The opinion of the court was delivered by: Ricardo M. Urbina United States District Judge
GRANTING IN PART AND DENYING IN PART THE PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT; GRANTING IN PART AND DENYING IN PART DEFENDANT J.C. WATSON'S MOTION FOR SUMMARY JUDGMENT; OVERRULING THE PLAINTIFF'S OBJECTION TO PROOF OF CLAIM
This case involves a statute not often examined in this court, the Perishable Agricultural Commodities Act ("PACA"), 7 U.S.C. § 499a et seq. Congress designed PACA to give extra protection to sellers of perishable agricultural commodities because of their unique situation vis-à-vis the companies who purchase their agricultural commodities. PACA requires produce dealers to maintain proceeds from produce sales in floating trusts so that if the dealer becomes insolvent, the produce sellers can claim a pro rata share of the trust funds before other creditors claim them. 7 U.S.C. § 499a et seq. The plaintiff in this case, Fresh Kist Produce ("Fresh Kist"), is a seller of perishable agricultural commodities and a PACA trust beneficiary. Defendants J.C. Watson ("JCW"), Norfolk Banana ("Norfolk"), and Berkley Tomato ("Berkley") are also sellers of perishable agricultural commodities and PACA trust beneficiaries. Defendant Washington Wholesale Produce Company ("WWP") is an insolvent produce dealer or buyer and PACA trustee.
This matter is before the court on the plaintiff's and defendant JCW's cross-motions for summary judgment. The plaintiff alleges that the defendants JCW, Norfolk, and Berkley received monies from WWP when WWP was insolvent, in violation of PACA. The plaintiff moves for disgorgement of monies paid by WWP to JCW, Norfolk, and Berkley so that the money can be distributed pro rata to all beneficiaries of the WWP PACA trust. Defendant JCW seeks summary judgment on the ground that the law does not support the plaintiff's claim. Both movants also raise several additional minor issues. For the reasons that follow, the court grants in part and denies in part both the plaintiff's and defendant JCW's motions for summary judgment.
The plaintiff, Fresh Kist, and the defendants, JCW, Norfolk, and Berkley, all sell perishable agricultural commodities in interstate commerce. Pl.'s Statement of Undisputed Facts (Pl's Statement) ¶ 1; Def. JCW's Statement of Undisputed Facts (Def.'s Statement) ¶ 1; Defs' Norfolk and Berkley's Opp'n at 1. Defendant WWP (also known as Choi Corporation) is an insolvent produce dealer. Def. WWP's Listing of Accounts and Assets filed Oct. 5, 2001. WWP is the trustee of the statutory floating trust created by PACA for the benefit of all sellers of perishable agricultural commodities. Defs.' Norfolk and Berkley Opp'n at 1.
Some of this case's critical facts are from a prior case, C.A. No. 01-1225: On June 5, 2001, JCW filed a complaint against WWP for breach of contract and breach of trust, averring that WWP owed JCW $70,946.90 for produce JCW had sold to WWP. Def.'s Statement ¶ 17.
In its complaint, JCW specifically stated that WWP was insolvent, and this provided the basis for JCW's claim that WWP dissipated trust assets by paying other suppliers. JCW's Compl. ¶ 19 (C.A. No. 01-1225). After June 5, 2001, in response to this complaint, WWP agreed to pay JCW $4,729.80 each week until the entire amount was paid. Def.'s Statement ¶ 18. WWP defaulted after several payments, however, and on August 6, 2001, JCW filed an Amended Complaint to obtain the balance owed by WWP. Id. ¶ 26. JCW's case was resolved on August 7, 2001 with a Stipulation for Injunction and corresponding Consent Order pursuant to which WWP made payments to JCW. Id. ¶ 29; Consent Order dated Aug. 10, 2001. WWP's payments to JCW made pursuant to both the parties' informal settlement, motivated by JCW's June 5, 2001 Complaint, and the Consent Order totaled $59,189.40. Def.'s Statement ¶¶ 31-35.
In early August 2001, attorneys for Fresh Kist contacted JCW's attorneys and asked to join JCW's claim against WWP. Cassell Aff. ¶ 13. The attorneys for JCW asked James Watson, Chief Executive Officer of JCW, if he would waive the potential conflict of interest if JCW's attorneys represented Fresh Kist. Watson Aff. ¶¶ 12, 14. Mr. Watson was not willing to do so. Id. Subsequently, Fresh Kist obtained separate counsel and filed the present lawsuit. Id.
On August 28, 2001, the plaintiff initiated this case with a complaint and a motion requesting (1) a temporary restraining order and (2) entry of an order establishing a non-party PACA claims procedure. Next, on August 29, U.S. District Judge Kollar-Kotelly issued a temporary restraining order that effectively froze WWP's PACA trust assets. Order Granting Motion for TRO dated Aug. 29, 2001. The temporary restraining order required WWP to pay $11,757.50, the remaining amount that WWP owed JWC pursuant to the Consent Order in C.A. No. 01-1225, into the court's registry until the resolution of this case. Id.
The instant case involves amounts owed by WWP to sellers of produce, Fresh Kist, JCW, Norfolk, Berkley, and other claimants, pursuant to PACA. The dispute centers on payments made by the dealer, WWP, to defendant-sellers after WWP became insolvent. Def. JCW's Mot. for Summ. J. at 12; Pl.'s Mot. for Summ. J. at 3. On August 31, 2001, this case was assigned to this member of the court. Then, on September 24, 2001, this court issued an order establishing a PACA trust and a claims procedure for the beneficiaries ("PACA Claims Order") pursuant to which a number of companies who sold produce to WWP for which they had not received payment filed PACA claims against WWP. Subsequently, Fresh Kist and JCW filed cross-motions for summary judgment.
Fresh Kists's main claim in its motion for summary judgment is that JCW, along with Berkley and Norfolk, must disgorge PACA benefits received from WWP after they learned that WWP was insolvent. Pl.'s Mot. for Summ. J. Fresh Kist relies heavily on the fact that JCW's June 5, 2001 complaint against WWP in C.A. No. 01-1225 states that WWP was insolvent. Pl.'s Mot. for Summ. J. at 8. Fresh Kist contends that this fact demonstrates JCW's knowledge of WWP's insolvency at the time it sought to enforce its PACA rights. Id. Nowhere in JCW's opposition does JCW contest the accuracy of the allegations in its complaint against WWP. Fresh Kist claims that payments made by WWP to JCW pursuant to the Consent Order depleted the trust assets to such an extent that other claimants will receive nothing, thereby making those payments to JCW a breach of the trust. Id. at 2. Fresh Kist asks the court to compel JCW to disgorge the $59,189.40 received from WWP so that the money can be placed in the PACA trust and distributed, pro rata, among all beneficiaries. JCW also moves for summary judgment, arguing against disgorgement.
Today, this court grants the portion of Fresh Kist's motion for summary judgment that requests disgorgement of $59,189.40 from JCW. This court denies Fresh Kist's arguments that JCW (1) lost its PACA trust beneficiary status, (2) over-reported its trust claim, and (3) failed to attach documents to its PACA trust claim. Additionally, this court denies Fresh Kist's motion for summary judgment against Norfolk and Berkley. This court grants JCW's motion for summary judgment regarding its claim that it is a qualified PACA trust beneficiary. This court denies JCW's arguments that (1) it did not breach or dissipate the PACA trust, (2) Fresh Kist has the burden of proving that funds paid by WWP to JCW came from the PACA trust, (3) JCW had no duty of inquiry, (4) JCW enhanced the value of the trust, (5) Fresh Kist did not exhaust all efforts to recover the balance due it from WWP, (6) JCW is a bona fide purchaser of PACA trust assets, and (7) Fresh Kist must compensate JCW for any attorney's fees.
A. Legal Standard for Motion for Summary Judgment
Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Diamond v. Atwood, 43 F.3d 1538, 1540 (D.C. Cir. 1995). To determine which facts are "material," a court must look to the substantive law on which each claim rests. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A "genuine issue" is one whose resolution could establish an element of a claim or defense and, therefore, affect the outcome of the action. Celotex, 477 U.S. at 322; Anderson, 477 U.S. at 248.
In ruling on a motion for summary judgment, the court must draw all justifiable inferences in the nonmoving party's favor and accept the nonmoving party's evidence as true. Anderson, 477 U.S. at 255. A nonmoving party, however, must establish more than "the mere existence of a scintilla of evidence" in support of its position. Id. at 252. To prevail on a motion for summary judgment, the moving party must show that the nonmoving party "fail[ed] to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322. By pointing to the absence of evidence proffered by the nonmoving party, a moving party may succeed on summary judgment. Id.
In addition, the nonmoving party may not rely solely on allegations or conclusory statements. Greene v. Dalton, 164 F.3d 671, 675 (D.C. Cir. 1999); Harding v. Gray, 9 F.3d 150, 154 (D.C. Cir. 1993). Rather, the nonmoving party must present specific facts that would enable a reasonable jury to find in its favor. Greene, 164 F.3d at 675. If the evidence "is merely colorable, or is not significantly ...