Opinion
03 Civ. 4579 (WHP)
May 18, 2004
Leonard Kreinces, Kreinces Rosenberg, P.C., Westbury, New York, for Plaintiff
Paul T. Gentile, Gentile Dickler, New York, NY, for Defendants
ORDER
Plaintiff Merex Food Corp. ("Merex") filed this action under the Perishable Agricultural Commodities Act ("PACA"), 7 U.S.C. § 499e(c), against Algin Import Export, Inc. ("Algin") and Charles Cernaro ("Cernaro"), Algin's principal officer, director and shareholder (collectively, "defendants"). Merex moves for summary judgment under PACA pursuant to Rule 56 of the Federal Rules of Civil Procedure. For the following reasons, Merex's motion for summary judgment is granted.
Merex is a dealer in perishable agricultural commodities in interstate commerce. (Plaintiff's Rule 56.1 Statement ("Pl. Stmt. ") ¶ 2; Affidavit of Robert Hauver, dated December 3, 2003 ("Hauver Aff.") ¶ 4.) In April 2002, Merex sold $30,430 worth of perishable fresh fruits and vegetables to Algin. (Hauver Aff. ¶ 4, Ex. C.) Following oral argument on this motion, the parties agreed that Algin's set-off for storage costs of the perishable goods was $12,000. (Letter from Leonard Kreinces to the Hon. William H. Pauley III, dated January 12, 2004.) The parties agree that defendants have neither paid the $18, 340 balance nor escrowed the funds. (Pl. Stmt. ¶ 4; Hauver Aff. ¶ 4; Declaration of Charles Cernaro, dated December 29, 2004 ("Cernaro Decl.") ¶ 5.)
The balance for which defendants are liable consists of the $30,430 claimed by Merex less the $12,000 off-set agreed to by the parties.
Courts may grant summary judgment only if "there is no genuine issue as to any material fact" and "the moving party is entitled to summary judgment as a matter of law." Fed.R.Civ.P. 56(c). The movant bears the burden of establishing that no genuine issues of material fact exist.Celotex Corp. v. Catrett, 477 U.S. 317, 322-24 (1986); accord McLee v. Chrysler Corp., 109 F.3d 130, 134 (2d Cir. 1997). Once the movant satisfies this requirement, the burden shifts to the nonmoving party "to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322. The court is required to resolve any ambiguities and to make all reasonable inferences in favor of the nonmoving party. Flanigan v. Gen. Elec. Co., 242 F.3d 78, 83 (2d Cir. 2001). A genuine issue of material fact exists when "a reasonable jury could return a verdict for the nonmoving party." Anderson V. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). PACA provides for a statutory trust to help sellers of agricultural goods enforce buyers' payment obligations. 7 U.S.C. § 499e(c)(1). Merchants, dealers and brokers of agricultural commodities must maintain such trusts for sellers of agricultural goods until the sellers receive full payment. 7 U.S.C. § 499e(c)(2); C.H. Robinson Co. v. Alanco Corp., 239 F.3d 483, 486 (2d Cir. 2001). PACA's statutory trust addresses the exigencies of the perishable goods industry by ensuring that sellers of agricultural commodities can collect the monies that are owed to them. See Am. Banana Co. v. Republic Nat'l Bank, 362 F.3d 33, 37 (2d Cir. 2004) (noting that Congress viewed perishable commodities sellers' inability to collect balances owed to them "as a burden on commerce and contrary to the public interest."). Accordingly, Congress amended PACA in 1984 to give sellers greater protection by adding Section 499e(c), which requires licensed dealers to hold all perishable commodities in trust for the benefit of unpaid sellers. See Am. Banana, 362 F.3d at 37.
It is undisputed that Algin neither made any payments for the agricultural products it received from Merex in April 2002, nor maintained a PACA trust for Merex's benefit. (Hauver Aff. ¶¶ 4-6; Cernaro Decl. ¶ 5.) Merex's claim against Cernaro is predicated on his ability to control the trust through Algin. See Compl. ¶ 5; see also Okun v. Zimmerman, 814 F. Supp. 346, 348 (S.D.N.Y. 1993) ("An individual who is in the position to control the trust assets and who does not preserve them for the beneficiaries has breached a fiduciary duty, and is personally liable for the tortuous act.").
Defendants assert as an affirmative defense that Merex waived its right to pursue this action because it first elected to seek an administrative remedy before the United States Department of Agriculture ("USDA"). The PACA provision governing election of remedies provides: "Such liability may be enforced either (1) by complaint to the Secretary [of Agriculture] . . . or (2) by suit in any court of competent jurisdiction." 7 U.S.C. § 499e(b). Charged with the primary responsibility for construing PACA, the USDA has interpreted Section 499e(b) to mean that claimants are required to make an election of remedies between pursuit of reparation in an administrative forum or in either state or federal court. See, e.g., M.S. Thigpen Produce Co., Inc. v. The Park River Growers, Inc., 48 Agric. Dec. 695, 697 (U.S.D.A. 1989) (discussing election of remedies provision).
Defendants argue that because Merex filed a formal complaint with the Secretary of Agriculture against Algin in April 2003, which Algin answered in May 2003, Merex elected to pursue an administrative remedy and is thus barred from proceeding with this action. However, Merex voluntarily dismissed its USDA administrative proceeding in July 2003 when Algin ceased doing business. (Hauver Reply Aff. ¶ 2.) No agency or court decision has interpreted PACA's election of remedies provision as barring a later-filed court action where there was a voluntary dismissal of a pending agency action. See "R" Best Produce, Inc. v. Eastside Food Plaza, Inc., No. 02 Civ. 6925 (DLC), 2003 WL 22231577, at *4 (S.D.N.Y. Sept. 30, 2003) ("[T] he USDA interprets the `election of remedies' provision in the statute as simply barring two suits from the same transaction from proceeding simultaneously before the agency and a court . . . No [PACA] case has been found in which the filing of a formal [administrative] complaint precluded a later election to file the same case in a court of competent jurisdiction.") (emphasis added).
Because there is no threat of simultaneous proceedings, and the USDA administrative proceeding did not result in a final adjudication, PACA's election of remedies provision is not a bar to this action. See Kurt Van Engel Comm'n Co., Inc. v. Schultz Sav-O Stores, Inc., 48 Agric. Dec. 731, 733 (U.S.D.A. 1989) ("[W]here an apparent election has been made, we would be warranted in asserting jurisdiction thereafter only if the election were later determined for some good reason to have not been final."), Accordingly, Merex's motion for summary judgment on defendants' liability for failure to pay the $18,430 balance and to hold the funds in escrow is granted. The Clerk of the Court is therefore directed to mark the case closed.
SO ORDERED.