Opinion ID: 758340
Heading Depth: 2
Heading Rank: 2

Heading: Current Dispute

Text: 7 Over a period of several months, Advantage purchased produce from Idahoan, CHR, Alsum, O.P. Murphy & Sons (Murphy), and Powerhouse Produce, L.L.C. (Powerhouse). The details of these transactions are not in dispute. 3 8 In a series of transactions from August 7, 1996, through 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 language required under 7 U.S.C. § 499e(c)(4), the 1995 PACA amendment, to notify the buyer that the seller intends to preserve its trust claim against the buyer. Idahoan and Advantage did not enter into a written agreement extending the payment term which, in this case, in the absence of a written agreement altering the term, is ten days. See 7 C.F.R. § 46.2(aa)(5). However, William Carson, president 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. 9 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 Idahoan, Carson claims that Alsum and Advantage had an oral agreement to extend the term, though in Alsum's case 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 provided in the 1995 PACA amendment notifying Advantage that Alsum intended to preserve its PACA trust claim. 10 CHR sold $36,004.80 worth of produce to Advantage pursuant to their written agreement to extend the payment term to 30 days. CHR's invoices for these sales included a payment term of 30 days as well as the statutory language required to preserve its interest in the PACA trust. See app. 5. 11 Advantage failed to pay Idahoan, Alsum, and CHR the amounts due on these outstanding invoices. On February 10, 1997, Idahoan filed a complaint against Advantage and its officers, William Carson and William Carson III, for damages and injunctive relief alleging violations of PACA based upon Advantage's failure to pay its invoices and breach of the statutory trust. The district court issued a temporary restraining order on February 11, 1997, enjoining the defendants from further dissipating the constructive trust imposed by 7 U.S.C. § 499e(c). On February 20, 1997, Idahoan and Advantage filed a Stipulated Order for Preliminary Injunction which stated a procedure for identifying all of Advantage's qualified and unpaid PACA trust creditors. 12 CHR intervened as a party plaintiff in the action on May 27, 1997. See app. 5. On June 2, 1997, Idahoan and Advantage filed a Joint Status Report and Motion for an Order for the Distribution of PACA Trust Proceeds (Joint Motion) identifying the following universe of qualified PACA trust creditors: 13 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. 14 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 Motion. On June 5, 1997, CHR filed an objection to the Joint Motion and served discovery requests upon Advantage seeking documents which established the alleged qualified status of the creditors set forth in the Joint Motion. See app. 7. CHR then filed a Motion to Exclude Alsum and Idahoan from the universe of qualified PACA trust creditors on the grounds that they failed to comply with the statute and regulations. In particular, CHR argued that Idahoan and Alsum orally agreed to extend the payment term beyond the ten-day period established in the regulations, and they were, therefore, not qualified PACA trust creditors because the agreements were not reduced to writing prior to the transaction. See app. 9. 15 At the time of briefing on this appeal, the total amount of available PACA trust funds was approximately $45,000.00. See Br. for Appellant at 5. If Idahoan and Alsum are excluded from the universe of qualified trust beneficiaries, the total qualified and unpaid trust claims would be $45,172.80. Thus, their exclusion would result in payment virtually in full, rather than a small pro-rata portion, to the qualified PACA trust creditors, CHR, Powerhouse, and Murphy. 16 On November 7, 1997, the district court issued an order denying CHR's Motion to Exclude Idahoan and Alsum citing the reasons stated of record at the argument of the motion. App. 12. Following argument on CHR's motion to exclude, the district court stated that an oral agreement to extend a payment term is totally ineffective and, provided that the supplier complies with the notice provisions 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, certification pursuant to 28 U.S.C. § 1292(b). On December 1, 1997, the district court certified the November 7, 1997 order, for immediate appeal, the controlling question of law being whether Idahoan and Alsum perfected their trust claims under PACA. On February 19, 1998, we granted CHR's Petition for Permission to Appeal. See app. 1, 14.