Skyline Potato Co. v. Hi-Land Potato Co.

• Decision Date: 24 May 2016
• Docket Number: No. CIV 10-0698 JB/LAM,CIV 10-0698 JB/LAM
• Citation: 188 F.Supp.3d 1097
• Parties: Skyline Potato Company, Inc., Plaintiff, v. Hi-Land Potato Company, Inc., Carl Worley, Gerald R. Anderson, Julie A. Anderson, Mark Lounsbury, and Bill Metz; Defendants, Tan-O-On Marketing, Inc., Defendant/Third-Party Plaintiff, v. High-Land Potato Company, Inc., and Carl Worley, Third-Party Defendants. Folson 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., and Hi-Land Potato Company, Inc., Defendants.
• Court: U.S. District Court — District of New Mexico

188 F.Supp.3d 1097

Skyline Potato Company, Inc., Plaintiff,

v.Hi-Land Potato Company, Inc., Carl Worley, Gerald R. Anderson, Julie A. Anderson, Mark Lounsbury, and Bill Metz; Defendants,Tan-O-On Marketing, Inc., Defendant/Third-Party Plaintiff,

v.High-Land Potato Company, Inc., and Carl Worley, Third-Party Defendants.

Folson 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., and Hi-Land Potato Company, Inc., Defendants.

No. CIV 10-0698 JB/LAM

United States District Court, D. New Mexico.

Filed May 24, 2016

Justin P. Pizzonia, Gonzalez & Pizzonia LLC, Albuquerque, New Mexico, Heather S. Jaramillo, Albuquerque Business Law, LLC, Albuquerque, New Mexico, Attorneys for the Plaintiff

Justin P. Pizzonia, Gonzalez & Pizzonia LLC, Albuquerque, New Mexico, Heather S. Jaramillo, Albuquerque Business Law, LLC, Albuquerque, New Mexico Katy Koestner Esquivel, Meuers Law Firm, PL, Naples, Florida, Attorneys for the Intervening Plaintiffs

William Spencer Reid, Benjamin F. Feuchter, Keleher & McLeod, P.A., Albuquerque, New Mexico, Attorneys for Defendants and Third-Party Defendants RPE, Inc. and Russell Wysocki

Henry M. Bohnhoff, Leslie McCarthy Apodaca, Melanie B. Stambaugh, Rodey Dickason Sloan Akin & Robb, P.A., Albuquerque, New Mexico, Attorneys for Third-Party Defendants Hi-Land Potato Company, Inc. and Carl Worley

MEMORANDUM OPINION¹

James O. Browning, UNITED STATES DISTRICT JUDGE

THIS MATTER comes before the Court on: (i) the Defendants and Third-Party Defendants Hi-Land Potato Company, Inc.'s, and Carl Worley's Motion for Award of Attorney's Fees and Costs, filed February 28, 2014 (Doc. 374) ("Motion"); and (ii) Defendant Tan-O-On Marketing, Inc.'s Motion to File Response Out of Time, filed April 8, 2014 (Doc. 382)("Timing Motion"). The Court held a hearing on July 9, 2014. The primary issues are: (i) whether the Court has the power under general trust law principles to award attorney's fees to Defendants and Third-Party Defendants Hi-Land Potato Company, Inc. and Carl Worley, the prevailing parties in this case under the Perishable Agricultural and Commodities Act, 7 U.S.C. §§ 499a -499t ("PACA"); (ii) whether the Court should award attorney's fees; and (iii) whether the Court should grant Defendant Tan-O-On Marketing's request to file its response to the Motion out of time. First, the Court will deny the Motion. The Court concludes that it will not award attorney's fees, because Hi-Land Potato and Carl Worley do not have a contractual or statutory right to attorney's fees, and general trust law principles do not support the award of attorney's fees under the circumstances of this case. Second, the Court will grant the Timing Motion.

FACTUAL BACKGROUND

The Court has explained the facts of this case in four prior Memorandum Opinion and Orders: (i) the Memorandum and Opinion and Order, filed July 4, 2012 (Doc. 214)("Motion to Amend MOO"), seeSkyline Potato Co., Inc. v. Tan – O – On Mktg., Inc., 879 F.Supp.2d 1228, 1233–34 (D.N.M.2012) ; (ii) the Memorandum Opinion and Order, filed June 12, 2012 (Doc. 189) see Skyline Potato Co., Inc. v. Tan – O – On Mktg., Inc., CIV 10–0698 JB/RHS, 2012 WL 2384087, at **1–4 (D.N.M. June 12, 2012) ; (iii) the Memorandum Opinion and Order, filed October 12, 2012 (Doc 101); and (iv) the Memorandum and Opinion and Order, filed Dec. 6, 2012 (Doc. 331), seeSkyline Potato Co., Inc. v. Tan – O – On Mktg., Inc., 909 F.Supp.2d 1225, 1230–37 (D.N.M.2012). The Court will therefore integrate those facts herein by reference, and not repeat them. The Court will restate only some facts that are needed to evaluate and provide context to the Motion.

This lawsuit arises from Defendant Tan-O-On Marketing's failure to pay Plaintiff Skyline Potato Company, Inc. ("Skyline Potato"), and Intervening Plaintiffs Folson Farm Corporation, Mark Produce Corporation, Billingsley Produce Sales, Inc., Alsum Produce, Inc., and Peterson Bros. River Valley Farms, Inc. (collectively the "Folson Farm Group") for sales of potatoes they made to Tan-O-On Marketing between October and December, 2009. During that time period, Tan-O-On Marketing paid Hi-Land Potato for potatoes that Hi-Land Potato shipped to customers between October and December, 2009. The invoices that Billingsley Produce provided to Tan-O-On Marketing during that time period included the following language:

The perishable agricultural commodities listed on this invoice are sold subject to the statutory trust authorized by section 5(c) of the Perishable Agricultural Commodities Act, 1930 (7 U.S.C. § 499e(c) ). The seller of these commodities retains a trust claim over these commodities, all inventories of food or other products derived from these commodities, and any receivables or proceeds from the sale of these commodities until full payment is received.

MISCELLANEOUS TERMS.

Should any action be commenced between the parties to this contract concerning the sums due hereunder or the rights and duties of any party hereto or the interpretation of this contract, the prevailing party in such action shall be entitled to, in addition to such other relief as may be granted, an award as and for the actual attorney's fees and costs in bringing such action and/or enforcing any judgment therein.

1.5% per month will be charged on past due accounts (18% annual percentage rate). Plaintiff and Intervening Plaintiffs' Joint Motion for Partial Summary Judgment and Incorporated Memorandum of Law, filed August 8, 2012 (Doc. 253-6)("Billingsley Produce invoice") at 11. The invoices that Mart Produce provided to Tan-O-On Marketing during that time period included the following language:

In compliance with the PACA TRUST, our terms are invoices due 10 days after shipment. The perishable commodities listed on this invoice are sold subject to the statutory trust authorized by section 5(c) of the P.A.C.A., 1980 (7 U.S.C. § 499e(c) ). The seller of these commodities retains a trust claim over there commodities, all inventories of food or other products derived from these commodities, and any receivables or proceeds from the sale of these commodities until payment in full is received. Not responsible for claims for shortage, damage, shrinkage, or any other allowances unless presented to us with all the proper papers within 24 hours after arrival of the goods and proper notation is made on freight bill at the time of unloading. In the event legal action is commenced to collect the sums due under this invoice, the prevailing party shall be entitled to recover all court costs and attorney fees incurred thereby as damages in addition to any principal balance then remaining due.

Plaintiff and Intervening Plaintiffs' Joint Motion for Partial Summary Judgment and Incorporated Memorandum of Law, filed August 8, 2012 (Doc. 253-7) ("Mart Produce invoice") at 9.

PROCEDURAL HISTORY

Skyline Potato and the Folson Farm Group allege that Tan-O-On Marketing, Inc. accepted delivery of Skyline Potato's and the Folson Farm Group's produce, and delivered the potatoes to various buyers, but did not pay Skyline Potato and the Folson Farm Group for the produce. See Petition for Enforcement of USDA PACA Order and Award of Damages; Complaint for Violation of Federal Unfair Trade Practices Provision in PACA (7 USC [sic] 499b ), Breach of Contract, Breach of Covenant of Good Faith and Fair Dealing, Fraud, Money Owed on Open Account, and Prayer for Declaratory Relief and Piercing of the Corporate Veil ¶¶ 22-25, at 5, filed July 23, 2010 (Doc. 2)("Skyline Complaint"); Complaint in Intervention ¶¶ 7-16, at 4-6, filed July 8, 2011 (Doc. 60)("Folson Farm Group Complaint"). Skyline Potato alleges that Hi-Land Potato and Carl Worley are liable for the same amount and on the same counts, because "Tan-O-On was acquired by Hi-Land Potato Company, Inc." Skyline Complaint ¶ 7, at 3. The Folson Farm Group alleges that Hi-Land Potato is liable to them for payment for the produce that they delivered to Tan-O-On Marketing, because Hi-Land Potato and Worley received assets and retained those assets, which were assets of the statutory trust created pursuant to § 499e of PACA. See Folson Farm Group Complaint ¶¶ 40-44, at 10-11. Tan-O-On Marketing alleges that Hi-Land Potato and Worley misappropriated its Kroger Co. vender number, and in the process, took over Tan-O-On Marketing's business operation. See Response to Motion to Dismiss Fraud Claims, filed Jan. 23, 2012 (Doc. 96). The Court entered its Final Judgment, together with its Findings of Fact, Conclusions of Law, and Order on January 31, 2014. See Final Judgment, filed January 31, 2014 (Doc. 373); Findings of Fact, Conclusions of Law, and Order, filed January 31, 2014 (Doc. 372). In its Findings of Fact, Conclusions of Law, and Order and Final Judgment, the Court ruled that Hi-Land Potato and Worley were not liable to Skyline Potato or to the Folson Farm Group for PACA violations. The Court also ruled that neither Hi-Land Potato nor Worley were liable to Tan-O-On Marketing or to the Andersons for theft of trade secrets, fraudulent conveyance, or unjust enrichment. The Court's ruling terminated this case. Hi-Land Potato and Carl Worley now ask the Court to award attorney's fees against Tan-O-On Marketing, the Andersons, Skyline Potato, and the Folson Farm Group.

1. Skyline Potato's Claims.

In Skyline Potato's Petition for Enforcement of USDA PACA Order and Award of Damages; Complaint for Violation of Federal Unfair Trade Practices Provision in PACA (7 U.S.C. § 499b ), Breach of Contract, Breach of Covenant of Good Faith and Fair Dealing, Fraud, Money Owed on Open Account, and Prayer for Declaratory Relief and Piercing of the Corporate Veil, filed July 23, 2010 (Doc. 2)("Skyline Potato's Original Complaint"), it raised the following causes of action, without distinguishing among the Defendants: (i) "Petition for Enforcement of...