An Oklahoma grocery store chain, Reasor’s LLC, must pay about $300,000 to a trust for produce farmers and sellers, a split Tenth Circuit panel ruled.
That amount includes about $173,000 in rebates that a wholesaler authorized in its last days of business and are allowed under the Perishable Agricultural Commodities Act, Judge Mary Beck Briscoe said for the U.S. Court of Appeals for the Tenth Circuit in an unpublished ruling.
Congress amended PACA in 1984 to protect produce suppliers from buyers who paid them slowly or not at all, according to the court. It therefore imposed a trust on the perishable agricultural commodities themselves, food and other products derived from them, and proceeds from their sale, the court said.
Various farmers sold produce to an Oklahoma wholesaler, Crossroads Fresh Connections Inc., which in turn sold produce to Reasor’s. Under the contract between Crossroads and Reasor’s, Reasor’s was entitled to a 3% rebate on its total purchases at the end of each quarter.
When Crossroads was about to go out of business, it authorized Reasor’s to deduct rebate amounts from upcoming payments. Reasor’s settled accounts with Meuers Law Firm PL, which served as the trustee of Crossroads’ trust for its suppliers, by retaining the $173,000 in authorized rebates plus more recent rebate claims from the outstanding balance it owed to Crossroads. The rebates totaled more than $308,000.
The district court ruled that Reasor’s could keep the $173,000 and had to pay the remaining amount.
The Tenth Circuit reversed in part. PACA’s language defining property subject to a trust is broad, the appeals court said.
And under general trust principles, Crossroads’ agreement to Reasor’s set-off breached the trust for the benefit of the suppliers. Reasor’s must therefore disgorge the whole amount, the majority said.
But Judge Joel M. Carson III dissented, saying the PACA clearly allows Reasor’s to keep the $173,000. The parties didn’t brief the PACA provisions on rebates, but the court should apply them anyway to avoid “characterizing entirely lawful conduct as unlawful,” he said.
The judges agreed that Reasor’s should pay the rest of the total amount because it isn’t entitled to keep it under PACA.
The unpublished decision is limited to the case because the parties didn’t brief all the issues, Briscoe said.
Judge Bobby R. Baldock also served on the panel.
Meuers was represented by itself and Capron & Edwards PLLC.
Reasor’s was represented by McAfee & Taft.
The case is Meuers Law Firm, P.L. v. Reasor’s, LLC, 2019 BL 457764, 10th Cir., No. 18-5055, unpublished 11/27/19.
