized and applied."); Huie v. Bowen, 788 F.2d 698, 704 (11th Cir.1986). This Court resolves any ambiguities in the statute in favor of the interpretation that permits federal courts to exercise fully their traditional equity powers. Huie, 788 F.2d at 705 (citing Hecht Co. v. Bowles, 321 U.S. 321, 330, 64 S.Ct. 587, 592, 88 L.Ed. 754 (1944)).

Section 499e(c)(4) of Title 7 states:

The several district courts of the United States are vested with jurisdiction specifically to entertain (i) actions by trust beneficiaries to enforce payment from the trust, and (ii) actions by the Secretary to prevent and restrain dissipation of the trust.

7 U.S.C.A. Sec. 499e(c)(4) (West Supp.1990). In analyzing its jurisdictional authority under the statute, the district court stated that jurisdictional provisions of federal statutes are to be strictly construed. Frio Ice, 724 F.Supp. at 1378 (citing Hardin v. City Title & Escrow Co., 797 F.2d 1037, 1040 (D.C.Cir.1986); In re Carter, 618 F.2d 1093, 1098 (5th Cir.1980)). The district court found that Section 499e(c)(4) granted it jurisdiction to consider injunctive actions only when such actions are brought by the Secretary. Id. The court claimed support for this reading based on the statute's language and on its legislative history, which specifically discussed injunctive actions only in relation to actions by the Secretary. Id.; See H.R.Rep. No. 543, 98th Cong., 2d Sess. 7, reprinted in 1984 U.S.Code Cong. & Admin.News 405, 410.

The plaintiff contends that the district court has read Section 499e(c)(4) erroneously. Specifically, it argues that the district court applied the wrong test to determine whether Congress limited the authority of federal courts to grant injunctive relief to trust beneficiaries. It claims that the proper test focuses on whether the statute or its legislative history clearly states that Congress intended to preclude such relief to private parties. ⁴

Contrary to the district court's conclusion, neither Section 499e(c)(4) nor PACA's legislative history directly or inferentially restricts the district court's jurisdiction to entertain injunctive suits by trust beneficiaries. On its face, the statute does not limit a federal court's jurisdiction over actions by private parties. Subsection (i) explicitly grants district courts the jurisdiction to entertain "actions by trust beneficiaries to enforce payment from the trust." 7 U.S.C.A. Sec. 499e(c)(4)(i) (West Supp.1990). Although the statute does not define the term "actions," since the merger of law and equity, there is only one form of action, a civil action. See Fed.R.Civ.P. 2. By using the term "actions" without any restrictions, Congress thus intended the federal courts to entertain claims for both legal and equitable relief by trust beneficiaries. ⁵ Moreover, the language of subsection (ii) does not change this conclusion. Rather, subsection (ii) may be read as simply granting to the Secretary standing to bring Section 499e(c)(4) suits to prevent dissipation of trust assets. Finally, this Court resolves ambiguities in favor of the interpretation that permits federal courts to exercise fully their traditional equity powers. Huie, 788 F.2d at 705. Thus, the language of the statute supports the conclusion that the district court has jurisdiction to entertain injunctive actions by private parties. ⁶

The district court noted correctly that the legislative history discusses injunctive suits only in relation to actions by the Secretary. The legislative history states that upon discovering that a produce dealer is in financial difficulty, the Secretary, acting on behalf of the trust beneficiaries, should seek an injunction to...