2005 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

6-14-2005

Weis Buy Serv Inc v. Paglia

Precedential or Non-Precedential: Precedential

Docket No. 04-1890

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

___________

NO. 04-1890

___________

WEIS-BUY SERVICES, INC.;

BRIGOTTA’S PRODUCE & GARDEN CENTER 

v.

RALPH PAGLIA, JR.,

in his individual capacity;

AUGUST J. SCOLIO, JR.,

in his individual capacity

August J. Scolio, Jr., 

in his official capacity

Appellant

___________

On Appeal from the United States District Court for the 

Western District of Pennsylvania

(Civil No. 00-cv-0121)

District Judge: Honorable Maurice B. Cohill, Jr.

___________
2

Argued May 3, 2005

BEFORE: McKEE, VAN ANTWERPEN, and WEIS, Circuit

Judges

(Filed: June 14, 2005)

Arthur D. Martinucci (Argued)

Kenneth W. Wargo

Quinn Buseck Leemhuis Toohey & Kroto, Inc.

2222 West Grandview Boulevard

Erie, PA 16506

Counsel for Appellant

Michael J. Keaton (Argued)

Keaton & Associates, P.C.

1278 West Northwest Highway

Suite 903

Palatine, IL 60067

Counsel for Appellee

___________

OPINION OF THE COURT

___________

VAN ANTWERPEN, Circuit Judge

In 1997 and 1998, Appellees Weis-Buy Services, Inc.

(“Weis-Buy”) and Brigiotta’s Produce & Garden Center
1. Our recitation of the facts is drawn from the opinion of the

District Court. See Weis-Buy Servs. v. Paglia, 307 F. Supp.

2d 682, 685-87 (W.D. Pa. 2004)

3

(“Brigiotta’s”) (collectively “Sellers” or “Appellees”) each

sold several shipments of fruit to Appellant United Fruit &

Produce Company (“United Fruit”), but never received

payment. United Fruit filed for bankruptcy on December 9, 1

1997. On December 29, 1999, the Bankruptcy court

authorized a partial distribution of United Fruit’s assets to the

Sellers. Seeking recoupment of the balance of the money

owed to them by United Fruit, Sellers then filed suit on April

26, 2000, against August J. Scolio, Jr., an officer and

shareholder of United Fruit, alleging that he had breached his

fiduciary duty under the Perishable Agricultural Commodities

Act of 1930, as amended, 7 U.S.C. §§ 499a-499s (“PACA”).

I. FACTUAL BACKGROUND AND PROCEDURAL

HISTORY

United Fruit was started by Scolio’s father in 1914. 

Scolio became involved with the company in 1949 and was a

partner by 1960. In 1965, Scolio’s father died and Scolio

became the sole proprietor of the business until 1986, when

he sold United Fruit to John Tarantino, Irvin Rovner, and

Larry Altman. In 1988, the owners brought in Ralph Paglia to

manage the company. Scolio remained an employee of

United Fruit, and was responsible for paying bills and

calculating the employees’ pay.
4

In 1994, Tarantino and Altman sold their shares,

leaving ownership of United Fruit in the hands of Paglia

(50%), Rover (25%), and Scolio (25%). According to Scolio,

he purchased shares for the benefit of Paglia who could not

afford to buy all the shares that he wanted. Although Scolio

claims that he eventually intended to sell his interest to Paglia,

he never did so, and thus Scolio remained a shareholder at the

time of United Fruit’s bankruptcy. 

Not only was Scolio a shareholder and employee of

United Fruit, but company policy required his and Paglia’s

signature for disbursement of United Fruit checks. To assist

him in this endeavor, Scolio had a signature stamp created to

use when issuing United Fruit’s checks.

In June 1997, Paglia asked Scolio to retire, but

encouraged him to remain active in the directorship of the

company. Scolio ceased working for United Fruit, but

retained his stake in the company, his position as officer, and

his title as vice-president. Scolio also remained a signatory on

United Fruit’s bank accounts and United Fruit continued to

use Scolio’s signature stamp after his retirement. 

Furthermore, Scolio acted as a guarantor on transactions

between United Fruit and Dollar Bank Leasing and possibly

First Western Bank.

Soon after Scolio retired, United Fruit began doing

business with Weis-Buy and Brigiotta’s. From July 9, 1997

through September 23, 1997, Weis-Buy sent five shipments of

produce to United Fruit, with payment on each shipment due

within ten days. October 3, 1997 was the latest date on which
5

payment was due for any of the Weis-Buy invoices. 

Brigiotta’s provided produce in numerous shipments to

United Fruit from August 23, 1997 through February 22,

1998. Again, payments were due within ten days of the date

of each invoice, and March 4, 1998 was the latest date on

which payment was due on any of the Brigiotta’s invoices. 

Neither Seller received any payment for the produce it

provided. 

United Fruit filed for bankruptcy under Chapter 11 of

the Bankruptcy Code on December 9, 1997. The company

ceased operations in March 1998. Sellers’ claims were

determined to be qualified valid PACA claims by the

Bankruptcy Court and each received a partial distribution

from United Fruit’s remaining assets. 

Seeking the rest of the money owed to them, Sellers

filed suit against Scolio in the United States District Court for

the Western District of Pennsylvania on April 26, 2000. In

their complaint, Sellers alleged that Scolio breached his

fiduciary duty owed to them under PACA. A bench trial was

held on March 19, 2003, and the District Court found Scolio

liable and ordered judgment in favor of the Sellers. The

District Court also awarded interest and attorneys’ fees. 

Scolio timely appealed.

II. JURISDICTION AND STANDARD OF REVIEW

The District Court had jurisdiction over this matter
“The several district courts of the United States are 2

vested with jurisdiction specifically to entertain (i) actions by

trust beneficiaries to enforce payment from the trust, and (ii)

actions by the Secretary to prevent and restrain dissipation of the

trust.”

7 U.S.C. § 499e(c)(5).

6

pursuant to 7 U.S.C. § 499e(c)(5)(i) and 28 U.S.C. § 1367. 

2

We have jurisdiction over the final decision of the District

Court pursuant to 28 U.S.C. § 1291. 

We exercise plenary review of the District Court’s

refusal to dismiss the case on statute of limitations grounds. 

Lake v. Arnold, 232 F.3d 360, 365 (3d Cir. 2000). We review

the award of attorneys’ fees and interest for abuse of

discretion. In re Rite Aid Corp. Securities Litig., 396 F.3d

294, 299 (3d Cir. 2005); Anthuis v. Colt Indus. Operating

Corp., 971 F.2d 999, 1002 (3d Cir. 1992).

III. ANALYSIS

Scolio raises three issues on appeal. First, he argues

that the District Court erred when it failed to dismiss the case

on statute of limitations grounds. Second, he claims that the

District Court erred in finding him personally liable. Finally,

Scolio challenges the District Court’s award of attorneys’ fees

and interest. Because we conclude that Sellers’ claims were

not timely, we do not address Scolio’s other arguments.
7

A. PACA

This Court has had few opportunities to examine

PACA, thus we begin by examining the history and purpose

of the statute. Congress enacted PACA in 1930 to deter

unfair business practices and promote financial responsibility

in the perishable agricultural goods market. Sunkist Growers

v. Fisher, 104 F.3d 280, 282 (9th Cir. 1997) (quoting Farley

and Calfee, Inc. v. United States Dep't of Agric., 941 F.2d

964, 966 (9th Cir. 1991)). “The Act was ‘designed primarily

for the protection of the producers of perishable agricultural

products--most of whom must entrust their products to a

buyer or commission merchant who may be thousands of

miles away, and depend for their payment upon his business

acumen and fair dealing.’” Tom Lange Co. v. Kornblum &

Co., 81 F.3d 280, 283 (2d Cir. 1996) (quoting H.R. Rep. No.

84-1196 (1955), reprinted in 1956 U.S.C.C.A.N. 3701,

3701).

In 1984 Congress amended PACA to allow for a nonsegregated floating trust for the protection of producers and

growers. H.R. Rep. No. 98-543 (1983), reprinted in 1984

U.S.C.C.A.N. 405, 406. Congress recognized that these

producers and growers tend to be small businesses in a high

cost/high risk industry. Id. They generally have capital tied

up in land and machinery and their survival depends on

timely returns on the sale of their products. Id. Congress

explained:

 Many commission merchants, dealers, or

brokers, in the normal course of their business
8

transactions, operate on bank loans secured by the

inventories, proceeds or assigned receivables

from sales of perishable agricultural commodities,

giving the lender a secured position in the case of

insolvency. Under present law, sellers of fresh

fruits and vegetables are unsecured creditors and

receive little protection in any suit for recovery of

damages where a buyer has failed to make

payment as required by the contract.

This legislation would provide a remedy

by impressing a trust in favor of the unpaid seller

or supplier on the inventories of commodities and

products derived therefrom and on the proceeds

of sale of such commodities and products in the

hands of the commission merchant, dealer or

broker in the same manner that has been provided

by ‘trust’ amendments to the Packers and

Stockyards Act adopted in 1976. The trust

provisions of that act have operated very

successfully without imposing a regulatory

burden on the industry. 

The trust impression by section 5(c)(2) of

this act is made up of a firm's commodity related

liquid assets, and is a nonsegregated ‘floating

trust’, which permits the commingling of trust

assets. In the view of the committee it provides

the protection needed by the trust beneficiaries

without creating an undue hardship to any person.
9

The committee believes that the statutory

trust requirements will not be a burden to the

lending institutions. They will be known to and

considered by prospective lenders in extending

credit. The assurance the trust provision gives

that raw products will be paid for promptly and

that there is a monitoring system provided for

under the act will protect the interests of the

borrower, the money lender, and the fruit and

vegetable industry. Prompt payments should

generate trade confidence and new business

which yields increased cash and receivables, the

prime security factors to the money lender. 

These amendments would give the

industry and department effective new tools to

overcome the payment problems. 

Id. at 406-07. It is clear that Congress intended to create a

system by which producers and growers would be secured in

their transaction with buyers, and in return they were expected

to make prompt claims when the buyers failed to pay. With

this background, we now turn to the claims against Scolio.

B. Individual Liability

We have not previously decided whether an individual

corporate officer can be held liable for breaching his or her

fiduciary duty to protect PACA trust assets. We have

guidance from our sister circuits, however, and several have

considered this issue and have concluded that individual
10

liability does exist in certain circumstances. See Patterson

Frozen Foods v. Crown Foods Int’l, 307 F.3d 666, 669 (7th

Cir. 2002) (recognizing that PACA permits recovery against

both the corporation and its controlling officers.);

Golman-Hayden Co. v. Fresh Source Produce Inc., 217 F.3d

348, 351 (5th Cir. 2000) (holding that shareholders, officers,

or directors who control assets may be held liable under

PACA.); Sunkist Growers, Inc. v. Fisher, 104 F.3d 280, 283

(9th Cir. 1997) (same). 

In Sunkist Growers, 104 F.3d at 283, the Ninth Circuit

examined the decisions of several district courts and

concluded that “individual shareholders, officers, or directors

of a corporation who are in a position to control PACA trust

assets, and who breach their fiduciary duty to preserve those

assets, may be held personally liable under the Act.” In

Golman-Hayden, the Fifth Circuit expressed its agreement

with Sunkist Growers and further explained:

PACA is a “tough law”. In addition to

protecting consumers, Congress expressly

designed it to protect the producers of perishable

agricultural products, most of whom must entrust

their products to a buyer who may be thousands of

miles away, and depend for their payment upon

his business acumen and fair dealing. An investor

in a perishable commodities corporation “should

know at the beginning of his association with

such a corporation that he is ‘buying into’ a

corporation which is strictly regulated by the

federal government through PACA.”
11

217 F.3d 348, 351 (internal citations and footnotes omitted).

Individual liability in the PACA context is not derived

from the statutory language, but from common law breach of

trust principles. Sunkist Growers, 104 F.3d at 282 (“Ordinary

principles of trust law apply to trusts created under PACA . . .

.”). “Under the common law, the trustee of a trust is under a

duty to the beneficiary in administering the trust to exercise

such care and skill as a man of ordinary prudence would

exercise in dealing with his own property.” Shepard v. K.B.

Fruit & Vegetable, 868 F. Supp. 703, 706 (E.D. Pa. 1994). 

Liability arising from this duty is distinct from the liability

that arises when the corporate veil is pierced:

An individual who is in the position to

control the [PACA] trust assets and who does not

preserve them for the beneficiaries has breached

a fiduciary duty, and is personally liable for that

tortious act. This legal framework is to be

distinguished from the piercing the veil doctrine,

where the corporate form is disregarded because

the individual has either committed a fraud, or

because the corporation is a “shell” being used by

the individual shareholders to advance their own

purely personal rather than corporate ends. 

Morris Okun, Inc. v. Harry Zimmerman, Inc., 814 F. Supp.

346, 348 (S.D.N.Y. 1993).
12

We join those circuits that have already addressed this

issue and hold that individual officers and shareholders, in

certain circumstances, may be held individually liable for

breaching their fiduciary duties under PACA. See Patterson

Frozen Foods, 307 F.3d at 669; Golman-Hayden Co., 217

F.3d at 351; Hiller Cranberry Prods. v. Koplovsky, 165 F.3d

1, 9 (1st Cir. 1999); Sunkist Growers, Inc., 104 F.3d at 283. 

That said, before we determine whether Scolio himself was

properly held liable here, we must determine whether Sellers

brought this action within the applicable statute of limitations

period.

C. Statute of Limitations

The District Court declined to determine whether there

was a limitations period applicable to the Sellers’ claims,

holding instead that the action either did not accrue, or was

tolled until December 29, 1999, the date the Bankruptcy court

authorized a partial distribution from United Fruit’s assets. 

We believe a more thorough analysis is necessary, and we

begin by identifying the appropriate statute of limitations. 

“Determining the statute of limitations period for

activity governed by a federal statute is a question of federal

law.” KingVision Pay-Per-View, Corp. v. 898 Belmont, Inc.,

366 F.3d 217, 220 (3d Cir. 2004). However, when a federal

law provides the basis for the cause of action, but fails to

supply a statute of limitations, we must borrow an appropriate

statute of limitations from the law of the forum state. Id.; see

also North Star Steel Co. v. Thomas, 515 U.S. 29, 34 (1995). 

We also incorporate relevant state tolling rules. Hardin v.
 This section prescribes a two-year statute of limitations 3

for:

Any other action or proceeding to recover damages

for injury to person or property which is founded on

negligent, intentional, or otherwise tortious conduct

or any other action or proceeding sounding in

trespass, including deceit or fraud, except an action or

proceeding subject to another limitation specified in

this subchapter.

42 Pa. C.S.A. § 5524(7).

13

Straub, 490 U.S. 536, 539 (1989); Lake v. Arnold, 232 F.3d

360, 368 (3d Cir. 2000). 

Because PACA does not set forth a limitations period

for breach of fiduciary duty claims, we look to Pennsylvania

law, which provides that such claims must be brought within

two years of the date the claim accrues. 42 Pa. C.S.A. §

5524(7); see also In re Mushroom Transp. Co., 382 F.3d 325, 3

336 (3d Cir. 2004) (recognizing a two-year statute of

limitations for breach of fiduciary duty claims); Maillie v.

Greater Del. Valley Health Care, Inc., 628 A.2d 528, 532 (Pa.

Commw. Ct. 1993) (acknowledging that 42 Pa.C.S. § 5524(7)

is the applicable statute for proceedings based upon breach of

a fiduciary duty). Therefore, Sellers claims will only be

timely if the Sellers brought them within two years of accrual,

or if the statute of limitations was tolled.
14

1. Accrual

Generally, the statute of limitations begins to run on a

breach of fiduciary duty claim when the trustee openly and

unequivocally violates his duties. Philippi v. Philippe, 115

U.S. 151, 157 (1885) (“[T]he statute of limitations will begin

to run from the time such repudiation and claim came to the

knowledge of the beneficiary.”); United States v. Rose, 346

F.2d 985, 989-990 (3d Cir. 1965) (“The statute of limitations

begins to run against the trust beneficiary with respect to a

suit against the express trustee, if at all, when he knows the

trust has been repudiated or reasonably should have known

it.”). Applying this reasoning, Scolio argues that the claims

against him accrued on the date that the Seller’s invoices

became overdue. The District Court rejected this rationale,

and concluded that because of the continuing nature of the

PACA trust, United Fruit’s failure to pay the Sellers’ invoices

amounted to a “continuing violation.”

We have previously addressed the contours of the

continuing violations doctrine in Cowell v. Palmer Tp., 263

F.3d 286, 293 (3d Cir. 2001). In Cowell, plaintiffs alleged

that a township violated their Fourteenth Amendment due

process rights by imposing two liens on their properties. Id. at

291. Although the statute of limitations had run since the

initial imposition of the liens, the plaintiffs argued that the

liens amounted to a continuing violation until they were lifted

or expunged. Id. at 293. We disagreed, explaining that “[t]he

focus of the continuing violations doctrine is on affirmative

acts of the defendants.” Id. Adopting the view of the Fourth

Circuit, we stated that “‘[a] continuing violation is occasioned
 We emphasize that the statute of limitations applies to 4

actions against the trustee for breach of fiduciary duty.

15

by continual unlawful acts, not continual ill effects from an

original violation.’” Id. (quoting Ocean Acres Ltd. v. Dare

County Bd. of Health, 707 F.2d 103, 106 (4th Cir.1983)). 

We find that reasoning equally applicable to claims

arising from a trust relationship and conclude that once

United Fruit and its officers failed to pay Sellers for the good

received, Sellers were on notice that the trustees were in

breach of their fiduciary duties. Nor are we persuaded that

the unique nature of the PACA trust changes our analysis. 

We recognize that the trust created by PACA exists until a

seller is paid, 7 U.S.C. § 499e(c)(2), and “[p]articipants who

preserve their rights to benefits . . . remain beneficiaries until

they are paid in full,” 7 C.F.R. 46.46(c)(2). However, when

Sellers are not suing to enforce the trust obligations or to

preserve their shares of the trust res, but instead are suing the

trustee in tort for damages resulting from a breach of his

fiduciary duties, we believe that the statute of limitations must

accrue from the time that the trustee openly repudiates those

duties.4

We likewise reject the contention that the claims

against Scolio did not accrue until Sellers exhausted their

remedies as against United Fruit. Under the District Court’s

theory, the statute of limitations for bringing PACA claims

against Scolio did not accrue until December 29, 1999,

because it was only then that the Sellers “were on notice that
16

United Fruits’s assets were insufficient to satisfy liability.” 

Weis-Buy, 307 F. Supp. 2d at 691. However, Sellers were on

notice that the United Fruit’s assets may not be sufficient

when United Fruit first failed to pay its bills, and at the very

least, they were on notice that United Fruit might come up

short when it filed for bankruptcy protection in 1997. 

Furthermore, because Sellers are suing Scolio in his

trustee capacity, it is irrelevant that they did not know whether

United Fruit would be able to satisfy Sellers claims. In

Donsco, Inc. v. Casper Corp., we explained that:

[a] corporate officer is individually liable

for the torts he personally commits and cannot

shield himself behind a corporation when he is an

actual participant in the tort. . . . His liability is in

no way dependent on a finding that [the

corporation] is inadequately capitalized, that the

corporation is a mere alter ego of [the officer],

that the corporate form is being used to perpetrate

a fraud, or that corporate formalities have not

been properly complied with. . . . The only

crucial predicate to [the officer]’s liability is his

participation in the wrongful acts. 

587 F.2d 602, 606 (3d Cir. 1978). As Scolio’s liability is

wholly separate from the corporation’s liability, there is no

reason to require Sellers to first bring claims against the
 Admittedly, some courts have suggested that individual 5

officer liability is determinable only after the plaintiff has shown

that the corporate assets are insufficient to satisfy the obligation.

For instance, in Golman-Hayden Co., the Fifth Circuit

explained:

PACA liability attaches first to the licensed

commission merchant, dealer, or broker of perishable

agricultural commodities. If, however, the assets of

the licensed commission merchant, dealer, or broker

are insufficient to satisfy the PACA liability, then

others may be held secondarily liable if they had

some role in causing the corporate trustee to commit

the breach of trust.

217 F.3d at 351 (footnotes omitted.). We do not read this

interpretation of PACA liability to mean that the injured party

cannot seek relief from the individual who is secondarily liable

until he has a judgment from the corporation that is primarily

liable, rather that the seller may only be on notice of the breach

of duty after first suing the corporation and discovering that the

assets were not preserved. 

17

corporation before pursuing claims against Scolio. Sellers 5

could have brought suit simultaneously, as the parties did in

Golman-Hayden Co., 217 F.3d at 349, or they simply could

have sued Scolio directly for breaching his duties.

2. Tolling

In the alternative, the District Court reasoned that if the

claims accrued when the invoices became overdue, “then the
18

limitations period for bringing PACA claims against Mr.

Scolio would have been tolled while Plaintiffs first sought

relief from United Fruit. Under this scenario, the tolling

period would have ended on December 29, 1999, when

Plaintiffs learned that United Fruit’s assets were insufficient.” 

Weis-Buy, 307 F. Supp. 2d at 691. Again, we see no

justification for tolling the statute of limitations.

“Equitable tolling functions to stop the statute of

limitations from running where the claim’s accrual date has

already passed.” Oshiver v. Levin, Fishbein, Sedran &

Berman, 38 F.3d 1380, 1387 (3d Cir. 1994). Generally,

“equitable tolling may be appropriate: (1) where the defendant

has actively misled the plaintiff respecting the plaintiff’s

cause of action; (2) where the plaintiff in some extraordinary

way has been prevented from asserting his or her rights; or (3)

where the plaintiff has timely asserted his or her rights

mistakenly in the wrong forum.” Id. None of these situations

is present here, and Appellees have offered no justification for

tolling the statute of limitations.

As explained infra, Sellers were not required to file

suit against United Fruit before pursuing an independent

action against Scolio. When Sellers were not timely paid,

they were on notice that United Fruit, and the responsible

parties inside United Fruit, had breached their trustee

obligations. At this point the Sellers should have attempted to

discover why payment was not forthcoming and who was

responsible. Instead, the Sellers sat on their hands, and even

after United Fruit filed for Bankruptcy protection in

December 1997, they did not file suit. Sellers were under no
While we have indicated our agreement that there are 6

circumstances under which officers may be held individually

liable for breaching their fiduciary duties arising from a PACA

trust, we express no opinion about the correctness of the District

Court’s conclusion that Scolio’s activities were enough to

establish individual liability under the facts in this case. 

19

misapprehension that their money was safe, nor could they

assume that no one inside United Fruit was liable for their

loss. Consequently, the statute of limitations was not tolled. 

IV. CONCLUSION

Weis-Buy’s last invoice came due on October 3, 1997,

and Brigiotta’s last invoice came due on March 4, 1998. 

Neither seller filed suit until April 26, 2000, a date plainly

later than two years after any of their invoices had come due

and more than two years after United Fruit originally filed for

bankruptcy. Because we conclude that the statute of

limitations had run on these claims before the actions were

filed, we need not determine Scolio’s individual liability, nor

determine whether the award of interest or attorneys’ fees

were appropriate. Instead, we remand to the District Court 6

for entry of judgment in favor of the Appellant.