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Pacific International Marketing, Inc. v. A & B Produce

August 30, 2006

PACIFIC INTERNATIONAL MARKETING, INC.; WALDEN-SPARKMAN, INC.; J&R ORCHARDS; DESERT FRESH, INC.; CENTRE MARAICHER EUGENE GUINOS JR., INC.; BONIPAK PRODUCE CO.; BLAZER-WILKINSON, LLC; AGRI-SALES, INC.; FRANK SPINGOLA & SON LTD.; MARK MARTIN'S J-MART EXPRESS, INC.; **BURCH EQUIP., LLC; UNITED SAVINGS BANK; FRUTECH, INC.; WILLIAM WALTERS; TANIMURA & ANTLE, INC.; METZ FRESH, LLC; DOUD & ASSOCIATES, INC.; BOSKOVICH FARMS, INC.; DENNIS B. JOHNSTON; GERALD A. JOHNSTON; JOHNSTON FARMS; WEST COAST DISTRIBUTING, INC.; *EXEL TRANSPORTATION SERVICES, INC.; BARTOLOTTA, INC. (INTERVENORS IN D.C.)
v.
A & B PRODUCE, INC.; ANTHONY G. BADOLATO, AN INDIVIDUAL; TEAMSTERS HEALTH AND WELFARE FUND OF PHILADELPHIA, TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY (EASTERN DISTRICT OF PA CIVIL NO. 03-3564)
FRANK SPINGOLA & SONS, LTD.
v.
A & B PRODUCE, INC.; ANTHONY BADOLATO; (EASTERN DISTRICT OF PA CIVIL NO. 03-5556)
*EXEL TRANSPORTATION SERVICES, INC., APPELLANT
*(AMENDED IN ACCORDANCE WITH THE CLERK'S ORDER DATED 9/3/04)
** (DISMISSED PER THE CLERK'S ORDER OF 9/22/04)



On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Civ. Nos. 03-3564 and 03-5556) Honorable Louis H. Pollak, District Judge.

The opinion of the court was delivered by: Greenberg, Circuit Judge.

PRECEDENTIAL

Argued June 7, 2006

BEFORE: AMBRO, FUENTES, and GREENBERG, Circuit Judges

OPINION OF THE COURT

I. INTRODUCTION

This matter comes on before the court on an appeal by Exel Transportation Services, Inc. ("Exel") from the district court's order entered on July 21, 2004, denying Exel's claim for payment as administrative expenses from the statutory trust created by the Perishable Agricultural Commodities Act ("PACA"), 7 U.S.C. § 499e(c), for its services in transporting produce for defendant A & B Produce, Inc. Exel, a logistics company, arranged and paid for the transportation of produce from sellers and suppliers to A & B Produce, Inc., but A & B Produce, Inc. did not pay Exel for its services. At around the same time, various unpaid sellers and suppliers of produce filed complaints against A & B Produce, Inc. seeking to recover benefits pursuant to PACA. Even though there were multiple sellers and suppliers of the produce, as a matter of convenience we hereinafter will refer to one of the plaintiffs, Pacific International Marketing, Inc. ("Pacific"), a seller and provider in the same position in this litigation as all of the plaintiffs, as if it had been the sole seller and provider and as the sole plaintiff. Exel intervened seeking to recover its unpaid transportation expenses from the PACA trust funds prior to their distribution to the trust beneficiaries. After the district court denied Exel's claim, Exel appealed, but we will affirm the district court's order.

II. FACTS AND PROCEDURAL HISTORY

The parties do not dispute the relevant facts. A & B Produce, Inc., which now is defunct, formerly was engaged in the business of buying produce from various sellers and suppliers for ultimate resale. Pursuant to its contract with A & B Produce, Inc., Exel arranged and paid for the transportation of produce from sellers and suppliers of produce to A & B Produce, Inc. In doing so, Exel paid certain carriers to transport seven shipments of produce from various sellers and suppliers to, or for the benefit of, A & B Produce, Inc. Exel submitted invoices to A & B Produce, Inc., which acknowledges that it received the shipments, for the freight charges in the sum of $39,200, but A & B Produce, Inc. did not pay Exel for its services.

On June 10, 2003, Pacific, a produce wholesaler, filed a complaint, later amended, in the district court against A & B Produce, Inc. and Anthony Badolato, its president (collectively "A & B Produce"), alleging that A & B Produce failed to pay for produce that it purchased from Pacific. Pacific claimed that it was the beneficiary of a statutory trust under PACA, 7 U.S.C. § 499e(c), from which it was entitled to recover payment for the produce.

On October 1, 2003, Pacific and A & B Produce entered into a stipulation and order, pursuant to which A & B Produce agreed to liquidate its assets subject to the PACA trust for the benefit of the potential PACA trust beneficiaries. On November 14, 2003, Exel filed a complaint in intervention in Pacific's action seeking to recover the cost of the transportation services that it provided to A & B Produce prior to the distribution of PACA trust funds to the PACA trust beneficiaries. Exel, however, did not claim to be a PACA trust beneficiary; rather, Exel sought payment for its transportation services as an administrative expense chargeable to the res of the PACA trust prior to any distribution of the PACA trust funds to the beneficiaries. Pacific opposed Exel's claim.

The district court denied Exel's claim for payment for its transportation services as administrative expenses of the PACA trust on the ground that allowing Exel payment "ahead of the PACA trust beneficiaries . . . would defeat the purpose of the PACA [trust] to place unpaid sellers in a priority position and expand the term 'administrative expense' too far." App. at 7. Exel then appealed.

III. JURISDICTION AND STANDARD OF REVIEW

The district court had subject matter jurisdiction over this case pursuant to 7 U.S.C. § 499e(c)(5). See Tanimura & Antle, Inc. v. Packed Fresh Produce, Inc., 222 F.3d 132, 138 (3d Cir. 2000) ("[D]istrict courts clearly have jurisdiction over actions by private parties seeking to enforce payment from the [PACA] trust."). We have jurisdiction pursuant to 28 U.S.C. ยง ...


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