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Fresh Kist Produce, L.L.C. v. Choi Corporation

March 3, 2005

FRESH KIST PRODUCE, L.L.C., PLAINTIFF,
v.
CHOI CORPORATION, INC. D/B/A WASHINGTON WHOLESALE PRODUCE COMPANY ET AL., DEFENDANTS.



The opinion of the court was delivered by: John M. Facciola United States Magistrate Judge

MEMORANDUM OPINION

Currently pending and ready for resolution is plaintiff's Motion to Disburse PACA Trust Assets in One of Three (3) Alternate Ways and for Reimbursement of Plaintiff's Fees and Costs from the Common Fund ("Mot. to Disburse"), which was referred to me by Judge Urbina for final determination. For the reasons articulated below, plaintiff's motion will be granted in part and denied in part.

INTRODUCTION

This matter was brought pursuant to the Perishable Agricultural Commodities Act ("PACA"),*fn1 7 U.S.C. § 499a et seq. PACA provides for the establishment of trust funds to protect sellers of perishable agricultural commodities from defaulting buyers. If a buyer defaults by going bankrupt or becoming insolvent, the buyer's trust reimburses the sellers, who are the trust beneficiaries. Congress enacted PACA so that a defaulting buyer's assets would be used to satisfy the trust fund before they are used to satisfy other debts. This means that the produce sellers, who are the trust beneficiaries, are reimbursed ahead of most other creditors if a produce buyer becomes insolvent.

In this case, defendant, Washington Wholesale Produce Company ("WWP"), bought produce from plaintiff, Fresh Kist Produce ("Fresh Kist"), defendant, J.C. Watson ("JCW"), and fourteen other companies. Ultimately, all sixteen companies became PACA trust beneficiaries of WWP. In the period between June 6, 2001 and August 6, 2001, JCW accepted $59,189.40 as partial payment for produce JCW had previously sold to WWP.

Upon learning of JCW's acceptance of payment from WWP, Fresh Kist sued JCW, WWP, and two other companies, Norfolk Banana ("Norfolk") and Berkley Tomato ("Berkley"), claiming that the defendants, knowing WWP had become insolvent, continued to accept payments from WWP when those payments should have gone to the trust fund for the benefit of all trust beneficiaries.

On August 29, 2001, Fresh Kist obtained a temporary restraining order ("TRO") against WWP. Pursuant to the TRO, WWP paid $11,757.50 (the balance of what WWP still owed JCW) into the court's registry pending resolution of the litigation.

Ultimately, on July 31, 2002, Judge Urbina granted in part and denied in part the parties' cross motions for summary judgment. Fresh Kist Produce, L.L.C. v Choi Corp., 223 F. Supp. 2d 1 (D.D.C. 2002) ("Partial Summ. J."). Judge Urbina found that defendant JCW knew that WWP was insolvent, and therefore JCW had to disgorge itself of the $59,189.40 it received from WWP after it became aware of WWP's insolvency. Id. at 10-11. Judge Urbina then designated JCW's $59,189.40 and WWP's $11,757.50 (a total of $75,516.95) as PACA trust funds to be distributed pro-rata to the trust beneficiaries, including Fresh Kist, JCW, and all other parties submitting valid claims. Id. at 11.

According to Fresh Kist, it incurred $95,290.57 in attorneys' fees and costs as a result of its suit against defendants; it now seeks reimbursement for those fees and costs. Fresh Kist argues that it should either be reimbursed for all of its attorneys' fees and costs out of the PACA trust fund for successfully recovering the trust assets or, alternatively, that JCW should pay Fresh Kist's attorneys' fees as a sanction for JCW's alleged misconduct. Thus, the two issues before me are (1) the disbursement of the PACA trust, and (2) the imposition of sanctions.

DISCUSSION

I. Disbursement of the PACA Trust Including Reimbursement of Attorneys' Fees

A. Background

On September 24, 2001, Judge Urbina issued a Consent Injunction and Agreed Order Establishing PACA Claims Procedure ("PACA Claims Procedure"). The PACA Claims Procedure established the PACA trust fund (valued at $75,516.95) and instituted a process for the filing and service of proofs of claim on the trust.

The deadline for filing a proof of claim was November 16, 2001. PACA Claims Procedure at 5. According to Paragraph 14 of the PACA Claims Procedure, [a]ny supplier or creditor who fails to timely file such Proof of Claim with the Court and serve it on those persons listed in ¶13 above, shall be forever barred from thereafter asserting any claim against the Company under the PACA for non-payment of Produce sold, whether in this Court or any other forum.

Id.

Sixteen companies filed proofs of claim,*fn2 amounting to a total of $420,798.40 in claims against WWP. As illustrated by the chart below, of the sixteen potentially eligible claimants, only thirteen companies will receive funds from the trust.

PACA Claimants Filing Proofs

 PACA ClaimantDate Proof of Claim was received by Clerk's OfficeDate Proof of Claim was File StampedWhether Claimant Filed on or by the November 16, 2001 DeadlineCourt's Determination as to Timeliness of Filing 1.Berkley Tomato Co.This proof of claim was not file stamped by the Clerk's Office. Docket Docket [#26]11/16/01Yes.*fn3The proof of claim will be considered. 2.Cardille Bros. Mushroom11/14/01 Docket [#29]11/14/01Yes.The proof of claim will be considered. 3.Eagle Fruit Traders12/04/01 Docket [#42]12/04/01No.The proof of claim will not be considered as it was not timely filed. 4.Edward G. Rahll & Sons11/14/01 Docket [#30]11/14/01Yes.The proof of claim will be considered. 5.E.M. Trading Corp.This proof of claim was not file stamped by the Clerk's Office. Docket [#34]11/05/01Yes.The proof of claim will be considered. 6.First Class Produce, Inc.11/14/01 Docket [#31]11/14/01Yes.The proof of claim will be considered. 7.Fresh Kist ProduceThis proof of claim was not file stamped by the Clerk's Office. Docket [#28]11/15/01Yes.The proof of claim will be considered. 8.J.C. Watson Co., Inc.11/15/01 Docket [#39]11/15/01Yes.The proof of claim will be considered. 9.Joco Products, Inc.11/15/01 Docket [#27]11/15/01Yes.The proof of claim will be considered. 10.Muranaka Farm, Inc.12/04/01 Docket [#41]12/04/01No.The proof of claim will not be considered as it was not timely filed. 11.National Onion, Inc.12/04/01 Docket [#40]12/04/01No.The proof of claim will not be considered as it was not timely filed. 12.Norfolk Banana Dist.This proof of claim was not file stamped by the Clerk's Office. Docket [#24]11/16/01Yes.The proof of claim will be considered. 13.North Florida Tomatoes11/05/01 Docket [#33]11/28/01No, but RMU allowed it to be filed.The proof of claim will be considered. 14.Pete Pappas & Sons, Inc.11/02/01 Docket [#32]11/28/01No, but RMU allowed it to be filed.The proof of claim will be considered. 15.Taylor & Fulton, Inc.11/05/01 Docket [#44]11/05/01Yes.The proof of claim will be considered. 16.West Coast Tomato, Inc.11/15/01 Docket [#26]11/15/01Yes.The proof of claim will be considered.

B. Simple Pro-Rata Disbursement of the PACA Trust

In his memorandum opinion, Judge Urbina noted that "when a PACA trust becomes insolvent, its assets are distributed among beneficiaries pro rata." Partial Summ. J. at 8 (citing In re Milton Poulos, Inc., 947 F.2d 1351, 1352 (9th Cir. 1991)).

The chart below illustrates the simple pro-rata disbursement of the PACA funds. Column 1 lists each company that has submitted a valid Proof of Claim.*fn4 Column 2 lists the amount of each company's Proof of Claim or Approved Claim Amount. The Approved Claim Amounts are added together to form a Total Claim Amount. Column 3 then converts each claimant's dollar amount into a percentage of the Total Claim Amount or Pro-Rata Share of the Total Claim. Finally, Column 4 lists (in dollars) each company's pro-rata share of the $75,516.95 PACA trust.

Simple Pro-Rata Disbursement of the PACA Trust

 Column 1: PACA ClaimantColumn 2: Approved Claim AmountColumn 3: Pro-Rata Share of the Total ClaimColumn 4: Pro-Rata Disbursement of $75,516.94 1Berkley Tomato Co.$20,941.087.02%$5,298.19 2Cardille Bros. Mushroom$20,188.006.76%$5,107.66 3Eagle Fruit Traders$0.000.00%$0.00 4Edward G. Rahll & Sons$15,206.505.09%$3,847.32 5E.M. Trading Corp.$10,441.003.50%$2,641.62 6First Class Produce, Inc.$11,239.703.77%$2,843.70 7Fresh Kist Produce$67,236.1222.53%$17,011.06 8J.C. Watson, Inc.$70,946.9023.77%$17,949.91 9Joco Products, Inc.$14,931.505.00%$3,777.74 10Muranaka Farm, Inc.$0.000.00%$0.00 11National Onion, Inc.$0.000.00%$0.00 12Norfolk Banana Dist.$10,230.433.43%$2,588.35 13North Florida Tomatoes$9,383.503.14%$2,374.07 14Pete Pappas & Sons, Inc.$14,672.004.92%$3,712.09 15Taylor & Fulton, Inc.$12,720.004.26%$3,218.22 16West Coast Tomato, Inc.$20,343.506.82%$5,147.00  TOTALS:$298,480.23100%$75,516.94

C. Pro-Rata Disbursement of the PACA Trust, Including Reimbursement of Attorneys' Fees and Costs under the Common Fund Doctrine

In his September 24, 2001 order, in addition to establishing the trust fund as well as a process for the filing and service of proofs of claim on the trust, Judge Urbina also outlined the procedure for recovering attorneys' fees and costs from the litigation:

In order to ensure all trust beneficiaries share in the costs and expenses incurred in enforcing the Company's [defendant WWP's] obligations under the PACA on the same pro-rata basis as they are accepting the benefits of such actions, including the prospective costs of marshaling the PACA Trust assets for their direct benefit, any counsel may request reimbursement of their fees and costs on a common fund theory, with such allowed fees and costs to be paid first out of the common pool of assets identified as the 'PACA Trust Fund' created through this procedure, and with such amounts to [be] listed on the PACA Trust Chart for any objections by only qualified PACA trust claimants.

PACA Claims Procedure at 7 (emphasis added). The method by which attorneys' fees are reimbursed, therefore, is not up for discussion, as Judge Urbina explicitly stated that attorneys' fees would be reimbursed under the "common fund theory."

Fresh Kist's pro-rata share of the PACA trust fund is 15.98%. Nevertheless, Fresh Kist requests reimbursement from the PACA trust for 100% of its attorneys' fees and costs, which it estimates at $95,290.57 (as of May 30, 2003). See Memorandum in Support of Motion for Authority to Disburse the PACA Trust Assets and for Reimbursement of Plaintiff's Fees and Costs ("Mem., Mot. to Disburse") at 3-5. Fresh Kist calls this Option #2 in its Motion to Disburse. In support of its claim, Fresh Kist notes the following:

[Fresh Kist's] efforts produced benefits to the PACA trust beyond the recovery of its own claim. In order to avoid the inherent inequity of having the Plaintiff, alone, bear the expenses of this action when those efforts benefitted all similarly-situated PACA trust claimants, the Plaintiff respectfully requests the Court to direct a common fund fee assessment against the PACA trust to assure equal treatment for all those PACA beneficiaries who stand to benefit from these efforts.

Id. at 3.

1. Timeliness of Request for Attorneys' Fees and Costs

Defendant JCW's initial response to Fresh Kist's claim for attorneys' fees is that the request untimely falls under Federal Rule of Civil Procedure 54(d)(2)(B), which states that "[u]nless otherwise provided by statute or order of the court, the motion [for attorneys' fees] must be filed no later than 14 days after entry of judgment...." PACA Claimant J.C. Watson Co., Inc.'s Opposition to Motion for Authority to Disburse the PACA Trust Assets in One of Three (3) Alternative Ways and for Reimbursement of Plaintiff's Fees and Costs from the Common Fund ("Opp'n to Mot. to Disburse") at 4-6 (citing Fed. R. Civ. P. 54(d)(2)(B)). JCW points out that Judge Urbina granted partial summary judgment on July 31, 2002 and then modified that judgment by granting pre-judgment interest on March 10, 2003, treating it as a Rule 59(e) motion to modify the judgment. JCW argues that any attorneys' fees arising out of the summary judgment motion must be sought within fourteen days of the Rule 59(e) modification of that judgment on March 10, 2003 and that, therefore, Fresh Kist's June 2, 2003 application for attorneys' fees is untimely.

While JCW is correct in observing that Rule 54(d)(2)(B) applies to Fresh Kist's request for attorneys' fees, JCW fails to address the first clause of the rule, which specifies, "unless otherwise provided by statute or order of the court." Fed. R. Civ. P. 54(d)(2)(B). Earlier in this litigation, ...


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