Judge issues mixed ruling in agricultural commodities case

By Jon Campisi | Nov 1, 2012

A judge has ordered a produce company to pay two wholesale sellers money owed for the

A judge has ordered a produce company to pay two wholesale sellers money owed for the

unpaid purchase of agricultural commodities sold to the defendant, although the plaintiffs won’t be entitled to attorney’s fees and a default judgment against one of the defendant company’s representatives.

DiMare Homestead and DiMare Ruskin sold and delivered 11 shipments of tomatoes to Klayman Produce between Jan. 7 and Feb. 18 of this year, the record shows.

The plaintiffs also sold and delivered to the defendant four shipments of plums and tomatoes between Dec. 27, 2011 and Jan. 4 of this year.

The defendant, however, never paid for the goods, the plaintiffs alleged.

The wholesalers subsequently filed suit against the produce company to recover amounts owed to the plaintiffs as trust beneficiaries under the Perishable Agricultural Commodities Act (PACA).

The plaintiffs sought a total of $111,986.55, plus interest and attorneys fees.

They also sought default judgment against Mark E. Klayman, in which Klayman would be held personally liable for the company’s breach due to his position within the corporation.

In an Oct. 31 order, U.S. District Judge Mary A. McLaughlin, of the Eastern District of Pennsylvania, entered judgment in favor of the plaintiffs on the unpaid purchase issue, ruling that Klayman Produce did, indeed, breach its fiduciary obligations under PACA by failing to pay the plaintiffs for the produce it purchased from them.

On the default judgment claim, however, the judge sided with the defendant, writing that Mark Klayman, as “reported principal” for the company, is not necessarily the company’s only manager, director or owner, such that personal liability for the company’s PACA violations would be appropriate.

“The plaintiffs do not elsewhere allege how Klayman was involved in Klayman Produce’s business and whether he actually had authority to make managerial decisions for the company,” McLaughlin wrote. “The plaintiffs’ assertions are insufficient to demonstrate that Klayman maintained actual control over the PACA trust assets at issue and fail to establish Klayman’s individual liability,” under federal law.

For that reason, the judge wrote, the court would have no choice but to deny without prejudice the portion of the plaintiff’s motion requesting default judgment against Klayman.

McLaughlin further wrote that while federal appeals courts have held that PACA beneficiaries may recover interest on unpaid sale prices and attorneys’ fees related to the collection of money owed under PACA where there is a contractual right to such sums, in this present case, the plaintiffs have not demonstrated that they are contractually owed interest and attorneys’ fees in connection with the sale of their produce.

“Critically, the plaintiffs have not provided the Court with the underlying contract or contracts for sale of agricultural commodities to Klayman Produce,” the ruling states. “For that reason, the Court will deny without prejudice the plaintiffs’ request for interest and attorneys’ fees.”

The judge ruled that the plaintiffs’ recovery is limited to the unpaid purchase price of produce and related shipping charges “readily ascertainable” on the face of the plaintiffs’ invoices to the defendant, which breaks down to $88,156.05 for DiMare Homestead and $23,830.50 for DiMare Ruskin.

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