Opinion ID: 786069
Heading Depth: 3
Heading Rank: 1

Heading: Funds Ultimately Disbursed to PACA Creditors

Text: 20 The District Court held that no breach of trust had occurred on the part of DLPS, and therefore on the part of KCB, with respect to funds that were ultimately disbursed to PACA creditors. See E. Armata, slip op. at 10-11. In so holding, the District Court relied on the Ninth Circuit's opinion in Boulder Fruit, see E. Armata, slip op. at 10, which had held that, in order for plaintiff PACA creditors to establish that trust assets had been misallocated, they had to demonstrate at a minimum that the trustee had not paid the funds in question to other PACA creditors, Boulder Fruit, 251 F.3d at 1272. Applying that holding to the instant case, the District Court rejected the argument of plaintiff PACA creditors that DLPS had dissipated the trust with respect to funds that were ultimately paid by DLPS to other PACA creditors. See E. Armata, slip op. at 10. 21 Although we agree with the District Court that, in the instant case, no breach occurred with respect to those funds that DLPS made available to PACA creditors after their deposit at KCB, we decline to adopt a blanket rule that a PACA trustee can commit no breach ... with respect to ... funds that are eventually paid to PACA beneficiaries. E. Armata, slip op. at 10. As we conclude below, see Discussion, Part III.C., post, such a holding is not necessary, because the fact that DLPS did not breach its duties as PACA trustee by depositing funds at KCB is dispositive of plaintiffs' allegations that KCB received funds in breach of trust. Accordingly, although it seems correct to conclude that neither the PACA trustee in Boulder Fruit nor the PACA trustee in the instant case breached the trust with respect to the funds they ultimately paid to PACA creditors, we decline to hold, as a general matter, that no breach of a PACA trust could have occurred with respect to any funds that a PACA trustee eventually makes available to PACA creditors. 22