Opinion
CIVIL ACTION NO. 02-10875-RWZ
September 12, 2003
MEMORANDUM OF DECISION
Beginning in 1999, plaintiffs B.C. Produce, Inc. ("B.C. Produce"), Brown Pontefract Brokerage, Inc.("Brown Pontefract"), Forlizzi Bros., Inc. ("Forlizzi"), Gregg Dziama, Inc. ("Dziama"), Grant Stanton Produce Company, Inc. ("Grant Stanton") sold wholesale quantities of perishable agricultural commodities ("produce") to defendant G G Lambert, Inc. ("G G"). Defendant Gregory Lambert is and defendant Geoffrey Lambert was an officer, director and shareholder of G G. Alleging that they were not paid, plaintiffs filed a Complaint on May 13, 2002, which they later amended, seeking the following amounts from defendants: $2,993.75 for BC Produce, $477.00 for Brown Pontefract, $4,059.25 for Forlizzi, $15,439.50 for Dziama, and $687.40 for Grant Stanton. Plaintiffs subsequently settled with a secured lender for G G and received $15,000.
Count I of the plaintiffs' First Amended Complaint, entitled "PACA Trust Enforcement," claims that the dissipation of trust assets under Perishable Agricultural Commodities Act, 1930, ("PACA"), 7 U.S.C. § 499a, et seq., and failure to pay the plaintiffs violates PACA. Therefore, plaintiffs seek the balance of the amount due plus interest and reasonable attorneys fees and costs. Count II, entitled "Recoupment/ Disgorgement of PACA Trust Proceeds," seeks recovery of funds paid to defendant Gregory from the PACA Trust at a time when he was indebted to plaintiffs. Count III seeks payment of interest and attorneys' fees. Count IV alleges violation of Mass. Gen. Laws ch. 93A §§ 2 and 11 because defendants purchased produce from the plaintiffs with knowledge "or reason to know" that they were unable to make timely payment.
After plaintiffs brought suit, defendants G G and Geoffrey filed for bankruptcy. It is unclear whether funds are available from G G's estate. Plaintiffs believe that any distribution will be de minimus. The estate of defendant Geoffrey Lambert has no funds. (PL's Mem. at 2). After defendants' attorney withdrew, this Court ordered defendants or their attorney to file an appearance by April 4, 2003 or be defaulted. Defendants have not filed an appearance to date. Plaintiffs have filed a "Motion for Entry of Default, Assessment of Damages and Entry of Judgment" stating that "all that remains for the Court to determine is the level of culpability for the award of multiple damages under [Section 93A] and the amount of attorneys fees." (PL's Mem. at 2-3).
Under the Perishable Agricultural Commodities Act, 1930 ("PACA"), 7 U.S.C. § 499a, et seq., produce received by a commission merchant will be held in trust for the benefit of the unpaid suppliers "until full payment of the sums owing in connection with such transactions has been received by such unpaid suppliers. . . ." 7 U.S.C. § 499e(2). The unpaid seller perfects his interest in the trust, which arises upon delivery of the produce, by timely filing notice of his claim with the debtor-broker. 7 U.S.C. § 499e(c)(3). Alternatively, interest in the PACA trust may be perfected by placing language specified in 7 U.S.C. § 499e(c)(4) on the billing or invoice statements. Thereafter, if the debtor-broker becomes bankrupt, the PACA trust assets are exempt from the bankruptcy estate and take priority over secured creditors as well as administrative claims which normally come first in a distribution. Stelly v. Galley Supply, Inc., No. CIV.A. 86-5662, 1996 WL 5742, *3 (E.D. La., Jan. 5, 1996); J.C. Produce. Inc. v. Paragon Steakhouse Restaurants. Inc., 70 F. Supp.2d 1119, 1120 (E.D. Cal. 1999).
Plaintiffs contend that they "properly preserved [their] right[s] to protection under PACA by including a notice of intent to that effect on invoices and statements tendered to G G and the responsibly connected persons[.]" (Pl's Mem. at 6). However, only the invoices attached to the plaintiffs' memorandum, which account for a small portion of the amount sought in the First Amended Complaint ($3,536.25), contain the required language. Notably, one of those invoices does not specify the identity of the customer or the item purchased. In contrast, the invoices attached as Exhibits B through E to the First Amended Complaint, totaling $20,663.15, do not contain language preserving plaintiffs' interests in the PACA trust. In the absence of a complete record of plaintiffs' invoices, the amount protected by the PACA trust is uncertain.
Furthermore, plaintiffs have not established the outstanding balance owed. The First Amended Complaint requests a total sum of $23,656.90, but plaintiffs state that $15,000 is credited to that amount. The new total is then $8,656.90, but plaintiffs attach invoices totaling only $3,536.25 to their Motion for Entry of Default. Given the ambiguity of the amount plaintiffs seek and the portion of that amount protected by the PACA trust, an evidentiary hearing is necessary.KPS Associates. Inc. v. Designs by FMC, Inc., 318 F.3d 1, 19 (1st Cir. 2003)("Following the entry of default, a district court can enter a final judgment without requiring further proof of damages only in limited situations[,]" i.e. where there is a sum certain.). Plaintiffs also seek attorneys' fees and interest on the amounts owed, which claim is best deferred until after determination of damages.
Contending that Geoffrey and Gregory ordered or caused G G to order and receive the produce knowing that they could not pay, plaintiffs seek at least two times or up to three times their damage award under Mass. Gen. Laws ch. 93A §§ 2 and 11. Section 2 declares that "[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce" are unlawful. Mass. Gen. Laws ch. 93A § 2. Section 11 allows for double or treble damages if the court finds that defendant's violation of Section 2 was "willful or knowing." Mass. Gen. Laws ch. 93A § 11. To the extent that Section 93A applies, the determination of whether defendants acted knowingly also requires a further evidentiary hearing.