Jason Klinowski, Tom Fawkes, and Brian Jackiw attend the 2014 PMA! Come see us at Booth #869.
Monthly Archives: October 2014
Jason Klinowski to Exhibit at the PMA’s Fresh Summit Convention + Expo in Anaheim, California
Please stop by Booth #869 and visit Jason Klinowski and other members of Freeborn’s Food Industry Team.
Do Canadian Produce Sellers Really Need Surety Bonds?
On October 3, 2014, The Packer reported that “as of October 1, 2014, Canadian produce sellers now have to have a surety bond that’s twice the amount of the claim, so selling $100,000 worth of product will have to have a bond of $200,000.” See Make your own PACA
This bond requirement is found in Section 499f(e) of the Perishable Agricultural Commodities Act, which states, in relevant part, as follows:
“In case a complaint is made by a nonresident of the United States [Canadian produce seller]… the complainant shall be required, before any formal action is taken on his complaint, to furnish a bond in double the amount of the claim conditioned upon the payment of costs, including a reasonable attorneys’ fee for the respondent if the respondent shall prevail, and any reparation award that may be issued by the Secretary of Agriculture against the complainant on any counter claim by respondent….” 7 U.S.C. § 499f(e)
To be clear, the foregoing only applies to nonresident (e.g. Canadian) produce sellers who elect to bring a claim against a PACA licensee before the USDA. Importantly, the USDA’s PACA Division provides a two tier dispute resolution process. The first tier involves the filing of an informal complaint and the PACA division will work with both parties to reach an amicable resolution to a PACA dispute. The second tier involves filing a formal complaint against a PACA licensee wherein the complainant alleges that a violation of Section 2 of PACA has occurred and seeks a reparation order. While the USDA may not require a bond as a condition precedent to the nonresident complainant’s participation in the informal dispute resolution process, a bond will be required before the USDA will accept a formal complaint seeking a reparation order.
How Do I Avoid the Bond Requirement?
To avoid the bond requirement, the unpaid Canadian produce seller could elect to follow the these steps:
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Preserve its PACA trust rights against the PACA licensee buyer by issuing a timely and properly formatted Notice of Intent to Preserve Trust Rights.
- Attempt to resolve disputes arising out of the produce transactions in-house or with the assistance of third parties (e.g. PACA counsel)
- File all complaints related to your unpaid produce transactions with a given PACA licensee in the U.S. District Court closest to the PACA licensee’s principal place of business. (e.g. if in Chicago, file in the Northern District of Illinois).
You must retain counsel to file a complaint in federal court, but you will not be required to post a bond if you elect to file a civil complaint in federal court. With that said, utilizing the USDA’s PACA Division for dispute resolution purposes is a cost-effective way to handle smaller (less than $15,000 – $20,000) PACA claims. Also, these same types of smaller claims may not justify the costs of retaining counsel to prepare and file a civil action in federal court. But, when you add the cost of the USDA’s double bond requirement to the regulatory equation (e.g. the cost of filing an administrative claim with the USDA vs. a civil action in federal court ) the scale of efficiency may now tip in favor of filing a civil action with an experienced PACA attorney who can work efficiently.
The bottom line is that the USDA’s double bond requirement only applies to administrative actions and Canadian produce sellers do have other options.
USDA Backs Off Investigation of Mucci Pac USA
As reported by The Packer on October 9, 2014, a civil action filed against the USDA in the Eastern District of Michigan – seeking both injunctive and declaratory relief – resulted in the USDA’s closure of its investigation of Mucci Pac USA. Specifically, Mucci Pac and the USDA entered into a stipulation and agreed that Mucci Pac does not buy or sell produce. As such, the USDA agreed that Mucci Pac does not need to maintain a PACA license and is not subject to PACA. The U.S. District Court ratified the stipulated agreement and closed the case. See USDA Backs Off Investigation of Mucci Pac USA (identifying Jason Klinowski as lead counsel for Mucci Pac USA)
This case did not go to trial and the court order is not much of a precedent for others to utilize, but it does show the industry that produce companies do have rights. More importantly, this case shows that Canadian produce companies can properly establish and maintain distribution centers in the United States without subjecting themselves to USDA jurisdiction. This practice holds immediate and obvious financial benefits for those Canadian companies that sell into the U.S. marketplace.
Jason Klinowski to Speak at Social Media Marketing Summit for Law Firms
On October 15, 2014, the Business Development Institute will host a Social Media Marketing Summit for Law Firms in Chicago. This half-day event will feature a variety of speakers who will share case studies and lessons learned from leading law firms about how they use social media and content marketing to highlight expertise, build business and expand relationships with existing clients. Among the speakers, Jason Klinowski and Christina Solomon of Freeborn & Peters LLP will discuss The Fresh Facts Blog and how Jason uses social media as a marketing channel for his agricultural and food law practice.