Belleza Fruit, Inc. v. Suffolk Banana Co.

• Decision Date: 05 July 2012
• Docket Number: CV-12-3033 (SJF)(WDW)
• Parties: BELLEZA FRUIT, INC., Plaintiff, v. SUFFOLK BANANA CO., INC., LONG ISLAND BANANA CORP., LONG ISLAND BANANA, and THOMAS HOEY JR., Defendants.
• Court: U.S. District Court — Eastern District of New York

BELLEZA FRUIT, INC., Plaintiff,

v.SUFFOLK BANANA CO., INC., LONG ISLAND BANANA CORP.,LONG ISLAND BANANA, and THOMAS HOEY JR., Defendants.

CV-12-3033 (SJF)(WDW)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

Dated: July 5, 2012

OPINION & ORDER

FEUERSTEIN, J.

I. Introduction

On June 18, 2012, plaintiff Belleza Fruit, Inc. ("plaintiff") filed a complaint against defendants Suffolk Banana Co., Inc. ("Suffolk Banana"); Long Island Banana Corp. and Long Island Banana (collectively, "LI Banana") and Thomas Hoey Jr. ("Hoey") (collectively, "defendants"), pursuant to the Perishable Agricultural Commodities Act, 1930 ("PACA"), 7 U.S.C. § 499a, et seq., accompanied by an application seeking an ex parte temporary restraining order ("TRO") and a preliminary injunction pursuant to Rule 65 of the Federal Rules of Civil Procedure. By order dated June 18, 2012, inter alia, plaintiff's application for a TRO was granted; defendants were restrained from alienating, dissipating, paying over or assigning any PACA trust assets, and defendants' bank accounts containing funds relating to the PACA trust assets were restrained, pending determination of plaintiff's application for a preliminaryinjunction; and defendants were ordered to show cause why plaintiff's application for a preliminary injunction should not be granted. Thereafter, defendants cross-moved to dismiss plaintiff's first, second, third and sixth causes of action pursuant to Rule 12(b) of the Federal Rules of Civil Procedure, and for costs and attorneys' fees. For the reasons set forth herein, plaintiff's motion is granted to the extent set forth herein and defendants' cross motion is granted in part and denied in part.

II. Background

A. Factual Background

Plaintiff is a New York corporation engaged in the business of buying and selling wholesale quantities of perishable agricultural commodities ("produce") in interstate commerce. (Compl., ¶ 3; Declaration of Andrew P. Persichetti dated June 15, 2012 ["Persichetti Decl."], ¶ 5). From at least September 27, 2010 until May 2, 2011 and March 21, 2012 through the present ("the licensed periods"), plaintiff was a PACA licensee. (Compl., Ex. A; Persichetti Decl., ¶ 6).

Suffolk Banana and LI Banana are New York corporations, (Compl., ¶¶ 4-6; Ans., ¶¶ 4-6; Affidavit of Thomas Hoey in Opposition to Plaintiff's Motion for Preliminary Injunction ["Hoey Aff."], ¶ 1), of which Hoey is an officer and shareholder, (Compl., ¶ 7; Ans., ¶ 7; Hoey Aff., ¶ 1). Suffolk Banana and LI Banana are primarily in the business of purchasing and selling bananas and other produce to buyers in the New York Metropolitan area. (Hoey Aff., ¶ 3). It is undisputed that at all relevant times, Suffolk Banana and LI Banana were purchasers of wholesale quantities of produce subject to and licensed under the trust provisions of PACA. (Compl., ¶¶ 4-6; Ans. ¶¶ 4-6; Hoey Aff., ¶ 14).

According to Hoey: (1) Suffolk Banana and LI Banana have been doing business with plaintiff for approximately two (2) years, (Hoey Aff., ¶ 15); (2) most of the produce purchased by LI Banana from plaintiff originate from Ecuador and are delivered to defendants by trucking companies contracted by plaintiff, (id. at ¶ 19); (3) payment for the bananas is "delayed for a period of time while the shipment is inspected by [defendants] and until [plaintiff] delivers an invoice to [defendants,]" (id. at ¶ 20); (4) "on many occasions, [defendants] will file a claim with Plaintiff requesting an adjustment on the price originally quoted due to issues regarding the condition of the bananas or [produce] delivered, the lack of delivery, or other circumstances justifying payment abatements," (id.): and (5) he sometimes gave plaintiff "cash payments for produce that was accepted," (id.).

Plaintiff alleges: (a) that between September 27, 2010 and June 11, 2012, it sold and delivered to defendants wholesale quantities of produce which had been moved in interstate commerce and accepted by defendants without objection worth a total of one million nine hundred ninety-eight thousand four hundred two dollars and eighty-one cents ($1,998,402.81), (Compl., ¶¶ 9, 36; Perschetti Decl., ¶¶ 14, 16, 19); (b) that following each delivery of produce, plaintiff sent invoices to defendants containing the language required by PACA, 7 U.S.C. § 499e(c)(4), (Compl., ¶¶ 12-14); (c) that defendants have failed to pay in full for the produce when payments were due, despite repeated demands, (Compl., ¶¶ 10, 18), and have advised plaintiff that they do not intend to pay the outstanding amounts, (Compl., ¶ 18); (d) that the amount due and owing to plaintiff from Suffolk Banana totals two hundred forty-two thousandtwo hundred thirty-nine dollars and ten cents ($242,239.10)¹ , (Compl., ¶ 9); and (e) that the amount due and owing to plaintiff from LI Banana totals one million seven hundred fifty-six thousand one hundred sixty-three dollars and seventy-one cents ($1,756,163.71)² , (Compl., ¶ 9). According to plaintiff, "[d]efendants' failure, inability, and refusal to pay plaintiff shows that [they] are failing to maintain sufficient assets in the statutory trust to pay plaintiff, and are dissipating trust assets." (Compl., ¶ 19).

All of the invoices sent by plaintiff to Suffolk Banana during the relevant time period contain a payment period of twenty-one (21) days from the date of delivery and the following legend:

"The Perishable Agricultural Commodities listed on this invoice are sold subject to the staturory [sic] trust authroized [sic] by section 5 C of the Perishable Agricultural Commodities Act 1930 (7USC499(E(C) [sic]. The seller of these commodities retains a trust claim on these commodities, all Inventories of food or other products derived from these commodities, and any recievable [sic] or

proceeds from the sale of these commodities until full payment is recieved [sic]." (Compl., Ex. C).

Defendants admit that "at times, Plaintiff sold and shipped produce to [them]," (Ans., ¶ 12), and that they have advised plaintiff that they will not pay for "rejected or defective produce," (Ans., ¶ 18). According to Hoey, during the period from June 2011 through June 2012: (a) LI Banana paid more than five million nine hundred sixty-nine thousand five hundred fifty-four dollars and ninety cents ($5,969,554.90) to plaintiff for bananas it had purchased; and (b) Suffolk Banana paid more than one million three hundred sixty-six thousand six hundred forty-one dollars and forty cents ($1,366,641.40) to plaintiff for bananas it had purchased. (Hoey Aff., ¶¶ 16-17). Hoey avers that defendants challenged many of plaintiff's invoices, either by noting their objections to shipments or payment terms on the invoices upon delivery of the produce or via e-mails with plaintiff's representatives, and "are entitled to credit for defective deliveries." (Hoey Aff., ¶¶ 26, 33, 39). In addition, Hoey challenges some of the invoices on the basis that defendants never received the load, e.g., invoice no. 2771. (Hoey Aff., ¶ 34). In his affidavit, Hoey avers that "[LI Banana] does not dispute that it may owe some money to [plaintiff]," although he contests the amount claimed by plaintiff to be due and owing from LI Banana and that he ever refused to pay plaintiff. (Hoey Aff., ¶¶ 5, 11).

According to Hoey, the parties "never adhered to a set payment schedule," (Hoey Aff, ¶¶ 18, 36), and "[t]he business dealings between [LI Banana] and [plaintiff] over the past two years found [LI Banana] owing [plaintiff] as much as $1 million at a time with payments routinely made on purchases more than 60 days old," (id. at 21). In his declaration, Persichetti, plaintiff's principal, (Persichetti Decl., at p. 1), avers, inter alia: (1) that in or about September 2010 andDecember 2010, he began noticing that LI Banana and Suffolk Banana, respectively, were slow in paying their outstanding invoices, (Persichetti Decl., ¶¶ 21-22); (2) that on or after June 9, 2012, he spoke with Hoey regarding the outstanding balances due and owing to plaintiff from defendants and although Hoey made "repeated promises" to pay, full payment was never received by plaintiff, (id. at ¶¶ 23-25, 28); (3) that thereafter, he "investigated and learned that defendants have failed to maintain sufficient trust assets to satisfy its obligations to [plaintiff], and is dissipating PACA trust assets," (id. at ¶ 29); (4) that based upon his "experience in the collection of Produce related receivables, * * * when a situation has deteriorated to this extent, it inevitably leads to the liquidation of the entity charged with maintaining the PACA trust * * * [and] such dissipation will undoubtedly continue until any hope of recovery is lost * * *," (id. at ¶¶ 32-33); and (5) that based upon defendants' failure to pay its obligations to plaintiff and "the record of unsatisfied judgments, liens and tax liens against [them]," he believes that defendants are insolvent and/or have liabilities in excess of their assets, (id. at 34).

Hoey contends that although plaintiff sent invoices to defendants, it never sent them an account reconciliation statement until May 30, 2012. (Hoey Aff., ¶¶ 22, 38). In his affidavit, Hoey avers, inter alia, that Suffolk Banana and LI Banana "have been in existence for 69 years with no bankruptcies or claims unsettled," (Hoey Aff., ¶ 7), and that if a preliminary injunction is granted, "[LI Banana] may not be able to conduct business and will be irreparably harmed, as will its employees if it can't make payroll.," (id. at ¶ 8).

B. Procedural Background

On June 18, 2012, plaintiff filed a complaint against defendants in this Court allegingcauses of action, inter alia: (1) for failure to pay trust funds in violation of PACA, 7 U.S.C. §§ 499(b)(2) and (4), 499e(a), (c)(2) and (c)(4) (first cause of action against all defendants); (2) for failure to pay for goods sold in violation of PACA, 7 U.S.C. §§ 499(b)(2), 499e(a), (c)(2) and (c)(4) (second cause of action against all defendants); (3)...