A & J Produce Corp. v. JD Produce Maspeth LLC

Background

A & J Produce Corp., D’Arrigo Bros. Co. of New York, Inc., and Nathel & Nathel, Inc. sued JD Produce Maspeth LLC and Sheng Bo Dong. The plaintiffs said they sold and delivered wholesale produce to the defendants, but had not been paid the aggregate principal amount of $294,327.50. The opinion states that the plaintiffs and JD Produce were licensed produce dealers under the Perishable Agricultural Commodities Act (PACA), a federal law that protects certain produce-sale proceeds through a statutory trust.

The plaintiffs said they preserved their interests in the PACA trust by sending invoices containing the language required by 7 U.S.C. § 499e(c)(4). They also stated that defendants had issued bounced checks, acknowledged that they lacked sufficient cash to pay in full, and refused to make full payment. The court found that PACA trust assets appeared to have been dissipated or were immediately threatened with dissipation. Despite notice, defendants had not appeared or responded to the allegations.

Temporary Restraining Order Standard

The plaintiffs sought a temporary restraining order (TRO), which is a short-term order intended to preserve the existing situation until the court can consider a request for a preliminary injunction. The court stated that the plaintiffs had to show a likelihood of success on the merits, likely irreparable harm, that the balance of the equities favored them, and that the injunction served the public interest. Because a TRO concerns immediate harm, the plaintiffs also had to show that the threatened harm would occur immediately.

Court’s Rulings

The court found that the plaintiffs had established a likelihood of success on the merits. It also found a likelihood of irreparable harm because the plaintiffs’ funds might be dissipated. The court concluded that the balance of the equities favored the plaintiffs and that temporary relief served the public interest by protecting produce sellers and potentially benefiting other creditors or produce sellers.

The court ordered defendants, along with their customers, agents, employees, officers, directors, subsidiaries, related entities, assigns, and banking institutions, not to alienate, dissipate, dissolve, pay over, transfer, or assign PACA trust assets or specified funds up to $294,327.50, except for payment to the plaintiffs. The restriction remains in effect until a further court order or until defendants pay the plaintiffs $294,327.50 by bank check or wire transfer.

The court also ordered defendants to preserve specified financial records, including recent balance sheets and profit-and-loss statements, accounts-receivable records, records concerning electronic payments owed to defendants, and financial records showing transfers to or from JD Produce during the prior six months. The court waived the bond because defendants were holding assets belonging to the plaintiffs.

The order dissolves 14 days after entry or when defendants pay $294,327.50, whichever occurs first. The court declined to immediately grant the plaintiffs’ separate request for a mandatory preliminary injunction requiring defendants or third parties to deliver the PACA trust assets to plaintiffs’ counsel. The court explained that this would effectively be a premature execution and that the plaintiffs had not shown why that extraordinary remedy was warranted.