Tag Archives: food attorney

PACA Trust Litigation Alert

PACA Trust Litigation Alert

PACA Trust Litigation Alert

On July 17, 2012, a civil action was filed in Arizona against Rainbow Produce Company Incorporated in an effort to collect approximately $43,611.00 in an alleged PACA trust debt.

On July 13, 2012, a civil action was filed in California against G. R. Products LLC in an effort to collect approximately $112,212.00 in alleged PACA trust debt.

On July 9, 2012, a civil action was filed in Texas against Empire Produce USA LLC  in an effort to collect approximately $124,366.00 in alleged PACA trust debt.  

On July 6, 2012, a civil action was filed in California against South Bay Fresh, Inc. in an effort to collect approximately $48,600.00 in an alleged PACA trust debt.

On July 3, 2012, a civil action was filed in Michigan against Great Lakes Produce and Marketing LLC in an effort to collect approximately $26,400.00 in an alleged PACA trust debt.

Please check your A/R to see if these cases affect you.  If they do, please do not wait to assert your rights.

Jason Klinowski Quoted in The Packer’s Updated Article on Adams Produce

The Packer quoted Jason Klinowski in its 7/12/2012 updated article announcing the entry of an Agreed Order Establishing a PACA Claims Procedure in the $50 million dollar Adams Produce bankruptcy case, which involves over $16 million in secured debt.

See: PACA Claims Due in Adams Produce Case

In this article, The Packer noted that: “Attorney Jason Klinowski, from Freeborn & Peters in Chicago, and Larry Meuers of Meuers Law Firm in Naples, Fla., represent produce companies seeking payment from Adams and were key players in the development of the plan. They worked with lawyers representing Adams, PNC Bank and other parties to resolve how the PACA claims should move forward.”  Id.

The article also quoted Jason as saying: “Getting the PACA trust beneficiaries paid quickly was our No. 1 priority,” Klinowski said. “A lot of good attorneys worked through some tough issues … Having been intimately involved in that process, I can tell you that it is not only a solid work product but the best way to get the PACA trust beneficiaries paid quickly.”  Id.

With the PACA Claims Procedure in place, here are some critical dates of interest:

EVENT

DEADLINE

Bankruptcy Proof of Claim Deadline

July 6, 2012

PACA Proof of Claim Deadline:

August 3, 2012

PACA Trust Asset Report Deadline:

August 3, 2012

Deadline to Object to PACA Proofs of Claim:

August 24, 2012

Deadline to Object to PACA Trust Asset Report:

August 24, 2012

Deadline to Schedule Meet and Confer:

August 31, 2012

Deadline to Meet and Confer:

September 14, 2012

Deadline to Notify Debtor of Result of Meet and   Confer Conferences:

September 17, 2012

Deadline to file Meet and Confer Report:

September 21, 2012

Deadline to Respond to Claim Objections:

September 28, 2012

Deadline to File PACA Trust Distribution Report:

October 5, 2012

Deadline to Object to PACA Trust Distribution   Report:

October 12, 2012

Deadline to Make First Interim Distribution:

October 19, 2012

Mediation Date for Disputed Claims and Disputed   Assets:

October __, 2012

Deadline to File Motion to Determine Disputed   Claims and Assets

December 7, 2012

Proofs of Claim Due in the Adams Produce Bankruptcy

Although the Court is set to establish a PACA Claims Procedure on July 9, 2012, the deadline to file all proofs of claim (PACA and non-PACA alike)  is July 6, 2012.  Importantly, any party that fails to file their proof of claim by July 6, 2012 will not be able to file their PACA proof of claim after the Court enters an approved order as the July 6, 2012 date is a statutory date.  Please do not be confused.

ALL creditors must file a proof of claim on or before July 6, 2012. 

In addition to meeting the July 6, 2012 deadline, the PACA creditors will be required to file a special PACA Proof of Claim as outlined in Judge Mitchell’s  forthcoming order.  Simply put, the PACA creditors need to be prepared to file two separate proofs of claim.  Any PACA creditor who fails to file any one of the two proofs of claim runs the risk of having the Court deny its claim.  Those familiar with this case can tell you that these dates are going to come fast.  Please do not wait to assert your rights.

PACA Trust Litigation Alert

PACA Trust Litigation Alert

PACA Trust Litigation Alert

On June 27, 2012, a civil action was filed in Wisconsin against The Red Onion LLC in an effort to collect approximately $56,960.00 in an alleged PACA trust debt.

On June 21, 2012, a civil action was filed in New York against New Farm, Inc. in an effort to collect approximately $140,000.00 in alleged PACA trust debt.

On June 18, 2012, a civil action was filed in New York against Suffolk Banana Co., Inc., Long Island Banana Corp. and Long Island Banana in an effort to collect approximately $1,998,400.00 in alleged PACA trust debt.  

On June 18, 2012, a civil action was filed in Idaho against Savory Sweet LLC in an effort to collect approximately $58,400.00 in an alleged PACA trust debt.

Please check your A/R to see if these cases affect you.  If they do, please do not wait to assert your rights.

Jason Klinowski Presents at the 3rd Advanced Summit on Food Safety Regulatory Compliance

Recently, I had the privilege of speaking at the American Conference Institute’s 3rd Advanced Summit on Food Safety Regulatory Compliance, which was held in Chicago, Illinois on June 26-27 2012.  My presentation discussed: “How to Prepare and Implement Effective Remediation and Corrective Action Plans Post-Inspection.”  Notable conference attendees included counsel and/or representatives from ConAgra Foods, H.J. Heinz Company, J.M. Smucker Company,  Whole Foods Market and others.  Freeborn & Peters LLP was a proud sponsor of this event.

My presentation provided a practitioner’s point of view (as outside general counsel to numerous food companies) on how to prepare a proper response to a FDA 483 Report of Investigation, which including drafting tips, best practices and response strategies.  Following this same format, I also discussed how to prepare effective corrective action plans  and reconditioning plans.

For those of you who may be interested, here is a link to my presentation:

Jason Klinowski’s – ACI Presentation

FSMA Update: FDA Releases New Information Related to Food Facility Registration

The FDA recently published information answering three frequently asked questions:

QUESTION:  What form do I use to renew a food facility registration?

ANSWER:  FDA Form 3537.

Registrants must use Form 3537 to register, update, or renew a registration. Form 3537 is being updated to meet registration renewal needs. The next registration renewal cycle begins October 1, 2012. Facilities may register online via the Internet at www.fda.gov/furls, which operates during business hours from 7:00 am to 11:00 pm U.S. Eastern Standard Time.

QUESTION: Am I required to renew a food facility registration online? 

ANSWER:  No!  Registrants can renew food facility registrations online or submit the paper Form 3537 by mail or fax. A business with multiple facilities may also register on a CD-ROM by mail. FDA encourages online registration as the least costly, quickest, and most efficient means for food facility registration. With online registration, a food facility must enter all of the required information before the system will accept the submission. After all required information has been entered, a registrant will receive confirmation of registration and a registration number. Paper registration is a more costly and less efficient process to supply FDA with registration information and to provide food facilities with their registration numbers. Further, paper registration may have a higher number of errors or omissions on the form, which may require additional time to complete the registration process.

QUESTION: Why wait until October 1, 2012 to start the registration renewal process? 

ANSWER:  Because you will be required to do it again between Oct. 1 and Dec. 31, 2012.   The FDA Food Safety Modernization Act (FSMA) mandates that all food facilities that are required to register must renew their registrations every other year during the period beginning on October 1st and ending on December 31st of each even-numbered year. The first registration renewal cycle will occur from October 1 to December 31, 2012.

As always, more information may be found at: Food Safety Modernization Act – FAQ Page

Please keep in mind that the FDA does not provide answers to questions of registration strategy, information disclosure and impact of registration choices on frequency of inspections and the classification of a food facility as high risk or non-high risk.  These are ALL very important issues that need to be addressed.

PACA Trust Litigation Alert

PACA Trust Litigation Alert

PACA Trust Litigation Alert

On June 14, 2012, a civil action was filed in Indiana against Superior Supermarket I-IV each d/b/a Super-Max in an effort to collect approximately $48,300.00 in an alleged PACA trust debt.

On June 13, 2012, a civil action was filed in Florida against J.P. Imports, Inc. in an effort to collect approximately $21,000.00 in alleged PACA debt.  

On June 13, 2012, a civil action was filed in the District of Columbia against E&C Foods, Inc. d/b/a Best World Supermarket a/k/a Best Way Supermarket in an effort to collect approximately $7,000.00 in alleged PACA debt.  

On June 8, 2012, a civil action was filed in New Jersey against Del Monte Farms LLC in an effort to collect approximately $181,700.00 in an alleged PACA trust debt.  The Court recently entered a Temporary Restraining Order in this case.

On June 8, 2012, a civil action was filed in Arizona against Fresh Touch Distributing, Inc. in an effort to collect approximately $45,800.00 in an alleged PACA trust debt. 

On June 7, 2012, a civil action was filed in Massachusetts against Joseph Aiello and Sons, Inc. in an effort to collect approximately $24,200.00 in an alleged PACA trust debt. 

Lastly, two new civil actions were filed in California against Patterson Vegetable Company LLC in an effort to collect upon more alleged PACA trust debt.

Please check your A/R to see if these cases affect you.  If they do, please do not wait to assert your rights.

PACA Trust Perfection Formula for Grower/Grower Agent Relationships

One of the most misunderstood, or misused, sections of the Regulations governing the Perishable Agricultural Commodities Act (“PACA”) concern the appropriate time for Growers to receive the proper accountings and prompt payment under PACA.  In my experience, few do it correctly and even fewer do it the same way twice.  This is a dangerous practice for the Grower because the Grower is the one who bears the risk of waiving its PACA trust rights.

Time and time again, I see cases where a Grower will sit back and wait for its Grower’s Agent to provide an accounting of all the Produce delivered under the parties’ agreement.  Once the Grower sees the accounting the Grower begins to look for payment and to calculate the reasonableness of the returns.  The problem with this approach is that the Grower’s time to properly perfect its PACA trust rights begins to tick away without regard to whether the Grower’s Agent timely complies with the Regulations.  To many Growers operate under the misconception that they are not able to invoice or otherwise perfect their trust rights in their Produce until they receive an accounting from the Grower’s Agent.  This is WRONG!  Let me show you why…

Important Definitions:

Grower means any person who raises produce for marketing.  7 C.F.R. § 46.2(p).

Growers’ agent means any person operating at shipping point who sells or distributes produce in commerce for or on behalf of growers or others and whose operations may include the planting, harvesting, grading, packing, and furnishing containers, supplies, or other services.  7 C.F.R. § 46.2(q).

Account promptly, except when otherwise specifically agreed upon by the parties, means rendering to the principal a true and correct accounting:

(2)        In connection with consignment or joint account transactions, within 10 days after the date of final sale with respect to each shipment, or within 20 days from the date the goods are accepted at destination, whichever comes first: Provided, That whenever a grower’s agent or shipper distributes individual lots of produce for or on behalf of others, accounting to the principal shall be made within 30 days after receipt of the shipment from the principal for sale or within 5 days after the date the agent receives payment for the goods, whichever comes first. Whenever a grower’s agent or shipper harvests, packs, or distributes entire crops or multiple lots therefrom for or on behalf of others, an accounting on the initial shipment shall be rendered within 30 days after receipt of the goods for sale. Accountings for subsequent shipments shall be made at 10-day intervals from the date of the accounting for the initial shipment and a final accounting for the season shall be made to each principal within 30 days from the date the agent receives the last shipment for the season from that principal: Provided further, That whenever the marketing agreement between a principal and agent includes a provision for storage of goods prior to sale, the agent shall render accountings of inventory and expenses incurred to date at 30-day intervals from the date the goods are received by the agent until sales from storage begin, and Provided further, That nothing in the regulations in this part shall prohibit cooperative associations from accounting to their members on the basis of seasonal pools or other arrangements provided by their regulations or bylaws; and

7 C.F.R. § 46.2(z)(2).

Full payment promptly is the term used in the Act in specifying the period of time for making payment without committing a violation of the Act. “Full payment promptly,” for the purpose of determining violations of the Act, means:

(9)        Whenever a grower’s agent or shipper harvests, packs, or distributes entire crops or multiple lots therefrom for or on behalf of others, payment for the initial shipment shall be made within 30 days after receipt of the goods for sale or within 5 days after the date the agent receives payment for the goods, whichever comes first. Payment for subsequent shipments shall be made at 10-day intervals from the date of the accounting for the initial shipment or within 5 days after the date the agent receives payment for the goods, whichever comes first, and final payment for the seasons shall be made to each principal within 30 days from the date the agent receives the last shipment for the season from that principal.

7 C.F.R. § 46.2(aa)(9).

Time to Perfect PACA Trust Rights:

Timely filing of a notice of intent to preserve benefits under the trust will be considered to have been made if written notice is given to the debtor within 30 calendar days:

(i)         After expiration of the time prescribed by which payment must be made pursuant to regulation,

7 C.F.R. §46.46 (f)(2)(i).

Trust Perfection Formula for Grower/Grower Agent Relationship

The Regulations require a Grower’s Agent to “account promptly” to the Grower in compliance with 7 C.F.R. § 46.2(q)(2).  The  Regulations further required the Grower’s Agent to make “full payment promptly” to the Grower in compliance with  7 C.F.R. § 46.2(zz)(9).

Simply put, the Grower’s Agent must both account to and pay the Grower for the initial shipment of Produce within 30 days of the Grower’s Agent’s receipt of said Produce.  The Regulations further require the Grower’s Agent to make additional prompt accountings on and payments for all subsequent shipments of Produce in 10-day intervals from the date of the Grower’s Agent’s accounting to the Grower for its receipt of the initial shipment of Produce.  The Grower’s Agent shall make the final accounting and payment for the season to the Grower within 30 days from the date the Grower’s Agent receives the last shipment of Produce for the season from the Grower.  7 C.F.R. § 46.2(aa)(9).

  • Company’s Receipt of Initial Shipment + 30 Days = First Accounting & Payment Due
  • Date of First Account & Pay + 10 Days = First Interim Account & Pay
  • Date of First Interim Account & Pay + 10 Days = Second Interim Account & Pay….
  • Company’s Receipt of Last Shipment  + 30 Days = Final Account & Pay

In light of the foregoing payment scheme, the Grower’s last day to timely perfect its PACA trust rights occur thirty (30) days after the expiration of the Grower’s Agent’s time to make full payment promptly under 7 C.F.R. § 46.2(aa)(9). 

Key Initiating Dates:

The Grower’s Agent’s statutory obligations to both “account promptly” and to make “full payment promptly” begin on the date the Grower’s Agent first receives Produce from the Grower during a given season.

The Grower’s obligation to perfect its PACA Trust rights – or risk waiver – arises on the date the Grower receives the Grower’s Agent’s accountings under 7 C.F.R. § 46.2(q)(2) and ends thirty (30) days after the expiration of the Grower’s Agent’s last day to make a “full payment promptly” on a given accounting under 7 C.F.R. § 46.2(aa)(9).

Important Take Away:

The Grower’s deadline to timely perfect its PACA trust rights is capable of calculation without any action on the part of the Grower’s Agent.  The Grower knows when it shipped Produce to the Grower’s Agent.  These dates can be found on either the field pick tickets or the relevant bill of lading.  Simply put, the Grower can calculate this date on its own and is responsible for doing so. 

Because of this fact, a Grower cannot successfully recover money damages for unpaid Produce invoices under the PACA if it fails to timely perfect its trust rights.  Equally important, Courts will not accept the fact that a Grower failed to timely perfect its PACA trust rights because the Grower’s Agent failed to provide the Grower with a timely accounting. 

PACA Trust Litigation Alert

PACA Trust Litigation Alert

PACA Trust Litigation Alert

On May 29, 2012, a civil action was filed in Chicago against CP No. 3, Inc. d/b/a Cermak Produce, DMM Produce, Inc. d/b/a Harvey Fresh Market, Mayfair Market Place, Inc. d/b/a Mayfair Market, Jenor LLC – Michael’s Fresh Market, Michael’s Market, Inc. and North Avenue Fresh Market LLC in an effort to collect approximately $1,9322,270.00 in an alleged PACA trust debt.

On May 29, 2012, a civil action was filed in Maryland against Tamburo, Inc. in an effort to collect approximately $23,500.00 in alleged PACA debt.  

On May 31, 2012, a new civil action was filed in Washington against Seven Stars Fruit Company LLC in an effort to collect approximately $2,018,400.00 in alleged PACA debt.  

On June 1, 2012, a civil action was filed in Chicago against A-1 Foodservice, Inc. and Forever Green Food Group, Inc. d/b/a Forever Green Foodservice in an effort to collect approximately $27,700.00 in an alleged PACA trust debt.

Please check your A/R to see if these cases affect you.  If they do, please do not wait to assert your rights.

Judge Rejects Deal from Adams Produce, PNC Bank and Pro*Act

On May 21, 2012, Judge Mitchell of the U.S. Bankruptcy Court for the Northern District of Alabama rejected a proposed settlement in the Adams Produce Bankruptcy, which the Court identified as a case of “national interest.”

On May 22, 2012, The Packer published an article outlining Judge Mitchell’s reasons for rejecting the proposed settlement, which can be found here:

Judge Rejects Deal from Adams Produce, PNC Bank and Pro*Act

Echoing Jason Klinowski and Brian Jackiw of Freeborn & Peters’ objections to the proposed settlement, the Court cited the “lack of financial statements,” the lack of “schedules, statement of affairs and a full creditors’ matrix.”  As key reasons the Court would not approve the proposed settlement.  The Court went further to say that “we know very little about this company” and we are only “three weeks and three days into this case.”  Simply put, settlement was both premature and overreaching given the timing and all of the conditions contained in the proposal.

Judge Mitchell, agreeing with counsel from Freeborn & Peters, also took issue with the liability releases contained in the proposed settlement agreement.  Specifically, the Court noted that the “deal would have benefitted PNC Bank because it would get other creditors off the books, clearing the way for it to receive payment on a $5 million lien it claims to have against Adams Produce.”    Jason Klinowski and Brian Jackiw of Freeborn & Peters were not willing to allow their clients to sign away their future rights and the Court clearly agreed!