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UNITED POTATO CO. v. BURGHARD & SONS

August 19, 1998

UNITED POTATO CO., INC., Plaintiff,
v.
BURGHARD & SONS, INC. d/b/a/ BURGHARD STEIN FOOD SERVICE and/or S.L. DAVIS, INC., Defendants.



The opinion of the court was delivered by: BUCKLO

MEMORANDUM OPINION AND ORDER

 The plaintiff, United Potato Co., Inc., ("United Potato"), sued the defendants, Burghard & Sons, Inc., ("BSI"), and S.L. Davis, Inc., ("Davis"), under the Perishable Agricultural Commodities Act, 1930 ("PACA"), 7 U.S.C. § 499 a et seq., for enforcement of a default judgment entered by the United States Department of Agriculture. BSI moves for judgment on the pleadings or in the alternative for summary judgment. *fn1" For the following reasons, the motion is denied.

 Background

 United Potato distributes produce and has its principal place of business in Chicago, Illinois. BSI distributes various products to grocery and convenience stores and has its principal place of business in Chicago. (Burghard Aff. P 3). Davis distributes produce to restaurants and has its principal place of business in Bensenville, Illinois. (Davis Aff. PP 7, 11). *fn2" Between July 15, 1996, and August 13, 1996, United Potato sent sixteen loads of perishable potatoes and other vegetables to "Burghard Stein." (Rule 12(M) Statement P 6; Complaint Exs. A- P). The total cost of the vegetables was $ 8,088.70. Burghard Stein failed to pay for the vegetables. (Rule 12(M) Statement P 11). The parties dispute whether BSI was doing business as Burghard Stein and whether BSI is responsible for payment of the vegetables.

 On September 17, 1996, United Potato began administrative proceedings under PACA by filing a complaint with the Secretary of Agriculture ("Secretary") alleging nonpayment by the defendants. (Comp. P 7). BSI and Davis did not defend against the complaint. On December 10, 1996, the Secretary entered a reparations order against BSI and Davis requiring them to jointly and severally pay United Potato the money owed. (Pl. Ex. A). BSI and Davis did not appeal the Department of Agriculture's decision, but have yet to abide by the order. On March 18, 1997, United Potato filed this suit to enforce the order.

 Defenses

 BSI offers a variety of defenses to argue it should not have to pay any money to United Potato. United Potato suggests that it is too late for BSI to offer a defense to the Secretary's reparations order because BSI did not appeal the order. Section 499g(c) of PACA states

 
Either party adversely affected by the entry of a reparation order by the Secretary may, within thirty days from and after the date of such order, appeal therefrom to the district court of the United States for the district in which said hearing was held....Such suit in the district court shall be a trial de novo and shall proceed in all respects like other civil suits for damages, except that the findings of fact and order or orders of the Secretary shall be prima-facie evidence of the facts therein stated.

 United Potato argues that if BSI wanted to offer new defenses, it needed to appeal the reparations order within thirty days of the date of the order. BSI did not appeal the Secretary's order and did not pay the reparations amount. Thus, United Potato brought suit under Section 499g(b), which states

 
If any commission merchant, dealer, or broker does not pay the reparation award within the time specified in the Secretary's order, the complainant...may within three years of the date of the order file in the district court of the United States for the district in which he resides...a petition setting forth briefly the causes for which he claims damages and the order of the Secretary in the premises....Such suit in the district court shall proceed in all respects like other civil suits for damages, except that the findings and orders of the Secretary shall be prima-facie evidence of the facts therein sated....

 United Potato suggests that allowing BSI to offer new defenses under Section 499g(b) extends the time to appeal to three years and renders the thirty day limit in Section 499g(c) meaningless. United Potato argues that BSI forfeited its "trial de novo" by not appealing and that it would be inherently unfair to allow BSI to fail to answer the complaint before the Secretary, fail to defend the suit in front of the Secretary, fail to use rehearing and reconsideration avenues, fail to appeal the reparation order, fail to pay the reparation order, and still be allowed to raise defenses when suit is brought to enforce the reparation order.

 While United Potato raises valid concerns, it appears the scheme Congress provided when it passed PACA allows BSI to offer new defenses under Section 499g(b). The plain language of Section 499g(b) states that suits to collect reparation awards "shall proceed in all respects like other civil suits for damages...," indicating BSI has a right to offer defenses as it would in any other civil suit.

 Other courts have considered the consequences of a company's failure to pay or appeal a reparations order. "Once a reparation order is issued against a broker, the broker must either pay the reparation award, appeal therefrom to the District Court, or suffer the suspension of his license." Chidsey v. Guerin, 443 F.2d 584, 586-587 (6th Cir. 1971). *fn3" Both the Ninth Circuit and the Sixth Circuit found that the Secretary's repatriation award is not an enforceable judgment. O'Day v. George Arakelian Farms, Inc., 536 F.2d 856, 859 n.3 (9th Cir. 1976); Chidsey, 443 F.2d at 586-587 ("A reparation order does not represent an enforceable obligation to make payment of a sum of money."). Thus, under PACA, an offender who does not pay a reparations award and does not appeal will only suffer the loss of its PACA license for two or three years. 7 U.S.C. § 499d(c); O'Day, 536 F.2d at 859 n.3; Chidsey, 443 F.2d at 587. To collect payment, the complainant must sue under section 499g(b). In O'Day, the court found that in a judicial proceeding under 499g(b) "the merits of the claim are determined de novo except that the findings and order of the Secretary constitute prima facie evidence of the facts recited." 536 F.2d at 859 n.3. Thus, the penalty for refusing to pay or appeal a reparations award is not the loss of trial rights, but rather an opportunity to contest the loss of a license.

 The Secretary has similarly interpreted Section 499g(b). A. Sam & Sons Produce Co., Inc. v. Sol Salins, Inc., 50 Agric. Dec. 1044, 1059 (1991) ("It is evident that the action in the district court [to enforce a repatriation order] is a trial de novo based on the pleadings before the Secretary."). The plain language of Section 499g(b) and its subsequent judicial interpretation permit a defendant a trial de novo and the right to raise new defenses. While this interpretation may not mesh perfectly with Section 499g(c), since Section 499g(c) was added to PACA four years after Section 499g(b) was enacted, ...


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