Opinion ID: 758340
Heading Depth: 2
Heading Rank: 1

Heading: Statutory and Regulatory Framework of Perishable Agricultural Commodities Act of 1930

Text: 4 We begin with a brief overview of the Perishable Agricultural Commodities Act (PACA). In 1930, Congress enacted PACA to promote fair trading practices in the produce industry. See 7 U.S.C. § 499a et seq.; Consumers Produce Co. v. Volante Wholesale Produce, Inc., 16 F.3d 1374, 1377 (3d Cir.1994). In particular, Congress intended PACA to protect small farmers and growers who were vulnerable to the practices of financially irresponsible 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 payment for a shipment of produce. See 7 U.S.C. § 499b(4). A buyer's failure to tender prompt payment triggers civil liability and the possible revocation of the buyer's PACA license required by 7 U.S.C. § 499c. See 7 U.S.C. §§ 499e(a), 449h(a). Prompt payment is defined by regulations which apply unless the parties agree otherwise in writing prior to the transaction. See 7 C.F.R. § 46.2(aa). 5 In 1984, Congress amended PACA to protect further certain unpaid suppliers 2 of produce by including a statutory trust provision which provides an additional 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. Prior to this amendment, unpaid produce suppliers were unsecured creditors vulnerable to the buyers' practice of granting other creditors a security interest in their inventory 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. 98-543, at 3 (1983), reprinted in 1984 U.S.C.C.A.N. 405, 407). Under the 1984 provision, a buyer's produce, products derived from that produce, and the proceeds gained therefrom are held in a non-segregated, floating trust for the benefit of unpaid suppliers who have met the applicable statutory requirements. See 7 U.S.C. § 499e(c); 7 C.F.R. § 46.46(b). Thus, the provision gives certain unpaid sellers of produce an interest in the PACA trust assets superior to that 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, § 6, 7 U.S.C. § 499e(c)(4). 6 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 prompt payment. See 7 U.S.C. § 499e(c)(5). A qualified unpaid seller remains entitled to benefits until paid in full. See 7 C.F.R. § 46.46(c)(1). A seller eligible for the statutory trust benefits must preserve its rights by satisfying a notice requirement by either sending notice to the buyer within 30 days of a payment default or, as provided in the 1995 amendment to PACA, including a statutory statement referencing the trust on its invoices. See 7 U.S.C. § 499e(c)(3), (4); 7 C.F.R. § 46.46(c), (f). While a seller may agree in writing to a payment period other than that defined in the regulations as prompt, an unpaid seller loses its right to participate in the trust if it agrees in writing to extend the payment period beyond 30 days. See 7 C.F.R. § 46.46(e)(2). The issue presented by this appeal is whether a seller also forfeits its right to participate in the PACA trust if it fails to reduce to writing an agreement to extend the payment term.