D'Arrigo Bros Co. of New York, Inc. v. Jefe Produce LLC

Background

D’Arrigo Bros. Co. of New York, Inc., Fierman Produce Exchange, Inc., and Coosemans New York Inc. sued Jefe Produce LLC, doing business as Garden Farm, and Jeung S. Lee. The plaintiffs alleged that they sold the defendants wholesale produce worth $291,771.50 and were not paid.

The court found that the produce had moved in interstate commerce or was sold with that movement contemplated, and that the parties were covered by the Perishable Agricultural Commodities Act (PACA). The court also found that the defendants accepted the produce without protest, did not make full payment despite repeated demands, and that the plaintiffs preserved their interests in the PACA trust by sending invoices containing the language required by federal law.

The court found that Lee told representatives of two plaintiffs that Jefe Produce lacked sufficient funds to pay its debts. The court also found that Lee said he was seeking money, including an Small Business Administration loan, and planned to sell Jefe Produce or property. Based on these facts, the court concluded that PACA trust assets in the defendants’ possession appeared to have been dissipated and remained at risk of dissipation.

Court’s analysis

Applying the standard for a preliminary injunction, the court found a likelihood that the plaintiffs would succeed on their claims, a likelihood of irreparable harm if relief were denied, a balance of hardships favoring the plaintiffs, and a public interest supporting protection of PACA trust assets. A preliminary injunction is a temporary court order issued before final resolution of the case.

Order

Judge John Cronan granted the plaintiffs’ motion for a preliminary injunction. The order barred the defendants, their customers, agents, employees, officers, directors, subsidiaries, related companies, successors, assigns, and banking institutions from transferring, spending, paying over, or otherwise dissipating Jefe Produce’s assets until further order of the court or until the defendants delivered $291,771.50 to the plaintiffs’ counsel.

The defendants were required to provide specified financial and accounts-receivable records within five business days. The defendants and their banking institutions were ordered, within two business days after service, to deliver PACA trust assets held for the defendants, up to $291,771.50, to the plaintiffs’ counsel pending further court order. The order also covered funds held by third parties, authorized the plaintiffs’ lawyers to collect Jefe Produce’s outstanding accounts receivable, and required the defendants to preserve their books and records and cooperate with those collection efforts.