Opinion ID: 857463
Heading Depth: 3
Heading Rank: 2

Heading: Six L’s Preserved its PACA Trust Rights

Text: We first consider Sunfresh’s defense that PACA’s reach cannot extend to invoices #242380 and #242381, because Sunfresh never took delivery of those tomatoes. The district court disagreed, reasoning that the Act’s protection does not turn on physical possession of the produce. Thus, it concluded that Six L’s preserved its trust rights by reciting the required language under 7 U.S.C. § 499e(c)(4) in each of its invoices. We agree. PACA provides a comprehensive regulatory scheme for the sale of produce in interstate commerce. “Under the Act, when a seller, dealer, or supplier ships produce to a buyer, a statutory trust is created upon acceptance of the commodities.” Golman-Hayden Co. v. Fresh Source Produce, Inc., 217 F.3d 348, 350 (5th Cir. 2000); see also 7 U.S.C. §§ 499a-499t. The trust protects sellers against buyers’ financing arrangements by giving sellers priority over secured creditors. To invoke the Act’s protection, sellers must provide buyers written notice of their intention to preserve trust rights. 7 C.F.R § 46.46(f)(1); Overton Distribs., Inc. v. Heritage Bank, 340 F.3d 361, 365 (6th Cir. 2003). In 1995, Congress amended the Act, allowing sellers to meet this notice requirement by including the appropriate statutory language on “ordinary and usual billing or invoice statements.” 7 U.S.C. § 499e(c)(4); 7 C.F.R § 46.46(f)(3); see also Overton, 340 F.3d at 365. -7- No. 12-5659 Six L’s v. JR Beale, et al. Though not questioning Six L’s notice, Sunfresh charges that the Act only activates when a commission merchant “received” the produce, 7 U.S.C. § 499e(c)(2), thereby requiring that Six L’s show Sunfresh took “actual or constructive possession” of the produce to fall under the Act’s purview. As the district court correctly pointed out, however, the statutory term “received” encompasses not only possession, but also “ownership [and] control.” 7 C.F.R. § 46.46(a)(1). Sunfresh gained ownership and control over the trust assets (the produce) once the tomatoes were harvested, gas-ripened, and stored at its behest. Through JE Beale, Sunfresh instructed Six L’s salesman to “keep [Sunfresh’s] orders cool,” thereby controlling not only the location of the tomatoes but also their stage in the ripening process. Sunfresh presents no evidence to dispute this determination, and we agree with the district court that Six L’s notices triggered PACA’s protections.