Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_11-cv-00102/USCOURTS-casd-3_11-cv-00102-0/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 07:499 Agricultural Commodities Act

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

F.T. PRODUCE, INC. d/b/a FAMILY TREE

PRODUCE,

Plaintiff,

CASE NO. 11-CV-102 JLS (WVG)

ORDER: (1) GRANTING

PLAINTIFF’S EX PARTE

APPLICATION FOR

TEMPORARY RESTRAINING

ORDER WITHOUT NOTICE;

(2) SETTING HEARING ON

PRELIMINARY INJUNCTION

(Doc. No. 4)

vs.

AGWA, INC. d/b/a NORTH PARK

PRODUCE CHULA VISTA; JAMIL A.

NEHME; SHELDEN J. NEHME; ROSETTE

J. SOWELL,

Defendants.

Presently before the Court is Plaintiff’s ex parte application for a temporary restraining order

(TRO) without notice and for a preliminary injunction hearing. (Doc. No. 4.) For the reasons stated

herein, Plaintiff’s application is GRANTED.

BACKGROUND

Plaintiff is a California corporation “engaged in the business of buying and selling wholesale

quantities of perishable agricultural commodities . . . in interstate commerce.” (Doc. No. 1 (Compl.)

¶ 3.) Defendants are a California limited liability corporation “engaged in the business of buying

wholesale quantities of produce in interstate commerce” and its officers. (Id. at ¶¶ 4(a), (b).)

According to Plaintiff, between November 6, 2010 and December 18, 2010, Plaintiff sold and

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

Case 3:11-cv-00102-JLS-WVG Document 6 Filed 01/21/11 Page 1 of 6
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$66,425.33. (Id. at ¶ 6; Doc. No. 4-2 (Guzman Decl. ISO Appl.) ¶ 7.) Plaintiff alleges that the entire

amount remains outstanding. (Compl. ¶ 6.) Plaintiff further alleges that, in response to a demand

letter, Defendants advised that they are unable to pay the $66,425.33 owed because of cash flow

problems. (Guzman Decl. ISO Appl. ¶ 10.) Defendant Jamil Nehme advised Plaintiff’s president that

“the only way he could pay [Plaintiff] is if [Plaintiff] agreed to allow him to pay the debt off over” one

year. (Id.) Plaintiff’s president informed Mr. Nehme that the proposed payment schedule “was not

acceptable and demanded full payment.” (Id.)

 LEGAL STANDARD

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

Motor Vehicle Bd. of Cal. v. Orrin W. Fox Co., 434 U.S. 1345, 1347 n.2 (1977) (Rehnquist, J.). “A

plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits, that

he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities

tips in his favor, and that an injunction is in the public interest.” Winter v. Natural Res. Def. Council,

Inc. (NRDC), — U.S. —, 129 S. Ct. 365, 374 (2008) (citing Munaf v. Geren, 553 U.S. 674, 128 S. Ct.

2207, 2218–19 (2008)); see also Am. Trucking Ass’ns, Inc. v. City of L.A., 559 F.3d 1046, 1052 (9th

Cir. 2009). This is an “extraordinary remedy that may only be awarded upon a clear showing that the

plaintiff is entitled to such relief.” NRDC, 129 S.Ct. at 376. This “clear showing” requires Plaintiff

to show more than a mere “possibility” of irreparable harm, but instead he must “demonstrate that

irreparable injury is likely in the absence of an injunction.” Id. at 375 (emphasis in original); Am.

Trucking Ass’ns, 559 F.3d at 1052.

When a plaintiff has not provided notice of her application to the defendant, Federal Rule of

Civil Procedure 65(b)(1) imposes additional requirements prior to the issuance of a TRO:

The court may issue a temporary restraining order without written or oral notice to the

adverse party or its attorney only if: (A) specific facts in an affidavit or a verified

complaint clearly show that immediate and irreparable injury, loss, or damage will

result to the movant before the adverse party can be heard in opposition; and (B) 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). “The stringent restrictions imposed . . . by Rule 65[] on the availability of

ex parte temporary restraining orders reflect the fact that our entire jurisprudence runs counter to the

notion of court action taken before reasonable notice and an opportunity to be heard has been granted

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both sides of a dispute.” Granny Goose Foods, Inc. v. Bhd. of Teamsters, 415 U.S. 423, 438–39

(1974) (footnote omitted).

Accordingly, “courts have recognized very few circumstances justifying the issuance of an ex

parte TRO.” Reno Air Racing Ass’n v. McCord, 452 F.3d 1126, 1131 (9th Cir. 2006). “For example,

an ex parte TRO may be appropriate ‘where notice to the adverse party is impossible either because

the identity of the adverse party is unknown or because a known party cannot be located in time for

a hearing.’” Id. (quoting Am. Can Co. v. Mansukhani, 742 F.2d 314, 322 (7th Cir. 1984)).

Alternatively, “[i]n cases where notice could have been given to the adverse party, courts have

recognized a ‘very narrow band of cases in which ex parte orders are proper because notice to the

defendant would render fruitless the further prosecution of the action.’” Id. (quoting Am. Can Co., 742

F.3d at 322).

ANALYSIS

Plaintiff contends that Defendants are in violation of their statutory duties under the Perishable

Agricultural Commodities Act (PACA), 7 U.S.C. §§ 499a–499t. (See generally Compl.) Plaintiff

further contends that a TRO is necessary to prevent dissipation of PACA trust assets pending a

hearing. (Doc. No. 4-1 (Mem. ISO Appl. 3–5); Guzman Decl. ISO Appl. ¶ 12.)

1. PACA

“Congress enacted PACA in 1930 to promote fair trading practices in the produce industry.”

Tanimura & Antle, Inc. v. Packed Fresh Produce, Inc., 222 F.3d 132, 135 (3d Cir. 2000); accord Frio

Ice, S.A. v. Sunfruit, Inc., 918 F.2d 154, 155 (11th Cir. 1990). In 1984, Congress amended PACA to

provide for a statutory trust under which a produce buyer holds its produce-related assets as a fiduciary

until full payment is made to the produce seller. Tanimura, 222 F.3d at 135–36 (citing 7 U.S.C.

§ 499e(c)). “This trust is created by operation of law upon the purchase of such goods, and the

produce buyer is the statutory trustee.” Tanimura, 222 F.3d at 136; accord 7 U.S.C. § 499e(c)(2). An

unpaid seller loses the benefits of the trust unless it gives written notice of its intent to preserve its

rights with the United States Department of Agriculture and the produce buyer within thirty days after

payment is due. 7 U.S.C. § 499e(c)(3); Tanimura, 222 F.3d at 136. Alternatively, the unpaid seller

may provide notice of intent through its ordinary and usual billing or invoice statements. 7 U.S.C. §

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499e(c)(4); Tanimura, 222 F.3d at 136.

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

unlawful. 7 U.S.C. § 499b(4). Produce dealers must “maintain trust assets in a manner that such

assets are freely available to satisfy outstanding obligations to sellers of perishable agricultural

commodities,” and “[a]ny act or omission which is inconsistent with this responsibility, including

dissipation of trust assets” is proscribed. 7 C.F.R. § 46.46(d)(1).

2. Propriety of a TRO Without Notice

A. Likelihood of Success on the Merits

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

trust claim for $66,425.33. First, Plaintiff is a supplier or seller of wholesale quantities of produce and

is licensed under PACA. (Guzman Decl. ISO Appl. ¶ 3; id. Ex. 1 (PACA license).) Second, Plaintiff

sold to Defendants, in interstate commerce, wholesale quantities of produce in the aggregate amount

of $66,425.33, which is allegedly past due and unpaid. (Id. ¶¶ 9–10; Compl. ¶ 6; see 7 U.S.C.

§ 499e(2).) Third, Plaintiff preserved its interest in the statutory trust by providing notice of intent

to preserve its rights through its ordinary and usual billing or invoice statements. (Guzman Decl. ISO

Appl. ¶ 9; id. Ex. 4 (invoices to Defendants); see 7 U.S.C. § 499e(4).) Fourth, Defendants have

advised Plaintiff that they are unable to promptly make payment of the amount owed. (Guzman Decl.

ISO Appl. ¶ 10; see 7 U.S.C. § 499b(4).)

B. Irreparable Harm

Plaintiff also appears likely to suffer irreparable harm in the absence of preliminary relief.

Plaintiff’s president declares, under penalty of perjury, that “[u]nless the assets of the defendant

corporation are frozen, it is likely that the trust assets will continue to be dissipated. As a result,

[Plaintiff] will suffer immediate and irreparable harm because it will lose the trust assets and rights

that are owed under the statute.” (Guzman Decl. ISO Appl. ¶ 12.) Dissipation of the trust assets

would cause Plaintiff irreparable injury because Plaintiff would not be able to recover the trust assets

and would forever be excluded as a beneficiary of the statutory trust. See Tanimura, 222 F.3d at

140–41; Frio Ice, 918 F.2d at 159.

//

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C. Balance of Equities and Public Interest

The balance of equities and public interest also militate in favor of a TRO. Enjoining

Defendants from dissipating trust assets only requires Defendants to fulfill the statutory duties PACA

imposes. See Tanimura, 222 F.3d at 140. Further, PACA is intended to remedy the burden on

commerce caused by welching produce buyers and to “protect the public interest”. 7 U.S.C.

§ 499e(c)(1).

D. Federal Rule of Civil Procedure 65(b)(1)

Finally, Plaintiff has satisfied the additional requirements for a TRO without notice. The Court

concluded supra that Plaintiff is likely to suffer irreparable harm in the absence of preliminary relief.

The harm is imminent, Plaintiff’s president opines, because Defendants are currently dissipating trust

assets. (Guzman Decl. ISO Appl. ¶ 11; see Fed. R. Civ. P. 65(b)(1)(A).) Further, Plaintiff’s counsel

certifies in writing that “[a]dvising Defendants of the pendency of this motion will allow Defendants

to continue to pay non-trust debts with trust assets . . . in order to avoid serious personal liabilities.”

(Doc. No. 4-3 (Lewin Certification ISO Appl.) 2; see Fed. R. Civ. P. 65(b)(1)(B).) Plaintiff’s counsel

also opines that notice to Defendants would render fruitless the further prosecution of the action

because “once trust assets are dissipated, it is all but impossible to recover them.” (Lewin

Certification ISO Appl. 2; see Reno Air Racing, 452 F.3d at 1131.)

CONCLUSION

For the reasons stated, Plaintiff’s application for a TRO without notice is GRANTED. Bond

shall be waived in light of the fact that Defendants currently hold $66,425.33 of Plaintiff’s assets.

IT IS HEREBY ORDERED:

(1) That Defendants, their counsel, agents, officers, assigns, or representatives be and

hereby are restrained and enjoined pending the hearing and determination of Plaintiff’s

motion for preliminary injunction from:

(a) Removing, withdrawing, transferring, assigning, or selling to any other person

or entity, the proceeds from the sales of any or all existing or future inventories

of food or other products derived from perishable agricultural commodities as

defined in PACA, 7 U.S.C. § 499a(b), or receipts of payment for such

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agricultural commodities sold prior to the date of this order, provided, however

that Defendants may sell perishable agricultural commodities or products

derived from perishable agricultural commodities for fair compensation

without right of set-off, on the condition that defendants maintain the proceeds

of such sale subject to this Order;

(b) Taking any other action which causes dissipation of Plaintiff’s interest in

PACA trust assets; or

(c) Taking any action that violates the provisions of 7 U.S.C. § 499b(4).

(2) Plaintiff shall forthwith serve Defendants and their counsel with copies of all

documents filed in this matter, including the complaint, the application, and a copy of

this Order. Plaintiffs shall electronically file proof of service not later than 4:00 p.m.

on January 24, 2011.

(3) This Order shall be binding upon the parties to this action and all other persons or

entities who receive actual notice of this Order by personal service or otherwise.

(4) The $66,425.33 in PACA trust assets belonging to Plaintiff and in the possession of

Defendants will serve as plaintiff’s security for this injunction as required by Federal

Rule of Civil Procedure 65(c).

(5) A hearing to show cause why a preliminary injunction should not issue in this case is

set for hearing on Tuesday, February 1, 2011 at 9:30 a.m. in Courtroom 6 of the

Edward J. Schwartz United States Courthouse, 940 Front Street, San Diego, California

92101. Defendants SHALL FILE an opposition to the imposition of a preliminary

injunction not later than January 27, 2011 at 4:00 p.m. Plaintiff may file a reply

memorandum not later than 10:00 a.m. on January 31, 2011.

IT IS SO ORDERED.

DATED: January 21, 2011

Honorable Janis L. Sammartino

United States District Judge

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