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Produce Company’s Claim Proof Fails

Deborah Elkins//September 12, 2011

Produce Company’s Claim Proof Fails

Deborah Elkins//September 12, 2011//

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A Norfolk U.S. District Court denies Poppell’s Produce’s proof of claim purporting to document unpaid receivables arising from produce sales to defendant Let-Us Produce Inc., because Poppell’s failed to meet the express requirements of the Perishable Agricultural Commodities Act and regulations necessary to preserve its PACA trust rights.

It is undisputed that Poppell’s did not violate the 30-day maximum term for the extension of credit under the Perishable Agricultural Commodities Act, 7 U.S.C. Sec. 499e(c). There is plainly a dispute as to whether Poppell’s notice of its intent to assert PACA trust rights was effective since Poppell’s failed to fully comply with the PACA regulation governing notice.

The PACA statute creates powerful trust in favor of produce suppliers in order to protect the public interest and remedy the burden on commerce in perishable agricultural commodities. The statute plainly states that an unpaid produce supplier that otherwise qualifies for PACA trust protection shall lose the benefits of such a trust unless the supplier properly notices its claims.

Here, Poppell’s and defendant Let-Us Produce entered into a written contract to modify the PACA prompt payment period. Because there is a prior written contract modifying the prompt payment period, the PACA statute and regulations require that Poppell’s invoices include 1) the two-sentence statutory notice language; and 2) the terms of payment agreed to by the parties in writing. Although Poppell’s invoices include the statutory notice language, all of its invoices state the payment terms are “COD” rather than the 21-day terms agreed to by written contract. Because the statute and regulations make clear that proper notice is required to preserve trust benefits, the plain language of the regulatory scheme requires this court to conclude that failure to provide proper notice results in the loss of trust benefits.

Here, because Poppell’s failed to meet the express requirements of the statute and regulations that are necessary to preserve its PACA trust rights, Poppell’s proof of claim must be disallowed. Although Poppell’s was provided an opportunity to file supplemental briefing on this issue, it was unable to cite a single case holding that, subsequent to the execution of a written contract modifying credit terms, an invoice that fails to include such modified terms satisfies the alternative “invoice notice” requirements.

The court must conclude Poppell’s failed to preserve its PACA trust rights.

The court denies the motion for interim distribution and holds that Poppell’s PACA proof of claim is disallowed.

Produce Alliance v. Let-Us Produce
(Friedman) No. 2:10cv198, July 1, 2011; USDC at Norfolk, Va. VLW 011-3-389, 10 pp.

VLW 011-3-389

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