Jacobs Silver K Farms, Inc. v. Taylor Produce, LLC

• Decision Date: 30 March 2015
• Docket Number: Case No. 4:13–cv–535–EJL–CWD.
• Citation: Jacobs Silver K Farms, Inc. v. Taylor Produce, LLC, 101 F.Supp.3d 962 (D. Idaho 2015)
• Parties: JACOBS SILVER K FARMS, INC., et al., Plaintiffs, v. TAYLOR PRODUCE, LLC, et al., Defendants. and Related Counterclaims, Crossclaims, and Third–Party Claims. Sunrise Potato, LLC, Plaintiff, v. Taylor Produce, LLC, et al., Defendants. and Related Crossclaims and Third-party Claims. GVO Farm Services, Inc., et al., Plaintiffs, v. Taylor Produce, LLC, et al., Defendants.
• Court: U.S. District Court — District of Idaho

101 F.Supp.3d 962

JACOBS SILVER K FARMS, INC., et al., Plaintiffs,

v.TAYLOR PRODUCE, LLC, et al., Defendants.and Related Counterclaims, Crossclaims, and Third–Party Claims.

Sunrise Potato, LLC, Plaintiff,

v.Taylor Produce, LLC, et al., Defendants.and Related Crossclaims and Third-party Claims.

GVO Farm Services, Inc., et al., Plaintiffs,

v.Taylor Produce, LLC, et al., Defendants.

Case No. 4:13–cv–535–EJL–CWD.

United States District Court, D. Idaho.

Signed March 30, 2015.

Charles A. Homer, Deanne Casperson, Holden Kidwell Hahn & Crapo, Brian T. Tucker, Nelson Hall Parry Tucker, PLLC, Steven W. Boyce, Smith & Banks, PLLC, Idaho Falls, ID, Steven E. Nurenberg, Meuers Law Firm, PL, Katy Koestner Esquivel, Esquivel Law, Chartered, Naples, FL, Bart M. Botta, Rynn & Janowsky, LLP, Newport Beach, CA, Joseph M. Meier, Cosho Humphrey, LLP, Boise, ID, for Plaintiffs.

Robin D. Dunn, Dunn Law Offices, PLLC, Rigby, ID, Steven Luke Dalling, Rexburg, ID, for Defendants.

MEMORANDUM DECISION AND ORDER

EDWARD J. LODGE, District Judge.

Before the Court in the above-entitled matter are the Third–Party Defendant's Motion to Dismiss the Third–Party Complaint and Motion to the Dismiss Amended Third–Party Complaint. The parties have filed their responsive briefing and the matter is ripe for the Court's consideration. Having fully reviewed the record herein, the Court finds that the facts and legal arguments are adequately presented in the briefs and record. Accordingly, in the interest of avoiding further delay, and because the Court conclusively finds that the decisional process would not be significantly aided by oral argument, the Motions shall be decided on the record before this Court without oral argument.

FACTUAL AND PROCEDURAL BACKGROUND

This case arises under the Perishable Agricultural Commodities Act of 1930 (“PACA”). Plaintiffs, Jacobs Silver K Farms, Inc., Kirk M. Jacobs, a/k/a Kirk Jacobs Farms, and Reynolds Brothers, LLP (collectively “Plaintiffs”), are wholesale sellers of perishable agricultural commodities in Rexburg, Idaho. (Dkt. 23.) In October and November of 2013, Plaintiffs entered into contracts to ship certain produce to Defendant Taylor Produce, LLC in the total amount of $1,539,077.35. (Dkt. 23 at ¶ 8.) Defendant Taylor Produce, a commission merchant, dealer, or broker subject to PACA, accepted delivery of the produce allegedly making it a statutory trustee of a PACA trust held for the benefit of Plaintiffs in the amount of the contracts. Ultimately, Taylor Produce failed to pay Plaintiffs for the produce it received. As a result, Plaintiffs initiated this action against Taylor Produce, Alan Taylor Produce, and Alan L. Taylor, (collectively the “Taylor Defendants”) for relief as provided for under PACA as well as breach of contract, breach of fiduciary duty to PACA trust beneficiaries, and conversion/unlawful retention of PACA trust assets. (Dkt. 1, 23.)¹

Plaintiffs further allege claims for conversion, unlawful retention, and alter ego of PACA trust assets against the other named Defendants: Idaho Potato Packers Corporation, Nonpareil Corporation, Nonpareil Farms Incorporated, Nonpareil Processing Corporation, and Nonpareil Dehydrated Potatoes Incorporated (collectively “IPP–Nonpareil”). (Dkt. 23.) These claims allege the produce received by Defendant Taylor Produce were PACA trust assets that were transferred to IPP–Nonpareil by Taylor Produce in breach of the PACA trust. As a result, IPP–Nonpareil was required to hold those assets in trust for the benefit of the Plaintiffs who were the PACA trust beneficiaries.

IPP–Nonpareil have filed a Third–Party Complaint and an Amended Third–Party Complaint alleging a third-party claim against, as relevant to this Motion to Dismiss, Silver K Trucking, LLC (“Silver K Trucking”). (Dkt. 35, 52.)²This third-party claim alleges that if IPP–Nonpareil are found to be liable for the claims brought against them by Plaintiffs, then IPP–Nonpareil are in turn entitled to subrogation/contribution recovery from Silver K Trucking because it too received PACA trust assets directly or indirectly from Taylor Produce with notice or knowledge that receipt of such assets was in breach of the PACA trust by Taylor Produce. (Dkt. 52 at ¶ 23.) Silver K Trucking moves to dismiss the third-party claim against it, which the Court takes up in this Order. (Dkt. 53, 61.)

STANDARD OF REVIEW

A motion to dismiss made pursuant to Federal Rule of Civil Procedure 12(b)(6)tests the sufficiency of a party's claim for relief. The Court's inquiry on such a motion is whether the allegations in a pleading are sufficient under applicable pleading standards. Federal Rule of Civil Procedure 8(a)sets forth minimum pleading rules, requiring only a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2).

A motion to dismiss will only be granted if the complaint fails to allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly,550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Ashcroft v. Iqbal,556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009)(citations omitted). Although “we must take all of the factual allegations in the complaint as true, we are not bound to accept as true a legal conclusion couched as a factual allegation.” Twombly,550 U.S. at 555, 127 S.Ct. 1955. Therefore, “conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss for failure to state a claim.” Caviness v. Horizon Comm. Learning Cent., Inc.,590 F.3d 806, 811–12 (9th Cir.2010)(citation omitted).

DISCUSSION

1. Motion to Dismiss

Silver K Trucking argues IPP–Nonpareil's third-party claim should be dismissed because there is no private right of action under PACA and the state law claim fails to state a cause of action. IPP–Nonpareil maintains that their third-party claim is properly brought under Idaho state law as well as an implied private right of action under PACA.

A. Private Right of Action Under PACA

Silver K Trucking alleges that IPP–Nonpareil are not PACA trust beneficiaries and, therefore, cannot raise their third-party claim under PACA directly. (Dkts. 53, 61 at 2.) Further, Silver K Trucking argues IPP–Nonpareil cannot show an implied cause of action exists for their third-party claim under PACA. (Dkts. 53, 61 at 6.) IPP–Nonpareil counter that they as well as Silver K Trucking are both potentially liable to Plaintiffs under PACA's statutory trust remedy and that they have an implied private right of action under PACA to bring their third-party claim. (Dkt. 69 at 4, 13–17.) Silver K Trucking asserts PACA's text evidences Congress's intent to refuse a private right of action to any one not specifically identified; e.g., the Secretary of Agriculture or the PACA trust beneficiaries. (Dkt. 53 at 8.)

In considering the question of congressional intent, the Court begins with the text of the statute itself and presumes that “Congress expressed its intent through the statutory language it chose.” Logan v. U.S. Bank Nat. Ass'n,722 F.3d 1163, 1171 (9th Cir.2013)(citations omitted). The Court finds the plain text of PACA does not expressly provide for a private right of action for anyone other than the Secretary of Agriculture and the PACA trust beneficiaries. See7 U.S.C. § 499e(a)-(c). PACA applies to dealings between buyers, sellers, and brokers of perishable agricultural commodities in wholesale quantities.7 U.S.C. §§ 499a(b)(4)(A), (b)(6). One who fails to maintain the trust as required under § 499e(c)is liable to the trust beneficiaries. 7 U.S.C. § 499b(4). “Such liability may be enforced either (1) by complaint to the Secretary [of Agriculture]” as provided in PACA or (2) by a suit brought by trust beneficiaries to enforce payment from the trust in any court of competent jurisdiction. 7 U.S.C. § 499e(b), (c)(5). Thus, PACA does not expressly provide for a private right of action for anyone other than a trust beneficiary or the Secretary.

The Court further finds that Congress did not intend to create an implied private right of action under PACA to parties other than the Secretary of Agriculture or the PACA trust beneficiaries. Both sides cite to the four-factor test articulated in Cort v. Ash,422 U.S. 66, 78, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975)as the applicable analysis for determining whether a federal statutory scheme provides for an implied private right of action where not explicitly provided for in the statute's provisions. (Dkt. 53 at 7) (Dkt. 69 at 14.) There, the Supreme Court stated:

In determining whether a private remedy is implicit in a statute not expressly providing one, several factors are relevant. First, is the plaintiff “one of the class for whose especial benefit the statute was enacted,” that is, does the statute create a federal right in favor of the plaintiff? Second, is there any indication of legislative intent, explicit or implicit, either to create such a remedy or to deny one? Third, is it consistent with the underlying purposes of the legislative scheme to imply such a remedy for the plaintiff? And finally, is the cause of action one traditionally relegated to state law, in an area basically the concern of the States, so that it would be inappropriate to infer a cause of action based solely on federal law?

Cort,422 U.S. at 78, 95 S.Ct. 2080(citations omitted). This framework, however, has since been refined to analyzing the issue by focusing on the determinative factor of “whether Congress intended to create, either expressly or by implication, a private cause of action.” Logan,722 F.3d at 1170(quoting Touche Ross & Co. v. Redington,442...