Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_17-cv-00037/USCOURTS-casd-3_17-cv-00037-0/pdf.json

Nature of Suit Code: 891
Nature of Suit: Agricultural Acts
Cause of Action: 07:0499 Agricultural Commodities Act

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

CHULA BRAND CA, Corp., a California 

corporation,

Plaintiff,

v.

JOSUE E. RODRIGUEZ MARTINEZ, an 

individual, and IRMA P. HERNANDEZ, 

an individual, both d/b/a ERVEY 

PRODUCE, and ERVEY PRODUCE, 

INC., a California corporation,

Defendants.

Case No.: 17cv37-JLS (KSC)

ORDER GRANTING APPLICATION 

FOR TEMPORARY RESTRAINING 

ORDER WITHOUT NOTICE

(ECF No. 2)

Presently before the Court is Plaintiff Chula Brand CA’s Application for Temporary 

Restraining Order Without Notice (“TRO Appl.”) (ECF No. 2), concurrently filed with a 

Complaint to Enforce Payment from Produce Trust (“Compl.”) (ECF No. 1). For the 

reasons set forth below, the Court GRANTS Plaintiff’s TRO.

BACKGROUND

Plaintiff is engaged in selling wholesale quantities of perishable agricultural 

commodities, i.e., produce, in interstate commerce. (Compl. ¶ 3.) According to Plaintiff, 

between October 14, 2014 and November 25, 2014, Plaintiff sold and delivered to 

Defendants, in interstate commerce, wholesale amounts of produce in the amount of 

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$9,480.60. (Id. ¶ 6.) Defendants accepted this produce, and Plaintiff timely delivered 

invoices to Defendants containing language preserving its PACA rights. (Ludlow Decl. ¶¶ 

7–8, ECF No. 1-3.) Plaintiff contends it has not been paid any monies by Defendants for 

the $9,480.60 worth of commodities sold, that—despite, “until recently, extend[ing] the 

due date for payment pursuant to the request from Defendants”—the payment is past due,

and that Defendants have not disputed the debt in any way. (Compl. ¶ 10; see id. ¶¶ 6, 12.)

Additionally, several of Defendants “long time” friends recently extended 

Defendants a loan in the amount of $27,000.00. (Halbo Decl. ¶ 3, ECF No. 1-4.) The 

purpose of the loan was to “enable Defendants to repay their debts to certain produce 

suppliers, namely to the Plaintiff . . . [and] to enable Defendants to carry on their business

. . . .” (Id.) After Defendants repaid $6,000 of the debt, they defaulted on the balance. (Id.)

Upon default, Defendants’ friends assigned the loan to Plaintiff. (Id.; Compl. ¶ 12.)

Plaintiff seeks enforcement of the statutory trust established under the Perishable 

Agricultural Commodities Act (“PACA”), 7 U.S.C. § 499a to t, and the regulations issued 

pursuant thereto. (TRO Appl. 1–2.) Plaintiff alleges that it has preserved its interest in the 

PACA trust in the full amount of $9,480.60 and that Defendants are failing to comply with 

their statutory duties under PACA to hold this undisputed amount in trust for the benefit of 

Plaintiff and to pay said sum to Plaintiff. (Compl. ¶¶ 9, 11–12.) Plaintiff also argues that 

the unpaid amount on the assigned loan—$21,000.00—“was made to the Defendants for 

the express purpose of replenishing PACA trust assets to their PACA creditors” and 

therefore also “qualifies for trust protection.” (TRO Appl. 3.) Accordingly, Plaintiff

requests that this Court issue an immediate injunction “restraining the transfer of any and 

all PACA assets of Defendants Josue E. Rodriguez Martinez, . . . Irma P. Hernandez, and 

Ervey corporation” until “there is payment to Plaintiff of $30,480.60 plus interest, attorney 

fees, and costs, pending entry of a Preliminary Injunction.” (TRO Appl. 1.)

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LEGAL STANDARD

PACA was enacted in 1930 to “suppress unfair and fraudulent practices in the 

marketing of fruits and vegetables in interstate and foreign commerce” and “provides a 

code of fair play . . . and aid to [agricultural] traders in enforcing their contracts.” 

Regulations Under the Perishable Agricultural Commodities Act; Addition of Provisions

to Effect a Statutory Trust, 49 Fed. Reg. 45735, 45737 (Nov. 20, 1984) (to be codified at 

7 C.F.R. pt. 46).

In 1984, PACA was amended to assure that suppliers of produce are paid by 

imposing a statutory trust on all produce-related assets, such as the produce itself or other 

products derived therefrom, as well as any receivables or proceeds from the sale thereof, 

held by agricultural merchants, dealers, and brokers. 7 U.S.C. § 499e(c)(2); Tanimura & 

Antle, Inc. v. Packed Fresh Produce, Inc., 222 F.3d 132 (3rd Cir. 2000); Frio Ice, S.A. v. 

Sunfruit, Inc., 918 F.2d 154 (11th Cir. 1990). The trust must be maintained for the benefit 

of the unpaid suppliers, sellers, or agents who provided the commodities until full payment 

has been made. § 499(e)(c). The trust provision thus offers sellers of produce, “a self-help 

tool that will enable them to protect themselves against the abnormal risk of losses resulting 

from slow-pay and no-pay practices by buyers or receivers of fruits and vegetables.” 49 

Fed. Reg. at 45737. 

Failure to maintain the trust and make full payment promptly to the trust beneficiary 

is unlawful. 7 U.S.C. § 499b(4). Produce dealers “are required to maintain trust assets in a 

manner that such assets are freely available to satisfy outstanding obligations to sellers of 

perishable agricultural commodities[,]” and any act or omission inconsistent with this 

responsibility, including dissipation of trust assets, is proscribed. 7 C.F.R. § 46.46(e)(1).

Dissipation of trust assets, defined as the diversion of trust assets or the impairment of a 

seller’s right to obtain payment, (7 C.F.R. § 46.46(b)(2)), is forbidden. 7 C.F.R.

§ 46.46(e)(i). 

A valid contractual claim for attorney fees and interest is within the scope of a PACA 

trust claim because the fees and interest are “sums owing in connection with perishable 

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agricultural commodities transactions.” See Middle Mountain Land & Produce Inc. v. 

Sound Commodities, Inc., 307 F.3d 1220, 1222–25 (9th Cir. 2002) (interpreting 7 U.S.C. 

§ 499e(c)(2)). Additionally, a district court may, in its discretion, “award reasonable 

prejudgment interest to PACA claimants if such an award is necessary to protect the 

interests of PACA claimants . . . .” Id. at 1226.

ANALYSIS

I. TRO Standard

Under Federal Rule of Civil Procedure 65(b), a plaintiff must make a showing that 

immediate and irreparable injury, loss, or damage will result if the court does not grant her

motion for a TRO. In particular, a court may not grant a TRO without notice to the adverse 

party unless “specific facts in an affidavit or a verified complaint” show immediate and 

irreparable harm, and “the movant’s attorney certifies in writing any efforts made to give 

notice and the reasons why it should not be required.” Fed. R. Civ. P. 65(b)(1)(A)–(B).

TROs are governed by the same standard applicable to preliminary injunctions. Stuhlbard 

Int’l Sales Co. v. John D. Brush and Co., 240 F.3d 832, 839 n.7 (9th Cir. 2001); see Cal. 

Indep. Sys. Operator Corp. v. Reliant Energy Servs., Inc., 181 F. Supp. 2d 1111, 1126 (E.D. 

Cal. 2001).

The Ninth Circuit has set forth two separate sets of criteria for determining whether 

to grant preliminary injunctive relief. Ranchers Cattlemen Action Legal Fund v. U.S. Dep’t. 

of Agric., 415 F.3d 1078, 1092–93 (9th Cir. 2005) (internal quotations and citations 

omitted); see also Preminger v. Principi, 422 F.3d 815, 826 (9th Cir. 2005). “Under the 

traditional test, a plaintiff must show: (1) a strong likelihood of success on the merits, (2) 

the possibility of irreparable injury to plaintiff if preliminary relief is not granted, (3) a 

balance of hardships favoring the plaintiff, and (4) advancement of the public interest (in 

certain cases).” Ranchers Cattlemen, 415 F.3d at 1092. “The alternative test requires that 

a plaintiff demonstrate either a combination of probable success on the merits and the 

possibility of irreparable injury or that serious questions are raised and the balance of 

hardships tips sharply in his favor.” Id.

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A. The Traditional TRO Test as to the $9,480.60

The facts of this case show that Plaintiff is entitled to a TRO under the traditional 

test as discussed below.

(i) Likelihood of Success on the Merits

Plaintiff demonstrates a strong likelihood of success on the merits because Plaintiff

appears entitled to enforce the PACA trust provisions and regulations to secure its trust 

claim for $9,480.60. First, Plaintiff is a supplier or seller of wholesale quantities of produce. 

Second, Plaintiff sold to Defendants, in interstate commerce, wholesale quantities of 

produce in the aggregate amount of $9,480.60, which is allegedly past due and unpaid.

Third, Plaintiff seems to have properly preserved its status as a trust creditor of Defendants 

under PACA by sending to Defendants PACA-compliant invoices for the produce and 

timely filing with this Court. See Weis-Buy Servs., Inc. v. Paglia, 411 F.3d 415, 422 (3d 

Cir. 2005) (noting that PACA is mostly silent regarding its statute of limitations and

therefore turning to state law regarding fiduciary duty to determine appropriate limitations

period). Fourth, Defendants’ failure to pay and statement to Plaintiff that they lack 

sufficient funds to pay the outstanding debt indicate a strong likelihood that Defendants 

are failing to maintain sufficient assets in the statutory trust and are dissipating trust assets.

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(ii) Possibility of Irreparable Injury

Plaintiff demonstrates a strong possibility of irreparable injury because in the 

absence of preliminary relief Defendants could completely deplete the statutory trust. Loss 

of such assets would be irreparable because Plaintiff would not be able to recover the trust 

assets once they are dissipated, and Plaintiff would be forever excluded as a beneficiary of 

 

1As currently pled, there is doubt as to whether Plaintiff will succeed in its request for attorney fees. 

Although a valid contractual claim for attorney fees and costs is encompassed by PACA, PACA on its 

own does not provide an express statutory basis for attorney fees. Middle Mountain Land & Produce, 307 

F.3d at 1225. In the present case, Plaintiff does not allege any specific contractual provision in the invoices 

which subject Defendants to liability for attorney fees, nor does Plaintiff explicitly allege any bad faith by 

Defendants. (See Compl. ¶¶ 15–17.) However, these potential deficiencies do not ultimately affect the 

Court’s overall conclusion regarding the balance of equities implicated by the TRO. 

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the statutory trust. See H.R. Rep. No. 543, 98th Cong. 2d Sess. 4 (1983), reprinted in 1984 

U.S. Code Cong. & Admin. News, 405, 411; Tanimura & Antle, Inc., 222 F.3d at 140; J.R. 

Brooks & Son, Inc. v. Norman’s Country Mkt., Inc., 98 B.R. 47 (Bankr. N.D. Fla. 1989); 

Cont’l Fruit Co. v. Thomas J. Gatziolis & Co., 774 F. Supp. 449 (N.D. Ill. 1991); Gullo 

Produce Co. v. A.C. Jordan Produce Co., 751 F. Supp. 64 (W.D. Pa. 1990).

(iii) Balance of Hardships and Public Interest

Plaintiff demonstrates that the balance of hardships tips strongly in its favor and that 

public interest here favors an entry of preliminary relief. By enjoining Defendants from 

dissipating trust assets, Defendants would only be required to fulfill the duties imposed by 

statute. Tanimura & Antle, Inc., 222 F.3d at 140. Further, PACA specifically declares that 

the congressional intent behind its passage is to protect the public interest and to remedy 

the burden on dealers, such as Plaintiff, by receivers who do not pay for produce. Id.; 7 

U.S.C. § 499e(c)(1).

(iv) Conclusion

Plaintiff satisfies the traditional test for an entry of a TRO regarding the outstanding

$9,480.60 of PACA trust assets.

B. The Traditional TRO Test as to the $21,000.00

Plaintiff additionally requests a TRO regarding the $21,000.00 owed on the assigned 

note, alleging that:

Said loan was made for the express purpose to replenish trust assets and 

thereby enable Defendants to pay the Plaintiff as well as other similarly 

situated PACA creditors. Defendants breached their PACA fiduciary duty 

regarding this PACA fund financing by: 1) obtaining the PACA funds falsely 

stating that they would use the funds to payoff [sic] PACA creditors with no 

intent of doing so; 2) failing to exercise fiduciary care over the PACA funds; 

3) failing to use the PACA funds to pay off the Plaintiff who is a PACA 

creditor; 4) failing to use the PACA funds to payoff [sic] other PACA 

creditors; [and] 5) failing to payback [sic] the PACA loan to the Plaintiff.

(Compl. ¶ 12.) In support, Plaintiff cites several cases for the general proposition that a

PACA “trust is imbued with an unusual ‘floating’ characteristic, i.e., it applies to all of [a] 

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[d]ebtor’s produce related inventory and proceeds thereof, regardless of [which] . . .

produce supplier was the source of such inventory.” In re Fresh Approach, Inc., 51 

B.R. 412, 422 (Bankr. N.D. Tex. 1985) (citing H.R. Rep. No. 98–543, 98th Cong., 1st 

Sess. 5 (1983), reprinted in 1984 U.S. Code Cong. & Ad. News 409, and 7 C.F.R. 46.46(c) 

(1984)); see also In re Gotham Provision Co., Inc., 669 F.2d 1000, 1010–11 (5th Cir. 1982)

(construing a highly analogous statutory scheme similarly).

Although in the present case it is not absolutely clear that the entire balance of

$21,000.00 constitutes delinquent PACA-related debts, (see Halbo Decl. ¶ 3 (noting 

purpose of loan, in part, was simply “to enable Defendants to carry on their business”), it 

is ultimately Plaintiff’s burden to show what portion, if any, of the $21,000.00 does not 

constitute PACA-related debt. See In re Fresh Approach, 51 B.R. at 422 (“[I]ndeed, it is 

the [d]ebtor who must determine which assets, if any, are not subject to the trust.”). Given 

this ultimate burden, and that Defendants have continually failed to honor the underlying 

$9,480.60 debt, the Court thus concludes that this slight uncertainty regarding the specific 

amount of the $21,000.00 that encompasses PACA-related debt does not bar Plaintiff’s 

TRO Application on this point. And because the factor analysis set forth above, supra 

Section I.A, otherwise applies with equal force to the $21,000.00 here at issue, the Court 

concludes that granting Plaintiff’s requested TRO as to the $21,000.00 is also appropriate.

CONCLUSION

Based on the foregoing reasons and consideration of Plaintiff’s Application, the 

Court finds that Plaintiff risks immediate irreparable injury in the form of the loss of trust 

assets. Further, Plaintiff sufficiently explains its failure to notice Defendants as to this 

TRO, noting that “Defendants are selling trust assets and are about to flee the jurisdiction 

with the same[,]” (TRO Appl. 5 (citing Ludlow Decl. and Halbo Decl.)), “Defendants[’] 

corporation has been suspended by the California Secretary of State[,]” (Wallis Decl. ¶ 5, 

ECF No. 2-4), and the TRO simply seeks to restrain the transfer of the remaining PACA 

funds held by third parties, “including Defendants[’] Banking Institutions, specifically 

Bank of America, and a few retail customers of the Defendants whom [sic] may not have 

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made final payments to Defendants,” (id. ¶ 6). Therefore, a TRO should be issued. The 

Court hereby ORDERS: 

(1) Defendants, their customers, agents, officers, subsidiaries, assigns, banking 

institutions, and related entities, SHALL NOT alienate, dissipate, pay over, or assign any 

assets of Ervey Produce, Inc., or its subsidiaries or related companies, or of Josue E. 

Rodriguez Martinez or Irma P. Hernandez, except for payment to Plaintiff, until further 

Order of this Court or until Defendants pay Plaintiff the sum of $30,480.60 by cashiers 

check or certified check. In the event of such payment, this Order shall be dissolved. 

(2) In the event Defendants fail to pay Plaintiff the sum referenced in the previous 

paragraph by cashiers or certified check within five business days of service of this Order, 

then the Defendants shall file with this Court, and provide a copy to Plaintiff’s counsel, an 

accounting which identifies the assets and liabilities and each account receivable of Ervey 

Produce, Inc., signed under penalty of perjury. Defendants shall also supply to Plaintiff’s

attorney, within ten days of the date of the Order, any and all documents in connection with 

the assets and liabilities of Ervey Produce, Inc. and its related and subsidiary companies, 

including, but not limited to, the most recent balance sheets, profit/loss statements, 

accounts receivable reports, accounts payable reports, accounts paid records and income 

tax returns. 

(3) Bond SHALL BE WAIVED in light of the fact that Defendants now hold the 

aggregate amount of at least $9,480.60 of Plaintiff’s assets.

(4) Pursuant to Federal Rule of Civil Procedure 65(b)(2), the TRO SHALL “state 

the date and hour it was issued; describe the injury and state why it is irreparable; state why 

the order was issued without notice; and be promptly filed in the clerk’s office and entered

in the record.”

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(5) Pursuant to Federal Rule of Civil Procedure 65(b)(2), the TRO SHALL endure 

for fourteen days only, unless Plaintiff seeks extend the TRO’s duration.

IT IS SO ORDERED.

Dated: January 11, 2017

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