Koam Produce, Inc. v. Dimare Homestead, Inc., 01 CIV. 2494(LLS).
| Citation | 213 F.Supp.2d 314 |
| Decision Date | 26 July 2002 |
| Docket Number | No. 01 CIV. 2494(LLS).,01 CIV. 2494(LLS). |
| Parties | KOAM PRODUCE, INC., Petitioner, v. DIMARE HOMESTEAD, INC., Respondent. |
| Court | U.S. District Court — Southern District of New York |
Gentile & Dickler (Paul T. Gentile, Keven P. Claffey, of counsel), New York City, for Petitioner.
Rynn & Janowsky (Bart M. Botta, of counsel), Newport Beach, CA, for Respondent.
This is an appeal by Koam Produce, Inc. ("Koam") from a November 16, 2000 reparation award in the amount of $4,800 plus interest and costs, rendered by a Judicial Officer of the United States Department of Agriculture ("USDA") against Koam and in favor of DiMare Homestead, Inc. ("DiMare").
Under Section 499g(c) of the Perishable Agricultural Commodities Act ("PACA"), 7 U.S.C. § 499a et. seq., such an appeal is tried de novo in the federal district court, in the same manner as other civil damage suits, except that the factual findings in the reparation order are prima facie evidence of the facts found.
A non-jury trial on stipulated facts and exhibits was held before me on May 20, 2002.
Sales of fresh fruits and vegetables in interstate commerce are regulated by the USDA pursuant to PACA. The USDA, through the Agricultural Marketing Service ("AMS"), employs inspectors who independently evaluate the quality and condition of produce. See 7 U.S.C. § 499n. The USDA summarizes the inspection process as follows:
USDA fruit and vegetable inspection is a voluntary, fee-for-service program, administered by AMS since 1928. The objective of the inspection program is to facilitate trade by providing buyers and sellers of fresh fruits and vegetables with impartial and accurate information about the quality (inherent, non-progressive characteristics, such as size or shape) and condition (defects of a progressive nature, such as decay or ripeness) of shipments of fresh produce based on well-known, published USDA standards.
. . . . .
The inspection program for fresh fruits and vegetables is available at shipping points located in growing areas and at wholesale markets and other points where large volumes of fresh produce are received. At shipping points, inspection is requested by growers, processors or packers for quality assurance, to satisfy the requirements of state or federal marketing orders, or to verify compliance with specifications on fresh produce for processing. At wholesale markets, such as Hunts Point, and other receiving points, fresh produce inspection is most often requested to resolve a dispute between a buyer and seller about the quality or condition of delivered produce. In either case, the inspection program enables financially interested parties to verify the extent to which shipments meet expectations.
At wholesale markets, either the seller or a prospective buyer can request AMS inspection. Although shippers at times initiate the request, most often it is buyers that ask for inspections, generally when they suspect that the shipment does not meet contract requirements and are seeking an adjustment in the price....
"Report and Analysis of the Hunts Point Bribery Incident," Koam Ex. B, at 1-2 ("Report").
On October 27, 1999, as part of an investigation known as "Operation Forbidden Fruit" covering the years 1996 to 1999, twenty-one people were arrested for bribery at the Hunts Point Wholesale Produce Market in the Bronx: eight USDA inspectors and thirteen owners and employees of wholesale companies doing business at Hunts Point. Another inspector and two wholesalers from a fourteenth company had previously been arrested, and cooperated with the government. "The AMS inspectors were charged with accepting cash bribes in exchange for reducing the grade of the produce they inspected, which then allowed the Hunts Point companies to pay some amount less than the invoice price to their suppliers." Id., at 1. All of the inspectors and most of the employees pleaded guilty. These included Marvin Friedman, an employee of Koam, who pleaded guilty to ten counts of bribing inspectors, and the three inspectors who inspected the five shipments from DiMare to Koam which are involved in this case.
As part of its response to the Hunts Point bribery scandal, the USDA sent letters to 17,000 members of the produce industry informing them of indictments in connection with the scandal, the department's plans to improve inspections, and a process by which injured parties could file PACA reparations claims for damages.
DiMare filed its claim, to the effect that it had paid $4,800 to Koam in unjustified price reductions based on fraudulent certificates issued by bribed inspectors. The Judicial Officer ruled in DiMare's favor, holding as a matter of law that Koam's negotiation of the adjustments, without disclosure of its involvement of the bribery of the federal inspectors, constituted a misrepresentation basic to the adjustment process, rendering the adjustments voidable because of misrepresentation and mistake. He held that because Koam could not rely on the tainted inspection certificates, or affidavits of its employees, it could not carry its burden of showing that the quality of the tomatoes DiMare had shipped to it was inferior. Accordingly, he held that the full contract price was payable by Koam, and set aside the $4,800 adjustments.
On Koam's appeal to this court, the parties stipulated the facts as follows:
UNCONTESTED FACTS
1. DiMare was the complainant in a reparation proceeding brought under the Perishable Agricultural Commodities Act of 1930, as amended ("PACA"), 7 U.S.C. § 499a et seq., entitled DiMare Homestead, Inc. v. Koam Produce, Inc., ("PACA Docket R-00-159, United States Department of Agriculture, Before the Secretary of Agriculture") ("Reparation Proceeding").
2. Koam was the respondent in the reparation proceeding.
3. DiMare instituted the reparation proceeding by filing an informal complaint against Koam on December 1, 1999 in which DiMare sought reparations in the amount of $4,800.00 in connection with DiMare's sale of tomatoes to Koam.
4. Thereafter, on April 7, 2000, DiMare filed a formal complaint against Koam seeking the same relief that DiMare requested in its informal complaint.
5. The amount of the claim against Koam did not exceed $30,000.00, and therefore the reparation proceeding was conducted under the documentary procedure provided in the Rules of Practice (7 C.F.R. § 47.20).
6. By decision and order dated November 16, 2000 (the "Reparation Order"), Judicial Officer, William G. Jenson, acting through the office of the Secretary of Agriculture (the "Secretary") granted DiMare the relief it requested in its complaint and ordered Koam to pay reparations in the sum of $4,800.00 plus interest and costs.
7. On or about January 10, 2001, Koam filed a petition for reconsideration of the Reparation Order with the Secretary.
8. On or about March 1, 2001, the Secretary issued an order on reconsideration dismissing Koam's petition for reconsideration and upholding the Reparation Order.
9. Koam appealed the Reparation Order to the United States District Court Southern District of New York when it filed with the Court a Notice of Appeal and Petition on or about March 23, 2001.
10. DiMare is a corporation whose address is 258 N.W. 1st Avenue, Florida City, Florida 33034.
11. Petitioner is a corporation whose address is 238 NYC Terminal Market, Bronx, New York 10474.
12. At the time of the transactions that are at issue in this case, both Petitioner and Respondent were licensed under the Act.
13. On March 16, 1999, under DiMare invoice number 1316, DiMare shipped to Koam 1600 boxes of DiMare brand 5×6 tomatoes at a price of $7.85 per box plus $23.50 for temperature recorder or a total of $12,583.50 F.O.B.
14. The shipment arrived at Koam on March 18, 1999 and, at Koam's request, 2 federal inspections were conducted, K677992-0 and K678203-1. Subsequent to the inspections, DiMare granted to Koam an allowance of $.50 per box or $800.00 in total. Koam check number 19666 in the amount of $11,783.50 was paid to DiMare in full payment of DiMare invoice number 1316. Neither of the investigations were conducted by investigators charged with or connected with any wrong doing regarding the Hunts Point bribery investigation.
15. The transaction evidenced by DiMare invoice number 1316 was not included in DiMare's complaint against Koam.
16. On March 20, 1999, under DiMare invoice number 1383, DiMare shipped to Koam 1600 boxes of DiMare brand 5×6 count price of $7.85 per box plus $23.50 for recorder or a total $12,583.50.
17. The shipment arrived at Koam on March 22, 1999, and without inspection, DiMare granted to Koam an allowance of $1.00 per box or $1600.00 in total. Koam paid DiMare invoice number 1383 by check number 19735 in the amount of $10,983.50
18. The transaction evidenced by DiMare invoice number 1383 was not included in DiMare's complaint against Koam.
19. On March 27, 1999 under DiMare invoices 1578 and 90884, DiMare shipped to Koam 800 boxes of 5×6 at $5.85 per box and 160 boxes of plum tomatoes at $7.90 per box plus $23.50 for recorder for a total of $5,967.50 for the two invoices. The shipment arrived at Koam on March 29, 1999. Koam paid DiMare invoices 1578 and 90884 by check number 19790 in the amount of $5,967.50. The transaction covered by DiMare invoices 1578 and 90884 are not the subject of DiMare's complaint against Koam.
20. On March 27, 1999 under DiMare invoice number 1678, DiMare shipped to Koam 800 boxes of 5×6 tomatoes at the price of $5.85 per box plus $23.50 for recorder for a total of $4703.50. There was no federal inspection of the shipment. Koam paid DiMare invoice number 1678 by check number 19870 in the amount of $4,703.50. The shipment covered by DiMare invoice number 1678 is not the subject of DiMare's complaint against Koam.
21. On April 5, 1999, under DiMare invoice numbers 1814 ...
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