Classic Harvest LLC v. Freshworks LLC, 1:15-cv-2988-WSD

• Decision Date: 31 May 2017
• Docket Number: 1:15-cv-2988-WSD
• Parties: CLASSIC HARVEST LLC, Plaintiff, v. FRESHWORKS LLC, et al., Defendants.
• Court: U.S. District Court — Northern District of Georgia

CLASSIC HARVEST LLC, Plaintiff,
v.
FRESHWORKS LLC, et al., Defendants.

1:15-cv-2988-WSD

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION

May 31, 2017

OPINION AND ORDER

This matter is before the Court to evaluate claims filed in this action under the Perishable Agricultural Commodities Act ("PACA"), 7 U.S.C. §§ 499a, et seq., by creditors of Crisp Holdings, LLC d/b/a Fresh Roots ("Crisp"), who claim that they delivered, but were not paid for, produce they sold to Crisp.

The following sixteen (16) creditors have filed Proofs of Claim in this action: Market Express, Inc. ("Market Express") [158]; Williams Farms [157]; Classic Harvest, LLC ("Classic Harvest") [168]; Sunkist [169], [170]; Vaughn Foods [181]; Taylor Farms California, Inc. ("Taylor Farms") [175]; Bengard Ranch [177]; Pacific Sales Company ("Pacific Sales") [173]; D'Arrigo Brothers Company of California ("D'Arrigo") [179]; Tanimura & Antle Fresh Foods ("Tanimura") [174]; Mann Packing [176]; Church Brothers [178]; West Pak

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Avocado ("West Pak") [176]; Eureka Specialties ("Eureka") [172]; Calvo Growers [80]; and Railex [182], [184].¹ Defendant AgriFact Capital, LLC ("AgriFact") filed Objections [226], [227], [234]-[237], [244], [245], [256]-[258], [260], [261], [264]-[266], and Motions to Sustain its Objections [346]-[351], [353], [357], to each Proof of Claim.²

I. BACKGROUND

When perishable agricultural commodities ("Produce") are sold, PACA imposes a nonsegregated, "floating" trust, in favor of Produce sellers, on the Produce sold, products derived from the Produce, "and any receivables or proceeds from the sale of such" Produce or product derived from it. 7 U.S.C. § 499e(c)(2). PACA requires the buyer to hold trust assets, including funds a buyer receives from the sale of Produce, "in trust for the benefit of all unpaid suppliers or sellers

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of such [Produce]," "until full payment of the sums owing in connection with such transactions has been received by such unpaid suppliers . . . ." Id. A trust beneficiary may bring an action in federal court "to enforce payment from the trust." 7 U.S.C. § 499e(c)(5).

Crisp bought Produce on credit from wholesale Produce suppliers, including Plaintiff Classic Harvest. Under PACA, Crisp was required to hold in trust (the "PACA Trust") the Produce, products derived from the Produce, and the proceeds from the sale of the Produce (the "Trust Assets"). These Trust Assets were required to be held for the benefit of Crisp's unpaid Produce suppliers, including Classic Harvest (all together, the "PACA creditors").

From June 15, 2015, to August 14, 2015, Classic Harvest sold Produce to Crisp, for which Classic Harvest has not been paid. To collect the amounts owed to it, on August 25, 2015, Classic Harvest filed its Complaint [1] asserting claims against Crisp and its principals for breach of their duties under PACA and to enforce the PACA Trust. Plaintiff also asserted a claim against AgriFact for conversion and unlawful retention of PACA Trust Assets.³

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On September 4, 2015, the Court entered the "Consent Injunction and Agreed Order Establishing PACA Claims Procedure" [24] (the "September 4th Order"). The September 4th Order provides for the Court to exercise exclusive in rem jurisdiction over Crisp's PACA Trust Assets, and further provides that any creditor who seeks to assert a claim to the Trust Assets must assert its claim in this action.

On January 14, 2016, the Court confirmed the PACA claims procedure proposed in the September 4th Order, as modified by the Court's October 23, 2015, Scheduling Order. ([115]). The Court's September 4th Order sets out the procedure for (i) submitting claims in this litigation and (ii) objecting to the claims submitted:

27. Each creditor of [Crisp] holding a claim and alleging rights under the PACA trust, shall file with the Clerk of Court . . . on or before [March 1, 2016], a PACA Proof of Claim . . . together with any and all documents supporting its claim.

. . .

31. Any objections to any PACA claims must be filed with the Clerk of Court. Any and all such objections must be filed and served on or before [April 11, 2016]. The Objection must set forth in detail all legal and factual grounds in support of . . . the objection.

32. On or before [June 13, 2016], any PACA claimant whose claim is subject to an objection may file with the Court a detailed response to any objection received. The response may include rebuttal evidence that the responding party wishes the Court to consider, if

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any. A claim, or any portion subject to an objection, will be disallowed if a valid objection is timely filed and the claimant fails to file a timely response.

33. The claimant and the objecting party shall thereafter exercise best efforts to resolve any Objections. In the event the claimant and the objecting party are unable to resolve such dispute or the objection is not withdrawn, the parties shall submit such dispute to the Court for summary resolution, on or before [September 8, 2016].

(September 4th Order ¶¶ 27, 31-32; October 23rd Scheduling Order [42] at 1-2; August 8, 2016, Order [329] granting motion for extension of time).

As of the date of this Order, the total principal amount of alleged PACA claims asserted in this case is $1,819,639.88. (See PACA Trust Chart [321]; Withdrawal of Claim by Eclipse Berry Farm [333]; Stipulation of Dismissal by Beaumont Juice, Inc. d/b/a Perricone Juices [359]).

Additional facts related to the parties' claims and objections are set out below.

II. LEGAL STANDARD

The parties requested, and the Court permitted, limited discovery on the PACA creditors' Proofs of Claim. The Court thus applies the summary judgment standard to evaluate AgriFact's objections and whether each PACA creditor has a valid PACA claim and may recover the amount of its claim from the PACA Trust Assets. (See September 4th Order at ¶ 33).

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Summary judgment is appropriate where the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56. The party seeking summary judgment bears the burden of demonstrating the absence of a genuine dispute as to any material fact. Herzog v. Castle Rock Entm't, 193 F.3d 1241, 1246 (11th Cir. 1999). Once the moving party has met this burden, the nonmoving party must demonstrate that summary judgment is inappropriate by designating specific facts showing a genuine issue for trial. Graham v. State Farm Mut. Ins. Co., 193 F.3d 1274, 1282 (11th Cir. 1999). The nonmoving party "need not present evidence in a form necessary for admission at trial; however, he may not merely rest on his pleadings." Id.

"At the summary judgment stage, facts must be viewed in the light most favorable to the nonmoving party only if there is a 'genuine' dispute as to those facts." Scott v. Harris, 550 U.S. 372, 380 (2007). Where the record tells two different stories, one blatantly contradicted by the evidence, the Court is not required to adopt that version of the facts when ruling on summary judgment. Id. "[C]redibility determinations, the weighing of evidence, and the drawing of inferences from the facts are the function of the jury . . . ." Graham, 193 F.3d at

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1282. "If the record presents factual issues, the court must not decide them; it must deny the motion and proceed to trial." Herzog, 193 F.3d at 1246. The party opposing summary judgment "'must do more than simply show that there is some metaphysical doubt as to the material facts . . . . Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial.'" Scott, 550 U.S. at 380 (quoting Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986)). A party is entitled to summary judgment if "the facts and inferences point overwhelmingly in favor of the moving party, such that reasonable people could not arrive at a contrary verdict." Miller v. Kenworth of Dothan, Inc., 277 F.3d 1269, 1275 (11th Cir. 2002) (quotations omitted).

III. AGRIFACT'S OBJECTIONS

A. Failure to Comply with the September 4th Order

1. Calavo Growers

On November 24, 2015, Calavo Growers ("Calavo") filed its Declaration in Support of the PACA Trust [80]. Calavo asserts that the current total amount past due and unpaid from Crisp is $373.50. (Id.). Calavo attaches an invoice, dated

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August 13, 2015, for "UHP F/S CHUNKY PULP DEL PASADO," in the amount of $373.50. (Id. at 7).⁴

On April 11, 2016, AgriFact objected to Calavo's claim, including because "depending on the processing activities involved, this produce may not [be] subject to the PACA." (Obj. [227] at 8) (citing 7 U.S.C. § 499a(b)(4)(A) and 7 C.F.R. § 46.2(u)).⁵ Calavo did not respond to AgriFact's objection.

On September 9, 2016, AgriFact moved to sustain its objection to Calavo's claim [357]. Calavo did not respond to AgriFact's motion, and the motion is thus deemed unopposed. See LR 7.1B, NDGa.

Calavo has not shown on the record here that the product sold—" UHP F/S CHUNKY PULP DEL PASADO"—is a "perishable agricultural commodity" the sale of which qualifies for PACA trust protection. See 7 U.S.C. § 499a(b)(4)(A) (defining "perishable agricultural commodity" as "fresh fruits and fresh vegetables of every kind and character"); 7 C.F.R. § 46.2(u) (excluding from "fresh fruits and fresh vegetables" "those perishable fruits and vegetables which have been manufactured into articles of food of a different kind of character"); Endico

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Potatoes, Inc. v. CIT Group/Factoring, Inc., 67 F.3d 1063 (2d Cir. 1995) (PACA covers fresh fruits and fresh vegetables "that are in their natural form or are subject to a change in form which does not change the essential nature of the item, such as slicing, or a change which is meant only to temporarily preserve the fruit or...