Court Opinion

ID: 4706848
Source: CourtListenerOpinion
Date Created: 2021-07-27 15:00:53.256978+00
Date Added: 2024-06-11T08:06:40.201301
License: Public Domain

20-2234-cv
The PACA Tr. Creditors of Lenny Perry’s Produce, Inc. v. Genecco Produce, Inc, et al.

                                    UNITED STATES COURT OF APPEALS
                                       FOR THE SECOND CIRCUIT

                                            SUMMARY ORDER
Rulings by summary order do not have precedential effect. Citation to a summary order filed
on or after January 1, 2007, is permitted and is governed by Federal Rule of Appellate
Procedure 32.1 and this Court’s Local Rule 32.1.1. When citing a summary order in a
document filed with this Court, a party must cite either the Federal Appendix or an
electronic database (with the notation “summary order”). A party citing a summary order
must serve a copy of it on any party not represented by counsel.

       At a stated term of the United States Court of Appeals for the Second Circuit, held at
the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York,
on the 27th day of July, two thousand twenty-one.

PRESENT:            PIERRE N. LEVAL,
                    JOSÉ A. CABRANES,
                    MICHAEL H. PARK,
                                 Circuit Judges.

THE PACA TRUST CREDITORS OF LENNY PERRY’S
PRODUCE, INC.,

                               Plaintiff-Appellee,                                 20-2234-cv

                               v.

GENECCO PRODUCE, INC., DAVID GENECCO,

                               Defendants-Appellants. *

FOR DEFENDANTS-APPELLANTS:                                                    David L. Rasmussen, Richard N. Franco,
                                                                              Davidson Fink LLP, Rochester, NY.

FOR PLAINTIFF-APPELLEE:                                                       Eric M. Kyser, Martyn & Associates,
                                                                              Cleveland, OH.

     *
         The Clerk of Court is directed to amend the caption as shown above.

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        Appeal from a June 15, 2020 judgment of the United States District Court for the Western
District of New York (William M. Skretny, Judge).

     UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED,
AND DECREED that the June 15, 2020 judgment of the District Court is AFFIRMED.

        Defendants-Appellants Genecco Produce, Inc. (“GPI”) and David Genecco (“Genecco”)
(together, “Defendants”) appeal from a June 15, 2020 judgment of $253,207.96 entered against
them 1 in favor of Plaintiff-Appellee (“Plaintiff”), a group of certain creditors of bankrupt agricultural
products dealer Lenny Perry’s Produce (“LPP”). We assume the parties’ familiarity with the
underlying facts, the procedural history of the case, and the issues on appeal.

         Plaintiff brought this adversary action in the Bankruptcy Court to recover monies GPI owed
to LPP. Plaintiff argued that GPI’s debts to LPP were assets of the LPP trust (the “PACA Trust”)
established under the Perishable Agricultural Commodities Act (“PACA”). 2 Defendants argued, in
substance, that GPI was a net creditor of LPP and could therefore completely offset its debts to
LPP. GPI withheld the disputed sums from the Trust pending litigation. Following the
recommendation of the Bankruptcy Court (Michael J. Kaplan, Judge), the District Court held, inter
alia, that (1) GPI’s debt to LPP was an asset of the Trust that could not be completely offset by
LPP’s debt to GPI, but (2) GPI could, as a creditor of LPP, recover its pro rata share of the PACA
Trust (“GPI’s Share”) and use that to offset its liability to the Trust. We affirmed both of those
holdings 3 and the case returned to the Bankruptcy Court for determination of a sum certain to be
paid by GPI to the PACA Trust after the offset for GPI’s Share.

      The District Court, over Defendants’ objection, adopted the Bankruptcy Court’s
recommendation that GPI’s Share be computed based on the whole principal of LPP’s debt to GPI,

    1
     Judgment entered primarily against GPI and secondarily (i.e., conditionally) against Genecco in
the event that GPI “fail[ed] to satisfy [the] judgment within 60 days of its entry date.” App’x 128
(Judgment).
    2
      7 U.S.C. § 499e(c). PACA was enacted in part to protect sellers of perishable agricultural
commodities from abnormal risks of loss from buyer default and delay. To simplify, when sellers’
contracts with buyers invoke PACA rights, the sellers become beneficiaries of a trust whose assets
consist of the buyer’s perishable agricultural commodities and any receivables or proceeds from such
commodities. This trust is to be administered by the buyer for the benefit of all qualified unpaid
sellers until those sellers have been paid in full. See, e.g., Endico Potatoes, Inc. v. CIT Grp./Factoring, Inc.,
67 F.3d 1063, 1066-67 (2d Cir. 1995) (generally describing PACA).

    See PACA Tr. Creditors of Lenny Perry’s Produce, Inc. v. Genecco Produce Inc., 913 F.3d 268 (2d Cir.
    3

2019).

                                                       2
plus interest on the net principal of LPP’s debt to GPI. This amounted to approximately 56.6% of
the PACA Trust.

        On appeal, Defendants argue that since “PACA creditors are entitled to recover interest
upon their PACA Trust Claim,” 4 GPI’s Share should be calculated with interest on the whole
principal of LPP’s debt to them. This method of calculation would raise GPI’s Share to 71.59% of
the Trust and thus significantly reduce GPI’s net liability. For its part, Plaintiff contends that if GPI
were to be credited with interest on Trust assets that it withheld from the Trust (and over which
GPI had exclusive control during the pendency of the litigation) there will be a de facto (and
inequitable) double recovery of interest. That is, GPI will have received both credit for interest on
the sum improperly withheld from the Trust and a separate opportunity to earn interest on the same
sum.

        We agree with Plaintiff that the computation of GPI’s Share was a determination properly
“confided to the [D]istrict [C]ourt’s broad discretion” which we will not disturb “absent an abuse of
that discretion.” 5 We find no abuse of discretion here. Defendants assert that “equity demands that
[all PACA creditors] be treated equally” 6 but (i) do not refute Plaintiff’s double-recovery theory; (ii)
do not deny that GPI is the only PACA creditor in this bankruptcy proceeding that stands to gain a
double recovery; and (iii) do not identify any statutory provision or court precedent that required the
District Court to overlook the equities in computing GPI’s Share.

        In our view, the District Court adopted a reasonable solution to the problem of calculating
GPI’s Share in an appropriate exercise of its informed discretion. We therefore affirm the judgment
of the District Court.

                                               CONCLUSION

       We have considered all Defendants’ arguments and find them to be without merit.
Accordingly, we AFFIRM the June 15, 2020 judgment of the District Court.

                                                        FOR THE COURT:
                                                        Catherine O’Hagan Wolfe, Clerk

    4
        Defendants’ Opening Br. at 6.
    5
        Endico Potatoes, 67 F.3d at 1071-72.
    6
        Defendants’ Opening Br. at 7.

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