2005 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit
6-14-2005 

# W ei s B uy S e rv Inc v

. P agli a P r e c e de nt i al or N on-P r e c e de nt i al : P r e c e de nt i al D ocke t N o . 04-1890

F o l low thi s a nd a dd it ion al work s at : http://d i git alc ommon s .l a w . vi ll a nova . e du/thir dc ir c uit_2005

Thi s de c i sion i s br ou ght t o you for f r e e and ope n a c c e s s b y the O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit at V i l l a nova U nive r sity S choo l of L a

w Di git al Reposit ory

. It h as be e n a c c ept e d for inclusion in 2005 D e c i sion s b y a n author i z e d a dmini s tr at or of V i l l a nova U nive r sity S choo l of L a

w Di git al Reposit ory

. F or mor e inform at ion, p le as e c ont a ct Be n j amin . C arl s on@l a

w . vi l l a nova . e du
. Re c omme nde d C it at ion

" W ei s B uy S e r v Inc v

. P agl i a" (2005). 2005 D e cisio n s . P ape r 920. http://d i git alc ommon s .l a

w . vi l l a nova . e du/thir dc ir c uit_2005/920P RE CE DE NT I AL UN I TED STATES CO UR T OF A PP EALS F O R T H E T H IR D C IR C U IT

___________ N O
. 04- 1890

___________ W E IS -B U Y S E R V IC E S , IN C .; BRI GOTTA’ S P RODUCE & G ARDEN CENT ER

v. R A L P H P A G L IA , J R ., i n h i s i n d i v i d u a l c a p a c i t y; A U G U S T J . S C O L IO , J R ., in h is in d iv id u a l ca p a c ity A u g u s t J . S c o lio , J r., in h is o f f icia l ca p a c ity

A ppel l ant

___________ O n A ppeal fr om t he U ni t ed St at es D i s t r i ctC our tfort he

W e ste rn D istric t o f

P e n n sy lv a n ia ( C i vi l N o. 00- cv- 0121) D istri ct Ju d g e: H o n o rab le M au ri ce B
. C o h il l, Jr.

___________

### 2 A r gued M ay3, 2005 B E F O R E : M c K E E , V A N A N T W E R P E N , an d W E IS , C irc u it J udges ( Fi l ed: J une 14, 2005) A r t hurD
. M ar t i nucci ( A r gued) K enneth W

. W ar go Q ui nn B us eck Leemhui s T oohey& K r ot o, I nc. 2 2 2 2 W est G ran d v iew B o u leva rd E r i e, PA 16506 C ouns el forA ppel l ant M i chae l J
. K eat on ( A r gued) Ke a t o n & A s s o c i a t e s , P
. C. 1278 W es tN or t hw es tH i ghw ay Sui t e 903 Pal at i ne, I L 60067 C ouns el forA ppel l ee

___________

OPI NI ON O F THE COURT

___________ V A N A N T W E R PE N , C i r cui tJ udge I n 1997 and 1998, A ppel l ees W ei s - B uySer vi ces , I nc. ( “W ei s - B uy ”) and B r i gi ot t a’ s Pr oduce & G ar den C ent er

### 1. Our r e c i t at i onof

the fa ct s i s dr aw n fr om t he opi ni on of the D i s t r i ctC our t
. See W ei s - B uySer vs . v. Pagl i a, 307 F. Supp. 2d 682, 685- 87 ( W
. D
. Pa. 2004) 

### 3 ( “B r i gi ot t a’ s ”) ( col l ect i vel y“Sel l er s ” or“A ppel l ees ”) eac h so ld se v e ra l sh ip m e n ts o f f ru it t o A p p e llan t U n ited F ru it & Pr oduce Com pany( “U ni t ed Frui t ”) , butneverr ece i ved paym ent
. U ni t ed Frui tfi l ed forbankrupt cyon D ece m ber9,

1 1 9 9 7
. O n D ec em b er 2 9 , 1 9 9 9 , the B an k rup tcyco u rt author i zed a par t i al di s t r i but i on of U ni t ed Frui t ’ s as s et s t o t he Sel l er s . Seeki ng r ecoupmentof the bal ance of the money o w e d to th e m b yU n ited F ru it, S e llers th e n f iled su it o n A p ril 26, 2000, agai ns tA ugus tJ
. Scol i o, J r . , an off i cerand sh a re h o ld e r o f

U n ited F ru it, a lleg in g th a t h e h a d b re a c h e d h is fi duci arydut yundert he Per i s habl e A gr i cul tur al C om m odi t i es A ct of 1 9 3 0 , as a m en d ed , 7 U
. S
. C
. § § 4 9 9 a-4 9 9 s (“P A C A ”). I . F ACT UAL BA CKGROUND AND P ROCE DURAL

HI S TORY U n ite d F ru it w a s s ta rt e d b yS c o lio ’s f a th e r i n 1 9 1 4
. S coli o b ecam e i nv olved w i t h the com pan yi n 1 94 9 an d w as a p a rtn e r b y1 9 6 0 . In 1 9 6 5 , S c o lio ’s f a th e r d ied a n d S c o lio beca m e the s ol e pr opr i et orof the bus i nes s unt i l 1986, w hen he s ol d U ni t ed Frui tt o J ohn T ar ant i no, I r vi n R ovner , and L a rryA ltm a n . In 1 9 8 8 , the o w n e rs b ro u g h t in R a lp h P a g lia to m anage t he company

. Scol i o r emai ned an e m pl oy ee of U ni t ed Frui t , and w as r es pons i bl e forpay i ng bi l l s and c a l c u l a t i n g t h e e m p l o ye e s ’ p a y.

### 4 In 199 4, T arant i no and A l t m an sold t heirshares , lea v in g o w n e rsh ip o f

U n ited F ru it i n th e h a n d s o f P a g lia ( 50% ) , R over( 25% ) , and Scol i o ( 25% )

. A ccor di ng t o Scol i o, he pur chas ed s har es fort he bene fi tof Pagl i a w ho coul d not a f f o rd to b u ya ll th e sh a re s th a t h e w a n ted . A lth o u g h S c o lio cl ai m s t hathe eve ntual l yi nt ended t o s el l hi s i nt er es tt o Pagl i a, he neve rdi d s o, and thus Scol i o r emai ned a s har ehol deratt he tim e o f U n ite d F ru it’ s b a n k ru p tc y . N otonl yw as Scol i o a s har ehol derand empl oy ee of U n it ed F ruit , b u t com p an yp o li cyreq u ir ed h is an d P ag li a’s si gn ature for di sbursem ent of U nit ed F rui tcheck s. T o assi st h im in th is e n d e a v o r, S c o lio h a d a sig n a tu re sta m p c re a ted to use w hen i ssui ng U nit ed F rui t ’s check s. I n J une 1997, Pagl i a as ked Scol i o t o r et i r e, but encour aged hi m t o r emai n act i ve i n t he di r ect or s hi p of the company . Scol i o cea s ed w or ki ng forU ni t ed Frui t , but r et ai ned hi s s t ake i n t he company , hi s pos i t i on as offi cer , and hi s t i t l e as vi ce- pr es i dent

. Scol i o al s o r emai ned a s i gnat or yon U n ited F ru it’s b a n k a c c o u n ts a n d U n ited F ru it co n tin u e d to u s e S c o lio ’s s ig n a tu re s ta m p a f te r h is re tir e m e n t. Fur t herm or e, Scol i o act ed as a guar ant oron t r ans act i ons b e tw e e n U n ited F ru it an d D o llar B a n k L e a sin g a n d p o ss ib ly Fi r s tW es t ern B ank. Soon aft erScol i o r et i r ed, U ni t ed Frui tbegan doi ng bus i nes s w i t h W ei s - B uyand B r i gi ot t a’ s . Fr om J ul y9, 1997 t hr ough Sept ember23, 1997, W ei s - B uys entfi ve s hi pm ent s of pr oduce t o U ni t ed Frui t , w i t h paym enton eac h s hi pm entdue w i t hi n t en day s . O ct ober3, 1997 w as t he l at es tdat e on w hi ch

### 5 p a ym e n t w a s d u e f

o r a n yo f th e W e is -B u yin v o ic e s . B rig io tta’s p ro v id e d p ro d u c e in n u m e ro u s s h ip m e n ts to U ni t ed Frui tfr om A ugus t23, 1997 t hr ough February22, 1 9 9 8 . A g a in , p a ym e n ts w e re d u e w ith in ten d a y s o f th e d a te of ea ch i nvoi ce, and M ar ch 4, 1998 w as t he l at es tdat e on w h ic h p a ym e n t w a s d u e o n a n yo f th e B ri g io tta ’s in v o ic e s . N e ith e r S e ller r e c e iv e d a n yp a ym e n t f o r th e p ro d u c e it p ro v id e d

. U ni t ed Frui tfi l ed forbankrupt cyunderC hapt er11 of t he B ankrupt cyC ode on D ece m ber9, 1997. T he company ce ase d o p era ti o n s in M arc h 1 9 9 8
. S ell ers’ claim s w ere det erm i ned t o be qual i fi ed val i d PA C A cl ai m s byt he B ankrupt cyC our tand ea ch r ece i ved a pa r t i al di s t r i but i on f ro m U n ite d F ru it’ s re m a in in g a s s e ts
. S ee k ing the re st of

the m o n eyo w ed to the m , S ell ers fi l ed s ui tagai ns tScol i o i n t he U ni t ed St at es D i s t r i ctC our tfor the W estern D istri ct of

P en n sy lvan ia on A p ri l 26 , 2 0 0 0
. In th e ir c o m p lain t, S e llers a lleg e d th a t S c o lio b re a c h e d h is fi duci arydut yow ed t o t hem underPA C A
. A bench tr i al w as h e ld o n M a rc h 1 9 , 2 0 0 3 , an d th e D istric t C o u rt f o u n d S c o lio l i abl e and or der ed j udgm enti n favorof the Sel l er s . T he D is tr ic t C o u rt a ls o a w a rd e d in te re s t a n d a tto rn e y s ’ f e e s . Scol i o t i m el yappea l ed. I I . J URI S DI CTI ON AND S TANDA RD O F REVI EW 

### Th e Dis tric t Court

had j uris diction o ver this matte r“T h e sev eral di s t r i ct cour t s of t he U ni t ed States are 2 ves t ed w i t h j ur i s di ct i on s peci fi cal l yt o ent er t ai n ( i ) a cti ons by tru st b e n e f

icia rie s to e n f

o rc e p a ym e n t f

r o m th e tru st, a n d (ii) act i ons by t he S ecr et ary t o pr eventand r es t r ai n di s s i pat i on of the tru s t.” 7 U
. S
. C
. § 4 9 9 e(c )(5).


### 6 p ursu ant to 7 U .S .C . § 4 9 9 e(c)(5 )(i) an d2 8 U .S .C . § 1 3 6 7
. 2 

### Wehave juri sdic ti onov er t he fi nal deci s i on of the D i s t r i ct C our tpur s uantt o 28 U
. S. C
. § 1291. W e e x erc ise p lena ryrev iew o f th e D istri ct C o u rt ’s re f u s a l to d is m is s th e c a s e o n s ta tu te o f lim ita tio n s g ro u n d s . L ake v. A r nol d, 232 F. 3d 360, 365 ( 3d C i r . 2000)

. W e r evi ew t he aw ar d of att or ney s ’ fee s and i nt er es tforabus e of di s cr et i on. I n r e R i t e A i d C orp. Secur i t i es L i t i g. , 396 F. 3d 294, 299 ( 3d C i r . 2005) ; A nt hui s v. C ol tI ndus

. O per at i ng C o rp., 9 7 1 F
. 2 d 9 9 9 , 1 0 0 2 (3d C ir

. 1 9 9 2 ).

III . A N A L Y S IS Scol i o r ai s es t hr ee i s s ues on appea l

. Fi r s t , he ar gues t hat the D i stri ctC ou rterr ed w hen i tfai l ed to di sm i ss the case on s t atut e of l i m i t at i ons gr ounds

. Second, he cl ai m s t hatt he D i s t r i c tC o u r te r r e d i n f i n d i n g h i m p e r s o n a l l y l i a b l e . F i n a l l y, Scol i o chal l enges t he D i s t r i ctC our t ’ s aw ar d of att or ney s ’ fee s an d interest. B ec au se w e c o n clud e tha t Se ll ers’ claim s w ere no tt i m el y , w e do no tadd res s Sco l i o’s other ar gu m ents
.

### 7 A. P ACA T hi s C our thas had fe w oppor tuni t i es t o exami ne P A C A , 

### thu s w e b eg inb y

ex amin in g th e h isto ry

an dp urp o se of the s tatute . Con gres s e nact ed PA CAin 19 30 to dete r un f air b u sin ess p ractices an dp ro m o te f in an cial resp o n sib ility in the peris hable a gric ultura l goo ds m ar ket. Sunk is t Growers v. Fisher , 104 F.3d28 0, 28 2 (9th C ir . 199 7) (quo ting Farl ey and Ca l fe e , I nc . v. Uni t e d St at e s De p' t of Agri c . , 941 F. 2d 9 6 4 , 9 6 6 (9 thC ir. 1 9 9 1 )). “T h e A ct w as ‘d esig n edp rim arily fo r the protec ti onof

the produ ce rs of

peri shableagri cult

ural pr oduc t s - - m os t

of whom m us t e ntr us t the i r pr oduc t s t o a buye r or c ommi s s i on m e r c hant

who m ay be thous ands of miles aw ay , an dd ep en df o r th eir p ay

m ent up o nh is b u sin ess a c ume nan df

a i r d e a l i n g . ’ ” T o m L an g e C o . v . K o rnb lum & Co. , 81 F. 3d 280, 283 ( 2d Ci r . 1996) ( quot i ng H. R. Re p. No. 8 4 -1 1 9 6 (1 9 5 5 ), rep rin ted in 1956 U. S. C. C. A. N. 3701, 37 01 ). I n 1984 Congr e s s am e nde d PACA t o a l l ow for anons e gr e gat e d fl oat i ng tr

us t for the pr ot e c t i on of pr oduc e r s and g ro w ers. H .R . R ep . N o . 9 8 -5 4 3 (1 9 8 3 ), rep rin ted in 1984 U .S .C .C .A .N . 4 0 5 , 4 0 6 . C o n g ress reco g n izedth at th ese pr oduc e r s and gr owe r s t e nd t o be s m a l lbus i ne s s e s i n ahi gh cost /high ris k industr

y . I d. Th ey

general ly have capi ta l tie d up i n l and and m a c hi ne ry and the i r s urvi va lde pe nds on tim ely return s o nth e sale o f

th eir p ro du cts. Id . C o n g ress e xpl a i ne d: Many

c ommi s s i on m erch ant s , de a l e r s , or b ro k ers, inth e n o rm al co urse o f th eir b u sin ess

### 8 tr a n s a c t i ons , ope r at e on bank l oans s e c ur e d by the inventorie s, proceeds or a ss igned rec ei vables f ro m sale sof peri s ha

bl eagri cult

uralc o mm o d ities, gi vi ng the l e nde r

as e c ur e d pos i t i on i n the c a s e of in so lv en cy . Un d er p resentlaw , sellers o f f resh fr ui t s and ve ge t abl e s ar e uns e c ur e d c r e di t or s and r e c e i ve l i tt l e pr ot e c t i on i n any s ui t for r e c ove ry of dam a ge s whe r e abuyer ha s fa i l e d t o m ake p ay m ent as requ iredb y

th e co ntract. Thi s l e gi s l at i on woul d pr ovi de ar e m e dy by im pres sing a trust in favo r o f the unp ai d sel le r or s uppl i e r on the i nve nt ori e s of c omm odi t i e s and pr odu c t s de ri ve d the r e fr om and on thepr oc e e ds of s a l e of s uc h c omm odi t i e s and pr odu cts i n the hands of the c ommi s s i on m e r c hant , dealer or brok er in the sam e m anner that has bee n p rovided by ‘ tr us t ’ am e ndm e nt s t o the Pa c ke r s and S to ckyard s A ct ad o p ted in1 9 7 6 . T h e tru st prov is ions of

that ac t have o perate d v er y succ es sfully

without i m

po sing a r egulat ory b urd eno nth e in du stry
. The tr us t i m pr e s s i on by s e c t i on 5( c ) ( 2) of this ac t i s m ade up of a fir m ' s c omm od it

y re late d l i qui d a s s e t s , and i s a

nons e gr e gat e d ‘ fl oat i ng tru st’, wh ich p e rmits th e co mmin g lin g o f tru st as se ts . In the view o f the c ommitte e i t provides the p rote ction n ee ded b y the trust benefici arie s wi thout c r e at i ng an undue har ds hip t o any pe r s on.

### 9 Th e c ommitte e bel ie ves that the st at utory tr us t r e qui r e m e nt s wi l lnot

be a b urd ent o the l e nd ing i ns t i t

ut i ons . The y

wi l lbe known t o and c ons i de r e d by

pr os pe c t i ve l e nde r s i n e xt e ndi ng cr edit . The as surance the tr ust provisi ongives that r aw pr o duc t s wi l lbe pa i d for pr om pt l y and that the r e i s am oni t ori ng s y st e m pr ovi de d for unde r the a c t wi l lpr ot e c t

the i n te r e s t s of the bo rro we r , the m one y

l e nde r , and the fr

ui t and v eg etab l e in du stry . P ro m p t p ay m ents sh o u ld g en erate trad e co n f

id en ce an dn ewb u sin ess whi c h yi e l ds i nc r e a s e d c a s h and r e c e i vabl e s , the p rim e security

f acto rs to th e m o n ey

len d er. The s e am e ndm e nt s w oul d gi ve the in du stry an dd ep artm ent ef

f ectiv e n ewto o ls to o v erco m e th e p ay

m ent p ro b lem s. I d. at 406- 07. I ti s cl eart hatC ongr es s i nt ended t o cr eat e a sy ste m b yw h ich p ro d u c e rs a n d g ro w e rs w o u ld b e se c u re d in t hei rt r ans act i on w i t h buy er s , and i n r etur n t heyw er e expe ct ed to m a k e p ro m p t cla im s w h e n th e b u y e rs f a iled to p a y . W ith t hi s backgr ound, w e now tur n t o t he cl ai m s agai ns tScol i o.

B . In d ividu a l L iab il it y W e have notpr evi ous l ydeci ded w hetheran i ndi vi dual corpor at e off

i cercan be hel d l i abl e forbr eac hi ng hi s orher fi duci arydut yt o pr ot ectPA C A t rus tas s et s . W e have gui dance fr om ours i s t erci r cui t s , how ever , and s ever al have cons i der ed thi s i s s ue and ha ve conc l uded thati ndi vi dual

### 10 l i abi l i t ydoes exi s ti n cert ai n ci r cumst ance s . See Pat t er s on F ro z e n F o o d s v . C ro w n F o o d s In t’l, 3 0 7 F .3 d 6 6 6 , 6 6 9 (7 th C i r. 20 02 ) ( recogn i zi ng t hat PA C A perm i t s r ecov eryagainst b o th the co rpo rati o n an d it s co n tr o ll ing o ff icers.) ; G ol m an- H ay den C o. v. Fr es h Sour ce Pr oduce I nc. , 217 F. 3d 34 8, 35 1 (5t h C i r. 20 00 ) ( ho l ding t hat s hareho l ders, off i cers , ordi r ect or s w ho contr ol as s et s m aybe hel d l i abl e under PA C A
. ) ; Sunki s tG r ow er s , I nc. v. Fi s her , 104 F. 3d 280, 283 (9 th C ir . 1 9 9 7 ) ( s a m e ). In S u n k ist G ro w e rs, 1 0 4 F .3 d a t 2 8 3 , the N in th C irc u it exami ned the dec i s i ons of s ever al di s t r i ctcour t s and co n clud ed that “ind ividu al sh are h o lders, of fice rs, o r directo rs of a c orporat i on w ho are i n a p osi t i on t o co ntr ol PA C A t rust asset s, and w ho breach thei r fi du ci arydu t yt o p res erve tho se asse ts, m ayb e h eld p erso n all yli ab le un d er the A ct. ” In G ol m an- H ay den, t he Fi fth C i r cui texpr es s ed i t s agr eement w i t h Sunki s tG r ow er s and furt herexpl ai ned:

P A C A is a “ to u g h law ” . In a d d iti o n to p ro te c tin g c o n su m e rs, C o n g re ss e x p re ss ly d e sig n e d it t o p ro tec t th e p ro d u c e rs o f p e rish a b le agri cultural produ ct s, m ost of w ho m m ustentrust t hei rpr oduct s t o a buy erw ho m aybe thous ands of m i l es aw ay , and depe nd fort hei rpaym entupon hi s bus i nes s acumen and fai r deal i ng. A n i nves t or in a p e rish a b le c o m m o d iti e s c o rp o ra tio n “ sh o u ld k n o w a t th e b e g in n in g o f h is a ss o c iatio n w ith s uch a corpor at i on t hat he i s ‘ buy i ng i nt o ’ a corpor at i on w hi ch i s s t r i ct l yr egul at ed byt he f e d e ra l g o v e rn m e n t th ro u g h P A C A .”

### 11 2 1 7 F
. 3 d 3 4 8 , 3 5 1 (i n terna l ci tat ion s an d fo o tno tes o m itted). I ndi vi dual l i abi l i t yi n t he PA C A cont exti s notder i ved fr om t he s t atut or yl anguage , butfr om comm on l aw br eac h of tru st princip les. S u n k istG row ers, 10 4 F
. 3 d at 28 2 (“O rdin ary p ri n c ip le s o f

tru s t la w a p p ly to tru s ts c re a te d u n d e r P A C A
. . .

. ”). “U n d er the co m m o n law , the trustee o f a tru st i s u n d er a du t yt o the ben efi ci aryi n ad m i nis t eri ng t he trustt o ex erci se su c h c a re a n d sk ill a s a m a n o f o rd in a ryp ru d e n c e w o u ld e x e r c i s e i n d e a l i n g wi t h h i s o wn p r o p e r t y . ” S h e p a r d v . K. B. F ru it & V e g e ta b le , 8 6 8 F . S u p p . 7 0 3 , 7 0 6 (E .D . P a . 1 9 9 4 ). L iab ili tya risin g f

ro m th is d u tyis d istin c t f ro m th e liab ili ty t hatar i s es w hen the corpor at e vei l i s pi er ced:

A n in d iv id u a l w h o is in th e p o sitio n to contr ol t he [PA C A ] t rus t as s et s and w ho does not pr ese rve t hem for the bene fi ci ar i es has br eac hed a fi duci arydut y , and i s per s onall yl i abl e fort hat t or t i ous act
. T hi s l egal fr amew or k i s t o be di s t i ngui s hed fr om t he pi er ci ng t he vei l doctr i ne, w here t he co rporat e form i s di sr egarded becau se t he i ndi vi dual has ei t hercomm i t t ed a frau d , or beca us e the corpor at i on i s a “s hel l ” bei ng us ed by t h e i n d i v i d u a l s h a r e h o l d e r s t o a d v a n c e t h e i ro wn p u re ly p e rs o n a l r a th e r t h a n c o rp o ra te e n d s .

M or r i s O kun, I nc. v. H arr yZ i m m erm an, I nc. , 814 F. Supp. 3 4 6 , 3 4 8 (S

. D
. N
. Y
. 1 9 9 3 ).

### 12 W e jo in th o se c irc u its th a t h a v e a lre a d ya d d re ss e d th is iss u e a n d h o ld th a t in d iv id u a l o f f ice rs a n d sh a re h o ld e rs, in cert ai n ci r cumst ance s , m aybe hel d i ndi vi dual l yl i abl e for br eac hi ng t hei rfi duci arydut i es underPA C A
. See Pat t er s on Fr ozen Foods , 307 F. 3d at669; G ol m an- H ay den C o. , 217 F. 3d at351; H i l l erC r anberr yPr ods

. v. K opl ovs ky , 165 F. 3d 1 , 9 (1 s t C ir . 1 9 9 9 ); S u n k is t G ro w e rs , In c ., 1 0 4 F .3 d a t 2 8 3
. T hats ai d, befor e w e det erm i ne w hetherScol i o hi m s el f w as p rop erlyh eld liable h ere , w e m u st de term ine w h ethe r S ell ers br oughtt hi s act i on w i t hi n t he appl i cabl e s t atut e of l i m i t at i ons per i od. C . St at ut e of Li m i t at i ons T h e D istri ct C o u rtd ec li n ed to d eterm ine w h ethe r th ere w as a l i m i t at i on s peri od app l i cable t o the Sell ers ’ cl ai m s, hol di ng i ns t ead thatt he ac t i on ei t herdi d notacc rue, orw as toll ed u n ti l D ec em b er 2 9 , 1 9 9 9 , the d ate the B an k rup tcyco u rt a u th o ri z e d a p a rt ia l d is tr ib u tio n f ro m U n ite d F ru it’ s a s s e ts
. We b e l i e v e a mo r e t h o r o u g h a n a l y s i s i s n e c e s s a r y , a n d we b e g in b yid e n tif

y in g th e a p p ro p ri a te s ta tu te o f lim ita tio n s . “D et erm i ni ng t he s t atut e of l i m i t at i ons per i od for act i vi t ygoverned bya fe der al s t atut e i s a ques t i on of fe der al la w .” K in g V is io n P a y -P e r- V ie w , C o rp . v . 8 9 8 B e lm o n t, I n c ., 366 F. 3d 217, 220 ( 3d C i r . 2004)

. H ow ever , w hen a f eder al law p ro v id e s th e b a sis f o r th e c a u se o f

a c tio n , b u t f

a ils to su p p lya sta tu te o f

lim itatio n s, w e m u st b o rro w a n a p p ro p ria te s t atut e of l i m i t at i ons fr om t he l aw of the forum s t at e. I d. ; s ee a ls o N o rt h S ta r S te e l C o . v . T h o m a s , 5 1 5 U .S . 2 9 , 3 4 (1 9 9 5 ). W e al s o i ncorpor at e r el evants t at e t ol l i ng rul es . H ar di n v.T hi s s ect i on pr es cr i bes a tw o -y ears t atut e of l i m i t at i ons 3 fo r: A nyot h er a ct i on orpr ocee di ng t o r ecove rdamages fori nj ur yt o per s on orpr oper t yw hi ch i s founded on negl i gent , i nt ent i onal , orot herw i s e t or t i ous conduct o r a n yo th e r a c tio n o r p ro c e e d in g so u n d in g in t r es pas s , i ncl udi ng dece i tor fr aud, exce pt an ac t i on or p ro c e e d in g su b

jec t to a n o th e r lim itatio n sp e c if ied in this sub ch ap ter. 4 2 P a. C
. S
. A
. § 5 5 2 4 (7).


### 13 St r aub, 490 U
. S. 536, 539 ( 1989) ; L ake v. A r nol d, 232 F. 3d 3 6 0 , 3 6 8 (3 d C ir . 2 0 0 0 ). B eca us e PA C A does nots etfor t h a l i m i t at i ons per i od f o r b re a c h o f

f id u c iar yd u tyc laim s, w e lo o k to P e n n sy lv a n ia law , w h ich p ro v id e s th a t su c h c laim s m u st b e b ro u g h t w ith in tw o y e a rs o f

th e d a te th e c la im a c c ru e s . 4 2 P a . C .S .A . § 5524( 7) ; s ee a l s o I n r e M us hr oom T r ans p. C o. , 382 F. 3d 325,

3 336 ( 3d C i r . 2004) ( r ecogni zi ng a tw o- y ears t atut e of l i m i t at i ons forbr eac h of fi duci arydut ycl ai m s ) ; M ai l l i e v. G r eat erD el

. V al l eyH eal t h C ar e, I nc. , 628 A
. 2d 528, 532 ( Pa. C om m w . C t
. 1993) ( acknow l edgi ng t hat42 Pa. C
. S. § 5524( 7) i s t he appl i cabl e s t atut e forpr ocee di ngs bas ed upon br eac h of a fi duci arydut y )

. T her efor e, Sel l er s cl ai m s w i l l onl ybe tim e lyif th e S e llers b ro u g h t th e m w ith in tw o y e a rs o f a c c ru a l, ori f the s t atut e of l i m i t at i ons w as t ol l ed.

### 14 1 . A ccr ual G ener al l y , t he s t atut e of l i m i t at i ons begi ns t o run on a br eac h of fi duci arydut ycl ai m w hen the trus t ee ope nl yand unequi vocal l yvi ol at es hi s dut i es . Phi l i ppi v. Phi l i ppe, 115 U .S . 1 5 1 , 1 5 7 (1 8 8 5 ) (“ [ T ]h e sta tu te o f lim itatio n s w ill b e g in t o run fr om t he t i m e s uch r epudi at i on and cl ai m came t o t he know l edge of

t he bene fi ci ary . ”) ; U ni t ed St at es v. R os e, 346 F. 2d 985, 989- 990 ( 3d C i r . 1965) ( “The st atut e of l i m i t at i ons begi ns t o run agai ns tt he trus tbenef i ci aryw i t h r es pectt o a s ui tagai ns tt he expr es s t rus t ee, i f atal l , w hen he know s t he t ru s th a s b e e n r e p u d i a t e d o rr e a s o n a b l ys h o u l d h a v e k n o wn i t
. ” )

. Ap p l y i n g t h i s r e a s o n i n g , S c o l i o a r g u e s t h a tt h e c l a i ms agai ns thi m acc rued on the dat e thatt he Sel l er ’ s i nvoi ces beca m e over due. T he D i s t r i ctC our tr ej ect ed thi s r at i onal e, and conc l uded thatbeca us e of the cont i nui ng natur e of the PA C A t rus t , U ni t ed Frui t ’ s fai l ur e t o payt he Sel l er s ’ i nvoi ces a m o u n te d to a “ c o n tin u in g v io la tio n .” W e have pr evi ous l yaddr es s ed the cont our s of the cont i nui ng vi ol at i ons doctr i ne i n C ow el l v. Pal m erT p. , 263 F. 3d 286, 293 ( 3d C i r . 2001)

. I n C ow el l , pl ai nt i ffs al l eged t hata t ow ns hi p vi ol at ed thei rFour t eenth A m endmentdue pr oces s r i ght s byi m pos i ng t w o l i ens on t hei rpr oper t i es . I d. at 291. A l t hough t he s t atut e of l i m i t at i ons had run s i nce the i ni t i al i m pos i t i on of the l i ens , t he pl ai nt i ffs ar gued thatt he l i ens amount ed t o a cont i nui ng vi ol at i on unt i l t heyw er e l i ft ed orexpunged. I d. at293. W e di s agr eed, expl ai ni ng t hat“[t ] he focus of the cont i nui ng vi ol at i ons doctr i ne i s on aff i r m at i ve a c ts o f th e d e f e n d a n ts.” Id . A d o p tin g th e v iew o f th e F o u rth C i r cui t , w e s t at ed that“‘ [a] cont i nui ng vi ol at i on i s occa s i onedW e e m p h a s iz e th a t th e s ta tu te o f li m it a ti o n s a p p lies to 4 a c t i o n s a g a i n s tt h e t ru s t e e f o rb r e a c h o f

f i d u c i a r y d u t y. 

### 15 bycont i nual unl aw ful act s , notcont i nual i l l eff ect s fr om an o ri g inal v iolati o n . ’” Id

. (qu o ti n g O ce an A cre s L td. v. D are C o u n ty B d . o f

H e a lth , 7 0 7 F .2 d 1 0 3 , 1 0 6 (4 th C ir .1 9 8 3 ))

. W e f i n d t h a tr e a s o n i n g e q u a l l ya p p l i c a b l e t o c l a i ms ar i s i ng fr om a trus tr el at i ons hi p and conc l ude thatonce U ni t ed Frui tand i t s offi cer s fai l ed t o paySel l er s fort he good re c e iv e d , S e llers w e re o n n o tice th a t th e tru ste e s w e re in br eac h of thei rfi duci arydut i es . N orar e w e per s uaded that th e u n iq u e n a tu re o f

th e P A C A tru s t c h a n g e s o u r a n a lysis

. W e re c o g n ize th a t th e tru st c re a ted b yP A C A e x ists u n til a s el l eri s pai d, 7 U
. S. C
. § 499e( c) ( 2) , and “[ p] ar t i ci pant s w ho p re se rv e th e ir rig h ts to b e n e f its . . . rem a in b e n e f

icia rie s u n til t heyar e pai d i n ful l , ” 7 C
. F. R
. 46. 46( c) ( 2)

. H ow ever , w hen S e llers a re n o t su in g to e n f o rc e th e tru st o b lig a tio n s o r to p re se rv e th e ir sh a re s o f th e tru st r es , buti ns t ead a r e s ui ng t he tru ste e in to rt f

o r d a m a g e s re su lti n g f

ro m a b re a c h o f

h is fi du ci arydu t i es, w e beli eve thatt he st atute of l i m i t at i on s m ust accrue from t he ti m e t hat the trust ee op enlyrepudiat es tho se du t i es. 4 W e l i k e wi s e r e

j e c tt h e c o n t e n t i o n t h a tt h e c l a i ms a g a in st S c o lio d id n o t ac c ru e u n til S e llers e x h a u ste d th e ir rem ed ies as a g ains t U n it ed F ruit

. U n d er the D istri ct C o u rt ’s t h e o r y , t h e s t a tu t e o f

l i mi t a t i o n s f

o rb r i n g i n g P ACA c l a i ms agai ns tScol i o di d notacc rue unt i l D ece m ber29, 1999, beca us e i tw as onl yt hen thatt he Sel l er s “w er e on not i ce that

### 16 U ni t ed Frui t s ’ s as s et s w er e i ns uffi ci entt o s at i s fyl i abi l i t y . ” W ei s - B uy , 307 F. Supp. 2d at691. H ow ever , Sel l er s w er e on not i ce thatt he U ni t ed Frui t ’ s as s et s m aynotbe s uffi ci ent w h en U n it ed F ruitfirstfa il ed to p ayit s b il ls, an d at th e v ery l eas t , t heyw er e on not i ce thatU ni t ed Frui tm i ghtcome up s h o rt w h e n it f

ile d f o r b a n k ru p tc yp ro te c tio n in 1 9 9 7
. F u rth e rm o re , b e c a u se S e llers a re su in g S c o lio in h is t rus t ee c apac i t y , i ti s i r r el evantt hatt heydi d notknow w hether U n it ed F ruitw o u ld b e a b le t o sati sfyS ell ers c lai m s. In D o n sc o , In c . v . C a sp e r C o rp ., w e e x p lain e d th a t:

[ a ] c o rp o ra te o f

f ice r is in d iv id u a llyliab le forthe tor t s he per s onal l ycomm i t s and ca nnot s hi el d hi m s el f behi nd a corpor at i on w hen he i s an a c tu a l p a rticip a n t in th e to rt. .
. . H is liab ili tyis in no w aydepende n t o n a fi ndi ng t hat[the corpor at i on] i s i nadequa t el y capi t al i zed, t hatt he co rpo rati o n is a m ere alt er e g o o f [ the o ff icer], th a t th e c o rp o ra te f

o rm is b e in g u se d to p e rp e tra te a fr au d , ort hatcorpor at e form al i t i es have not b e e n p ro p e rly c o m p lied w ith

. . . . T h e o n ly c r u c ia l p re d ica te to [ th e o f f ice r]’s liab ili tyis h is p a rt ic ip a tio n in th e w ro n g f u l a c ts
.

587 F. 2d 602, 606 ( 3d C i r . 1978) 

### . A s S co lio ’s liab ility is whol l y s e par at e fr om

the c or por at i on’ s l i abi l i ty , the r e i s no r e a s on t o r e qui r e Se l l e r s t o fi r s t bri ng c l a i m s a ga i ns t

theA dm i t t edl y , s om e court s have sugge s t ed thati ndi vi dual 5 o f f i c e rl i a b i l i t y i s d e t e r mi n a b l e o n l y a f t e r t h e p l a i n t i f

f h a s s h o wn t hatt he corpor at e as s et s ar e i ns uffi ci ent t o s at i s fyt he obl i gat i on. F o r in sta n c e , in G o lm a n -H a y d e n C o ., th e F if th C irc u it expl ai ned: PA C A l i abi l i t yat t ache s fi r s tt o t he l i ce ns ed c o m m iss io n m e rc h a n t, d e a ler , o r b ro k e r o f p e rish a b le agr i cul tur al comm odi t i es . I f, how ever , t he ass et s of t he l i cens ed comm i s s i on m er chant , deal er , orbr oker ar e i ns uffi ci entt o s at i s fyt he PA C A l i abi l i t y , t hen ot her s m ay b e hel d s econda r i l yl i abl e i f theyhad so m e ro le in c a u sin g th e c o rp o ra te tru ste e to c o m m it th e b re a c h o f

tru st. 2 1 7 F .3 d a t 3 5 1 (f

o o tn o tes o m itt e d .). W e d o n o t re a d th is in ter p re tatio n o f

P A C A liab ili tyto m e a n th a t th e in ju re d p a rty c a n n o t s e e k re lief

f ro m th e in d iv id u a l w h o is s e c o n d a rilyliab le u n til h e h a s a ju d g m e n t f ro m th e c o rp o ra tio n th a t is p rim a rily l i abl e, r athert hatt he s el l erm ayonl y be on not i ce of t he br eac h of dut y aft er fi r s t s ui ng t he corpor at i on and di s cover i ng t hatt he a s s e ts w e re n o t p re s e rv e d

. 

### 17 co rp o ratio nb ef

o re p ursu in g claim s ag ain st S co lio

. S ell ers 5 c o u ld h a v e b ro u g h t su it sim u ltan e o u sly , as th e p a rties d id in G o lm a n -H a y d e n C o ., 2 1 7 F .3 d a t 3 4 9 , o r th e ysim p lyc o u ld hav e sued S coli o d i rect l yfor breachi ng his du t i es. 2. Tol ling I n t he al t ernat i ve, t he D i s t r i ctC our tr eas oned thati f the cl ai m s acc rued w hen the i nvoi ces beca m e over due, “then the

### 18 li m it ati o n s p eriod fo r bring ing P A C A claim s ag ains t M r. Scol i o w oul d have be en t ol l ed w hi l e Pl ai nt i ffs fi r s ts ought r el i ef f r om U ni t ed Frui t
. U ndert hi s s cena r i o, t he t ol l i ng per i od w oul d have e nded on D ece m ber29, 1999, w hen Pl ai nt i ffs l earned thatU ni t ed Frui t ’ s as s et s w er e i ns uffi ci ent
. ” W ei s - B uy , 307 F. Supp. 2d at691. A gai n, w e s ee no j ust i fi cat i on for t oll i ng t he st atute of l i m i t at i on s. “Equi t abl e t ol l i ng funct i ons t o s t op t he s t atut e of l i m i t at i ons fr om runni ng w her e the cl ai m ’ s acc rual dat e has al r eadypas s ed. ” O s hi verv. L evi n, Fi s hbei n, Sedr an & B e r m a n , 3 8 F
. 3 d 1 3 8 0 , 1 3 8 7 ( 3 d C i r . 1 9 9 4 )

. G e n e r a l l y, “equi t abl e t ol l i ng m aybe appr opr i at e: ( 1) w her e the def endant h as a cti v elym isl ed the p lai n ti ff resp ec ti n g the p lai n ti ff ’s ca u se o f a cti o n ; ( 2 ) w h ere the p lai n ti ff in so m e e x tr ao rdin ary w ayhas been pr event ed fr om as s er t i ng hi s orherr i ght s ; or( 3) w h e re th e p lain tiff

h a s tim e lya ss e rte d h is o r h e r rig h ts m i s t akenl yi n t he w r ong forum . ” I d. N one of thes e s i tuat i ons i s pr es enther e, and A ppel l ees have of fer ed no j us t i fi cat i on for t oll i ng t he st atute of l i m i t at i on s. A s expl ai ned i nfr a , S e llers w e re n o t re q u ire d to f ile s ui tagai ns tU ni t ed Frui tbefor e pur s ui ng an i ndepende nt act i on agai ns tScol i o. W hen Sel l er s w er e nott i m el ypai d, th e yw e re o n n o tice th a t U n ited F ru it, a n d th e re sp o n sib le par t i es i ns i de U ni t ed Frui t , had br eac hed thei rt rus t ee o b lig a tio n s. A t th is p o in t th e S e llers sh o u ld h a v e a ttem p ted to di s coverw hypaym entw as notfor t hcomi ng and w ho w as r es pons i bl e. I ns t ead, t he Sel l er s s aton t hei rhands , and eve n a f ter U n ited F ru it file d f

o r B a n k ru p tcy pr o tec tio n in D ece m ber1997, t heydi d notfi l e s ui t
. Sel l er s w er e undernoW h il e w e h av e ind icated o u r ag ree m en t th a t th e re a re 6 ci rcum st ances u nd er w hich officer s m aybe h el d indi vid u a lly l i a b l e f o rb r e a c h i n g t h e i rf

i d u c i a r y d u t i e s a r i s i n g f r o m a P ACA t rus t , w e expr es s no opi ni on aboutt he corr ectnes s of the D i s t r i ct C o u rt’s c o n c lu s io n th a t S c o lio ’s a c tiv iti e s w e re e n o u g h to e s ta b lis h in d iv id u a l lia b ility u n d e r t h e f a c ts in th is c a s e . 

### 19 m i s appr ehens i on t hatt hei rm oneyw as s afe , norcoul d t hey a ss u m e th a t n o o n e in sid e U n ited F ru it w a s lia b le f o r th e ir lo s s . C o n s e q u e n tly, th e s ta tu te o f lim ita tio n s w a s n o t to lle d

. I V. CO NC L US I ON W ei s - B uy ’ s l as ti nvoi ce c ame due on O ct ober3, 1997, a n d B ri g io tta ’s la s t in v o ic e c a m e d u e o n M a rc h 4 , 1 9 9 8
. N e ith e r se ller f

iled su it u n til A p ril 2 6 , 2 0 0 0 , a d a te p lain ly l at ert han tw o y ear s aft eranyof thei ri nvoi ces had come due and more t han tw o y ear s aft erU ni t ed Frui tor i gi nal l yfi l ed for bankrupt cy . B eca us e w e conc l ude thatt he s t atut e of li m it ati o n s h ad run o n thes e c lai m s b ef o re the ac ti o n s w ere fi l ed, w e nee d notdet erm i ne Scol i o’ s i ndi vi dual l i abi l i t y , nor det erm i ne w hethert he aw ar d of i nt er es torat t or ney s ’ fee s w ere ap p rop ri ate. Instea d , w e re m an d to the D istri ct C o u rt 6 f o r e n tryo f

ju d g m e n t in f

a v o r o f th e A p p e llan t.