Superior Herbs, LLC v. Herbguy, Inc.

Background

Superior Herbs, LLC, a produce dealer licensed under the Perishable Agricultural Commodities Act (PACA), sought a preliminary injunction under Federal Rule of Civil Procedure 65 against Herbguy, Inc., doing business as Rockhedge Herb Farms, and John Alva. Superior alleged that it sold the defendants wholesale produce worth $155,103, that the defendants accepted the produce, and that the amount remained unpaid.

The court found that Superior preserved its interest in PACA’s statutory trust by sending invoices containing the language required by 7 U.S.C. § 499e(c)(4). The court also found that the defendants had acknowledged severe cash-flow and financial problems and had not paid the amount due under the PACA trust. The defendants were served with the order to show cause and Superior’s supporting application.

Court’s Findings

The court found that PACA trust assets in the defendants’ possession appeared to have been dissipated and were further threatened with dissipation. Applying the preliminary-injunction requirements, the court found: (1) a likelihood that Superior would succeed on its claims; (2) a likelihood of irreparable harm to Superior without relief; (3) that the balance of equities favored Superior; and (4) that the public interest supported an injunction because PACA’s trust provisions were intended to address the public harm caused by nonpayment for produce.

Order

Judge Kenneth M. Karas granted Superior’s motion for a preliminary injunction. The order prohibited the defendants, their customers, agents, employees, officers, directors, subsidiaries, related entities, successors, assigns, and banking institutions from alienating, dissipating, paying over, or assigning Rockhedge-related assets until further court order or until the defendants delivered $155,103 to Superior’s counsel.

The order also required the defendants, within five business days, to provide financial records concerning Rockhedge and related companies, including balance sheets, profit-and-loss statements, accounts-receivable records, electronic-payment information, and records of transfers during the preceding six months. Within two business days after service, the defendants and their banks were required to deliver specified produce-sale funds and other Rockhedge-related funds in their possession, up to $155,103, to Superior’s counsel to hold pending further court order. Superior’s attorneys were authorized to collect outstanding accounts receivable and apply the collections toward the $155,103 amount, and the defendants were required to cooperate by providing documents needed for that collection.