SPECIAL PACA TRUST COUNSELS OMNIBUS OBJECTION TO PACA CREDITORS FEE APPLICATIONS ____________________________________________________________________________
Special PACA Trust Counsel (hereinafter, the PACA Counsel) for Debtor Delta Produce, L.P. and Superior Tomato-Avocado, Ltd, submits its Omnibus Objection to PACA fee applications filed by various PACA trust creditors pursuant to this Courts Order dated September 12, 2012. I. POSITION ON ENTITLEMENT TO FEES IN BANKRUPTCY CASES OBJECTION OF WALTER SCOTT JENSEN.
PACA Counsel notes that Walter Scott Jensen (Jensen), through his counsel, filed an Omnibus Objection to PACA Trust Creditors Applications for Attorneys Fees on October 2, 2012 [D.E. #331]. Mr. Jensen takes the position that no fees may be paid to PACA trust creditors due to the fact that the two PACA trust debtors are in bankruptcy. Due to the fact that the PACA Trust Creditors on whose behalf the PACA Counsel acts do not have identical interests, PACA counsel takes no position as to the objection filed by Jensens counsel. II. APPLICATION FOR PREJUDGMENT INTEREST, ATTORNEYS FEES AND COSTS BY BRUCE W. AKERLY AND JASON R. KLINOWSKI, COUNSEL FOR MULLER TRADING COMPANY, INC.
1 Debtors are the following entities: Delta Produce, L.P. Case No. 12-50073-LMC, Superior Tomato-Avocado, Ltd. Case No. 12-50074-LMC, Atled, Ltd. Case No. 12-50075-LMC and Staci Properties, Ltd. Case No. 12-50110- LMC. 12-50073-lmc Doc#347 Filed 10/12/12 Entered 10/12/12 16:13:53 Main Document Pg 1 of 9 2
Muller Trading Company, Inc. (Muller Trading) has filed two separate fee applications. In one of the applications it seeks $13,686.90 in attorneys fees [D.E. #300] and $28,874.90 in another application [D.E. #301] which is described as a common fund application. A. Billing rate of Freeborn and Peters are both excessive and inconsistent with submitted Invoices.
1. Lead counsel for Muller, Mr. Klinowski, who has not filed for pro hac vice admission to this Court, is seeking a $350.00 per hour rate on his fee application. A review of the records of the Illinois Attorney Registration and Disciplinary Commission reveals that Mr. Klinowski was admitted to practice in Illinois in 2004 (see, Exhibit A). Based on other reported PACA cases, it appears that Mr. Klinowski is claiming a rate that is more appropriate for attorneys with far more experience in PACA litigation. In Sun Pac. Mktg. Coop. v. DiMare Fresh, Inc., 2012 WL 4482013 (E.D. Ca., September 28, 2012), PACA Counsel with 30 years of experience were awarded $350.00 an hour, counsel with 20 years experience were awarded $300.00 an hour and lawyers with five years experience were awarded $265.00 an hour. In Grant Family Farms v. Liqua-Dry, 2012 WL 4467522 (D. Utah, September 27, 2012). Mr. Klinowskis former employer, a lawyer with far more experience in PACA cases was granted $365.00 an hour while other counsel with less experience was granted $265.00. In Mister Sprout, Inc. v. Williams Farms Produce Sales, Inc., 2012 WL 3031471, (S.D.N.Y., July 25, 2012), attorney Mark Amendola was awarded $345.00 an hour and the Supreme Court of Ohios Public Attorney Information page reflects that Mr. Amendola has 23 years of experience. In summary, Mr. Klinowskis $350.00 hourly rate is more appropriate for an attorney with 20 years of practice and PACA Counsel requests that Mr. Klinowskis rate be reduced to $265.00. 2. Similarly, the rates of other lawyers at Freeborn & Peters, LLP are excessive. Richard T. Kienzler who according to the same Illinois Attorney Registrations website (see 12-50073-lmc Doc#347 Filed 10/12/12 Entered 10/12/12 16:13:53 Main Document Pg 2 of 9 3
Exhibit B) is a four-year lawyer has billed at $305.00 and $325.00 an hour. PACA Counsel contends that a rate of $200.00 an hour would be more appropriate. 3. Special PACA notes that Mr. Klinowskis attached invoices carry various rates [D.E. #301-7]:
4. In any event, PACA Counsel suggests to the Court that based both on Mr. Klinowskis experience and comparable rates that the Court set Mr. Klinowskis rate at $265.00 5. PACA Counsel has no objection to Mr. Bruce Akerlys rate. B. Fees charged in both applications are excessive. Muller Trading is a PACA trust creditor of Delta with a claim based upon a single $24,573.50 invoice. The PACA trust in the Delta case may be short-funded. Both companies have been in Chapter 11 since January 3, 2012, a mere six days after Muller Tradings suit was filed. Both fee applications are excessive in light of the amount of the claim made. Absent the possibility of fee shifting no creditor would choose to incur such fees of $13,000+ or $28,000+ on an undisputed debt for a debtor that was in Chapter 11 for all but the first six days that the claims has been pending. C. The common fund fee application is excessive and inconsistent with the history of the case.
In addition to its contractual claim for PACA attorneys fees, counsel for Muller Trading is also claiming common fund attorneys fees. Leaving aside whether any such fees could be 12-50073-lmc Doc#347 Filed 10/12/12 Entered 10/12/12 16:13:53 Main Document Pg 3 of 9 4
appropriate for a creditor which counsel was one of three that filed for PACA injunctive relief on the same day Debtors would enter Chapter 11 six days later, these fees are not supported by the facts of this matter. Counsel for Muller Trading, despite its claims in its application, did not create the common fund for all PACA trust creditors. Congress did. Congress established the PACA trust for the benefit of all creditors in 1984 with the amendments to PACA which created the PACA Trust. Counsel for Muller Trading attempts to create the impression that but for its efforts the PACA trust funds of Delta would have otherwise disappeared. The fact is lead counsel for Muller Trading was racing to the courthouse and arrived just before two other creditors who were also seeking to obtain PACA preliminary injunctions each to protect their own clients interests. The Court can take judicial notice of the filing dates of three U.S. District Court cases, since then sent to this Court pursuant to Judge Rodriguezs Order [D.E. #28], Muller Trading Company, Inc. v. Delta Produce, LP, Delta Produce Management LLC and Walter Jensen, 1:11- cv-01114-SS, filed December 28, 2012; Rio Bravo Produce Ltd. Co., LLC v. Superior Tomato- Avocado Ltd., Inc. et. al; 5:11-cv-01126-XR filed December 29, 2012 and Willson Davis Company v. Superior Tomato-Avocado, Ltd., Inc. et al, 5:11-cv-01125-XR, all filed on the same day and the case numbers of which are eleven digits apart. All of these creditors were seeking TROs against Delta or Superior. What counsel for Muller Trading was seeking was to control the claims procedure in these three cases. An e-mail dated December 29, 2011 from Muller Tradings lead counsel attached hereto as Exhibit C reveals that he was aware of the pending of the other actions. Certainly this e-mail is not consistent with the position that Muller Tradings counsel is taking in its application for common fund fees. 12-50073-lmc Doc#347 Filed 10/12/12 Entered 10/12/12 16:13:53 Main Document Pg 4 of 9 5
In any event, Muller Trading did not create a common fund for the benefit of all creditors. In fact, its TRO sought only to protect its own interests. The TRO which was granted sought only to obtain payment for Muller Trading; see Exhibit D (brief and Order). If Delta had only paid Muller Trading, it would have been free to dissipate and Muller Trading cannot say with credibility that it was seeking to protect all Delta or Superior creditors when it only sought and obtained TRO relief for itself. Certainly Muller Trading was acting on behalf of its own interests and not on behalf of all creditors. At least three lawyers were seeking injunction relief against Delta and Superior. Exactly five days later on January 3, 2012, Delta and Superior filed for Chapter 11 relief. No PACA assets could be adjudicated after the Chapter 11 filing without court's approval. Any fees after January 3, 2012 except for filing of a proof of claim, were not strictly necessary. PACA Counsel requests the Court to bring Muller Tradings fees to $7,500.00. III. CLAIM FOR ATTORNEYS FEE FILED BY CHRIS TILLMANN AND JAKE C. BLANCHARD, COUNSEL FOR HARLLEE PACKING, INC.
Harllee Packing, Inc. claims filed in Superior Tomato-Avocado are approximately $35,000.00 [D.E. #113] and its claims in Delta approximately $108,000.00 [D.E. #304]. Chris S. Tillmanns rate of $410.00 an hour is excessive. The fee application reflects that Mr. Tillmanns rate is $410.00 an hour and Mr. John D. Emmanuels rate at $460.00 an hour. Although we are informed that Mr. Tillmanns was admitted to the bar in 1984, we are told nothing about Mr. Tillmanns experience in PACA matters. A Westlaw search of reported PACA cases does not turn up any reported case with either Mr. Tillmanns or Mr. Emmanuels names. Based on rates for experienced PACA counsel being at $350.00 to $356.00 an hour, as noted in the objections to the Muller Tradings claim above, PACA Counsel believes Mr. Tillmanns and Mr. Emmanuels rates should be reduced to $300.00 an hour. 12-50073-lmc Doc#347 Filed 10/12/12 Entered 10/12/12 16:13:53 Main Document Pg 5 of 9 6
With these rate reductions, PACA Counsel has no further objections to the fee application filed by Harllee Packing, Inc. IV. CLAIM FOR ATTORNEYS FEES UNDER PACA FILED BY THE LAW FIRMS OF McCARRON AND DIESS AND BY CURL & STAHL, P.C., COUNSEL FOR COOSEMANS HOUSTON, EAGLE EYE PRODUCE, MECCA FAMILY FARMS, INC., AND TEXAS SWEET POTATO.
PACA Counsel has no objection to these fee applications.
V. CLAIM FOR ATTORNEYS FEES FILED BY RYNN & JANOWSKI, LLP AND BY CURL & STAHL COUNSEL FOR CREDITORS UESUGI FARMS, INC., WILSON PRODUCE, LLC.
PACA Counsel has no objection to fee applications filed by Rynn & Janowski, LLP. [D.E. #306, Delta case, and D.E. #115, Superior case]. VI. MOTION FOR ATTORNEYS FEES FILED BY ROBERT E. GOLDMAN, COUNSEL FOR CREDITOR LONDON FRUIT, INC., AND TRIPLEH PRODUCE, LLC.
PACA Counsels has a particular objection to the fee application of Robert E. Goldman. While total fees charged by Mr. Goldman are extremely reasonable, at less than $18,000 [D.E. #307, Delta case, D.E. #116, Superior case] and Mr. Goldmans rate of $325.00 an hour is quite modest, the fee application does not reflect the largest claim of Mr. Goldmans group, Willson Davis, Inc. has no contractual attorneys fee clause and therefore this creditor has no fee claim in the cases. The Court should consider some apportionment of Mr. Goldmans claimants who are eligible for fees and those that are not. However, given Mr. Goldmans extensive involvement in the drafting of the claims procedure order, some fees are appropriate. VII. FEE APPLICATION OF LOUIS T. ROSENBERG, COUNSEL FOR CREDITOR I KUNIK COMPANY, INC. AND RIO BRAVO PRODUCE LTD., LLC.
PACA Counsel has no objections to Mr. Rosenberg per hours rates charged. VIII. APPLICATION FOR CONTRACTUALLY DUE ATTORNEYS FEES AND COSTS IN PACA CLAIM BY KEVIN P. KELLEY, COUNSEL FOR CREDITOR I KUNIK COMPANY, INC. 12-50073-lmc Doc#347 Filed 10/12/12 Entered 10/12/12 16:13:53 Main Document Pg 6 of 9 7
PACA Counsel has no objection as to Mr. Kelleys fee application on behalf of I Kunik Company, Inc. IX. APPLICATION FOR CONTRACTUALLY DUE ATTORNEYS FEES AND COSTS IN PACA CLAIM BY KEVIN P. KELLEY RIO BRAVO PRODUCE LTD. CO., LLC.
PACA Counsel has no objection to the per hour rates charges. PACA Counsel objects to the December 2011 fees of $13,803.39 [D.E. #114-1]. As Mr. Kelley notes himself, his firm files many PACA cases; the fees incurred were to prepare a standard form for which the charge of $13,803.39 of which all his $600.00 is attorneys fees is excessive for work that is filing a standard form and obtaining an ex parte temporary restraining order. Special Counsel attaches the standard forms that Mr. Kellys firm has used in similar PACA cases as Exhibits E and F. There is nothing improper with use of standard forms, but the amount of hours claimed by Mr. Kelly for the filing of an original suit against Superior and for obtaining a TRO does not seem to be consistent with the economies that should come from the expertise of his firm and the use of basically the same forms. Given the experience of Mr. Kelleys firm, it is surprising that associate counsel needed 2.3 hours on or before 12/27/2012, 10.3 hours on 12/28/2011, 5.6 hours on 12/29/2011 and 4.2 hours on 12/30/11, when in addition, lead counsel at $365.00 an hour was charging 2.3 hours on 12/27/2011, 7.8 hours on 12/28/2011, 2.4 hours on 12/29/2011 and 1.3 hours on 12/30/2011 [D.E. #114-1] all while local counsel was charging an additional $3,400.00 [D.E. #114-3] and local counsel was the lawyer who apparently actually presented the TRO application to the District Court. It is difficult to imagine how such an experienced PACA firm needed 22 hours of associate time, 13 hours of partner time, including nearly 8 hours to file standard, ex parte pleading. The fees for December are excessive. See, Chip Berry Produce v. Thomas, 2007 WL 12-50073-lmc Doc#347 Filed 10/12/12 Entered 10/12/12 16:13:53 Main Document Pg 7 of 9 8
2219342 (ED Mich., July 25, 2007) ($53,000 fee application of the same law firm in case reduced to $12,689.00); Wescott Agri-Products, Inc. v. Sterling State Bank, Inc., 2012 WL 2428423 (8 th Cir. 2012) (counsel fees in PACA case, denied); In re Robaeck Corp., 9:06-bk- 0729-ALP (Bank. MDFL, January 1, 2007) (fees reduced in bankruptcy case in which majority of work was done by other counsel). Indeed, counsel for Willson Davis Company which filed a District Court PACA suit [5:11-cv-1125, USDC WDTX, San Antonio) at the same time as Rio Bravo Produce Ltd. Co., LLCs counsel [5:11-CV-01126, USDC WDTX, San Antonio] and who actively participated in negotiating the claims procedure order has billed slightly over $16,000 for the period from December 2011 to September 2012! X. OMNIBUS APPLICATION FOR ATTORNEYS FEES BY STEVEN S. NURENBERG, COUNSEL FOR CREDITORS C & R FRESH, LLC, DUCKWALL FRUIT CO., ECCO-FARMS SALES, INC., FRESH START PRODUCE SALES, GARGIULO, INC. HENRY AVOCADO CORP., RIO QUEEN CITRUST, INC., AND SUNRIVER SALES.
A. Delta Case. PACA Counsel objects to all fees amounting to $11,692.00 of Henry Avocado [D.E. #112-2] because Henry Avocado is a net debtor of Delta due to offsets and in fact owes Delta for produce. There is no provision of which PACA Counsel is aware to award contractual attorneys fees to a party that is a net debtor. B. Superior Case. PACA Counsel has no objections to these fees. WHEREFORE, Special PACA Counsel for Debtor respectfully requests the Court to enter an order reducing the above fee applications to the extent stated, and granting such other relief as may be appropriate under the circumstances. DATED: October 12, 2012
12-50073-lmc Doc#347 Filed 10/12/12 Entered 10/12/12 16:13:53 Main Document Pg 8 of 9 9
Respectfully submitted,
STOKES LAW OFFICE LLP 3330 Oakwell Court, Suite 225 San Antonio, TX 78218 Telephone (210) 804-0011 Facsimile (210) 822-2595
By: /s/ Craig A. Stokes______________ Craig A. Stokes SBN 19267700 cstokes@stokeslawoffice.com
Special PACA Counsel for Delta Produce, L.P. and Superior Tomato and Avocado, LLP
CERTIFICATE OF SERVICE
I hereby certify that on the 12 th day of October, 2012, I electronically filed the foregoing Omnibus Objection to PACA Creditors Fee Applications with the Clerk of the Court using the CM/ ECF system which will send a notice of electronic filing to all parties of record. I further certify that a copy of the foregoing pleading was mailed to all of Deltas produce creditors, listed in the attached Exhibit G.
/s/ Craig A. Stokes_____________________ Craig A. Stokes
12-50073-lmc Doc#347 Filed 10/12/12 Entered 10/12/12 16:13:53 Main Document Pg 9 of 9 12-50073-lmc Doc#347-1 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 1 of 2 AKUL 1 Lawyer :::;earch: Attorney's Keg1stratwn and Public Disciplinary Record Page 1 of2 Lawye:r Registration Hmv ro Submi l n Request For Investigation Rutes and Decisions Ethlcs [nquiry Puhlications New Filin12s. Schedules\md Ch?rk'rs Office Client Protection ProgrJm Resources & Links ARDC Orgoniznt1onal Inforn1mirn1 LAWYER SEARCH: ATTORNEY'S REGISTRATION AND PUBLIC DISCIPLINARY RECORD ARDC Individual Attorney Record of Public Registration and Public Disciplinary and Disability Information as of October 12, 2012 at 9:00:00 AM: I Full Licensed Name: I Full Former name(s): Date of Admission as Lawyer by Illinois Supreme Court: Registered Business Address: Registered Business Phone: Illinois Registration Status: Malpractice Insurance: (Current as of date of registration; consult attorney for further information) II Jason Ryan Klinowski II None In annual registration, attorney reported that he/she has malpractice coverage. Public Record of Discipline and Pending Proceedings: None Check carefully to be sure that you have selected the correct lawyer. At times, lawyers have similar names. The disciplinary results displayed above include information relating to any and all public discipline, court-ordered disability inactive status, reinstatement and restoration dispositions, and pending public proceedings. Investigations are confidential and information relating to the existence or status of any investigation is not available. For additional information regarding data on this website, please contact ARDC at (312) 565-2600 or, from within Illinois, at (800) 826-8625. ARDC makes every effort to maintain the currency and accuracy of Lawyer Search. If you find any typographical errors in the Lawyer Search information, please email registration@iardc.org. For changes to contact information, including address, telephone or employer information, we require that the attorney submit a change of address form. Please consult our Address Change Requests page for details. Name changes require the filing of a motion with the Supreme Court. Please consult our Name Change Requests EXHIBIT A https://www.iardc.org/ldetail.asp?id=294804384 10/12/2012 12-50073-lmc Doc#347-1 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 2 of 2 AKIJC 1 Lawyer Search: Attorney's Registration and Public Disciplinary Record Page 2 of2 page for details. Back to Search Results New Search IARDC :online access to registration and discipline information regarding lllinois lawvers presented by the Hlinois Attorney Registration & Disciplinary Commission. Lawyer Search I Lawyer Ref!istration I How to Submit a Request For lnvestif!ation Rules and Decisions I Ethics lnquirv Program I Publications New Filings. Hearing Schedules and Clerk's Office I Client Protection Program Resources & Links I ARDC Organizational Information Website Information I Search Site I Home https://www.iardc.org/ldetail.asp?id=294804384 10/12/2012 12-50073-lmc Doc#347-2 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 1 of 2 ARDC J Lawyer Search: Attorney's Registration and Public Disciplinary Record Page 1 of2 Hmv to Submit a Request For Investigation Rn!es and Decisions Ethics Inquiry Pmgn11n Publications New Filings, Bearing Schedules and Clerk's Office Client Protection Program Resoun:es & Links ARDC Organizational Information LAWYER SEARCH: ATTORNEY'S REGISTRATION AND PUBLIC DISCIPLINARY RECORD ARDC Individual Attorney Record of Public Registration and Public Disciplinary and Disability Information as of October 12, 2012 at 9:00:00 AM: I Full Licensed Name: I Full Former name(s): Date of Admission as Lawyer by Illinois Supreme Court: Registered Business Address: Registered Business Phone: Illinois Registration Status: II Richard Thomas Kienzler II None Malpractice Insurance: (Current as of date of registration; consult attorney for further information) Public Record of Discipline and Pending Proceedings: None Check carefully to be sure that you have selected the correct lawyer. At times, lawyers have similar names. The disciplinary results displayed above include information relating to any and all public discipline, court-ordered disability inactive status, reinstatement and restoration dispositions, and pending public proceedings. Investigations are confidential and information relating to the existence or status of any investigation is not available. For additional information regarding data on this website, please contact ARDC at (312) 565-2600 or, from within Illinois, at (800) 826-8625. ARDC makes every effort to maintain the currency and accuracy of Lawyer Search. If you find any typographical errors in the Lawyer Search information, please email registration@iardc.org. For changes to contact information, including address, telephone or employer information, we require that the attorney submit a change of address form. Please consult our Address Change Requests page for details. Name changes require the filing of a EXHIBITB https://www.iardc.org/ldetail.asp?id=748533376 10112/2012 12-50073-lmc Doc#347-2 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 2 of 2 ARDC 1 Lawyer Search: Attorney's Registration and Public Disciplinary Record Page 2 of2 motion with the Supreme Court. Please consult our Name Change Requests page for details. Back to Search Results New Search IARDC :online access to registration and discipline information regarding Illinois lawyers presented by the Hlinois Attorney Registration & Disciplinarv Commission. Lawyer Search I Lawyer Regjstmtion I How to Submit a Request For Investigation Rules and Decisions I Ethics Inquirv Prog-ram I Publications New Filings. Hearing Schedules and Clerk's Office I Client Protection Program Resources & Links I ARDC Organizational Information Website Information I Search Site I Home https://www.iardc.org/ldetail.asp?id=748533376 10112/2012 12-50073-lmc Doc#347-3 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 1 of 1 Crai Stokes From: Sent: To: Cc: Subject: Craig, Klinowski, Jason R. <jklinowski@freebornpeters.com> Thursday, December 29, 2011 5:22 PM Craig Stokes 'Bruce Akerly'; Kienzler, Richard T. Delta Produce Please e-mail me of give me a buzz on my cell phone- 312/375-6849. It looks like several other cases were filed today against your client and Muller, my client, has both the low case number and a TRO. I would like for us to agree on a PACA claims procedure before we are forced to include too many cooks in the kitchen. As you know, this will reduce the cost of litigation for everyone involved. If you are not interested, we will simply move the court for the entry of such an order tomorrow based on the numerous after filed PACA claims. Hopefully, you will call me and we can work something out quickly. Please advise. Thanks. Jason R. Klinowski, Esq. EXHIBlTC 1 12-50073-lmc Doc#347-4 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 1 of 19 Case 5: 12-cv-00046-XR Document 5 Filed 12/29/11 Page 1 of 13 UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS SAN ANTONIO DIVISION MULLER TRADING COMPANY, INC., ) ) Plaintiff, ) ) v. ) ) DELTA PRODUCE, LP, DELTA ) PRODUCE MANAGEMENT LLC ) and WALTERJENSEN, individually, ) ) Defendants. ) CIVIL ACTION CASE NO.: 11-cv-01114-SS PLAINTIFF'S MEMORANDUM OF LAW IN SUPPORT OF MOTION FOR TEMPORARY RESTRAINING ORDER I. INTRODUCTION Muller Trading Company, Inc. (the "Plaintiff''), has filed an action to recover no less than $29,573.50, plus further interest, costs and attomeys fees for perishable agricultural commodities ("Produce") sold to the defendants, Delta Produce, LP (the "Company") and Delta Produce Management LLC and Walter Jensen (the "Principals") (the Principals and the Company are collectively referred to herein as the "Defendants"). Count I seeks enforcement of the trust imposed on the Defendants' assets under the Perishable Agricultural Commodities Act, 1930, as amended, 7 U.S.C. 499a-499t(the "PACA"). Plaintiff alleges that the Defendants have dissipated, and are continuing to dissipate, the assets impressed with the statutory P A CA trust, thereby harming the rights of all of the Company's PACA trust beneficiaries, including the Plaintiff herein. The Defendants' dissipation and continued dissipation of Plaintiffs trust assets is wrongful and in violation of Plaintiffs trust rights. The PACA requires a Produce debtor in the PLAINTIFF'S MEMORANDUM OF LAW IN SUPPORT OF MOTION FOR TEMPORARY RESTRAINING ORDER- Page 1 EXHIBIT D 12-50073-lmc Doc#347-4 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 2 of 19 Case 5:12-cv-00046-XR Document 5 Filed 12/29/11 Page 2 of 13 Company's position to maintain sufficient assets at all times to satisfy the claims of all the qualified PACA trust beneficiaries, such as the Plaintiff herein. Accordingly, Plaintiff's action seeks the entry of a Temporary Restraining Order to prevent the Company from further dissipating the PACA trust. If the Company is not restrained from dissipating the PACA trust, the trust assets will be forever lost to Plaintiff and it will thereby suffer the exact irreparable harm this remedial statute was designed and enacted to prevent. II. STATEMENT OF THE FACTS Plaintiff is a seller of wholesale quantities of Produce. The Defendants are buyers of wholesale quantities of Produce. The Plaintiff sold Produce to the Defendants and the Defendants accepted shipments of Produce from the Plaintiff which have a current aggregate invoice value of $24,573.50. After the inclusion of all sums owing in connection with the transactions, per the USDA regulations, the Plaintiff properly preserved its PACA trust rights for this entire sum. Despite repeated demands, the Defendants have not paid Plaintiff the balance due on their PACA trust claims and the current aggregate sum of $29,573.50 remains due and owing. (See Affidavit of Eric Muller, the owner of the Plaintiff, attached hereto as Exhibit 1). The Defendants are unable to pay due to the dissipated condition of the P ACA trust res. (See Ex. 1, ~ ~ 11, 12-21). Based on the Company's demonstrated inability to pay its bills (See Ex. 1), this situation will effectively prevent the Company from satisfying the balances owed to the Plaintiff or any other equally-situated trust beneficiary if allowed to continue dissipating the trust. Id. Rather than allocating the PACA trust assets to their only rightful purpose, i.e., the payment of the claims of PACA trust beneficiaries such as the Plaintiff, the Defendants have PLAINTIFF'S MEMORANDUM OF LAW IN SUPPORT OF MOTION FOR TEMPORARY RESTRAINING ORDER- Page 2 12-50073-lmc Doc#347-4 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 3 of 19 Case 5:12-cv-00046-XR Document 5 Filed 12/29/11 Page 3 of 13 instead been, either voluntarily or against their will, diverting these trust assets to other uses in clear violation of their duties as statutory trustees under PACA. III. SUMMARY OF THE PERISHABLE AGRICULTURAL COMMODITIES ACT Congress enacted the PACA in 1930 to provide a comprehensive scheme for the regulation of traders of fresh fruit and vegetables. "This Act provides a code of fair play ... and provides an aid to [agricultural] traders in enforcing their contracts." 49 Fed. Reg. 45735, 45737 (Nov. 20, 1984). As the Eleventh Circuit succinctly stated, PACA regulates the sale of perishable agricultural commodities to protect produce sellers from unscrupulous or insolvent dealers, brokers, and commission merchants. Country Best v. Christopher Ranch, LLC, 361 F.3d 629, 631 (11th Cir. 2004). The PACA requires produce buyers to make full payment promptly for any produce they purchase. 7 U.S.C. 499b(4). The PACA protects suppliers of produce by giving rise to civil liabilities in favor of the unpaid seller against buyers who fail to make full payment promptly. 7 U.S.C. 499e(a); In re Carpenito Bros., 46 Agric. Dec. 486 (1987), aff'd 851 F.2d 1500 (D.C. Cir. 1988). See also Endico Potatoes, Inc. v. CIT/Factoring, Inc., 67 F.3d 1063, 1066-67 (2nd Cir. 1995). An unpaid seller loses the benefit ofthe trust unless it serves written notice of its intent to preserve trust benefits with the produce buyer within 30 days after payment becomes past due. 7 U.S.C. 499e(c)(3) (as amended). In 1984, Congress determined that the increase in nonpayment and delinquent payment by Produce buyers threatened the financial stability of the produce industry. Congress recognized that under the prevailing law "sellers of fresh fruits and vegetables "[were] unsecured creditors and receive[ d] little protection in any suit for recovery of damages where a buyer ha[ d] failed to make payment required by the contract." H. R. Rep. 98-453 (1983), as reprinted in 1984 U.S. Code Cong. & Admin. News, 405, 407. In response, Congress amended the PACA in PLAINTIFF'S MEMORANDUM OF LAW IN SUPPORT OF MOTION FOR TEMPORARY RESTRAINING ORDER- Page 3 12-50073-lmc Doc#347-4 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 4 of 19 Case 5:12-cv-00046-XR Document 5 Filed 12/29/11 Page 4 of 13 1984 to provide further protection to sellers of produce and to establish an express, non- segregated floating statutory trust in which a Produce buyer as trustee holds its Produce-related assets in trust as a fiduciary until full payment is made to the unpaid seller/trust beneficiary. 7 U.S.C. 499e(c); Frio Ice S.A. v. Sunfruit, 918 F.2d 154, 156 (11th Cir. 1990). The PACA trust commences by operation of law upon delivery of the Produce and continues until full payment for the Produce has been made. 7 C.P.R. 46.46(d)(l), 7 U.S.C. 499e(c)(2). Once the seller delivers the Produce, failure of the buyer (as trustee) to maintain trust assets sufficient to make full payment promptly to the trust beneficiaries is unlawful. 7 U.S.C. 499b(4); See also, Collins Brothers v. Perrine (In re PeiTine), 2006 Bankr. LEXIS 2516 * 14-15 (Bankr. N.D. Ga. 2006)("Use of the trust assets for any purpose other than paying the produce seller, including the payment of legitimate business expenses, is a violation ... under PACA."). The trust provisions of the PACA are similar to, and based upon, the trust provisions of the Packers and Stockyards Act, 7 U.S.C. 181-229 (1980) (the "PSA"). The trust provisions of both Acts are interpreted similarly, and the courts have looked to the PSA for guidance in interpreting the PACA. See In re: Fresh Approach, 48 B.R. 926, 931 (Bankr. N.D. Tex. 1985). The principal benefit of the trust for a Produce seller is that when a buyer fails to pay or becomes insolvent, the seller is placed first in line among creditors to receive the trust res, which consists of all assets of the debtor unless and until the debtor proves a particular asset was acquired with something other than the proceeds of the debtor's dealings in Produce. Frio Ice, 918 F.2d at 156. See In re: Monterey House, 71 B.R. 244, 249 (Bankr. S.D. Tex. 1986); Fresh Approach, 51 B.R. at 420-422. The PACA trust res serves as a fund from which unpaid Produce PLAINTIFF'S MEMORANDUM OF LAW IN SUPPORT OF MOTION FOR TEMPORARY RESTRAINING ORDER- Page 4 12-50073-lmc Doc#347-4 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 5 of 19 Case 5:12-cv-00046-XR Document 5 Filed 12/29/11 Page 5 of 13 sellers can be assured payment. By operation of trust law, while a buyer of Produce has legal title to the PACA trust res, equitable title remains with the seller of the Produce. The establishment of the trust occurs upon the commencement of the buyer's buying and selling of Produce and exists continuously throughout the life of the buyer's business until the sellers are paid in full. Any assets purchased while the trust is in existence will be assumed to be purchased with trust assets and will, therefore, become part of the trust fund assets available to satisfy the claims of the qualified unpaid sellers. In re: Atlantic Tropical Market, 118 B.R. 139, 142 (Bankr. S.D. Fla. 1990). When trust assets are commingled with funds not subject to the trust, the trust is impressed upon the entire commingled fund for the benefit of the trust beneficiaries. In re: Gotham Provision, 669 F.2d 1000 (5th Cir. 1982). The PACA was designed to ensure that a Produce buyer's secured lender and other third parties do not receive and retain proceeds from the sale of Produce when the buyers's Produce suppliers have not been paid. The USDA has recognized that Congress intended unpaid sellers to recover trust assets that are transferred to third parties including secured lenders. 49 Fed. Reg. 45736 (Nov. 20, 1984). See 44 U.S.C. 1507. With respect to any issue of tracing assets, the Atlantic Tropical Market comi considered this legislative history when it placed on the buyer the burden to "track the status of the trust fund and to provide evidence of other origin of purchases of assets." Id., citing In re: AI Nagelberg & Co., 84 B.R. 19 (S.D.N.Y. 1988); In re: Fresh Approach, 51 B.R. at 422 ("[s]hould a dispute arise, it will be the buyers' burden to establish which, if any, assets are not subject to the PACA trust."); In re: N. Merberg & Sons, 166 B.R. 567, 570 (Banlcr. S.D.N.Y. 1994; Six L's Packing v. West Des Moines State Bank, 967 F.2d 256, 258 (8th Cir. 1992). PLAINTIFF'S MEMORANDUM OF LAW IN SUPPORT OF MOTION FOR TEMPORARY RESTRAINING ORDER- Page 5 12-50073-lmc Doc#347-4 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 6 of 19 Case 5: 12-cv-00046-XR Document 5 Filed 12/29/11 Page 6 of 13 In Sanzone-Palmisano Co. v. Seaman Enterprises, 986 F.2d 1010 (6th Cir. 1993), the Sixth Circuit provided a detailed discussion on the issue of tracing and the policy reasons for placing the burden on the buyer/debtor, recognizing: that in most cases it will be virtually impossible for a PACA debtor to trace the origin of the disputed assets ... [However, w ]e believe that this is the outcome that Congress intended. Id. at 1014 (emphasis added). After finding the supplier had established the validity of its PACA trust interest, the Court stated the burden on remand to the district court is on the buyer to: prove which seized assets were not purchased with funds from the sale of produce. All of the seized assets that cannot be traced to a non-trust source are part of the trust res and are subject to [supplier's] trust claim. Id. (emphasis added.) The Produce buyer is required to maintain trust assets so that such assets are freely available to satisfy all outstanding obligations to Produce sellers. 7 C.P.R. 46.46(e). This obligation is plainly set forth in the PACA statute. 7 U.S.C. 499(b)(4). The officers of a corporation responsible for its financial dealings are personally liable to PACA trust creditors for any dissipation of the Plaintiffs PACA trust assets by virtue of their directing the corporate trustee to breach its fiduciary duties. Sunkist Growers v. Fisher, 104 F.3d 280, 283 (9th Cir. 1997) (agreeing with prior district court decisions, the Court stated: "individual shareholders, officers, or directors of a corporation who are in a position to control P ACA trust assets, and who breach their fiduciary duty to preserve those assets, may be held personally liable under the Act."). IV. JURISDICTION Injunctive relief is necessary and proper under the PACA to prevent the dissipation of a seller's interest in PACA trust assets, and the District Courts have jurisdiction to entertain PLAINTIFF'S MEMORANDUM OF LAW IN SUPPORT OF MOTION FOR TEMPORARY RESTRAINING ORDER- Page 6 12-50073-lmc Doc#347-4 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 7 of 19 Case 5:12-cv-00046-XR Document 5 Filed 12/29/11 Page 7 of 13 injunctive actions by both the USDA and private unpaid Produce sellers with PACA trust rights. Frio Ice, 918 F.2d at 158; Gullo Produce v. Jordon Produce, 751 F. Supp. 64 (W.D. PA. 1990); Debruyn Produce v. Olympia Produce, 734 F. Supp. 483 (N.D. Ga. 1989); J.R. Brooks & Sons v. Norman's Country Market, 98 B.R. 47 (Bania. N.D. Fla. 1989). See also 7 U.S.C. 499e(c)(4). "Injunctive relief is necessary to preserve the status quo for the protection of the produce sellers." Debruyn Produce, 734 F.2d at 486. Preventing dissipation of the trust is a key purpose of the PACA. Preventing transfer of trust assets often may be the only means by which a Federal Court can prevent dissipation of the trust. Upon a showing the trust is being dissipated or threatened with dissipation, a District Court should require the maintenance of trust assets. Frio Ice, 918 F.2d at 159. See also Taylor Farms Florida v. Gennaro's Produce, 2007 U.S. Dist. LEXIS 13260 (S.D. FL 2007)(wherein the Court granted no notice injunctive relief to the PACA trust beneficiary in order to stop the defendants continued dissipation of the trust res and to maintain the status quo). V.ARGUMENT Federal Rule of Civil Procedure 65 (b) provides that a temporary restraining order may be issued without written or oral notice to the adverse party or that party's attorney only if (1) it clearly appears from the specific facts shown by affidavit or by the verified complaint that immediate and irreparable injury, loss, or damage will result to the applicant before the adverse party or that party's attorney can be heard in opposition, and (2) the applicant's attorney certifies to the court, in writing the effmis, if any, which have been made to give the notice and the reasons supporting the claim that notice should not be required. Rule 65(b ). Defendants' dissipation of Plaintiffs PACA trust funds is an immediate and irreparable injury which courts have consistently held as a valid basis to a plaintiff's entitlement to an PLAINTIFF'S MEMORANDUM OF LAW IN SUPPORT OF MOTION FOR TEMPORARY RESTRAINING ORDER- Page 7 12-50073-lmc Doc#347-4 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 8 of 19 Case 5: 12-cv-00046-XR Document 5 Filed 12/29/11 Page 8 of 13 immediate injunction to restrain any further dissipation of trust assets when the produce supplier is not paid. See Taylor Farms Florida v. Gennaro's Produce,_2007 U.S. Dist. LEXIS 13260 *5 (S.D. FL 2007)(holding that the Plaintiff "will suffer immediate irreparable injury in the f01m of a loss of trust assets unless this Order is granted without notice."); Frio Ice, supra, 918 F. 2d at 159 ("[ u ]pon a showing that the trust is being dissipated or threatened with dissipation, a district court should require the PACA debtor to escrow its proceeds from produce sales, identify its receivables, and inventory its assets.")(emphasis added). Accord Dole Fresh Fruit v. United Banana, 821 F.2d 106 (2d Cir. 1987); In re Richmond Produce, 112 B.R. 364, 367 (Bania. N.D. Cal. 1990). Second, granting the TROis necessary and proper to prevent further dissipation ofPACA trust assets. In Taylor Fanns Florida v. Gennaro's Produce, 2007 U.S. Dist. LEXIS 13260 (S.D. FL 2007), also involving a PACA creditor requesting a TRO, District Judge Cooke addressed the no-notice provision ofFRCP 65(b) and stated that: [i]f notice is given to Defendants of the pendency of this Motion, trust assets will be further threatened with dissipation before the Motion is heard. As noted in the legislative history of PACA, once dissipation has occurred, recovery of trust assets is all but impossible. Entry of this Oder without notice assures retention of the trust assets under the control of this Court which is specifically vested with jurisdiction over the trust. Id. at 4. (internal citations omitted). See also Procacci Brothers Sales Group v. Indian Rock Produce, U. S. Dist. Court E.D. Pa. No. 03-5543 (E.D. Pa. October 9, 2003) (Wells, M.J.), similarly involving a PACA creditor requesting an ex parte TRO, Magistrate Judge Wells addressed the no-notice provision of FRCP 65(b), stating in her Report and Recommendation that: "[ e ]x parte proceedings pursuant to FRCP 65(b ), are appropriate in this instance, because, once the produce has been sold and trust funds dissipated, there will be no asset or other reliable PLAINTIFF'S MEMORANDUM OF LAW IN SUPPORT OF MOTION FOR TEMPORARY RESTRAINING ORDER- Page 8 12-50073-lmc Doc#347-4 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 9 of 19 Case 5:12-cv-00046-XR Document 5 Filed 12/29/11 Page 9 of 13 source of payment available to the Plaintiff." 2003 U.S. Dist. Lexis 19620 *4 (E.D. Pa 2003). On the same date the Report and Recommendation issued, October 9, 2003, Judge O'Neill adopted Magistrate Judge Wells' recommendation that Plaintiffs suggested temporary restraining order be granted. Plaintiffs Motion for a Temporary Restraining Order should be granted with an Order providing as follows: A. Restraining the Company from further violating the provisions of the PACA through dissipation and establishing a common fund for the payment of all valid P ACA claims; B. Restraining the Company, its principals, agents, banking institutions, or any entity acting on behalf of, or in concert with, the Company from using or consuming PACA trust assets in any way until further Order or until the Company pays the sum of at least $29,573.50, plus further interest, costs and attorneys' fees into the Registry of this Honorable Court; and C. Within three (3) business days of entry of this Order, the Company is ordered to tender a detailed accounting of all the Company's accounts receivable, accounts payable, inventory, equipment and other assets by a date certain to the Comi and to Plaintiffs counsel for a detennination of the extent of the dissipation. The above-listed preliminary relief is significantly less burdensome than the relief other courts have found necessary to effectuate the purpose of the statute, that being to ensure payment to unpaid sellers of Produce who have properly preserved their rights under the law. See also Gullo Produce, 751 F. Supp. at 65-66. In deciding whether to issue a preliminary injunction, a court must consider four factors: (1) whether the movant has shown a reasonable probability of success on the merits; (2) whether the movant will be irreparably injured by denial of the relief; (3) whether granting the preliminary relief will result in even greater harm to the nonmoving party; and ( 4) whether granting the preliminary relief will be in the public interest. ... A court should endeavor to balance these factors when determining if an injunction should issue. PLAINTIFF'S MEMORANDUM OF LAW IN SUPPORT OF MOTION FOR TEMPORARY RESTRAINING ORDER- Page 9 12-50073-lmc Doc#347-4 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 10 of 19 Case 5: 12-cv-00046-XR Document 5 Filed 12/29/11 Page 1 0 of 13 Tanimura, supra, at 140; William Inglis & Sons Baking v. ITT Continental Baking, 526 F.2d 86 (9th Cir. 1975); Corning Glass Works v. Jeannette Glass, 308 F. Supp. 1321 (D.C. N.Y. 1970), affd 432 F. 2d 784 (2nd Cir. 1970). See also Strube Celery & Vegetable v. Global Foods, 2006 U.S. Dist. LEXIS 78330 *4 (S.D. IN 2006)(citing Faheem-El v. Klincar, 841 F.2d 712 (7th Cir. 1988)). Plaintiff will now demonstrate the satisfaction of each factor for temporary and permanent injunctive relief. 1. LIKELIHOOD OF SUCCESS ON THE MERITS The Affidavit of the Plaintiff's owner, Eric Muller, demonstrates, the Plaintiff properly preserved its tmst rights by affixing the required notice language on the face of its invoices and serving same on the Company. See Ex. 1, ~ 7; see also 7 U.S.C. 499e(c)(4). As a case based almost exclusively on written documents which have been properly authenticated (an "account stated" action), and because the Company has no defenses to these claims under the P ACA, the Plaintiff will almost certainly prevail at any hearing on the merits of its claims. 2. IRREPARABLE INJURY In cases interpreting the rights of P A CA creditors, courts in other jurisdictions have recognized that without injunctive relief, a PACA seller faced with a financially unstable or an insolvent buyer will not receive either the PACA tmst assets or the proceeds of such trust assets. Tanimura, supra. "PACA tmst dissipation ... constitutes irreparable harm." Tanimura, 222 F.3d at 140. See also Gullo Produce, 751 F. Supp. at 67; Frio Ice, 918 F.2d at 159 ("[t]he legislative history [of the PACA] noted that once the trust is dissipated it is almost impossible for the beneficiary to obtain recovery") (emphasis added). "[T]rust dissipation can satisfy [the irreparable hann] factor if, absent such relief, ultimate recovery is rendered unlikely." Tanimura, 222 F .3d at 141. A moving party must show either actual dissipation or the threat of dissipation PLAINTIFF'S MEMORANDUM OF LAW IN SUPPORT OF MOTION FOR TEMPORARY RESTRAINING ORDER- Page 10 12-50073-lmc Doc#347-4 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 11 of 19 Case 5: 12-cv-00046-XR Document 5 Filed 12/29/11 Page 11 of 13 of the PACA trust in order to obtain injunctive relief and a segregation of the trust proceeds. Frio Ice, 918 F.2d at 159. In this instance, the Company lacks the ability to pay for the Produce it purchased from the Plaintiff. Furthermore, the Company has ceased operations, and it is therefore incapable of timely satisfying the debts owed to the trust's beneficiaries, such as the Plaintiff. See Ex. 1, ~ ~ 11-21. This clearly establishes either actual dissipation or a clear threat of dissipation of the PACA trust assets unless the Company is enjoined from further violating the P ACA statute. Injunctive relief will force the Company to cease dissipation of the PACA trust, prevent third party purchasers from terminating or "cutting off' the Plaintiffs trust rights and require the Company to retum the trust to a fully-funded level sufficient to satisfy the claims of qualified beneficial interests in full. To date, the Company has dissipated the trust by failing to pay Plaintiffs, and the Company has demonstrated their inability to do so. The Company continues to dissipate the trust assets to entities other than the rightful owners of the P ACA trust's beneficial interests and by failing to make the trust assets readily available to make a full payment promptly to Plaintiff as required under federal law (the PACA). Because Congress specifically recognized the virtual impossibility of recovering PACA trust assets once they have been dissipated or transferred to third pmiies who may have BFP status, the loss to Plaintiff and other trust creditors is irreparable. 3. BALANCING OF HARM The Company simply cannot be harmed by the issuance of an injunction because the relief Plaintiff seek is merely to force the Company to comply with the law. It will also require the Company to satisfy its pre-existing obligations under PACA, that is, to preserve the PACA trust assets for the benefit of P ACA beneficiaries and make "full payment promptly" on all PLAINTIFF'S MEMORANDUM OF LAW IN SUPPORT OF MOTION FOR TEMPORARY RESTRAINING ORDER- Page 11 12-50073-lmc Doc#347-4 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 12 of 19 Case 5:12-cv-00046-XR Document 5 Filed 12/29/11 Page 12 of 13 Produce-related invoices. On the other hand, the risk of harm to Plaintiff is great if the Company is allowed to further dissipate trust assets and disburse the PACA trust assets to non-trust creditors. Judicial oversight is necessary to protect the trust rights of the Plaintiff and other PACA trust beneficiaries. As stated above, previous experience has bome out the fact that, once the PACA trust assets are dissipated, an unpaid P ACA claimant is extremely unlikely to recover any portion of its beneficial interest in the trust -- a result clearly at odds with the express purpose of this remedial federal statute. Thus, the issuance of a TRO will merely ensure the Company does not continue to violate the law. 4. PUBLIC INTEREST The strong preference for the plight ofPACA trust creditors which Congress expressed in the 1984 trust amendments to the PACA clearly illuminates the public interest at stake in this case. In the text of the statute itself, Congress made this point very clear: [t]his subsection [the new PACA trust provision] is intended to remedy such burden on commerce in perishable agricultural commodities and to protect the public interest. 7 U.S.C. 499e(c)(1) (emphasis added). These safeguards were established in order to assure payment to Produce growers and shippers. There can scarcely be a more vital public concem than the economic security and viability of this nation's food supply. This supply and distribution chain consists of the very same growers, producers and distributors which Congress sought to protect when it enacted this legislation in 1930, and then amended it in 1984 to include the PACA trust provisions. To deny Plaintiff the requested relief would erode the protection Congress guaranteed to the growers and sellers of Produce in Plaintiffs position, by passing the PACA and the regulations promulgated thereunder. "[I]ssuance of a preliminary injunction here is in the public interest, as the statutory purpose PLAINTIFF'S MEMORANDUM OF LAW IN SUPPORT OF MOTION FOR TEMPORARY RESTRAINING ORDER- Page 12 12-50073-lmc Doc#347-4 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 13 of 19 Case 5:12-cv-00046-XR Document 5 Filed 12/29/11 Page 13 of 13 explicitly encapsulates injunctive relief." Tanimura, 222 F .3d at 140 (3rd Cir. 2000). Therefore, the requested injunction is clearly in the public interest. VI. CONCLUSION For the foregoing reasons, Plaintiff respectfully requests the Court to issue a Temporary Restraining Order and set this matter for a full hearing on Plaintiffs motion for a preliminary injunction and to consolidate that hearing with a hearing on the merits. DATE: December 29, 2011 Respectfully submitted, By: /s/ Bruce Akerly Bruce W. Akerly Texas Bar No. 00953200 CANTEY HANGER LLP 1999 Bryan Street, Suite 3300 Dallas, Texas 75201 Telephone: (214) 978-4100 Facsimile: (214) 978-4150 bakerly@canteyhanger.com Attorney for the Plaintiff Of-Counsel: Jason R. Klinowski, Esq. (pro hac vice forthcoming) Illinois Bar. No. 6283266 FREEBORN & PETERS LLP 311 S. Wacker Dr., Suite 3000 Chicago, Illinois 60606 Telephone: (312) 360-6536 Facsimile: (312) 360-6570 jklinowski@freebornpeters.com Attorney for the Plaintiff PLAINTIFF'S MEMORANDUM OF LAW IN SUPPORT OF MOTION FOR TEMPORARY RESTRAINING ORDER Page 13 12-50073-lmc Doc#347-4 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 14 of 19 Case 5:12-cv-00046-XR Document 6 Filed 12/29/11 Page 1 of 3 UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS SAN ANTONIO DIVISION MULLER TRADING COMPANY, INC., ) ) Plaintiff, ) ) v. ) ) DELTA PRODUCE, LP, DELTA ) PRODUCE MANAGEMENT LLC ) and WALTERJENSEN, individually, ) ) Defendants. ) CIVIL ACTION CASE NO.: 11-cv-01114-SS (PROPOSED) TEMPORARY RESTRAINING ORDER On December 29, 2011, Muller Trading Company, Inc. (the "Plaintiff') applied for the issuance of a Temporary Restraining Order under Federal Rules of Civil Procedure 65(b) (the "Applications") which came before this Honorable Court and the undersigned on the date set forth below. The Court considered all of the pleadings, including the Application, the Affidavit of Eric Muller, owner of the Plaintiff, and all related moving papers. The Plaintiffs Affidavit demonstrates the defendants, Delta Produce, LP (the "Company") and Delta Produce Management LLC and Walter Jensen, (collectively the "Principals")(the Principals and the Company are collectively referred to herein as the "Defendants") purchased perishable agricultural commodities ("Produce") in interstate commerce and, thereafter, failed to pay Plaintiff in violation of the Perishable Agricultural Commodities Act, 1930, as amended, 7 U.S.C. 499a-499t (the "PACA"). These same pleadings and supporting documents establish the Defendants have either dissipated the PACA trust or have presented a sufficient threat of dissipation of such trust to warrant the relief granted in this Order. On the basis of the pleadings, the Affidavit and other 12-50073-lmc Doc#347-4 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 15 of 19 Case 5: 12-cv-00046-XR Document 6 Filed 12/29/11 Page 2 of 3 submissions the Plaintiff filed in this matter, it appears to this Honorable Court that the Plaintiff will suffer immediate and iiTeparable injury due to the Defendants' dissipation of Plaintiffs beneficial interest in the statutory trust created pursuant to 7 U.S.C. 499e(c) and that such dissipation will continue in the absence of injunctive relief. The Court is of the opinion that a Temporary Restraining Order should be issued due to the threat of further dissipation. Based on the foregoing, IT IS HEREBY ORDERED: 1. The Company and its respective agents, officers, assigns, and any of their banking institutions are DIRECTED NOT to pay, withdraw, transfer, assign or sell any and all existing PACA trust assets or otherwise dispose of corporate assets to any creditors, persons or entities until fmiher Order for this Court, or until the Company deposits into the Registry of this Comi the sum of$29,573.50. 2. Pending further orders of this Court, or until such time as the Company pays Plaintiff or deposits into the Registry of the Court the sum of $29,573.50, no banking institution holding funds for the Company shall pay, transfer or pennit assignment or withdrawal of any existing PACA trust assets held on behalf of the Company. Further, pending further order of this Court, or until such time as the Company deposits into the Registry of this Comi the sum of $29,573.50, no banking institution holding funds for the Company shall pay, transfer or permit assignment or withdrawal of the corporate assets of the Company without this Court's express written approval. 3. If the Company fails to deposit into the Registry of this Court the sum of $29,573.50 in full within three (3) business days of the entry of this Order, the Company must account to the Court and Plaintiffs counsel for all accounts receivable, accounts payable, 2 12-50073-lmc Doc#347-4 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 16 of 19 Case 5:12-cv-00046-XR Document 6 Filed 12/29/11 Page 3 of 3 equipment, inventory and all other assets subject to the PACA trust and the regulations promulgated thereunder. 4. In furtherance of such an accounting, the Court hereby directs any banking institution holding funds for the Company to tum over to Plaintiffs undersigned counsel any statements, signature cards and other documents relating to or regarding any of the Company's accounts at such banking institutions within five (5) days of receipt ofthis Order. 5. This Order will be binding upon the parties to this action, their officers, agents, servants, employees, banks, or attomeys and all other persons or entities who receive actual notice of this Order by personal service or otherwise. In this regard, the Company shall serve a copy of this Order on all financial institutions with which the Company does any business, may do any business with, or who may be holding any assets for or on behalf of any of the Company. 6. Because Company already possess $29,573.50 ofPACA trust assets which is the Plaintiffs property, the bond in this matter is hereby set at $0.00. 7. A Preliminary Injunction Hearing is hereby set for January __ , 2012 at .M. in Courtroom ____ of the U.S. Courthouse, in ______ , Texas. 8. Plaintiff, through its Counsel, shall serve a true and correct copy of this Order on all Defendants including their respective counsel. DONE AND SO ORDERED the date shown below in , Texas. ------- Signed: __________ , 20 UNITED STATES DISTRICT JUDGE 3 12-50073-lmc Doc#347-4 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 17 of 19 ....--------------------------.. -------- Case 1 : 11-cv-0 4-SS Document 12 Filed 1 UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS SAN ANTONIO DIVISION MULLER TRADING COMPANY, INC., ) ) Plaintiff, ) ) v. ) CIVIL ACTION Page 1 of 3 ) CASE NO.: 11-cv-01114-SS DELTA PRODUCE, LP, DELTA ) PRODUCE MANAGEMENT LLC ) and WALTERJENSEN, individually, ) ) Defendants. ) ~ { P l 1 II; i.ij!ii)) TEMPORARY RESTRAINING ORDER On December 29, 2011, Muller Trading Company, Inc. (the "Plaintiff") applied for the issuance of a Temporary Restraining Order under Federal Rules of Civil Procedure 65(b) (the "Applications") which came before this Honorable Court and the undersigned on the date set forth below. The Court considered all of the pleadings, including the Application, the Affidavit of Eric Muller, owner of the Plaintiff, and all related moving papers. The Plaintiff's Affidavit demonstrates the defendants, Delta Produce, LP (the "Company") and Delta Produce Management LLC and Walter Jensen, (collectively the "Principals")(the Principals and the Company are collectively referred to herein as the "Defendants") purchased perishable agricultural commodities ("Produce") in interstate commerce and, thereafter, failed to pay Plaintiff in violation of the Perishable Agricultural Commodities Act, 1930, as amended, 7 U.S.C. 499a-499t (the "PACA"). These same pleadings and supporting documents establish the Defendants have either dissipated the PACA trust or have presented a sufficient threat of dissipation of such trust to warrant the relief granted in this Order. On the basis of the pleadings, the Affidavit and other 12-50073-lmc Doc#347-4 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 18 of 19 Case 1 : 11-cv-0 4-SS Document 12 Filed 1 Page 2 of 3 submissions the Plaintiff filed in this matter, it appears to this Honorable Court that the Plaintiff will suffer immediate and irreparable injury due to the Defendants' dissipation of Plaintiff's beneficial interest in the statutory trust created pursuant to 7 U.S.C. 499e(c) and that such dissipation will continue in the absence of injunctive relief. The Court is of the opinion that a Temporary Restraining Order should be issued due to the threat of further dissipation. Based on the foregoing, IT IS HEREBY ORDERED: 1. The Company and its respective agents, officers, assigns, and any of their banking institutions are DIRECTED NOT to pay, withdraw, transfer, assign or sell any and all existing PACA trust assets or otherwise dispose of corporate assets to any creditors, persons or entities until further Order for this Court, or until the Company deposits into the Registry of this Court the sum of$29,573.50. 2. Pending further orders of this Court, or until such time as the Company pays Plaintiff or deposits into the Registry of the Court the sum of $29,573.50, no banking institution holding funds for the Company shall pay, transfer or permit assignment or withdrawal of any existing PACA trust assets held on behalf of the Company. Further, pending further order of this Court, or until such time as the Company deposits into the Registry of this Court the sum of $29,573.50, no banking institution holding funds for the Company shall pay, transfer or permit assignment or withdrawal of the corporate assets of the Company without this Court's express written approval. 3. If the Company fails to deposit into the Registry of this Court the sum of $29,573.50 in full within three (3) business days of the entry of this Order, the Company must account to the Court and Plaintiff's counsel for all accounts receivable, accounts payable, 2 12-50073-lmc Doc#347-4 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 19 of 19 Case 1 : 11-cv-0 4-SS Document 12 Filed 12/2 Page 3 of 3 equipment, inventory and all other assets subject to the PACA trust and the regulations promulgated thereunder. 4. In furtherance of such an accounting, the Court hereby directs any banking institution holding funds for the Company to turn over to Plaintiffs undersigned counsel any statements, signature cards and other documents relating to or regarding any of the Company's accounts at such banking institutions within five (5) days of receipt of this Order. 5. This Order will be binding upon the parties to this action, their officers, agents, servants, employees, banks, or attorneys and all other persons or entities who receive actual notice of this Order by personal service or otherwise. In this regard, the Company shall serve a copy of this Order on all financial institutions with which the Company does any business, may do any business with, or who may be holding any assets for or on behalf of any of the Company. 6. Because Company already possess $29,573.50 ofPACA trust assets which is the Plaintiffs property, the bond in this matter is hereby set at $0.00. 7. A Preliminary Injunction Hearing is hereby set for January _5__, 2012 at 00 .e_.M. in Courtroom Jf 2- of the U.S. Courthouse, in Ausl-i , Texas. 8. Plaintiff, through its Counsel, shall serve a true and correct copy of this Order on all Defendants including their respective counsel. DONE AND SO ORDERED the date shown below in , Texas. Signed: , 3 12-50073-lmc Doc#347-5 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 1 of 10 Case: 1:11-cv-08212 Document#: 1 Filed: 11/17/11 Page 1 of 9 PageiD #:1 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION LEATHERS MELON COMPANY, INC., Plaintiff, v. QUALITY PRODUCE SUPPLIERS, INC., DONALD SRUM, RICHARD SRUM and PATSY SRUM, each individually, Defendants. ) ) ) CIVIL ACTION ) ) Case No. ) ) ) ) ) ) COMPLAINT For its complaint, Plaintiff respectfully states as follows: THE PARTIES 1. Leathers Melon Company, Inc. (the "Plaintiff') has offices in LaBelle, Florida and operates its business under a valid P ACA License, which the United States Depmiment of Agriculture granted to Plaintiff 2. Plaintiff sells wholesale quantities of perishable agricultural commodities ("Produce") in interstate commerce. 3. Defendants are: a) Quality Produce Suppliers, Inc., is an Illinois corporation (the "Company"); b) Donald Snnn, individually("D. Srum"), is an officer, director, shareholder or person in a position to control the Company at all times relevant to this action; c) Richard Srum, individually ("R. Snun"), is an officer, director, shareholder or person in a position to control the Company at all times relevant to this action, and; EXHIBITE 12-50073-lmc Doc#347-5 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 2 of 10 Case: 1:11-cv-08212 Document#: 1 Filed: 11/17/11 Page 2 of 9 PageiD #:2 d) Patsy Srum, individually ("P. Srum"), is an officer, director, shareholder or person in a position to control the Company at all times relevant to this action. D. Srum, R. Srum and P. Srum are collectively refeued to herein as the "Principals." The Company and Principals are collectively refeued to herein as the "Defendants." 4. Defendants are engaged in the business of purchasing or selling Produce in wholesale or jobbing quantities and, therefore, are "dealers" of Produce as defined by the Perishable Agricultural Commodities Act, 1930, as amended, 7 U.S.C. 499a-499t (20 11) (the "PACA"). 5. Defendants are engaged in the business of negotiating purchases and sales of various types of Produce in interstate or foreign commerce, and, therefore acting as "brokers" of Produce within the scope of the PACA. 6. At all times relevant hereto, the Defendants operated their business under a license the United States Department of Agriculture ("USDA") issued to the Company. JURISDICTION AND VENUE 7. The District Court has jurisdiction over this civil action arising under 5( c )(5) of the PACA, 7 U.S.C. 499e(c)(5), pursuant to 28 U.S.C. 1331. The Court has supplementaljurisdiction over Plaintiffs other claims pursuant to 28 U.S.C. 1367(a). 8. Venue in thisDistrictis based on28 U.S.C. 139l(b) because a substantial part ofthe events or omissions giving rise to Plaintiff's claims occurred in this district and a substantial part of the property that is the subject of this action is situated in this district. 2 12-50073-lmc Doc#347-5 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 3 of 10 Case: 1:11-cv-08212 Document#: 1 Filed: 11/17/11 Page 3 of 9 PageiD #:3 FACTUAL ALLEGATIONS 9. Plaintiff sold to the Defendants, and Defendants purchased from Plaintiff, Produce having a current aggregate value of $190,153.90, as set forth the chart attached hereto as Exhibit A and incorporated herein by this reference. 10. The Defendants accepted a load ofProduce which corresponds to the invoice number listed in Exhibit A. 11. The Defendants accepted the load of Produce stated in Exhibit A in Chicago, Illinois. 12. The Plaintiff issued to the Defendants, and the Defendants received, the invoice listed in Exhibit A 13. The Plaintiff is an unpaid supplier or seller ofProduce, having sold Produce to the Defendants for which it remains unpaid. 14. The Plaintiff utilized the invoices listed in Exhibit A to preserve its PACA tmst rights. 15. The Defendants failed to deliver good funds to the Plaintiff in the amomt set forth under "Tmst Amount" in Exhibit A, despite repeated demands from the Plaintiff. COUNT I. ENFORCEMENT OF TilE PACA TRUST 7 U.S.C. 499e(c)(4) COMPANY and PRINCIPALS 16. Plaintiff re-alleges paragraphs 1 through 15 as though fully set forth herein. 3 12-50073-lmc Doc#347-5 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 4 of 10 Case: 1:11-cv-08212 Document#: 1 Filed: 11/17/11 Page 4 of 9 PageiD #:4 17. The Defendants are in possession, custody and control of all assets derived from the Defendants' sale of Produce (the "P ACA Trust Assets") for the benefit of the Plaintiff and other similarly-situated PACA trust beneficiaries. 18. The Defendants failed to deliver to the Plaintiff sufficient funds from the PACA Tmst Assets from the shipment of Produce as listed in Exhibit A. 19. The Defendants failed to presetve sufficient amounts of the PACA Tmst Assets to fully satisfy all qualified PACA tmst claims, such as the Plaintiffs unpaid claims asserted in this action. 20. As a direct result of the Defendants' failme to properly protect the PACA Tmst Assets fiom dissipation, the Plaintiff suffered damages for the unpaid invoice which is covered under the PACA trust in the current aggregate amount of $190,153.90, plus fmther intet-est at the Illinois 5.0% statutory rate of pre-judgment interest. 21. On information and belief, additional unknown and unpaid tmst beneficiaries exist. As a result, the Plaintiff further seeks the entry of an Order directing the Defendants to immediately tmn over to the registry of the Court all assets impressed with the PACA tmst for the benefit of all unpaid trust beneficiaries such as the Plaintiff herein, thereby creating a fund for the benefit of said tmst beneficiaries. 4 12-50073-lmc Doc#347-5 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 5 of 10 Case: 1:11-cv-08212 Document#: 1 Filed: 11/17/11 Page 5 of 9 PageiD #:5 COUNT II. FOR VIOLATION OF THE PERISHABLE AGRICULTURAL COMMODITIES ACT: FAILURE TO PAY PROMPTLY 7 U.S.C. 499b(4) COMPANY and PRINCIPALS 22. Plaintiffre-alleges paragraphs 1 through 21 as though fully set fmih herein. 23. The Defendants received the shipment of Produce referenced in paragraph above. 24. The Defendants failed to pay the invoice within the applicable payment terms in effect between the pariies at the time of each transaction. 25. As a direct result of the Defendants' failure to pay the invoice within tenns, the Plaintiff incurred damages in the aggregate current amount of $190,153.90, plus further interest at the Illinois statutory rate of 5.0%. COUNT III. BREACH OF CONTRACT COMPANY 26. Plaintiff re-alleges paragraphs 1 through 25 as though fully set fmih herein. 27. Plaintiff and the Company entered into a contract under which Plaintiff agreed to sell the Produce and the Company agreed to purchase the Produce, which is referenced in paragraph 9 above. 2 8. The Plaintiff delivered confonning goods to the Company and has otherwise satisfied all conditions of the contracts. 29. The Company failed to pay for the shipment of Produce referenced in paragraph 9 5 12-50073-lmc Doc#347-5 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 6 of 10 Case: 1:11-cv-08212 Document#: 1 Filed: 11/17/11 Page 6 of 9 PageiD #:6 above. 30. As a direct result of the Company's failure to pay for the shipment of Produce, the Plaintiff incuned damages in the cunent aggregate amount of$190,153.90, plus further interest at the Illinois statutory rate of 5.0%. COUNT IV. BREACH OF FIDUCIARY DUTY TO PACA TRUST BENEFICIARIES PRINCIPALS 31. Plaintiff re-alleges paragraphs 1 through 30 as though fully set forth herein. 32. At all times relevant to this action, the Principals were each a person in charge of the Company's relevant business undertakings. 33. At all times relevant to this action, the Principals were each a person engaged in the business of buying or selling Produce in interstate commerce in wholesale or jobbing quantities. 34. At all times relevant to this action, the Principals controlled and managed the Company's operations and had control over the Company's financial dealings, including those involving the P ACA Trust Assets. 35. At all times relevant to this action, the Principals were each in a position to control and manage the Company's business operations and had the ability to control the Company's financial dealings, including those involving the PACA Trust Assets. 36. At all times relevant to this action, the Principals had authority to direct the payment of the Company's funds and otherwise had the power to direct the application or disposition of the PACA Trust Assets. 6 12-50073-lmc Doc#347-5 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 7 of 10 Case: 1:11-cv-08212 Document#: 1 Filed: 11/17/11 Page 7 of 9 PageiD #:7 37. At all times relevant to this action, the Principals were authorized signatories on the Company's bank account(s). 38. At all times relevant to this action, the Principals had the power to direct the application or disposition of the PACA Tmst Assets. 39. The Principals were each stah1tory tmstees with a duty to safeguard the PACA Tmst Assets and were required to maintain the trust assets in such a manner as to ensure there were, at all times, sufficient tmst assets to satisfy all outstanding P ACA tmst obligations such as those owed to the Plaintiffherein. 40. Because the Principals controlled and/or were in a position to control the Company's operations, and the Plaintiff's invoice has not been paid from PACA tmst assets as its bills fell due, the Principals breached their respective fiduciary duties under the PACA trust. 41. The Principals continue to hold any and all PACA Tmst Assets having come into their individual possession as tmstees for the Plaintiff's beneficial interest in the P ACA tmst. 42. The Principals are each personally liable to the Plaintiff, which liability is joint and several with the Company and any third parties having received any P ACA trust assets with actual or constructive notice of the breach of the PACA Trust, for the dissipation of the PACA trust in the current aggregate amount of$190,153.90, plus the Illinois 5.0% statutory rate of interest contract rate. 7 12-50073-lmc Doc#347-5 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 8 of 10 Case: 1:11-cv-08212 Document#: 1 Filed: 11/17/11 Page 8 of 9 PageiD #:8 FOR THESE REASONS, Plaintiff respectfully seeks the entry of an Order providing as follows: A) As to Count I: (i) entering an Order creating a common fund and/or otherwise compelling the preservation of the Defendants' P ACA trust assets for the benefit of the Plaintiff and other similarly-situated P ACA trust beneficiaries that properly join in the instant action, (ii) entering an Order directing the Defendants to immediately turn over to the registry of the Court all assets impressed with the PACA trust for the benefit of all unpaid trust beneficiaries such as the Plaintiff, (iii) entering a Final Judgment in favor of the Plaintiff and against the Defendants, jointly and severally, in the current amount of $190,153 .90, plus further interest at the Illinois statutmy rate of 5.0%, less any actual recovery on other C01mts herein. B) As to Count II, entering a Final Judgment in favor of Plaintiff and against the Defendants, jointly and severally, in the current amount of $190,153.90, plus further interest at the Illinois statutory rate of 5 .0%, less any actual recovery on other Counts herein. C) As to Count III, entering a Final Judgment in favor of Plaintiff and against the Company for breach of contract in the current amount of $190,153.90, plus further interest at the Illinois statutory rate of5 .0%, less any actual recovery on other Cmmts herein. D) As to Count IV, entering a Final Judgment in favor of Plaintiff and against the Principals, on a joint and several basis with the Company, for breach of their fiduciary 8 12-50073-lmc Doc#347-5 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 9 of 10 Case: 1:11-cv-08212 Document#: 1 Filed: 11/17111 Page 9 of 9 PageiD #:9 duties to the P ACA Trust, in the current amount of $190,153.90, plus fmiher interest at the Illinois statutory rate of5.0%, less any actual recovery on other Counts herein. E) Providing such other and further relief as the Court deems appropriate upon consideration of this matter. Date: November 17, 2011 9 Respectfully submitted, LEATHERS MEWN COMPANY, INC. By: Is/ John C. Crees, Esq. Michael J. Keaton, Esq.- IL Bar #6207206 John C. Crees, Esq. - IL Bar #6299569 KEATON & ASSOCIATES, P.C. 1278 W. Northwest Highway, Suite 903 Palatine, Illinois 60067 Tel: 847/934-6500 Fax: 847/934-6508 E-mail: keaton@pacatrust.com 1 2 - 5 0 0 7 3 - l m c
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1-' 1-' lJ P-l co (j) 1-' 0 _,., N N lJ s:u co (j) 0 :tf 1-' 0 12-50073-lmc Doc#347-6 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 1 of 13 Case: 1:11-cv-08212 Document#: 9 Filed: 11/17/11 Page 1 of 65 PageiD #:46 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION FILE NOV 1 7 2011 MF LEATHERS MELON COMPANY, INC., ) MICHAEL W. D08BIN5 CLERK, U.S. DISTRICT COURT Plaintiff, v. QUALITY PRODUCE SUPPLIERS, INC., DONALD SRUM, RICHARD SRUM and PATSY SRUM, each individually, Defendants. ) 11 cv8212 ) ( ) ) ) ' Judge William J. Hibbler . Magistrate Sidney I. Sctt_enkter ) ) ) ) ) PLAINTIFF'S MEMORANDUM OF LAW IN SUPPORT OF APPLICATION FOR TEMPORARY RESTRAINING ORDER I. INTRODUCTION Leathers Melon Company Inc. ("Plaintiff'), has just filed an action to recover $190,153.90, plus further interest for perishable agricultural commodities ("Produce") sold to defendants, Quality Produce Suppliers, Inc. (the "Company'') and Donald Srum, Richard Srum and Patsy Srum, each individually (collectively the "Principals") (the Company and the Principals hereinafter collectively the "Defendants"). Count I seeks enforcement of the trust imposed on the Defendants' assets under 5(c)(3) [7U.S.C. 499e(c)(3)] ofthePerishableAgricultural Commodities Act, 1930, as amended, 7 U.S.C. 499a-499t (2009 & Supp. 2011) (the "PACA"). Plaintiff alleges that the Defendants have dissipated, and are continuing to dissipate, the assets impressed with the statutory P ACA trust, thereby harming the rights of the trust beneficiaries such as the Plaintiff. The Defendants' dissipation and continued dissipation ofPlaintiff s trust assets is wrongful and in violation of Plaintiffs trust rights. The PACA requires a Produce debtor in the Defendants' position to maintain sufficient assets at all times to satisfy the claims of the qualified P ACA trust beneficiaries such as the Plaintiff herein. Accordingly, Plaintiffs action seeks the entry of a EXHIBITF 12-50073-lmc Doc#347-6 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 2 of 13 Case: 1:11-cv-08212 Document#: 9 Filed: 11117111 Page 2 of 65 PageiD #:47 Temporary Restraining Order ("TRO") to prevent the Defendants from further dissipating the P ACA trust. If the Defendants are not restrained from dissipating the P ACA trust, the trust assets will be forever lost to Plaintiff and it will thereby suffer the exact irreparable harm this remedial statute was designed and enacted to prevent. II. STATEMENT OF THE FACTS Plaintiff are sellers of wholesale quantities of Produce. The Defendants are buyers of wholesale quantities of Produce. The Plaintiff sold Produce to the Defendants and the Defendants accepted shipments of Produce from the Plaintiff which have a current aggregate invoice value of $190,153.90. After the inclusion of all sums owing in connection with the transactions, per the USDA regulations, the Plaintiff properly preserved its P ACA trust rights for this entire sum. Despite repeated demands, the Defendants have not paid Plaintiff the balance due on their P ACA trust claims and the cunent aggregate sum of $190,153.90, plus further interest remains due and owing. (See Affidavit of James E. Leathers, President of the Plaintiff, attached as Exhibit 1). The Defendants also appear to be unable to pay due to the dissipated condition of the P ACA trust res. (See Exhibit 1, ~ ~ # # ) . Based on the Defendants' demonstrated inability to pay its bills (See Exhibit 1, Plaintiffs Affidavit), this situation will effectively prevent the Defendants from satisfying the balances owed to the Plaintiff or any other equally-situated trust beneficiary if allowed to continue dissipating the trust. Id. Rather than allocating the P ACA trust assets to their only rightful purpose, i.e., the payment of the claims ofPACA trust beneficiaries such as the Plaintiff, the Defendants have instead been, either voluntarily or against their will, diverting these trust assets to other uses in clear violation of their duties as statutory trustees under P A CA. 2 12-50073-lmc Doc#347-6 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 3 of 13 Case: 1:11-cv-08212 Document#: 9 Filed: 11117/11 Page 3 of 65 PageiD #:48 III. SUMMARY OF THE PERISHABLE AGRICULTURAL COMMODITIES ACT Congress enacted the P ACA in 1930 to provide a comprehensive scheme for the regulation of traders of fresh fruit and vegetables. "It provides a code of fair play ... an aid to agricultural traders in enforcing their contracts." 49 Fed. Reg. at 45737. The PACArequires produce buyers to make "full payment promptly'' for any produce they purchase. 7 U.S.C. 499b(4). The PACA protects suppliers of produce by giving rise to civil liabilities in favor of the unpaid seller against buyers who fail to make full payment promptly. 7 U.S.C. 499e(a); In re Carpenito Bros., 46 Agric. Dec. 486 (1987), affd 851 F.2d 1500 (D.C. Cir. 1988). See also Endico Potatoes v. CIT/Factoring, 67 F.3d 1063, 1066-67 (2nd Cir. 1995). An unpaid seller loses the benefit of the trust unless it serves written notice of its intent to preserve trust benefits with the produce buyer within 30 days after payment becomes past due. 7 U.S.C. 499e(c)(3) (as amended). In 1984, Congress determined that the increase in nonpayment and delinquent payment by Produce buyers threatened-the financial stability of the produce industry. Congress recognized that under the prevailing law "sellers of fresh fruits and vegetables [were] unsecured creditors and receive[ d] little protection in any suit for recovery of damages where a buyer ha[ d] failed to make payment required by the contract." H. R. Rep. No. 543, 98th Cong. 1 St. Sess. (1983), reprinted in 1984 U.S. Code Cong. & Admin. News, 405, 407. In response, Congress amended the PACA in 1984 to provide further protection to sellers of produce and to establish an express, non-segregated "floating" statutory trust in which a Produce buyer as trustee holds its Produce-related assets in trust as a fiduciary until full payment is made to the unpaid seller/trust beneficiary. 7 U.S.C. 499e( c); Frio Ice S.A. v. Sunfruit, 918 F.2d 154, 156 (11th Cir. 1990). 3 12-50073-lmc Doc#347-6 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 4 of 13 Case: 1:11-cv-08212 Document#: 9 Filed: 11/17/11 Page 4 of 65 PageiD #:49 The P A CA trust commences by operation oflaw upon delivery of the Produce and continues until full payment for the Produce has been made. 7 C.F.R. 46.46(d)(l), 7 U.S.C. 499e(c)(2). Once the seller delivers the Produce, failure of the buyer (as trustee) to maintain trust assets sufficient to make full payment promptly to the trust beneficiaries is unlawful. 7 U.S.C. 499b( 4). The trust provisions of the PACA are similar to, and based upon, the trust provisions of the Packers and Stockyards Act, 7U.S.C. 181-229 (1980)(the "PSA"). The trust provisions ofbothActs are interpreted similarly, and the courts have looked to the PSA for guidance in interpreting the P ACA. See In re: Fresh Approach, 48 B.R. 926, 931 (Bankr. N.D. Tex. 1985). The principal benefit of the trust for a Produce seller is that when a buyer fails to pay or becomes insolvent, the seller is placed first in line among creditors to receive the trust res, which consists of all assets of the debtor unless and until the debtor proves a particular asset was acquired with something other than the proceeds of the debtor's dealings in Produce. Frio Ice, 918 F .2d at 156. See In re: Monterey House, 71 B.R. 244, 249 (Bankr. S.D. Tex. 1986); Fresh Approach, 51 B.R. at 420-422. The P ACA trust res serves as a fund from which unpaid Produce sellers can be assured payment. By operation of trust law, while a buyer of Produce has legal title to the PACA trust res, equitable title remains with the seller of the Produce. The establishment of the trust occurs upon the commencement of the buyer's buying and selling ofProduce and exists continuously throughout the life of the buyer's business until the sellers are paid in full. Any assets purchased while the trust is in existence will be assumed to be purchased with trust assets and will, therefore, become part of the trust fund assets available to satisfy the claims of the qualified unpaid sellers. In re: Atlantic Tropical Market, 118 B.R. 139, 142 (Bankr. S.D. Fla. 1990). When trust assets are commingled with funds not subject to the trust, the trust is 4 12-50073-lmc Doc#347-6 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 5 of 13 Case: 1:11-cv-08212 Document#: 9 Filed: 11/17/11 Page 5 of 65 PageiD #:50 impressed u p o ~ the entire commingled fund for the benefit of the trust beneficiaries. In re: Gotham Provision, 669 F.2d 1000 (5th Cir. 1982). The PACA was designed to insure that a Produce buyer's secured lender and other third parties do not receive and retain proceeds from the sale of Produce when the buyers's Produce suppliers have not been paid. The USDA has recognized that Congress intended unpaid sellers to recover trust assets that are transferred to third parties including secured lenders. 49 Fed. Reg. 45736 (Nov. 20, 1984). See 44 U.S.C. 1507. With respect to any issue of tracing assets, the Atlantic Tropical Market court considered this legislative history when it placed on the buyer the burden to "track the status of the trust fund and to provide evidence of other origin of purchases of assets." Id., citing In re: AI Nagelberg & Co., 84B.R. 19 (S.D.N.Y. 1988); In re: Fresh Approach, 51 B.R. at422 ("[s]hould a dispute arise, it will be the buyers' burden to establish which, if any, assets are not subject to the PACA trust."); In re: N. Merberg & Sons, 166 B.R. 567, 570 (Bankr. S.D.N.Y. 1994; In re: Milton Poulos, Inc., 94 B.R. 648, 652-53 (Bankr. C.D. Cal. 1988), aff'd 107 B.R. 715 (9th Cir. BAP 1989) ("the debtor or bankruptcy trustee, rather than the trust beneficiary, is responsible for determining which assets, if any, are not subject to the trust."); In Sanzone-Palmisano Co. v. Seaman Enterprises, 986 F.2d 1010 (6 1 h Cir. 1993), the Court provided a more detailed discussion on the issue of tracing and the policy reasons for placing the burden on the buyer/debtor, recognizing: that in most cases it will be virtually impossible for a P ACA debtor to trace the origin of the disputed assets ... [However, w ]e believe that this is the outcome that Congress intended. Id. at 1014 (emphasis added). After finding the supplier had established the validity of its P ACA trust interest, the Court stated the burden on remand to the district court is on the buyer to: 5 12-50073-lmc Doc#347-6 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 6 of 13 Case: 1:11-cv-08212 Document#: 9 Filed: 11/17/11 Page 6 of 65 PageiD #:51 prove which seized assets were not purchased with funds from the sale of produce. All of the seized assets that cannot be traced to a non-trust source are part of the trust res and are subject to [supplier's] trust claim. Id. (emphasis added.) The Produce buyer is required to maintain trust assets so that such assets are freely available to satisfy all outstanding obligations to sellers of produce. 7 C.P.R. 46.46(e). This obligation is plainly set forth in the P ACA statute as follows: [ a]ny act or omission which is inconsistent with the buyer's responsibility to maintain trust assets, including any act which results in the diversion of trust assets or which prejudices the ability of unpaid sellers to recover money owed, is unlawful. 7 U.S.C. 499(b )( 4) (emphasis added). The officers of a corporation responsible for its financial dealings are personally liable to PACA trust creditors for any dissipation of the Plaintiff's PACA trust assets by virtue of their directing the corporate trustee to breach its fiduciary duties. Sunkist Growers v. Fisher, 104 F.3d 280,283 (9 1 h Cir. 1997) (agreeing with prior district court decisions, the Court stated: "individual shareholders, officers, or directors of a corporation who are in a position to control P ACA trust assets, and who breach their fiduciary duty to preserve those assets, may be held personally liable under the Act."). IV. JURISDICTION Injunctive relief is necessary and proper under the PACA to prevent the dissipation of a seller's interest in P ACA trust assets, and the District Courts have jurisdiction to entertain injunctive actions by both the USDA and private unpaid Produce sellers with PACA trust rights. Frio Ice, 918 F.2d at 158; Gullo Produce Co. v. Jordon Produce Co., 751 F. Supp. 64 (W.D. PA. 1990); Debruyn Produce Co. v. Olympia Produce, 734 F. Supp. 483 (N.D. Ga. 1989); J.R. Brooks & Sons v. Norman's Country Market, 98 B.R. 47 (Bankr. N.D. Fla. 1989). See also 7 U.S.C. 499e(c)(4). 6 12-50073-lmc Doc#347-6 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 7 of 13 Case: 1:11-cv-08212 Document#: 9 Filed: 11/17/11 Page 7 of 65 PageiD #:52 "Injunctive relief is necessary to preserve the status quo for the protection of the produce sellers<' Debruyn Produce, 734 F.2d at 486. Preventing dissipation of the trust is a key purpose of the PACA. Preventing transfer of trust assets often may be the only means by which a Federal Court can prevent dissipation of the trust. Upon a showing the trust is being dissipated or threatened with dissipation, a District Court should require the maintenance of trust assets. Frio Ice, 918 F.2d at 159. See also Taylor Farms Florida v. Gennaro's Produce, 2007 U.S. Dist. LEXIS 13260 (S.D. FL 2007)(wherein the Court granted ex parte injunctive relief to the P ACA trust beneficiary in order to stop the defendants continued dissipation ofthe trust res and to maintain the status quo). V. ARGUMENT Federal Rule of Civil Procedure 65(b) provides that a temporary restraining order may be issued without written or oral notice to the adverse party or that party's attorney only if (1) it clearly appears from the specific facts shown by affidavit or by the verified complaint that immediate and irreparable injury, loss, or damage will result to the applicant before the adverse party or that party's attorney can be heard in opposition, and (2) the applicant's attorney certifies to the court, in writing the efforts, if any, which have been made to give the notice and the reasons supporting the claim that notice should not be required. FRCP Rule 65(b ). Defendants' dissipation ofPlaintiffs P ACA trust funds is an immediate and irreparable injury which this District has previously serves as a valid basis for issuance of an ex parte injunction to preserve the PACA trust assets until a full injunction hearing can be scheduled. See Exhibit 2 to Affidavit fo James E. Leathers. See also Taylor Farms Florida v. Gennaro's Produce, 2007 U.S. Dist. LEXIS 13260 *5 (S.D. FL 2007)(holding that the Plaintiff"will suffer immediate irreparable injury in the form of a loss of trust assets unless this Order is granted without notice."); Frio Ice, 7 12-50073-lmc Doc#347-6 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 8 of 13 Case: 1:11-cv-08212 Document#: 9 Filed: 11/17/11 Page 8 of 65 PageiD #:53 918 F. 2d at 159 ("[u]pon a showing that the trust is dissipated or threatened with dissipation, a district court should require the P ACA debtor to escrow its proceeds from produce sales, identify its receivables, and inventory its assets.")( emphasis added). Accord Dole Fresh Fruit v. 821 F.2d 106 (2ndcir. 1987); InreRichmondProduce, 112 B.R. 364,367 (Bankr. N.D. Cal. 1990). Second, granting the TRO ex parte is necessary and proper to prevent further dissipation of P ACA trust assets. In Sanzone Brokerage. Inc. v. J &M Produce Sales. Inc., 2008 U.S. Dist. LEXIS 21524, the Court concluded that, "providing notice would only serve to provide Defendants 'an opportunity to further dissipate the P ACA trust assets to ... non-trust creditors, who can then claim a bona fide purchaser status."' Id. at 9. In Taylor Fanns Florida v. Gennaro's Produce, 2007 U.S. Dist. LEXIS 13260 (S.D. FL 2007), also involving a PACA creditor requesting an ex parte TRO, the Court specifically addressed the no-notice provision ofFRCP 65(b) and stated that: [i]f notice is given to Defendants of the pendency of this Motion, trust assets will be further threatened with dissipation before the Motion is heard. As noted in the legislative history ofPACA, once dissipation has occurred, recovery of trust assets is all but impossible. Entry of this Oder without notice assures retention of the trust assets under the control of this Court which is specifically vested with jurisdiction over the trust. I d. at 4. (internal citations omitted). See also Procacci Brothers Sales Group v. Indian Rock Produce, U.S. Dist. CourtE.D. Pa. No. 03-5543 (E.D. Pa. October9, 2003) (Wells, M.J.), similarly involving a P ACA creditor requesting an ex parte TRO, the Court addressed the no-notice provision ofFRCP 65(b ), stating that: "[ e ]x parte proceedings pursuant to FRCP 65(b ), are appropriate in this instance, because, once the produce has been sold and trust funds dissipated, there will be no asset or other reliablesourceofpaymentavailabletothePlaintiff." 2003 U.S. Dist. Lexis 19620 *4(E.D.Pa2003). 8 12-50073-lmc Doc#347-6 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 9 of 13 Case: 1:11-cv-08212 Document#: 9 Filed: 11/17/11 Page 9 of 65 PageiD #:54 Plaintiffs Motion f o ~ a Temporary Restraining Order should be granted with an Order providing as follows: A. Restraining the Defendants from further violating the provisions of the P ACA through dissipation and establishing a common fund for the payment of all valid P ACA claims; B. Restraining the Defendants, their principals, agents, banking institutions, or any entity acting on behalf of, or in concert with, the Defendants from using or consuming P ACA trust assets in any way until further Order or until the Defendants pay into the Registry of this Court the sum of $190,153.90, plus further interest, and; C. If the Defendants fail to make payment in full to the Registry of this Court within three (3) business days of entry of this Order, the Defendants are ordered to tender a detailed accounting of all the Company's accounts receivable, accounts payable, inventory, equipment and other assets by a date certain to the Court and to Plaintiff's counsel for a determination of the extent of the dissipation. The Third Circuit in Tanimura & Antle v. Packed Fresh Produce, 222 F.3d 132 (3rd Cir. 2000) held that "the dissipation ofP ACA trust assets can render money damages inadequate." I d. at 139-140. Accord Dole Fresh Fruit v. United Banana, 821 F.2d 106 (2nd Cir. 1987); Inre Richmond Produce, 112 B.R. 364, 367 (Bankr. N.D. Cal. 1990). The above-listed preliminary relief is significantly less burdensome than the relief other courts have found necessary to effectuate the purpose of the statute, that being to ensure payment to unpaid sellers of Produce who have properly preserved their rights under the law. See also Gullo Produce, 751 F. Supp. at 65-66. [f]our factors must be considered by a court in deciding whether to issue a preliminary injunction: (1) whether the movant has shown a reasonable probability of success on the merits; (2) whether the movant will be irreparably injured by denial of the relief; (3) whether granting the preliminary relief will result in even greater harm to the nonmoving party; and ( 4) whether granting the preliminary relief will be 9 12-50073-lmc Doc#347-6 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 10 of 13 Case: 1:11-cv-08212 Document#: 9 Filed: 11/17/11 Page 10 of 65 PageiD #:55 in the public interest. ... A court should endeavor to balance these factors when determining if an injunction should issue. Tanimura, supra, at 140; William Inglis & Sons Bakingv. ITT Continental Baking, 526 F.2d 86 (9th Cir. 1975); Corning Glass Works v. Jeannette Glass, 308 F. Supp. 1321 (D.C. N.Y. 1970), a.ff'd 432 F. 2d 784 (2nd Cir. 1970). See also See Strube Celery & Vegetable v. Global Foods, 2006 U.S. Dist. LEXIS 78330 *4(S.D. IN 2006)(citingFaheem-El v. Klincar, 841 F.2d 712 (7th Cir.1988). Plaintiff will demonstrate the satisfaction of each condition for temporary and permanent injunctive relief. 1. LIKELIHOOD OF SUCCESS ON THE MERITS The Affidavit of James E. Leather, President of the Plaintiff, demonstrates that the Plaintiff properly preserved its trust claim by affixing the required notice language on the face of its invoices and serving the same on the Company. See 7 U.S.C. 499e(c)(4). As a case based almost exclusively on written documents which have been properly authenticated (an "account stated" action), and because the Defendants have admitted the debt in this case, the Plaintiff will almost certainly prevail at any hearing on the merits of its claims. 2. In cases interpreting the rights ofP ACA creditors, courts in this and other jurisdictions have recognized that without injunctive relief, a P ACA seller faced with a financially unstable or an insolvent buyer will not receive either the P ACA trust assets or the proceeds of such trust assets. Tanimura, supra. "PACA trust dissipation ... constitutes irreparable harm." Tanimura, 222 F.3d at 140 (3rd Cir. 2000). See also Gullo Produce, 751 F. Supp. at 67; Frio Ice, 918 F.2d at 159 ("[t]he legislative history [of the P A CA] noted that once the trust is dissipated it is almost impossible for the beneficiary to obtain recovery') (emphasis added). "[T]rust dissipation can satisfy [the irreparable harm] factor if, absent such relief, ultimate recovery is rendered unlikely." Tanimura, 10 12-50073-lmc Doc#347-6 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 11 of 13 Case: 1:11-cv-08212 Document#: 9 Filed: 11/17/11 Page 11 of 65 PageiD #:56 222 F.3d at 141 (3rd Cir. 2000). A moving party must show either actual dissipation OR the threat of dissipation of the P ACA trust in order to obtain injunctive relief and a segregation of the trust proceeds. Frio Ice, 918 F.2d at 159 n.8. In this instance, the Defendants have lacked the ability to pay for the Produce they purchased for several months, despite repeated promises and efforts to pay (albeit through delivery ofNSF checks). This clearly establishes either actual dissipation or a clear threat of dissipation of the P ACA trust assets unless the Defendants are enjoined from further violating the P ACA statute. Injunctive reliefwill force the Defendants to cease dissipation of the PACA trust, prevent third party purchasers from terminating or "cutting off" the Plaintiff's trust rights and require the Defendants to return the trust to a fully-funded level sufficient to satisfy the claims of qualified beneficial interests in full. To date, the Defendants have dissipated the trust by failing to pay Plaintiffs and the Defendants have demonstrated their inability to do so by delivering at least six (6) NSF checks in a row to the Plaintiff. The Defendants continue to dissipate the trust assets to entities other than the rightful owners of the P ACA trust's beneficial interests and by failing to make the trust assets readily available to make "full payment promptly" to Plaintiff as required under federal law (the P ACA). Because Congress specifically recognized the virtual impossibility of recovering P ACA trust assets once they have been dissipated or transferred to third parties who may have "BFP" status, the loss to Plaintiff and other trust creditors is irreparable. 3. BALANCING OF HARM The Defendants simply cannot be harmed by the issuance of an injunction because the relief Plaintiff seek is merely to force the Defendants to comply with the law. It will also require the Defendants to satisfy their pre-existing obligations under PACA- that is, to preserve the PACA trust 11 12-50073-lmc Doc#347-6 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 12 of 13 Case: 1:11-cv-08212 Document#: 9 Filed: 11/17/11 Page 12 of 65 PageiD #:57 assets for the benefit of P ACA beneficiaries and make "full payment on all Produce- related invoices. On the other hand, the risk of harm to Plaintiff is great if the Defendants are allowed to further dissipate trust assets and disburse the P ACA trust assets to non-trust creditors. Judicial oversight is necessary to protect the trust rights of the Plaintiff and other PACA trust beneficiaries. As stated above, previous experience has borne out the fact that, once P ACA trust assets are dissipated, an unpaid P ACA claimant is extremely unlikely to recover any portion of its beneficial interest in the trust -- a result clearly at odds with the express purpose of this remedial federal statute. Thus, the issuance of a TRO will merely ensure the Defendants do not continue to violate the law. 4. PUBLIC INTEREST The strong preference for the plight of P ACA trust creditors which Congress expressed in the 1984 trust amendments to the P ACA clearly illuminates the public interest at stake in this case. In the text of the statute itself, Congress made this point very clear: [t]his subsection [the new PACA trust provision] is intended to remedy such burden on commerce in perishable agricultural commodities and to protect the public interest. 7 U.S.C. 499e(c)(1) (emphasis added). These safeguards were established in order to assure payment to the growers and shippers of Produce. There can scarcely be a more vital public concern than the economic security and viability of this nation's food supply. This supply and distribution chain consists of the very same growers, producers and distributors which Congress sought to protect when it enacted this legislation in 1930 and then amended it in 1984 to include the PACA trust provisions. To deny Plaintiff the requested relief would erode the protection Congress guaranteed to the growers and sellers of Produce in Plaintiffs 12 12-50073-lmc Doc#347-6 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 13 of 13 Case: 1:11-cv-08212 Document#: 9 Filed: 11/17111 Page 13 of 65 PageiD #:58 position, bypassing the PACA and the promulgated thereunder. "[I]ssuance of a preliminary injunction here is in the public interest, as the statutory purpose explicitly encapsulates injunctive relief. Tanimura, 222 F .3d at 140 (3rd Cir. 2000). Therefore, the requested injunction is clearly in the public interest. VI. CONCLUSION For the foregoing reasons, Plaintiff respectfully requests the Court to issue a Temporary Restraining Order and set this matter for a full hearing on Plaintiffs motion for a preliminary injunction and to consolidate that hearing with a hearing on the merits. Dated: November 16,2011 13 Respectfully submitted, Michael J. Keaton, Esq. John C. Crees, Esq. Kevin P. Kelley, Esq. KEATON & ASSOCIATES, P.C. 1278 W. Northwest Highway, Suite 903 Palatine, lllinois 60067 Tel: 847/934-6500 Fax: 847/934-6508 E-mail: keaton@pacatrust.com A & A Concepts, LLC 1219 S. Zarzamora St San Antonio, TX 78207-6747 Andrew & Williamson 9940 Marconi Drive San Diego, CA 92154-7270 Averitt Brokerage Co., Inc. Mr. David Faubion 9999 Perrin Beitel, Suite B San Antonio, TX 78217 B. Catalani, Inc. 1500 South Zarzamora, Unit #326 San Antonio, TX 78207 Bernardi & Associates c/o Diana M. Geis Curl & Stahl 700 North St Marys Street, Suite 1930 San Antonio, TX 78205 Bernardi & Associates c/o Bart M. Botta Rynn & Janowsky, LLP 4100 Newport Place Drive, Suite 700 Newport Beach, CA 92660 Bucks Fresh Produce P. O. Box 207 Hidalgo, TX 78557-0207 Buster Lind Produce 502 W. Schunior St. Edinburg, TX 78541-3099 C & R Fresh, LLC Michael J. Black BURNS & BLACK, PLLC 750 Rittiman Road San Antonio, Texas 78209 California Fruit Produce 1500 So. Zarzamora, #338 San Antonio, Texas 78207-7291 California Artichoke & Veg Growers Corp. c/o Diana M. Geis Curl & Stahl 700 North St Marys Street, Suite 1930 San Antonio, TX 78205 California Artichoke & Veg Growers Corp. c/o Bart M. Botta Rynn & Janowsky, LLP 4100 Newport Place Drive, Suite 700 Newport Beach, CA 92660 Camila Fresh 2501 W. Military Hwy., Suite C-34 McAllen, TX 78503-8948 Canon Potato Co. P.O.Box 880 Center, CO 81125-0880 Central American Produce 2200 Park Central Blvd., #600 Pompano Beach, FL 33064-2220 Chuys Produce 1500 S. Zarzamora St., Unit 434 San Antonio, TX 78207-7209 Comptom Brokerage, Ltd 5530 IH-10 East, Bldg F San Antonio, TX 78219-4504 Compton Brokerage, Ltd. P. O. Box 1696 Pharr, TX 78577-1630 Coosemans Houston, Inc. Mr. Richard D. Thomas 3124 Produce Row Houston, TX 77023 Costa Oro, LLC P.O. Box 2424 McAllen, TX 78502-2424 Cummer Graham Company 1500 South Zarzamora, #310 San Antonio, TX 78207-7383 Dajalala Produce Co. 2501 Military Hwy, #A-30 McAllen, TX 78503-8941 DiMare Enterprises, Inc. c/o Diana M. Geis Curl & Stahl 700 North St. Marys Street, Suite 1930 San Antonio,TX 78205 DiMare Enterprises, Inc. c/o Bart M. Botta Rynn & Janowsky, LLP 4100 Newport Place Drive, Suite 700 Newport Beach, CA 92660 Dayka & Hackett, LLC 42874 Rd. 64 Reedley, CA 93654-9010 Del Campo Supreme, Inc. 672 W. Frontage Rd. Nogales, AZ 85621-9633 Delightful Quality Produce 2201 S. Laredo San Antonio, TX 78207 Delina Fresh 1068 Pine Branch Rd. Weston, FL 33326-2842 Dajlala Produce, Co. 2501 Military Highway, Unit A-30 McAllen TX 78503 Direct Source Produce 1500 So. Zarzamora, Unit 707 San Antonio, TX 78207-7210 12-50073-lmc Doc#347-7 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 1 of 5 Diversified Produce P. O. Box 911523 Dallas, TX 75391-1523 Divine Ripe, LLC c/o Michael J. Black BURNS & BLACK, PLLC 750 Rittiman Road San Antonio, Texas 78209 Duckwall Fruit Co. c/o Michael J. Black BURNS & BLACK, PLLC 750 Rittiman Road San Antonio, Texas 78209 Dynasty Farms P. O. Box 3737 Salinas, CA 93912-3737 Eagle Eye Produce 32 Avenida Acaponeta Rio Rico, AZ 85648 Eagle Eye Produce P. O. Box 460 Iona, ID 83427-0460 Eco Farms Sales, Inc. Michael J. Black BURNS & BLACK, PLLC 750 Rittiman Road San Antonio, Texas 78209 Eco Farms Sales, Inc. c/o Meuers Law Firm, P.L. 5395 Park Central Court Naples, FL 34109-5932 Expo Fresh, LLC 8775 Airway Rd. San Diego, CA 92154-6207 Farm Fresh Direct, LLC c/o Michael G. Colvard MARTIN & DROUGHT 300 Convent, Suite 2500 San Antonio, Texas 78205 Farmer Brothers Co. P.O. Box 79705 City of Industry, CA 91716-9705 Fernandez Produce Express 1603 S. Zarzamora St. San Antonio, TX 78207-7214 Fikes Family Farms 3760 North grape Creek Fredericksburg, TX 78624-5740 Five Brothers Jalisco Produce Co., Inc. c/o Kevin P. Kelley Keaton & Associates, P.C. 1278 W Northwest Highway, Suite 903 Palatine, IL 60067 Franks Distributing of Produce, LCC c/o Bart M. Botta Rynn & Janowsky, LLP 4100 Newport Place Drive, Suite 700 Newport Beach, CA 92660 Franks Distributing of Produce, LLC c/o Diana M. Geis Curl & Stahl 700 North St. Marys Street, Suite 1930 San Antonio,TX 78205 Fresh Imports International 824 E. Hackberry Ave., #100 McAllen, TX 78501 Fresh Pac International c/o Bart M. Botta Rynn & Janowsky, LLP 4100 Newport Place Drive, Suite 700 Newport Beach, CA 92660 Fresh Pac International c/o Diana M. Geis Curl & Stahl 700 North St Marys Street, Suite 1930 San Antonio, TX 78205 Fresh Start Produce Sales c/o Michael J. Black BURNS & BLACK, PLLC 750 Rittiman Road San Antonio, Texas 78209 Full Service Commodities 1500 S. Zarzamora San Antonio, TX 78207-7297 Gargiulo, Inc. Michael J. Black BURNS & BLACK, PLLC 750 Rittiman Road San Antonio, Texas 78209 Gargiulo, Inc. Steve Nurenberg, Esq. c/o Meuers Law Firm, P.L. 5395 Park Central Court Naples, FL 34109-5932 Greenhouse Produce Co., Inc. Robert E. Goldman, Esq. 1 East Broward Blvd., Suite 700 Fort Lauderdale, FL 33301 Greenpoint Distributors P. O. Box 7270 Nogales, AZ 85628-7270 Gonzalez Mexican Produce 2501 W. Military Hwy., A-23 McAllen, Texas 78503 Guerra Produce 1500 S. Zarzamora, Unit 304 San Antonio, TX 78207-7210 G.R. Produce, Inc. Kevin P. Kelley, Esq. Keaton & Associates, P.C. 1278 W Northwest Highway, Suite 903 Palatine, IL 60067 Harllee Packing, Inc. John P. Harllee, IV P.O. Box 8 Palmetto, FL 34220-0008 Harvest Crown Co., Inc. c/o Diana M. Geis Curl & Stahl 700 North St. Marys Street, Suite 1930 San Antonio,TX 78205 12-50073-lmc Doc#347-7 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 2 of 5 Harvest Crown Co., Inc. c/o Bart M. Botta Rynn & Janowsky, LLP 1100 Newport Place Drive, Suite 700 Newport Beach, CA 92660 Henry Avocado Corp. Michael J. Black BURNS & BLACK, PLLC 750 Rittiman Road San Antonio, Texas 78209 Henry Avocado Corp. Steve Nurenberg, Esq. c/o Meuers Law Firm, P.L. 5395 Park Central Court Naples, FL 34109-5932 Hermez Produce, Inc. 3909 E. Ramseyer Rd Edinburg, TX 78542-0855 I Kunik Company c/o Kevin P. Kelley Keaton & Associates, P.C. 1278 W Northwest Highway, Suite 903 Palatine, IL 60067 International Bank of Commerce c/o Michael G. Colvard MARTIN & DROUGHT 300 Convent, Suite 2500 San Antonio, Texas 78205 Irigoyen Farms, Inc. 14801 S. Clovis Ave. Selma, CA 93662-9641 J-C Distributing, Inc. c/o Bart M. Botta Rynn & Janowsky, LLP 1100 Newport Place Drive, Suite 700 Newport Beach, CA 92660 J-C Distributing, Inc. c/o Diana M. Geis Curl & Stahl 700 North St Marys Street, Suite 1930 San Antonio, TX 78205 Jacks Produce P. O. Box 561 Pearsall, TX 78061-0561 JFJ Company Mr. Jose Francisco Jimenez 127 N San Gabriel San Antonio, TX 78237
Juniper Tomato Growers, Inc. C/o Robert E. Goldman 1 East Broward Blvd., Suite 700 Fort Lauderdale, FL 33301 Kingdon Fresh Produce, Inc. C/o Kevin P. Kelley Keaton & Associates, P.C. 278 W Northwest Highway, Suite 903 Palatine, IL 60067 Le Best Banana Supply Co., Inc. P. O. Box 295 Hidalgo, Texas 78557-0295 London Fruit, Inc. C/o Robert E. Goldman 1 East Broward Blvd., Suite 700 Fort Lauderdale, FL 33301 Lone Star Citrus Growers 9625 N. Moorfield Rd. Mission, TX 78574-4598 M & P Logistic LP Mr. Michael Lopez, Jr. 1500 S. Zarzamora, Unit 306 San Antonio, TX 78207-7210 M & P Produce Co., Inc. Mr. Michael J. Lopez 1500 Zarzamora #308 San Antonio, TX 78207-7284 Malena Produce 947 E. Frontage Rd. Rio Rico, AZ 85648-6264 Marengo Foods Company P. O. Box 190649 Dallas, TX 75219-0649 Mecca Family Farms, Ltd. c/o Diana M. Geis Curl & Stahl 700 North St Marys Street, Suite 1930 San Antonio, TX 78205 Mecca Family Farms, Ltd. c/o Bart M. Botta Rynn & Janowsky, LLP 1100 Newport Place Drive, Suite 700 Newport Beach, CA 92660 Miedema Produce 5005 40 th Avenue Hudsonville, MI 49426-9481 Mission Produce, Inc. c/o Diana M. Geis Curl & Stahl 700 North St. Marys Street, Suite 1930 San Antonio, TX 78205 Mission Produce, Inc. Bart M. Botta, Esq. Rynn & Janowsky, LLP 4100 Newport Place Drive, Suite 700 Newport Beach, CA 92660 Muller Trading Company, Inc. Bruce W. Akerly, Esq. CANTEY HANGER LLP 1999 Bryan Street, Suite 3300 Dallas, Texas 75201 Muller Trading Company, Inc. c/o Jason R. Klinowski, Esq. FREEBORN & PETERS LLP 311 S. Wacker Dr., Suite 3000 Chicago, Illinois 60606 Ninos Fresh Cut Fruits & Veggies 1500 S. Zarzamora, Unit 404 San Antonio, TX 78207-7210 Pacific International Veg Marketing Inc. c/o Diana M. Geis Curl & Stahl 700 North St. Marys Street, Suite 1930 San Antonio, TX 78205 Pacific International Veg Marketing Inc. c/o Bart M. Botta Rynn & Janowsky, LLP 4100 Newport Place Drive, Suite 700 Newport Beach, CA 92660 12-50073-lmc Doc#347-7 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 3 of 5 Paul Obst Farms 1520 N. Alamo Rd. Alamo, TX 78516-6817 Prime Time Sales Diana M. Geis, Esq. Curl & Stahl 700 North St. Marys Street, Suite 1930 San Antonio, TX 78205 Prime Time Sales c/o Bart M. Botta Rynn & Janowsky, LLP 4100 Newport Place Drive, Suite 700 Newport Beach, CA 92660 Produce Express 1603 S. Zarzamora San Antonio, TX 78207-7214 Providencia Fresh, LLC P. O. Box 381 Hidalgo, TX 78557-0381 The Pumpkin Patch, LLP Robert E. Goldman, Esq. 1 East Broward Blvd., Suite 700 Fort Lauderdale, FL 33301 R. C. Food Service & Produce 305 Market St. Laredo, TX 78040-8529 R.M. Compton Transport, Inc. PO Box 1696 Pharr, TX 78577-1630 Richie Boice Tomato Sales 1368 NW 100 th Dr. Coral Springs, FL 33071-5937 Rio Bravo Produce Limited LLC Kevin P. Kelley, Esq. Keaton & Associates, P.C. 1278 W Northwest Highway, Suite 903 Palatine, IL 60067 Rio Queen Citrus, Inc. c/o Michael J. Black BURNS & BLACK, PLLC 750 Rittiman Road San Antonio, Texas 78209 Rio Queen Citrus, Inc. Steve Nurenberg, Esq. c/o Meuers Law Firm, P.L. 5395 Park Central Court Naples, FL 34109-5932 River City Produce 1616 So. Laredo St. San Antonio, TX 78207-7029 Johnny Rizo Rizzo Farms 432 CR 6610 Devine, TX 78016-4147 Royal Flavor, LLC c/o Bart M. Botta Rynn & Janowsky, LLP 4100 Newport Place Drive, Suite 700 Newport Beach, CA 92660 Royal Flavor, LLC c/o Diana M. Geis Curl & Stahl 700 North St. Marys Street, Suite 1930 San Antonio, TX 78205 Six Ls Packing Co., Inc. P. O. Box 3088 Immokalee, FL 34143-3088 Skyline Potato Company Mr. Michael D. Jones 55 North Torres Street P. O. Box 416 Center, CO 81125-0416 Slankard Produce 1500 So. Zarzamora St. San Antonio, TX 78207-7284 South Central Brokerage Mr. Victor M. Gonzalez 11550 IH 10 West, Suite 232 San Antonio, TX 78230-1036 Solano Produce 1500 S. Zarzamora ST., 301B San Antonio, TX 78207-7372 Steinbeck Country Produce PO Box 7417 Spreckels, CA 93962-7417 Sunriver Sales c/o Michael J. Black BURNS & BLACK, PLLC 750 Rittiman Road San Antonio, Texas 78209 Sunsweet Fresh Stone Fruit, LLC P. O. Box 250 Kingsburg, CA 93631 Texas Sweet Potato Dist. 11281 State Highway 19 Edgewood, TX 75117-5438 Tijerina & Sons, LLC 808 S. Shary Rd., Suite 5 Mission, TX 78572-8569 Tomatoes of Ruskin, Inc. PO Box 306 Ruskin, FL 33575-0306 Total Quality Logistics, Inc. 1701 Edison Drive Milford, OH 45150 Triple H Produce, LLC Robert E. Goldman, Esq. 1 East Broward Blvd., Suite 700 Fort Lauderdale, FL 33301 Uesugi Farms, Inc. c/o Diana M. Geis Curl & Stahl 700 North St. Marys Street, Suite 1930 San Antonio,TX 78205 12-50073-lmc Doc#347-7 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 4 of 5 Uesugi Farms, Inc. c/o Bart M. Botta Rynn & Janowsky, LLP 4100 Newport Place Drive, Suite 700 Newport Beach, CA 92660 Unifresh, Inc. 1500 So. Zarzamora St., #348 San Antonio, TX 78207-7376 Vaughn Foods, Inc. Ms. Sonya Logan 216 NE 12 th St. Moore, OK 73160-5841 Verstuyft Farms 14819 IH 35 South Von Ormy, TX 78073-3903 Visalia Produce Sales Mr. George M. Matoian PO Box 190 Kingsburg, CA 93631 West Coast Tomato, Inc. 502 6 th Avenue West Palmetto, FL 34221-5110 Whisenant Farms, Inc. 19755 State Rd. 62 Parrish, FL 34219-9235 Willson Davis Co. c/o Joe R. Hinojosa Barkhurst & Hinojosa, P.C. 110 Broadway, Suite 350 San Antonio, Texas 78205 Wilson Produce, LLC c/o Diana M. Geis Curl & Stahl 700 North St. Marys Street, Suite 1930 San Antonio, TX 78205 Wilson Produce, LLC c/o Bart M. Botta Rynn & Janowsky, LLP 4100 Newport Place Drive, Suite 700 Newport Beach, CA 92660 ###
EXHIBIT G 12-50073-lmc Doc#347-7 Filed 10/12/12 Entered 10/12/12 16:13:53 Exhibit Pg 5 of 5