Skyline Potato Co. v. Tan-O-On Mktg., Inc., CIV 10-0698 JB/RHS

• Decision Date: 31 January 2014
• Docket Number: No. CIV 10-0698 JB/RHS,CIV 10-0698 JB/RHS
• Parties: SKYLINE POTATO COMPANY, INC., A Colorado Corporation, Plaintiff, v. TAN-O-ON MARKETING, INC. d/b/a TMI; a Colorado corporation with a principal place of business in New Mexico; HI-LAND POTATO COMPANY, INC., a Colorado corporation; GERALD R. ANDERSON, in his individual capacity and As Director/Shareholder of Tan-O-On Marketing Inc.; JULIE A. ANDERSON, in her individual capacity and as Director/Shareholder of Tan-O-On Marketing Inc.; and CARL WORLEY, in his individual capacity, as Director/Shareholder of Tan-O-On Marketing Inc., and as Director/Shareholder Hi Land Potato Company, Defendants, and FOLSOM FARM CORPORATION, POTANDON PRODUCE, L.L.C., MART PRODUCE CORPORATION, BILLINGSLEY PRODUCE SALES, INC., ALSUM PRODUCE, INC., and PETERSON BROS. RIVER VALLEY FARMS, INC., Intervening Plaintiffs, v. TAN-O-ON MARKETING, INC. d/b/a TMI, and HI-LAND POTATO COMPANY, INC., Defendants, and TAN-O-ON MARKETING, INC. d/b/a TMI; GERALD R. ANDERSON, JULIE A. ANDERSON, Third-Party Plaintiffs, v. HI-LAND POTATO COMPANY, INC.; and CARL WORLEY, RPE, INC. and RUSSELL WYSOCKI Third-Party Defendants.
• Court: U.S. District Court — District of New Mexico

SKYLINE POTATO COMPANY, INC., A Colorado Corporation, Plaintiff,
v.
TAN-O-ON MARKETING, INC. d/b/a TMI; a Colorado corporation with a principal place
of business in New Mexico; HI-LAND POTATO COMPANY, INC., a Colorado corporation;
GERALD R. ANDERSON, in his individual capacity and As Director/Shareholder of Tan-O-On
Marketing Inc.; JULIE A. ANDERSON, in her individual capacity and as Director/Shareholder
of Tan-O-On Marketing Inc.; and CARL WORLEY, in his individual capacity, as Director/Shareholder
of Tan-O-On Marketing Inc., and as Director/Shareholder Hi Land Potato Company, Defendants,
and
FOLSOM FARM CORPORATION, POTANDON PRODUCE, L.L.C., MART PRODUCE
CORPORATION, BILLINGSLEY PRODUCE SALES, INC., ALSUM PRODUCE, INC.,
and PETERSON BROS. RIVER VALLEY FARMS, INC., Intervening Plaintiffs,
v.
TAN-O-ON MARKETING, INC. d/b/a TMI, and HI-LAND POTATO COMPANY, INC., Defendants,
and
TAN-O-ON MARKETING, INC. d/b/a TMI; GERALD R. ANDERSON,
JULIE A. ANDERSON, Third-Party Plaintiffs,
v.
HI-LAND POTATO COMPANY, INC.; and CARL WORLEY, RPE, INC.
and RUSSELL WYSOCKI Third-Party Defendants.

No. CIV 10-0698 JB/RHS

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXICO

Dated: January 31, 2014

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FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER

THIS MATTER comes before the Court on the bench trial held on October 22-October 26, 2012. The primary issues are: (i) whether Hi-Land Potato is a beneficiary of Tan-O-On Marketing's trust pursuant to the Perishable Agricultural Commodities Act, 7 U.S.C. §§ 499a-t ("PACA"); (ii) whether, as a beneficiary of Tan-O-On Marketing's PACA trust, Hi-Land Potato breached its duties to its co-beneficiaries of Tan-O-On Marketing's PACA trust when it received full payment for potato shipments that Tan-O-On Marketing arranged while its co-beneficiaries Plaintiffs Folson Farm Corporation, Mart Produce Corporation, Billingsley Produce Sales, Inc., Alsum Produce, Inc., and Peterson Bros. River Valley Farms, Inc. (collectively, "the Folson Farm Group") and Skyline Potato Company, Inc., went unpaid; (iii) whether Defendant Hi-Land Potato Company, Inc. and Carl Worley stole trade secrets from Defendants/Third-Party Plaintiffs Tan-O-On Marketing, Inc., Gerald R. Anderson, and Julie A. Anderson in violation of New Mexico's Uniform Trade Secrets Act, N.M.S.A. 1978, §§ 57-3A-1 to -7 (1989)("UTSA"); (iv) whether Hi-Land Potato and Carl Worley engaged in a fraudulent transfer of Tan-O-On Marketing's assets in violation of New Mexico's Uniform Fraudulent Transfer Act, N.M.S.A. 1978, § 56-10-14 to -25 (1989)("UFTA"); and (v) whether Hi-Land Potato and Carl Worley were unjustly enriched. The Court concludes that: (i) because a supplier becomes a beneficiary

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of a commission merchant's, dealer's, or broker's PACA trust automatically upon transfer of the supplier's produce's title, Hi-Land Potato was a beneficiary of Tan-O-On Marketing's PACA trust; (ii) Hi-Land Potato did not violate its PACA trust duties to Skyline Potato or to the Folson Farm Group; (iii) Hi-Land Potato and Carl Worley did not steal trade secrets from Tan-O-On Marketing; (iv) Hi-Land Potato and Carl Worley did not fraudulently transfer Tan-O-On Marketing's assets; and (v) Hi-Land Potato and Carl Worley were not unjustly enriched.

FINDINGS OF FACT

All parties have submitted proposed findings of fact. See Plaintiff and Intervening Plaintiffs' Findings of Fact, Conclusions of Law, and Order, filed February 25, 2013 (Doc. 355)("Skyline Potato's and the Folson Farm Group's FOF and COL"); Defendants/Third Party Plaintiffs [sic] Findings of Fact, Conclusions of Law and Order, filed February 26, 2013 (Doc. 256)("Tan-O-On Marketing's FOF and COL"); Defendants and Third-Party Defendants Hi-Land Potato Company, Inc.'s and Carl Worley's Proposed Findings of Fact and Conclusions of Law, filed February 26, 2013 ("Hi-Land Potato's FOF and COL"). The Court has carefully considered all three sets of proposed facts and accepts some of those facts, rejects some, and finds some facts that neither party brought to its attention. The Court sets forth its findings below.¹

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1. Hi-Land Potato Before Tan-O-On Marketing.

1. The Worley family has been growing, packing, and shipping potatoes near Monte Vista, Colorado, in the San Luis Valley for many decades. See Trial Transcript at 827:5-828:24 (taken October 25, 2012)(Doc. 338)("Oct. 25 Tr.")(Bohnhoff, Carla Worley).

2. Hi-Land Potato is a potato "shed" or warehouse that stores, cleans, packs, and ships potatoes to grocery store chains, such as Kroger Co., and institutional customers. See Trial Transcript at 480:2-481:11 (taken October 23, 2012)(Doc. 336)("Oct. 23 Tr.")(Robinson, Carl Worley).

3. The Worley family started Hi-Land Potato many years ago and continues to operate it. See Oct. 25 Tr. 825:25-827:24 (Bohnhoff, Carla Worley).

4. Hi-Land Potato's facilities include a shed with packing facilities and a separate building that stores enough potatoes to feed about 20,000 people in a given year. See Oct. 25 Tr. at 830:2-22 (Bohnhoff, Carla Worley).

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5. Hi-Land Potato holds a PACA license. See Hi-Land Potato's FOF and COL ¶ A.1, at 3.²

6. Approximately forty-five employees work at the shed. See Oct. 25 Tr. at 831:19-20 (Bohnhoff, Carla Worley).

7. Carl Worley is the president of Hi-Land Potato and the chairman of its board of directors; he is eighty-two years old. See Trial Transcript at 576:22-24 (taken October 24, 2012)(Doc. 337)("Oct. 24 Tr.")(Jaramillo, Carl Worley).

8. Carl Worley, along with Hi-Land Potato's board of directors and employees, makes Hi-Land Potato's decisions. See Oct. 24 Tr. at 573:1-574:25 (Robinson, Carl Worley).

9. Carl Worley is worth ten-to-twelve million dollars, excluding the value of his land holdings. See Oct. 24 Tr. 519:22-520:10 (Robinson, Carl Worley).

10. Hi-Land Potato's Vice President is Bob Mattive, and its Secretary is Phil Smart. See Oct. 24 Tr. at 828:17-21 (Bohnhoff, Carla Worley).

11. Carla Worley, Carl Worley's daughter, is Hi-Land Potato's treasurer. See Oct. 24 Tr. at 828:17-21 (Bohnhoff, Carla Worley).

12. Carla Worley, and not Carl Worley, is primarily responsible for and familiar with billings, payments, and bookkeeping, and is otherwise the person at Hi-Land Potato with primary

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involvement in the events at issue. See Oct. 23 Tr. at 498:16-24 (Robinson, Carl Worley); id. at 501:16-502:12 (Robinson, Carl Worley); id. at 505:11-18 (Robinson, Carl Worley); Oct. 24 Tr. at 576:14-1 (Jaramillo, Carl Worley); id. at 579:17-580:3 (Jaramillo, Carl Worley); id. at 589:8-11 (Esquivel, Carl Worley); id. at 614:23-615:11 (Robinson, Carla Worley); id. at 623:12-624:7 (Robinson, Carla Worley); Oct. 25 Tr. at 828:17-830:1 (Bohnhoff, Carla Worley).

13. Carl Worley originally handled Hi-Land Potato's sales, and his wife and daughter kept the books. See Oct. 25 Tr. at 833:23-24 (Carla Worley).

14. Later, Smart briefly handled sales; however, he was not particularly well suited for that role, and Carl Worley reassumed the sales responsibilities until Hi-Land Potato hired produce salesman Gerald Anderson for that role. See Oct. 25 Tr. at 833:23-834:11 (Carla Worley).

2. G. Anderson.

15. G. Anderson began his career in the produce industry in 1966 as a warehouse worker, and later as a produce salesman. See Trial Transcript at 138:13-139:6 (taken October 22, 2012)(Doc. 335)("Oct. 22 Tr.")(Robinson, G. Anderson).

16. G. Anderson was a produce salesman for various companies until he became a produce buyer for Topco Associates. See Oct. 22 Tr. at 139:7-18 (Robinson, G. Anderson).

17. While at Topco Associates, G. Anderson bought approximately $150 million in produce annually. See Oct. 22 Tr. at 139:19-21 (Robinson, G. Anderson).

18. After leaving Topco Associates, G. Anderson took a job in Monte Vista, Colorado as a potato salesman for Sergeant Produce Company, where he continued to sell to retail produce buyers. See Oct. 22 Tr. at 139:23-140:24 (Robinson, G. Anderson).

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19. While at Sergeant Produce, G. Anderson formed relationships with Hi-Land Potato and other potato growers in the Monte Vista area. See Oct. 22 Tr. at 138:13-142:6 ("Oct. 22 Tr.")(Robinson, G. Anderson).

20. While G. Anderson worked at Topco Associates, he established a relationship with Kroger Co., the retail grocery chain. See Oct. 23 Tr. at 308:23-309:10 (Robinson, G. Anderson).

21. G. Anderson's relationship with Kroger Co. grew over the next ten years. See Oct. 23 Tr. at 308:23-309:10 (Robinson, G. Anderson).

22. After G. Anderson left Sergeant Produce, he and Hi-Land Potato agreed that he would act as the agent for Hi-Land Potato's potatoes. See Oct. 22 Tr. at 142:7-143:14 (Robinson, G. Anderson); Oct. 23 Tr. at 263:4-265:2 (Robinson, G. Anderson); id. at 473:21-474:8 (Robinson, Carl Worley).

23. G. Anderson was paid a flat fee of $0.25 per hundredweight of potatoes sold, and he worked out of an office in Hi-Land Potato's shed. See Oct. 22 Tr. at 142:7-143:14 (Robinson, G. Anderson); Oct. 23 Tr. at 263:4-265:2 (Robinson, G. Anderson); id. at 473:21-474:8 (Robinson, Carl Worley).

24. G. Anderson sold Hi-Land Potato's potatoes to Kroger Co. and other buyers. See Oct. 23 Tr. at 309:11-14 (Robinson, G....