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. e du/thir dc ir c uit_1998/239Filed October 6, 1998

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 98-3169

IDAHOAN FRESH, A Division of Clement Enterprises

v.

ADVANTAGE PRODUCE, INC.; WILLIAM H. CARSON;
WILLIAM H. CARSON, III

C.H. Robinson Company (Intervenor in D.C.), Appellant

On Appeal from the United States District Court for the Western District of Pennsylvania (D.C. Civ. No. 97-00237)

Submitted under Third Circuit LAR 34.1(a) October 5, 1998

BEFORE: GREENBERG and MCKEE, Circuit Judges, and LUDWIG, District Judge.*

(Filed October 6, 1998)

___________________________________________________ ______________

*Honorable Edmund V. Ludwig, Senior United States D istrict Judge, for the Eastern District of Pennsylvania, sitting by de signation.Jennifer Sorce

Mark A. Amendola Martyn & Associates 820 Superior Avenue, N.W.

10th Floor Cleveland, OH 44113

Attorneys for Appellant

Joseph P. McCafferty McCafferty & Williams

2000 East 9th Street

Suite 700 Cleveland, OH 44115

Attorneys for Appellees

OPINION OF THE COURT

GREENBERG, Circuit Judge.

I. INTRODUCTION

C.H. Robinson Company ("CHR") appeals from the dist rict court's order of November 7, 1997, denying its moti on to exclude certain suppliers of perishable agricultura l commodities ("produce") from the universe of unpaid suppliers entitled to recover benefits under the st atutory trust created by the Perishable Agricultural Commod ities Act, 7 U.S.C. S 499e(c). CHR intervened in this act ion filed by Idahoan Fresh ("Idahoan") against Advantage Prod uce, Inc. ("Advantage") to enforce the trust and challen ged Idahoan's proposed schedule of qualified claimants under

the trust.

The district court had jurisdiction pursuant to 7 U .S.C. S 499e(c)(5). We have jurisdiction over the distric t court's interlocutory order denying the exclusion of Idahoa n and Alsum Produce, Inc. ("Alsum") as qualified benefici aries pursuant to 28 U.S.C. S 1292(b) as the district cou rt certified the order of November 7, 1997, for immedi ate

2appeal and we granted CHR's Petition for Permission to

Appeal.

II. FACTUAL AND PROCEDURAL HISTORY

A. Statutory and Regulatory Framework of Perishabl e Agricultural Commodities Act of 1930

We begin with a brief overview of the Perishable Agricultural Commodities Act ("PACA"). In 1930, Con gress enacted PACA to promote fair trading practices in t he produce industry. See 7 U.S.C. S 499a et seq.; Cons umers Produce Co. v. Volante Wholesale Produce, Inc., 16 F.3d 1374, 1377 (3d Cir. 1993). In particular, Congress intended PACA to protect small farmers and growers who were vulnerable to the practices of financially irrespon sible buyers.1 See Hull Co. v. Hauser's Foods, Inc., 924 F.2d 777, 780 (8th Cir. 1991). Under PACA, it is unlawful for buyers of produce, inter alia, to fail to make prompt paym ent for a shipment of produce. See 7 U.S.C. S 499b(4). A buye r's failure to tender prompt payment triggers civil lia bility and the possible revocation of the buyer's PACA license required by 7 U.S.C. S 499c. See 7 U.S.C. SS 499e(a), 449h(a ). Prompt payment is defined by regulations which appl y unless the parties agree otherwise in writing prior to the transaction. See 7 C.F.R. S 46.2(aa).

In 1984, Congress amended PACA to protect further certain unpaid suppliers2 of produce by including a statutory trust provision which provides an additio nal remedy for sellers against a buyer failing to make prompt payment. See P.L. 98-273; H.R. Rep. No. 98-543, at 2 (1983), reprinted in 1984 U.S.C.C.A.N. 405, 406. Pr ior to this amendment, unpaid produce suppliers were unsec ured creditors vulnerable to the buyers' practice of gra nting

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1. The statute and regulations speak in terms of "c ommission merchant, dealer and broker." See 7 U.S.C. S 499a et seq. For ease of reference, we refer to these participants as "buyers."

2. The statute and regulations use the terms "suppl ier, seller, or agent." This opinion refers to the these participants inter changeably as suppliers

or sellers.

3other creditors a security interest in their invent ory and

accounts receivable. See Tom Lange Co. v. Lombardo Fruit & Produce Co. (In re Lombardo Fruit & Produce Co.), 12 F.3d 806, 808-09 (8th Cir. 1994) (citing H.R. Rep. No. 9 8-543, at 3 (1983), reprinted in 1984 U.S.C.C.A.N. 405, 407). Under the 1984 provision, a buyer's produce, products der ived from that produce, and the proceeds gained therefro m are held in a non-segregated, floating trust for the be nefit of unpaid suppliers who have met the applicable statut ory requirements. See 7 U.S.C. S 499e(c); 7 C.F.R. S 46 .46(b). Thus, the provision gives certain unpaid sellers of produce an interest in the PACA trust assets superior to th at of a perfected, secured creditor. See Consumers Produce, 16 F.3d at 1379. In a 1995 amendment to PACA, which we discuss below, Congress made procedural changes in the trust fund provisions. See P.L. 104-48,S 6, 7 U.S.C

. S 499e(c)(4).

To enforce its rights under the statutory trust, a qualified beneficiary may file a claim in the district court immediately upon the buyer's failure to tender prom pt payment. See 7 U.S.C. S 499e(c)(5). A qualified unp aid seller remains entitled to benefits until paid in full. Se e 7 C.F.R. S 46.46(c)(1). A seller eligible for the statutory trust benefits must preserve its rights by satisfying a notice req uirement by either sending notice to the buyer within 30 day s of a payment default or, as provided in the 1995 amendme nt to PACA, including a statutory statement referencing t he trust on its invoices. See 7 U.S.C. S 499e(c)(3), (4); 7 C.F.R. S 46.46(c), (f). While a seller may agree in writin g to a payment period other than that defined in the regul ations as prompt, an unpaid seller loses its right to part icipate in the trust if it agrees in writing to extend the pay ment period beyond 30 days. See 7 C.F.R. S 46.46(e)(2). The iss ue presented by this appeal is whether a seller also f orfeits its right to participate in the PACA trust if it fails to reduce to writing an agreement to extend the payment term.

B. Current Dispute

Over a period of several months, Advantage purchase d produce from Idahoan, CHR, Alsum, O.P. Murphy & Son s ("Murphy"), and Powerhouse Produce, L.L.C.

4("Powerhouse"). The details of these transactions a re not in

dispute.3

In a series of transactions from August 7, 1996, th rough December 28, 1996, Idahoan sold a total of $116,684 .26 worth of produce on credit to Advantage. See app. 9 .4 All of Idahoan's invoices to Advantage contain the languag e required under 7 U.S.C. S 499e(c)(4), the 1995 PACA amendment, to notify the buyer that the seller inte nds to preserve its trust claim against the buyer. Idahoan and Advantage did not enter into a written agreement ex tending the payment term which, in this case, in the absenc e of a written agreement altering the term, is ten days. S ee 7 C.F.R. S 46.2(aa)(5). However, William Carson, pres ident of Advantage, alleges that they had an oral agreement extending the payment term to 20 days. Additionally , 28 of the 30 outstanding invoices issued by Idahoan to Advantage stated "PAYMENT TERMS: Net 20 days." The remaining two invoices contain no payment term.

Alsum sold, on credit, a total of $10,708.00 worth of produce to Advantage in two transactions on October 9 and 24, 1996. Alsum and Advantage did not enter into a written agreement extending the payment term. As with Idaho an, Carson claims that Alsum and Advantage had an oral agreement to extend the term, though in Alsum's cas e the extended term was 15 rather than 20 days. Notwithstanding the oral agreement, both of Alsum's unpaid invoices state "PAYMENT TERMS: NET 10." Both invoices also contain the statutory language as pro vided in the 1995 PACA amendment notifying Advantage that Al sum intended to preserve its PACA trust claim.

CHR sold $36,004.80 worth of produce to Advantage pursuant to their written agreement to extend the p ayment term to 30 days. CHR's invoices for these sales inc luded a

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3. Because there seems to be no dispute that Murphy and Powerhouse are qualified PACA trust beneficiaries, we need not be concerned with the details of their transactions with Advantage. O ur discussion of the facts therefore is limited to Advantage's transacti ons with Alsum, Idahoan, and CHR.

4. Citations to the appendix refer to the tab numbe r because the pages of the Appendix are not numbered continuously.

5payment term of 30 days as well as the statutory la nguage

required to preserve its interest in the PACA trust . See app.

5.

Advantage failed to pay Idahoan, Alsum, and CHR the amounts due on these outstanding invoices. On Febru ary 10, 1997, Idahoan filed a complaint against Advanta ge and its officers, William Carson and William Carson III , for damages and injunctive relief alleging violations o f PACA based upon Advantage's failure to pay its invoices and breach of the statutory trust. The district court i ssued a temporary restraining order on February 11, 1997, enjoining the defendants from further dissipating t he constructive trust imposed by 7 U.S.C. S 499e(c). O n February 20, 1997, Idahoan and Advantage filed a Stipulated Order for Preliminary Injunction which s tated a procedure for identifying all of Advantage's qualif ied and unpaid PACA trust creditors.

CHR intervened as a party plaintiff in the action o n May 27, 1997. See app. 5. On June 2, 1997, Idahoan and Advantage filed a Joint Status Report and Motion fo r an Order for the Distribution of PACA Trust Proceeds ( "Joint Motion") identifying the following universe of qual ified PACA

trust creditors:

Idahoan $ 116,684.26 CHR 36,004.80 Murphy 4,300.00 Alsum 10,708.00 Powerhouse 4,868.00

____________ $ 172,565.06

App. 6.

Although CHR was a party to the action at the time Advantage and Idahoan filed the Joint Motion, they did not consult CHR or invite CHR to join in the Joint Moti on. On June 5, 1997, CHR filed an objection to the Joint M otion and served discovery requests upon Advantage seekin g documents which established the alleged qualified s tatus of the creditors set forth in the Joint Motion. See ap p. 7. CHR

then filed a Motion to Exclude Alsum and Idahoan fr om the universe of qualified PACA trust creditors on the g rounds

6that they failed to comply with the statute and reg ulations.

In particular, CHR argued that Idahoan and Alsum or ally agreed to extend the payment term beyond the ten-da y period established in the regulations, and they wer e, therefore, not qualified PACA trust creditors becau se the agreements were not reduced to writing prior to the transaction. See app. 9.

At the time of briefing on this appeal, the total a mount of available PACA trust funds was approximately $45,00 0.00. See Br. for Appellant at 5. If Idahoan and Alsum ar e excluded from the universe of qualified trust benef iciaries, the total qualified and unpaid trust claims would b e $45,172.80. Thus, their exclusion would result in p ayment virtually in full, rather than a small pro-rata por tion, to the qualified PACA trust creditors, CHR, Powerhouse, an d Murphy.

On November 7, 1997, the district court issued an o rder denying CHR's Motion to Exclude Idahoan and Alsum c iting "the reasons stated of record at the argument of th e motion." App. 12. Following argument on CHR's motio n to exclude, the district court stated that an oral agr eement to extend a payment term is totally ineffective and, p rovided that the supplier complies with the notice provisio ns of the statute, it is a qualified PACA trust beneficiary. See Br. for Appellee, Attach. at 11-12.5 Thereafter, CHR filed a motion for reconsideration or, in the alternative, certifi cation pursuant to 28 U.S.C. S 1292(b). On December 1, 199 7, the district court certified the November 7, 1997 order , for immediate appeal, the controlling question of law b eing whether Idahoan and Alsum "perfected their trust cl aims under PACA." On February 19, 1998, we granted CHR's Petition for Permission to Appeal. See app. 1, 14.

III. DISCUSSION

CHR contends that the district court erred in findi ng that Idahoan and Alsum were qualified to receive statuto ry benefits under PACA. According to CHR, the plain

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5. A partial transcript of the argument is included as an Attachment to the Brief for the Appellee, Idahoan.

7language, legislative history, and purposes of the statute

and regulations lead to the conclusion that a selle r forfeits its right to PACA trust benefits if it orally agree s to extend the payment term beyond that established in the regulations as prompt, in this case, ten days.

There is no dispute that Idahoan and Alsum did not reduce to writing their agreements to extend the pa yment period in their transactions with Advantage. There is also no dispute that Idahoan's and Alsum's invoices prop erly notified Advantage of their intent to preserve thei r right to statutory benefits under 7 U.S.C. S 499e(c)(4). Thu s, as we have indicated, this appeal raises the following is sue regarding the proper interpretation of PACA: whethe r an agreement to extend the payment term beyond the tim e defined by the regulations as prompt must be in wri ting in order for the seller to qualify for the benefits of the PACA trust. Because this appeal concerns solely the lega l issue of the proper interpretation of statutes and regulatio ns, we exercise de novo review over the district court's o rder. See Shell Oil Co. v. Babbit, 125 F.3d 172, 175 (3d Cir. 1997).

We initially point out that certain general precept s guide us on this appeal. The role of the courts in interp reting a statute is to give effect to Congress's intent. See Negonsott v. Samuels, 507 U.S. 99, 104, 113 S.Ct. 1119, 1122- 23 (1993). Because it is presumed that Congress expres ses its intent through the ordinary meaning of its language , every exercise of statutory interpretation begins with pl ain language of the statute itself. See Santa Fe Med. S ervs., Inc. v. Segal (In re Segal), 57 F.3d 342, 345 (3d Cir. 1 995) (citing Mansell v. Mansell, 490 U.S. 581, 588, 109 S.Ct. 2023, 2028 (1989)); United States v. Pelullo, 14 F. 3d 881, 903 (3d Cir. 1994). Where the statutory language is plain and unambiguous, further inquiry is not required, e xcept in the extraordinary case where a literal reading of t he language produces an absurd result. See In re Segal , 57 F.3d at 346. Moreover, a court may depart from the plain language of a statute only by an extraordinary show ing of a contrary congressional intent in the legislative history. See Garcia v. United States, 469 U.S. 70, 75, 105 S .Ct. 479, 482 (1984).

8In interpreting a statute, courts should endeavor t o give

meaning to every word which Congress used and there fore should avoid an interpretation which renders an ele ment of the language superfluous. See United States v. Stat e of Alaska, ___ U.S. ___, 117 S.Ct. 1888, 1918 (1997); United

Food & Commercial Workers Union Local 751 v. Brown Group, Inc., 517 U.S. 544, 550, 116 S.Ct. 1529, 153 3 (1996) (reading which gives effect to all of a stat ute's provisions prevails over one which disregards a pro vision as legislative oversight); First Bank Nat'l Ass'n v. F DIC, 79 F.3d 362, 367 (3d Cir. 1996); Insurance Co. of N. Am. v. Cohn (In re Cohn), 54 F.3d 1108, 1115 (3d Cir. 1995). This b asic tenet of statutory construction applies equally to the interpretation of regulations. See Silverman v. Eas tich Multiple Investor Fund, LP, 51 F.3d 28, 31 (3d Cir. 1995) (dealing with canon that court should construe stat utory language so that all provisions are given effect); LaVallee Northside Civic Ass'n v. Virgin Islands Coastal Zon e Management Comm'n, 866 F.2d 616, 623 (3d Cir. 1989) (regulation which conflicts with statute under whic h it was promulgated is ineffective, but court should endeav or to reconcile the two). Thus, the preferred constructio n of a statute and its regulations is the one that gives m eaning to all provisions. See United States v. Higgins, 128 F .3d 138, 142 (3d Cir. 1997).

In addition to following these general canons of st atutory construction, we are mindful that PACA, which was e nacted to protect unpaid suppliers of produce and alleviat e the burden of nonpayment on commerce, see 7 U.S.C. S 499e(c)(1); H.R. Rep. No. 98-543, at 3-4 (1983), reprinted in 1984 U.S.C.C.A.N. at 407, is remedial legislatio n which a court should construe broadly to effectuate its p urpose. See Tcherepnin v. Knight, 389 U.S. 332, 336, 88 S.C t. 548, 553 (1967); RNS Servs., Inc. v. Secretary of Labor, Mine Safety & Health Admin., 115 F.3d 182, 186-87 (3d Ci r. 1997); see also Hull, 924 F.2d at 782; Exportal LTD A. v. United States, 902 F.2d 45, 46 (D.C. Cir. 1990); Ha rry Klein Produce Corp. v. United States Dep't of Agric., 831 F.2d 403, 405 (2d Cir. 1987).

With these principles in mind, we begin our analysi s with the statutory and regulatory language. The statute and

9regulations refer, in numerous instances, to the

requirement that an agreement to extend the prompt payment period be in writing. This appeal requires us to determine whether that requirement relates only to the enforceability of such an agreement or is a precond ition to a seller's qualification for trust benefits. We tur n first to the section of the statutory trust provision which refe rs to the writing requirement.

The statutory trust provision provides that the pro duce, products derived from that produce, and any proceed s gained therefrom are held in trust by the buyer for the benefit of unpaid sellers until such sellers are pa id in full. See 7 U.S.C. S 499e(c)(2). Two subsections conditio n this provision by requiring an unpaid seller to preserve its rights to the trust benefits by notifying the buyer of its intent to do so, 7 U.S.C. S 499e(c)(3), which we discussfirst , and 7 U.S.C. S 499(c)(4), which we discuss below. In the context of establishing this notice requirement, the statute r efers to the mandate that an agreement must be in writing. I n particular, the statute provides that

(3) The unpaid supplier . . . shall lose the benefits of such trust unless such person has given writ ten notice of intent to preserve the benefits of the tr ust to the [buyer] within thirty calendar days (i) afte r the expiration of the time prescribed by which p ayment must be made, as set forth in regulations is sued by the Secretary; [or] (ii) after expiration of suc h other time by which payment must be made, as the parties h ave expressly agreed to in writing before enteri ng into the transaction . . . . When the parties express ly agree to a payment time period different from that es tablished by the Secretary, a copy of any such agreeme nt shall be filed in the records of each party to the transaction and the terms of payment shall be disclosed on invoices, accountings, and other documents r elating to

the transaction.

7 U.S.C. S 499e(c)(3).6

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6. Section 499e(c)(3) also provides that proper not ice may be given within 30 days after the seller receives notice that the p ayment instrument presented by the buyer had been dishonored. See 7 U.S.C. S 499e(c)(3).

The facts of the transactions in this case do not i mplicate this portion

of

the statute.

10According to CHR, the plain language of section

499e(c)(3), in particular Congress's use of the ter m"shall," unambiguously requires that an agreement to extend the payment term be in writing in order for the seller to preserve its PACA trust benefits. This reading over states what the subsection requires. The statute provides that an unpaid seller "shall lose the benefits of such trus t unless such person has given written notice of intent to p reserve the benefits of such trust." 7 U.S.C. S 499e(c)(3) (emp hasis added). The remainder of that sentence establishes the time period in which such notice must be given. In the c ontext of defining timely notification, the statute then p rovides that agreements to extend payment terms must be in writing and that parties shall maintain a copy of s uch an agreement and disclose the terms of the agreement o n invoices and other documents relating to the transa ction. See 7 U.S.C. S 499e(c)(3); see also 7 C.F.R. S 46.2 (aa)(11).

Thus, Congress, using the verb "shall," unambiguous ly intended that a seller timely notify the buyer of i ts intent to preserve its rights to PACA trust benefits. The pla in and unambiguous language of the section does not provid e, however, that a written agreement is a precondition of being entitled to the statutory trust benefits. Rat her, the requirement is relevant to assessing when prompt pa yment is due and therefore when notice is timely.

The plain language of the regulations supports this reading of the statute. The regulations first menti on the writing requirement in the context of defining prom pt payment. As noted above, the regulations establish times for prompt payment for various scenarios. See 7 C.F .R. S 46.2(aa)(1) - (10); 7 U.S.C. S 499e(c)(3). In thi s case, the regulations provide that, unless agreed otherwise i n writing, prompt payment is defined as payment within ten day s of the buyer's acceptance of the produce. See 7 C.F.R. S 46.2(aa)(5). The regulations also provide that

[p]arties who elect to use different times o f payment than those set forth [herein] must reduce th eir agreement to writing before entering into th e transaction and maintain a copy of the agree ment for their records. If they have so agreed, then payment within the agreed upon time shall constitute `full

11payment promptly': Provided, That the party claiming

the existence of such an agreement for time of payment shall have the burden of proving it.

7 C.F.R. S 46.2(aa)(11). This section unambiguously requires that an agreement to extend a payment term must be in writing prior to the transaction.

The regulations concerning the statutory trust also refer to the writing requirement. In particular, the regu lation provides that

[w]hen a seller, supplier or agent who has m et the eligibility requirements of paragraphs (e)(1 ) and (e)(2) of this section, transfers ownership, possessio n, or control of goods to a commission merchant, d ealer, or broker, it automatically becomes eligible to participate in the trust. Participants who preserve thei r rights to benefits in accordance with paragraph (f) of this section remain beneficiaries until they are paid in full.

7 C.F.R. S 46.46(c)(1). Subsection (f) requires tha t the seller properly notify the buyer of its intent to preserve its PACA trust benefits. See 7 C.F.R. S 46.46(f).7 The "elig ibility" requirements of paragraphs (e)(1) and (e)(2) provid e the following:

(e) Prompt payment and eligibility for trust benefits.

(1) The times for prompt accounting and prom pt payment are set out in S 46.2(z) and (aa). P arties who elect to use different times for payment mus t reduce their agreement to writing before entering i nto the transaction and maintain a copy of their agr eement for their records, and the times of payment must be

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7. This regulation refers to the writing requiremen t in the same context, and virtually to the same extent, as 7 U.S.C. S 499 e(c)(3). In particular, the regulation provides that a seller's notice of a n intent to preserve

the right to PACA trust benefits is timely if given 30 days "[a]fter expiration of such other time by which payment must be made as the parties have expressly agreed to in writing before entering into the transaction, but not longer than [30 days]." 7 C.F.R. S 46.46(f)(2)( ii). We therefore

conclude that this section's reference to the writi ng requirement has the same effect as that of 7 U.S.C. S 499e(c)(3) discus sed above.

12disclosed on invoices, accountings, and othe r

documents relating to the transaction.

(2) The maximum time for payment for a shipm ent to which a seller, supplier, or agent can agree and still qualify for coverage under the trust is 30 d ays after receipt and acceptance of the commodities as defined in S 46.2(dd) and paragraph (a)(1) of this s ection.

7 C.F.R. S 46.46(e). As in the statute, section (e) (1) of this regulation discusses the writing requirement in the context of defining prompt payment for a given transaction. Section (e)(2) explicitly provides that a seller is disqual ified from receiving trust benefits if it agrees to extend the payment term longer than 30 days from the buyer's acceptanc e of the produce. The existence of such an explicit disqualification supports our view that the writing requirement is not a prerequisite to eligibility to participate

in the PACA trust.

Under CHR's view, these regulations establish eligi bility requirements separate from the notice requirement t o preserve eligibility. CHR argues that the eligibili ty requirements for sellers who agree to payment terms beyond ten days are that such an agreement be reduc ed to writing, those terms be included on all invoices re garding the transaction, and that eligibility is lost if th e parties agree to a payment term over 30 days. CHR asserts t hat these prerequisites do not apply where there is not an agreement to extend a payment term. The plain langu age does not support this interpretation.

The plain language of the statute and regulations requires that an agreement establishing a "prompt payment" period other than that established in the regulations must be in writing. The plain language also provides that an unpaid seller loses its right to P ACA trust benefits if (1) it does not timely notify the buyer of its intent to preserve that right or (2) it agrees to a paymen t period beyond 30 days. Because we liberally interpret PACA to further its remedial purposes of reducing the burde n on commerce and protecting unpaid sellers, we find tha t the writing requirement relates to the enforceability o f an agreement to extend a payment term, but does not disqualify an unpaid seller from receiving trust be nefits.

13Idahoan and Alsum satisfied the notice requirement by

including the requisite language on the face of the ir invoices to Advantage, see 7 U.S.C. S 499e(c)(4), a nd neither party agreed to a payment period over 30 days.8 The ir failure to reduce their oral agreements with respec t to the payment term to writing does not disqualify them, a nd they therefore are entitled to share in a pro-rata distr ibution of the statutory trust res until they receive payment in full.

In so holding, we join the United States Court of A ppeals for the Eighth Circuit, the only other court of app eals of which we are aware which has addressed the precise issue presented by this appeal, in concluding that a supp lier's failure to reduce to writing an agreement to extend the payment term does not disqualify that supplier as a PACA trust beneficiary. See Hull, 924 F.2d 777. In Hull, two unpaid wholesale distributors of produce, Hull & J. J. Distributing, instituted suit against a defunct ret ail grocery store, Hauser's, to enforce their PACA trust rights . See id.

at 778. Some of the retail store's assets were seiz ed by one of the store's secured creditors, Gateway, who held perfected security interests in all of the store's assets and inventory. See id. at 778.

It was undisputed that Hull and J.J. Distributing supplied Hauser's with produce over several years a nd that during that time the two suppliers orally agreed to a payment period of 45 days and 30 days after deliver y, respectively. See id. Hull's invoices to Hauser ind icated this as the payment period, while J.J. Distributing's in voices did not indicate any payment term. See id.

The district court held that Hull and J.J. Distribu ting were entitled to trust benefits for their unpaid in voices notwithstanding the fact that they had not reduced their payment term extensions to writing. See id. at 779. Finding that the two suppliers had given Hauser's sufficien t notification of their intent to preserve their PACA trust rights, the district court held that while the plai n language of the statute makes oral agreements extending the

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8. We are not reaching the issue of what would happ en if the oral extension provided for a payment period in excess o f 30 days because

that situation is not before us in this case. See 7 C.F.R. S 46.46(e)(2).

14payment term unenforceable, it only disqualifies a supplier

from trust benefits where the supplier enters into a written agreement to extend the payment term beyond 30 days . See

id.

The court of appeals affirmed the district court,fi nding that "oral agreements have no effect on produce sel lers' trust protection." Id. at 781. According to the cou rt, a buyer who orally agrees to an extension of the payment te rm beyond ten days makes an arrangement to violate PAC A's prompt payment provision. See id. at 782. The court found

that

it would be incongruous to disregard oral ag reements for purposes of enforcing PACA but recognize them for the purpose of voiding the sellers' protecti on under the trust. Thus, notwithstanding the oral agreem ents, both sellers retained the right to demand payment within ten days and seek trust protection under PAC A.

Id. at 782.9 In concluding its discussion of this i ssue, the

(Text continued on page 17)

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9. We note that the Court of Appeals for the Eighth Circuit has suggested a conflicting result in two subsequent decisions. S ee Tom Lange Co. v. Lombardo Fruit & Produce Co. (In re Lombardo Fruit & Produce Co.), 12 F.3d 806, 809 (8th Cir. 1993) (hereinafter In re Lo mbardo II); Goldman

Fruit & Produce Co. v. Lombardo Fruit & Produce Co. (In re Lombardo Fruit & Produce Co.), 12 F.3d 110 (8th Cir. 1993) ( hereinafter In re Lombardo I). These two cases concern disputes betwe en two different produce suppliers and a single buyer. In both insta nces, the court held that the unpaid seller was not entitled to PACA tru st benefits. See 12 F.3d at 809; 12 F.3d at 113.

In In re Lombardo I, although letters and the invoi ces indicated an extended payment period, there was no written agree ment which complied with all respects of PACA and its regulati ons. See 12 F.3d at 113. There was also evidence of an oral agreement t o extend the payment term. In the absence of a valid written agr eement under PACA to extend the payment term, the court first stated that it could not measure the timeliness of notice based upon the ext ended payment term. See id. Then the court rejected the supplier' s argument that its notice to the buyer was within 30 days of the expir ation of the payment period established in the regulations. The court he ld that

[t]he evidence in the record clearly demonst rates that the parties had an agreement to extend the payment terms beyond the ten days15in the regulations. Though this agreement is insufficient to

preserve Goldman's trust protection, it is a valid co ntract between the parties. A predicate to the trust protection is the requirement

that payment is delinquent; having agreed to exte nd the payment period beyond ten days, it would be incongruous to permit Goldman to now claim that no agreement existed and that pay ment was therefore due within ten days.

Id. at 113 (citation omitted).

In making this statement, the In re Lombardo I cour t cited the opinion in Bowlin & Son, Inc. v. San Joaquin Food Serv., In c. (In re San Joaquin Food Serv., Inc.), 958 F.2d 938, 941 n.2 (9th Cir. 1992). Our reading of In re San Joaquin suggests that the In re Lombardo I court may have cited it for a proposition In re San Joaquin did no t state. Furthermore, In re Lombardo I did not question Hull. In the circ umstances, to the extent, if any, that the language in In re Lombardo I conflicts with Hull, we find it unpersuasive.

In In re Lombardo II, the supplier and the buyer en tered into a written agreement prior to the transaction to extend the pa yment term to 30 days. See 12 F.3d at 809. This agreement complied w ith PACA and its regulations in all respects. See id. Thereafter, th e parties modified the agreement in writing in such a manner that no longe r complied with PACA. See id. Although the court does not explain t his subsequent written agreement or explicitly state in what manne r it no longer complied with PACA, the opinion suggests that the a greement extended the payment term beyond 30 days, for which PACA exp licitly disqualifies a seller as a trust beneficiary. The court found th at, at that time, "an agreement complying with PACA no longer existed. Th ere being no written agreement complying with PACA, Lange is pro hibited from claiming PACA's trust protection." Id. at 807 (foot note omitted). The

court

further stated that

PACA imposes a trust upon the funds held by delinquent purchasers if a written agreement required p ayment within thirty days of delivery. Thus, at the time trust pr otection is claimed,

there must exist a valid written agreement complyi ng with PACA's terms.

Id. at 809-10.

This language could be read to imply that without a written agreement to extend the payment term, the seller is not entit led to trust benefits. Although we believe that such a result would be inc orrect in light of the explicit holding to the contrary in Hull, we note t he potential conflict

as16court also noted that a liberal construction of the statute is

appropriate because it is remedial legislation. See id. at 782.10

CHR argues that Hull is not applicable to this case because it was decided prior to Congress's 1995 amendment to the PACA statutory trust which, it arg ues, changed the statutory landscape. In 1995, Congress added section 499e(c)(4) which provides, as an alternativ e to the post-delinquency methods outlined in subsection 3, an invoicing method of notifying the buyer of a seller 's intent to preserve its right to trust benefits. See 7 U.S. C. S 499e(c)(4). According to CHR, because there was n o invoice-notification method under PACA at the time the court decided Hull, the payment terms were crucial to determining the timeliness of the notice. CHR asser ts that the rationale of Hull is inapplicable to this case where the

timeliness of the notice is irrelevant because the sellers complied with the invoice-notification provision. I n essence, CHR asserts that our interpretation renders the wri ting requirement meaningless in cases such as this where the supplier invokes invoice notification.

The purpose of the 1995 amendment was to remove the expense to the United States Department of Agricult ure in administering the trust provisions. See H.R. Rep. N o. 104- 207, at 9 (1995), reprinted in 1995 U.S.C.C.A.N. 45 3, 456. Under the 1995 amendment, a seller may satisfy the notice requirement by including on its regular invoicing documents a statutory statement indicating the inte nt to preserve its trust rights. See id. An invoice which serves as notice to preserve a seller's trust rights also mus t include "[t]he terms of the payment if they differ from pro mpt

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we are unsure of the court's intentions. Of course, the court may have meant nothing more than that the trust protection w as lost because the payment period was extended in writing beyond 30 da ys contrary to 7 C.F.R. S 46.46(e)(2). If so, In re Lombardo II is n ot inconsistent with

Hull which involved an oral extension by one seller to 4 5 days.

10. We recognize that one of the suppliers in Hull agreed to a payment period of 45 days. As we have indicated, we are not reaching the issue of what would happen if the oral extension provided for a period in excess of 30 days. See n.8, supra. The Hull court d id not distinguish between a 30-day and 45-day period.

17payment set out in section 46.2(z) and (aa) of this part, and

the parties have expressly agreed to such terms in writing

before the affected transactions occur." 7 C.F.R. S 46.46(f)(3)(ii). The writing requirement therefor e is not rendered superfluous under our interpretation of th e statute where the seller invokes the invoice-notifi cation provision. Rather, a written agreement to extend th e payment period gives rise to the obligation to incl ude the payment term on the invoice which serves as notice of the seller's intent to preserve it PACA rights.

District courts in other circuits have followed, ei ther implicitly or explicitly, the Court of Appeals for the Eighth Circuit's approach in Hull. See A & J Produce Corp. v. CIT Group/Factoring, Inc., 829 F. Supp. 651, 655 (S.D.N .Y. 1993) (holding that only a written agreement to ext end a payment term beyond 30 days forfeits the seller's r ights, so that in the absence of a written agreement otherwis e, a seller is entitled to enforce its right to full pay ment against the buyer within ten days of delivery of the produc e); Continental Fruit Co. v. Thomas J. Gatziolis & Co., 774 F. Supp. 449, 452 (N.D. Ill. 1991) (holding that evide nce of a course of dealing between the parties accepting pay ment beyond 30 days does not forfeit an unpaid seller's right to statutory benefits); C.H. Robinson Co. v. B.H. Prod uce Co., 723 F. Supp. 785, 797 (N.D. Ga. 1989), aff'd sub no m., C.H. Robinson Co. v. Trust Co. Bank, N.A., 952 F.2d 1311 (11th Cir. 1992) (discussing the lack of a written agreement to extend the payment period only in reference to t he timeliness of the notice). In each of these cases, there was no evidence of a prior written agreement to extend the payment term, yet the courts held that the unpaid s ellers were entitled to PACA trust benefits if they notifi ed the buyers within 40 days after the delivery of the pro duce, which is 30 days after the expiration of the ten-da y prompt payment period established by the regulations.

In addition, at least one court has described the P ACA writing requirement for agreements to extend paymen t terms as being in the nature of a statute of frauds . See Debruyn Produce Co. v. Richmond Produce Co. (In re Richmond Produce Co.), 112 B.R. 364, 374 (Bankr. N. D. Cal. 1990). In In re Richmond, the court was faced with the

18issue of whether certain notices were timely to pre serve the

sellers' rights to statutory trust benefits. Findin g that certain letters satisfied the writing requirement a nd therefore validly extended the payment term, the co urt found that the notices sent were timely because the y were sent within 30 days of the expiration of the extend ed payment period. In so holding, the court commented that

the purpose of the writing requirement is to preclude uncertainties as to the applicable payment t erms and the resulting deadline for filing a PACA not ice. Thus, the provision at issue is in the nature of a statute of frauds and serves the same purpose. This con clusion is supported by the statutory requirement that both parties maintain a copy of the agreement in their records and that the terms of the payment be disclosed
on `invoices. . . .'

Id. at 374 (citation omitted). Thus, the court view ed the writing requirement as relevant to assessing when p rompt payment is due and not as a precondition to preserv ing statutory trust benefits.

CHR urges this court to join those courts which hav e required strict compliance with the preconditions o f the statutory trust.11 See, e.g., Bowlin & Son, Inc. v . San

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11. Most of the case law considering whether strict or substantial compliance is necessary addresses the notice requir ement. There is authority in support of both positions. Compare Ani c, Inc. v. Chipwich, Inc. (In re Chipwich, Inc.), 165 B.R. 135, 136 (Ban kr. S.D.N.Y. 1994) (requirements of notice to preserve trust must be c omplied with strictly such that wrong name on notice renders it ineffecti ve); Blair Merriam Fresh Fruit & Produce Co. v. Clark (In re D.K.M.B., Inc.), 95 B.R. 774,

779 (Bankr. D. Colo. 1989) (requiring strict compliance with content of notice); In re Marvin Properties, Inc., 854 F.2d 11 83, 1186 (9th Cir. 1988) (requiring notice to be given by seller itself andf inding that the buyer's actual knowledge of the seller's intent was insuffi cient to preserve its statutory PACA trust benefits) with In re Richmond Produce Co., 112 B.R. 364 (Bankr. N.D. Cal. 1990) (holding that substanti al compliance with notice requirement is sufficient to preserve right to trust benefits such that early notification or notice lacking certain i nformation is effective); Dubin v. Carlton Fruit Co. (In re Carlton Fruit Co. ), 84 B.R. 810 (Bankr. M.D. Fla. 1988) (requiring substantial compliance w ith requirements for

19Joaquin Food Serv., Inc. (In re San Joaquin Food Se rv., Inc.),

958 F.2d 938, 940 (9th Cir. 1992) (requiring strict compliance with the clear mandate of Congress to in clude the payment term on an invoice); In re John DeFranc esco & Sons, Inc., 114 B.R. 335, 336 (Bankr. D. Mass. 1990 ) (requiring strict compliance with the preconditions of participation in trust benefits). But, this case pr esents the issue of whether the writing requirement is a preco ndition to qualification as a PACA trust beneficiary. Only if we answered that question positively would we be requi red to

reach the issue of whether strict or substantial co mpliance with that requirement was necessary to preserve pro perly an unpaid seller's right to receive benefits. Havin g found that it is not and is rather only relevant to deter mining what constitutes prompt payment in a given transact ion, we need not decide today whether strict compliance with the requirements of PACA trust eligibility is requi red.

Nonetheless, we recognize that these cases support the interpretation urged by CHR. Although the Court of Appeals for the Ninth Circuit has not addressed explicitly the precise issue presented by this appeal, its ruling on a similar issue suggests a conclusion other than the one we reach today. In In re San Joaquin the court held th at a produce supplier was not entitled to PACA trust ben efits where the invoices it issued to the buyer did not c ontain the payment term agreed upon by the two parties in writing prior to the transaction. See 958 F.2d 938.

In In re San Joaquin, there was no dispute that the supplier gave the buyer timely notice of its intent to preserve its interest in the trust or that the agre ement to extend the payment term was in writing. See id. at 939-40. Thus, the sole issue presented was whether the supp lier's failure to include the payment term on the invoice forfeited

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notice such that failure to include date of transac tion, contract terms

and amount due did not render notice ineffective to preserve benefits of the statutory trust); In re W.L. Bradley Co., 75 B. R. 505, 511 (Bankr. E.D. Pa. 1987) (holding that premature filing of no tice under section 499e(c)(3) was effective). Because there is no disp ute that Alsum and Idahoan complied with the invoice-notice provision, we need not address this issue today.

20its rights to the PACA trust. As discussed above, 7 U.S.C.

S 499e(c)(3) requires that "[w]hen the parties expr essly agree to a payment time period different from that establ ished by the Secretary, a copy of any such agreement shall b efiled in the record of each party to the transaction and the terms of payment shall be disclosed on invoices, accounti ngs, and other documents relating to the transaction." (emph asis added). The In re San Joaquin court found that the provision relating to the disclosure of the payment terms on invoices was a requirement to preserve a supplier's trust rights. See id. at 940. The court found that becaus e this was a clear mandate of Congress as expressed in unambiguous statutory terms, sellers must comply st rictly

with it to receive trust benefits. See id.

It is possible that the Court of Appeals for the Ni nth Circuit also would hold that the requirement of a w ritten agreement to extend the payment term beyond the per iod prescribed in the regulations is a prerequisite to preserving a supplier's rights to PACA trust benefits. After a ll, that requirement is in the same clause in 7 U.S.C. S 499 e(c)(3) as the requirement that extended payment terms be

indicated on invoices.

In re John DeFrancesco & Sons, Inc., 114 B.R. 335, also is inconsistent with the interpretation of PACA tha t we have adopted. The court held that

in order to preserve its PACA trust benefits under the statute, [the seller] must prove that it str ictly complied with all the necessary statutory requirement s. By not offering evidence of an agreement in writing before the transaction was entered into, [the seller] f ails to meet its burden of proof that it strictly complie d with the

statute.

114 B.R. at 338 (citing In re Lombardo, 106 B.R. 59 3 (Bankr. E.D. Mo. 1989)). Thus, the court implicitly held that the writing requirement is a precondition to e ligibility as a trust beneficiary with which sellers must comp ly strictly.

As discussed above, under our reading of the statut e and the regulations, the plain language does not suppor t the result reached by these cases. Guided as we must by the

21plain language, we therefore find them unpersuasive

.

Moreover, a departure from the plain meaning of PAC A is not warranted because we find no extraordinary show ing of congressional intent otherwise in the legislative h istory. On the contrary, the legislative history supports our reading of PACA and its regulations. Like the statute and the regulations, the legislative history explicitly ref ers to two requirements for an unpaid supplier to qualify for trust benefits: (1) that the seller notify the buyer of i ts intention to preserve its rights and (2) that an agreement to extend the payment period not be beyond a reasonable time. See, e.g., H.R. Rep. No. 98-543, at 4 (1983), reprinted in 1984 U.S.C.C.A.N. at 407-08 ("[T]he unpaid seller must a ccept the burden to preserve the trust by notifying both the Secretary and the commission merchant, dealer or br oker within 30 days after expiration of the prompt payme nt date or date on which a payment instrument has been dishonored, or the trust benefits will be lost."); id. at 7, reprinted in 1984 U.S.C.A.A.N. at 410 ("[T]he commi ttee does not intend the trust to apply to any credit tr ansaction that extends beyond a reasonable period. . . . [T]h e secretary is required to establish, through rulemak ing, the time by which, the parties to a transaction must ag ree payment on a transaction must be made, to qualify i t for coverage under the trust. An agreement for payment after such time will not be eligible to receive the benef its of the trust."); 49 Fed. Reg. 45735, 45739 (1984) ("The le gislation is clear that an absolute precondition to pursuing trust assets held by a defaulting buyer or receiver is th efiling of a written notice by the seller, supplier or agent a fter a failure to pay within the prescribed periods has el apsed.").

Finally, we reject CHR's argument that requiring st rict compliance with the writing requirement, such that a seller loses it right to statutory benefits if an agreemen t to extend the payment term is not reduced to writing, further s the purposes of the statutory scheme. According to CHR, interpreting the writing requirement as a precondit ion to receiving trust benefits furthers the purposes of P ACA by construing the trust to protect only those sellers who conduct their business in such a manner that compli es with PACA and encourages prompt payment. Thus, CHR urges that "permitting sellers to orally extend pay ment

22terms without adverse effect on trust eligibility w ould result

in, and in fact already resulted in, practices by s ellers

which are in direct contravention of the PACA and i ts purpose." Br. at 23.

PACA makes a buyer's failure to tender prompt payme nt a violation, but it does not make a seller's failur e to demand prompt payment a violation. After all, PACA does not preclude a seller from agreeing in writing to a payment term beyond 30 days, but only disqualifies such a s eller from participating in the trust.12 See 7 C.F.R. SS 46.2 (aa)(11), 46.46(e)(2).

We recognize that, in instances such as the one presented here, our interpretation places those sel lers who reduce to writing agreements to extend payment term s in no better position than those who do not. Neverthel ess, because Congress established the PACA trust to prot ect unpaid sellers against buyers' failure to make prom pt payment and their subordination of the sellers' cla im to secured creditors, we believe that our interpretati on furthers the statutory purpose. The primary purpose of the statute was to protect unpaid sellers vis-a-vis sec ured creditors, not to prefer certain unpaid sellers ove r others.

IV. CONCLUSION

For the foregoing reasons, we will affirm the distr ict court's order denying CHR's motion to exclude Idaho an and Alsum from the universe of those qualified to recei ve trust

benefits in this case.

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12. In urging this court not to follow Hull, CHR ar gues that the court

failed to sanction sellers who do not conduct their business in accord with PACA's prompt payment requirements. In particu lar, CHR challenges the Hull court's conclusion that a buyer who orally agrees to extend a payment term thereby makes an arrangement to violate PACA without the corresponding recognition that the sell er necessarily makes the same arrangement. According to CHR, the sanctio n for sellers who make an arrangement to violate PACA by orally agree ing to an extended payment term is the forfeit of its trust benefits. We reject this argument

for the reasons discussed above.

23A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

24