Opinion
CIVIL ACTION NO. 3:03-CV-0152-G.
July 8, 2003.
MEMORANDUM ORDER
Before the court are the following motions: (1) the motion and incorporated brief of Sage Marketing, LLC, Sequoia Enterprises, Inc., Collins Brothers, Corporation, and Dew Drop Farms for leave to file complaint in intervention out of time, filed April 21, 2003; (2) the motion and incorporated brief of Coosemans Dallas, Inc. and Coosemans Houston, Inc., for leave to file complaint in intervention out of time and to deem declarations timely filed, filed April 21, 2003; (3) the motion of Commerce Fresh Marketing. Inc., for leave to file complaint in intervention out of time, combined with brief in support thereof, filed April 21, 2003; (4) the motion for leave to file nunc pro tunc complaint in intervention and PACA proof of claim of Giorgio Fresh Company, Agent for Giorgio Mushroom Company, filed April 25, 2003; and (5) the motion of S.C. Distributing Company for leave to file complaint in intervention and PACA proof of claim out of time, combined with brief in support thereof, filed May 12, 2003.
Movants seek leave to intervene in this suit, which arises under the Perishable Agricultural Commodities Act ("PACA"), 7 U.S.C. § 499a-499s. Plaintiffs and intervening plaintiffs are largely creditors who sold perishable agricultural commodities to defendant Fresh America Corporation ("Fresh America"). Under federal law, when a commission merchant, dealer, or broker receives such commodities, a floating, segregated trust (to the benefit of the seller) arises over the commodities themselves, any foods or products derived therefrom, and any receivables or proceeds from the sale of such goods. See 7 U.S.C. § 499e(c). The statute permits — but does not require — beneficiaries to enforce payment of the trust in federal court. Id. § 499e(c)(5). Plaintiffs Produce Alliance, LLC and Ruby Robinson Co., Inc. brought this suit on January 23, 2003. By order dated February 19, 2003 ("the Order" or "the February 19 Order"), this court established the procedure by which beneficiaries of the PACA trust would be allowed to make and prove their claims. Fresh America was obliged to provide written notice of this Order and procedure to all known creditors, The Order was and remains binding on all parties to this action, their officers, agents, employees, banks, or attorneys and all other persons or entities who receive actual notice of the Order.
Under the Order, trust beneficiaries were required to file complaints in intervention as well as PACA proofs of claims on or before March 24, 2003. Objections to PACA Proofs of Claims were due April 7, 2003, while responses to objections were to be submitted by April 21, 2003. By a subsequent order, the parties were permitted to file motions to have the court rule on objections by May 21, 2003. An interim distribution to trust beneficiaries was made on May 21, 2003. See Order, May 13, 2003.
The movants failed to file their complaints in intervention before March 24, 2003. They now seek leave to do so out of time. Paragraph 22 of the February 19 Order grants "[a]ll persons or entities having an unpaid invoice for the sale of Produce to Fresh America, or who otherwise claim to be a PACA Trust Creditor of Fresh America, . . . leave to intervene pursuant to the procedure set forth below . . ." Paragraph 25 establishes a March 24, 2003 deadline for filing complaints and proofs of claim. Paragraph 26 explains what shall be filed with the clerk of this court and/or served on listed counsel as well as how service is to be effected. As for the complaints in intervention, paragraph 26 states that the complaint shall comply with Federal Rule of Civil Procedure 8(a). The Order does not address how would-be intervenors may enter the case after the deadline set by paragraph 25.
This court has previously applied the ordinary rules of civil procedure in determining whether to grant motions for leave to intervene after March 24, 2003. See Order, April 30, 2003 (granting leave to Central American Produce and Joseph Cognetti on grounds that the motion appeared to be unopposed). Neither the defendants — nor any other party — have responded to these motions for leave to intervene. The court thus deems them to be unopposed. Accordingly, the motion of Sage Marketing, LLC, Sequoia Enterprises, Inc., Collins Brothers Corp., Dew Drop Farms, Coosemans Dallas, Inc., Coosemans Houston, Inc., Commerce Fresh Marketing, Inc., Giorgio Fresh Company, and S.C. Distributing Company is granted and the clerk is directed to file these complaints forthwith.
Coosemans Dallas, Inc., Coosemans Houston, Inc., and Giorgio Fresh Company have asked the court to deem their complaints and proofs of claim timely. Fresh America has not directly responded to this request, and it has not formally objected to the PACA claims asserted by these intervenors. The claims asserted by these intervenors are listed in the First Amended PACA Trust Chart, but the pro rata share apportioned to these intervenors has been withheld as disputed.
The court construes Giorgio Fresh Company's request that its complaint in intervention be filed nunc pro tunc as a request that it be deemed timely.
The question whether to deem timely the complaint and proofs of claim presented by Coosemans Dallas and Coosemans Houston is uncomplicated. The uncontradicted, sworn statements of Dennis Smith and John Acton avow that neither company received the notice Fresh America was required to send to all known creditors until after the deadline for intervening without leave had passed. Fundamental principles of due process caution against leaving these intervenors out of the distribution where they received no notice that their claims might be barred. See Mullane v. Central Hanover Batik Trust Co., 339 U.S. 306, 314 (1950) ("An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections."). The court therefore deems their intervention timely for purposes of paragraph 28 of the February 19 Order.
The request of Giorgio Fresh Company, as agent for Giorgio Mushroom Company, is slightly more problematic. The intervenor admits that it became aware of the PACA suit against Fresh America on or about January 28, 2003. Counsel for Giorgio contacted counsel for Fresh America to inquire as to the procedure to be followed in connection with the trust. The company's credit manager admittedly received the notice required by the February 19 Order and filed it among her records. According to Giorgio, the credit manager, "under the mistaken belief that [the company's] counsel would have received the same Notice, inadvertently neglected to send it to [the company's] counsel until April 22, 2003." The motion for leave to intervene was filed on April 25, 2003.
By this motion, Giorgio not only seeks to intervene, but it also seeks to participate in the distribution of PACA assets. Giorgio urges the court to deem the intervention timely for the purposes of the time bar in paragraph 28 of the February 19 Order, citing rule 6(b) of the Federal Rules of Civil Procedure as a basis for doing so. Rule 6(b) permits courts to alter certain deadlines upon a showing of excusable neglect: "When . . . by order of court an act is required . . . at or within a specified time, the court for cause shown may at any time in its discretion . . . upon motion made after the expiration of the specified period permit the act to be done where the failure was the result of excusable neglect . . ." (emphasis added). Thus, under Rule 6(b)(2), the court may, upon a showing of excusable neglect, exercise its discretion to deem Giorgio's intervention timely and thus permit Giorgio to participate in the distribution of PACA assets.
The Supreme Court defined the term "excusable neglect" in Pioneer Investment Services Company v. Brunswick Associates Limited Partnership, 507 U.S. 380 (1993). According to the Court, "[t]he ordinary meaning of 'neglect' is 'to give little attention or respect' to a matter, or, closer to the point for our purposes, 'to leave undone or unattended to esp[ecially] through carelessness.'" 507 U.S. at 388 (quoting Webster's Ninth New Collegiate Dictionary 791 (1983) (emphasis in original)). "Although inadvertance, ignorance of the rules, or mistakes construing the rules do not usually constitute 'excusable' neglect, it is clear that 'excusable neglect' under Rule 6(b) is a somewhat 'elastic concept' and is not limited strictly to omissions caused by circumstances beyond the control of the movant." Id. at 392 (footnotes omitted). Rather, "[t]he word . . . encompasses both simple, faultless omissions to act and, more commonly, omissions caused by carelessness." Id. at 388.
Clearly, it was careless of Giorgio's credit manager to file away this court's February 19 Order without first confirming that the company's attorney had received a copy. She did not intend to flout the deadline; she merely assumed wrongly. The question facing the court is whether this neglect is excusable. In Pioneer Investments, the Supreme Court explained that this "determination is at bottom an equitable one" and that a court should consider "all relevant circumstances surrounding the party's omission." 507 U.S. at 395. Such considerations include "the danger of prejudice to the [claimant], the length of the delay and its potential impact on judicial proceedings, the reason for the delay, including whether it was within the reasonable control of the movant, and whether the movant acted in good faith." Id.
In deciding this question, the court is also mindful of the purposes of the PACA trust provisions. The Second Circuit explained those purposes in Endico Potatoes, Inc. v. CIT Group/Factoring, Inc.:
Although PACA[,] as first enacted[,] provided some protection for sellers of fresh produce, in 1984 Congress determined that greater protection was warranted. According to Congress, due to the need to sell perishable commodities quickly, sellers of perishable commodities are often placed in the position of being unsecured creditors of companies whose creditworthiness the seller is unable to verify. Due to a large number of defaults by the purchasers, and the sellers' status as unsecured creditors, the sellers recover, if at all, only after banks and other lenders who have obtained security interests in the defaulting purchaser's inventories, proceeds, and receivables. . . . In order to redress this imbalance, Congress added Section 499e(c) to PACA, . . . which impresses a trust in favor of the sellers on the inventories of commodities, the products derived therefrom, and the proceeds of sale of such commodities and products.67 F.3d 1063, 1067 (2d Cir. 1995) (citations omitted). The trust provisions in § 499e(c) function "to protect sellers and suppliers of perishable agricultural commodities until full payment of sums due have been received." In re Southland + Keystone, 132 B.R. 632, 639 (9th Cir. B.A.P. 1991) (quoting In re Milton Poulos, Inc., 94 B.R. 648, 650 (Bankr. C.D. Cal. 1988), aff'd, 107 B.R. 715 (9th Cir. B.A.P. 1989)).
The court is further guided by the reasons behind the Order's requirement that purported trust beneficiaries intervene in this action. The February 19 Order spells out these purposes as follows:
The efficient administration of justice requires that all persons or entities claiming to be potential PACA Trust Creditors of Fresh America be notified of this action. Further, to ensure finality of any ultimate distribution of PACA Trust Assets in this case, all persons or entities claiming to be PACA Trust Creditors of Fresh America must be required to intervene in this action to bring them within the jurisdiction of this Court. Accordingly, all persons or entities claiming an interest in the PACA Trust Assets are hereby required to intervene in this action prior to an established bar date in order to (i) avoid duplicate actions, (ii) define the class of PACA Trust Creditors, (iii) establish a method to determine the validity and amount of their claims, and (iv) share in any distribution of PACA Trust Assets . . .
Order, February 19, 2003 ¶ 22 (emphasis added). As the emphasized portions of the Order indicate, the intervention requirement serves several functions: to ensure the efficient administration of justice, to bring claimants within the jurisdiction of this court, to facilitate the payment of claims, and to ensure finality.
It should be noted that nothing in the statute conditions a trust beneficiary's participation in the distribution of PACA trust assets on that creditor's filing of a complaint in federal court. The statute permits, but does not require, claimants to bring their claims before this tribunal. In light of this, it should be made clear that the February 19 Order does not impose extra statutory burdens on parties whose position v í s à v í s commission merchants, dealers and brokers Congress clearly meant to improve. Nor should the Order be construed in a manner that would erect an impenetrable barrier to recovery for all claimants who failed to file complaints in intervention by March 24, 2003. As long as a PACA creditor "timely files [a] Complaint in Intervention and Proof of Claim" — as determined by this court — it is not barred from participating in the ultimate distribution of trust assets.
Other courts have been willing to excuse neglect in similar (perhaps less excusable) circumstances than those presented by Giorgio's motion. For example, in Pioneer Investments, it was an attorney who inadvertently failed to file a proof of claim in a bankruptcy proceeding; the Supreme Court hold that even this inadvertence could, under rule 6(b), be considered excusable neglect. See 507 U.S. at 386; see also Standard Enterprises, Inc. v. Bag-It, Inc., 115 F.R.D. 38, 39 (S.D.N.Y. 1987) (summons and complaint inadvertently placed in pile of junk mail; relief granted where defendant acted promptly upon discovery); Owens-Illinois, Inc. v. T N Ltd., 191 F.R.D. 522, 528 (E.D. Tex. 2000) ("mislaid complaint was the product of isolated human error"); Bavouset v. Shaw's of San Francisco, 43 F.R.D. 296, 298 (S.D. Tex. 1967) (excusable neglect found where there was confusion while party changed attorneys); but cf. Rogers v. Hartford Life Accident Insurance Company, 167 F.3d 933, 938-39 (5th Cir. 1999) (no abuse of discretion not to find excusable neglect where failure to respond timely is caused by a business entity's failure to maintain safeguards against losing legal papers).
The court concludes that Giorgio has demonstrated excusable neglect. Assuming that a legal document was also sent to the company's attorney is not of itself inexcusable. There is no indication of bad faith on the part of Giorgio and the company made its claim known to Fresh America within three days after discovering the error. Furthermore, Giorgio's claim has been considered in the calculation of initial distribution amounts, and it does not appear that any existing parties would suffer cognizable prejudice to their ability to pursue their own claims. Indeed, failure to deem the intervention timely for purposes of paragraph 28 would significantly prejudice (if not totally prevent) Giorgio from recovering assets held in trust for its benefit. To apply the procedures established by the February 19 Order in a manner that prevents Giorgio from recovering its portion of the trust assets simply because a formality was not followed would undermine the purposes of the PACA trust provisions. The court therefore deems the intervention of Giorgio Fresh Company, agent for Giorgio Mushroom Company, timely for purposes of the time bar in the Order of February 19, 2003.
None of the remaining intervenors has expressly asked the court to deem its intervention timely for purposes of paragraph 28 of the February 19 Order, although each includes a generic request to be granted such further relief to which the court may find it is entitled. Having ruled on the requests of Coosemans Dallas, Coosemans Houston, and Giorgio Mushroom Company to deem their interventions timely, the court considers it appropriate to determine whether the complaints and claims of the other intervenors should be deemed timely as well.
The court begins with S.C. Distributing. According to the sworn affidavit of Joseph G. Leimbach ("Leimbach"), this company first learned of the PACA suit against Fresh America on or about January 30, 2003. Leimbach did nothing further because he "believed [he] would be receiving further information on how and when S.C. Distributing would recover amounts [owed by Fresh America]." He further avows that his company did not receive the notice required by the February 19 order until after the deadline for intervening without leave. At some point after March 24, 2003; Leimbach contacted counsel for Fresh America to inquire about the PACA suit. The company filed its motion to intervene before the interim distribution of assets. Just as it is proper to permit Coosemans Dallas and Coosemans Houston to participate in the distribution of PACA assets due to their lack of notice, it is proper to deem the intervention and claim of S.C. Distributing Co. timely.
Sage Marketing, LLC, Sequoia Enterprises, Inc., and Dew Drop Farms filed sworn declarations asserting PACA trust claims on March 21, 2003. See Docket Sheet. A declaration on behalf of Collins Brothers Corp. was filed on March 25, 2003. See id. A combined motion to intervene was filed on April 21, 2003, following Fresh America's objection to their claims on grounds that no complaint in intervention had been filed. See id. With the motion to intervene, Steve Reisenauer submitted a sworn statement in which he avers that Sage Marketing "did not hire an attorney and file an Intervention because it did not understand that it was required to follow this additional requirement as a condition of participating in the PACA trust fund created for the benefit of produce suppliers like it." Similar sworn statements were submitted by James L. Wilson on behalf of Sequoia Enterprises, Robert L. Rehberger for Collins Brothers, and Michael Huska for Dew Drop Farms.
The court concludes that these four intervenors have demonstrated excusable neglect. Although the February 19 Order is clear enough that scores of PACA creditors were able to comprehend the necessity of filing both a complaint and a proof of claim, these intervenors are hardly the only PACA creditors who failed to discern the necessity of filing a complaint in intervention. There is no allegation of bad faith. These intervenors seek to participate in a distribution of funds held for their benefit in a nonsegregated, floating trust created by federal law. They made known their claim to PACA trust funds within the court-adopted deadline or so soon thereafter that the delay can be considered negligible. They applied for leave to intervene while the claims process was ongoing. Their claims have been considered in the calculation of initial distribution amounts, and it does not appear that any existing parties would suffer cognizable prejudice to their ability to pursue their own claims. Indeed, failure to deem the intervention timely for purposes of paragraph 28 would significantly prejudice, if not totally prevent, these intervenors from recovering assets held in trust for their benefit. The purpose of the trust is to protect parties in the position of these intervenors, and the procedures established by the Order are meant to facilitate, rather than hinder, the distribution of those trust funds. To apply court-adopted procedures in a manner that prevents trust beneficiaries from recovering their portion of the trust funds simply because a formality was not followed would do violence to the purposes of the PACA trust provisions. The complaint in intervention of Sage Marketing, Sequoia Enterprises, Collins Brothers, and Dew Drop Farms is deemed timely for purposes of paragraph 28 of the February 19 Order.
Finally, the court considers whether Commerce Fresh Marketing's Complaint in Intervention and PACA Proof of Claim should be deemed timely. Diran Elsaifi has submitted a sworn affidavit in which he states that he "honestly and sincerely believed that all [he] needed to do was to file a proof of claim with the court which supported Commerce Fresh's trust claim against Fresh America under [PACA]." Before the company's April 21 motion for leave to intervene, however, Commerce Fresh had filed no documents in this court. This apparent omission notwithstanding, it is clear that the company made its claim known to Fresh America before April 7, 2003, because Fresh America formally objected to the claim. For the same reasons given above for deeming timely the complaints of Sage Marketing, Sequoia Enterprises, Collins Brothers, and Dew Drop Farms, the court considers it appropriate to deem Commerce Fresh's complaint and proof of claim timely.
In sum, all five motions for leave to intervene are GRANTED. In its discretion, the court further DEEMS TIMELY the complaints and proofs of claims of all these intervenors for purposes of paragraph 28 of the February 19 Order.
In light of this disposition, the Motion to Rule on any Objections to the PACA Trust Claims of Giorgio Fresh Company, Agent for Giorgio Mushroom Company and the Motion to Rule on Objections to the PACA Trust Claims of Coosemans Dallas, Inc. and Coosemans Houston, Inc. are DENIED as moot. The Motion to Rule on Objections to the PACA Trust Claims of Sage Marketing, LLC, Sequoia Enterprises, Inc., Collins Brothers Corp., and Dew Drop Farms is DENIED as moot to the extent that it seeks to resolve objections based on the untimeliness of these intervenors' complaint in intervention.