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Sunrise Orchards, Inc. v. Pets Calvert Co.

March 23, 2010

SUNRISE ORCHARDS, INC., PLAINTIFF,
v.
PETS CALVERT CO. AND MICHAEL F. O'NEILL, DEFENDANTS.
BORZYNSKI BROS. DISTRIBUTING, INC., INTERVENING PLAINTIFF,
v.
PETS CALVERT CO. AND MICHAEL F. O'NEILL, DEFENDANTS.



The opinion of the court was delivered by: Robert M. Dow, Jr. United States District Judge

Judge Robert M. Dow, Jr.

MEMORANDUM OPINION AND ORDER

On November 21, 2008, Plaintiff Sunrise Orchards, Inc. filed suit against Defendants Pets Calvert Co. and Michael F. O'Neill to enforce its rights pursuant to the Perishable Agricultural Commodities Act ("PACA") and to recover for common-law breach of contract. On December 18, 2008, Plaintiff Borzynski Bros. Distributing, Inc. intervened in this action, also to enforce its PACA rights. On June 3, 2009, Defendant O'Neill moved for partial summary judgment [56] against Sunrise and Borzynski, which corporate Defendant Pets Calvert Co. joined on August 3, 2009. Defendants seek to dismiss all PACA claims in the complaints filed by Sunrise and Borzynski. Also on August 3, 2009, Borzynski moved for summary judgment [72] against Defendants. For the following reasons, the Court grants Borzynski's motion for summary judgment [72], and grants in part and denies in part Defendants' motion for partial summary judgment [56].

I. Background

A. Procedural History

On November 21, 2008, Plaintiff Sunrise Orchards, Inc. ("Sunrise") filed its complaint against Defendants Pets Calvert Co. and Michael F. O'Neill, alleging the following causes of action: Failure to Maintain Trust (Count I), Dissipation of Trust Assets (Count II), Failure to Pay Trust Funds/Unfair Conduct (Count III), Breach of Fiduciary Duty/Non-Dischargeability (Count IV), and Breach of Contract (Count V). On December 9, 2008, Borzynski Bros. Distributing, Inc. ("Borzynski") filed a motion to intervene, which the Court granted on December 12, 2008, and on December 18, 2008, Borzynski filed its complaint against Defendants Pets Calvert Co. and Michael F. O'Neill, alleging the following causes of action: Declaratory Relief Validating PACA Trust Claim (Count I), Enforcement of Payment from PACA Trust Assets (Count II), Violation of PACA -- Failure to Maintain PACA Trust Assets and Creation of Common Fund (Count III), Violation of PACA -- Failure to Pay Promptly (Count IV), Breach of Contract (Coun V), Breach of Fiduciary Duty to PACA Trust Beneficiaries (Count VI), Conversion and Unlawful Retention of PACA Trust Assets (Count VII), and Constructive Trust (Count VIII).*fn1

Defendants initially did not respond to Sunrise's complaint, and on January 22, 2009, the Court entered a default against both Defendants. Sunrise then moved for default judgment, which the Court denied, and Defendants filed answers to both complaints. At a status hearing on February 5, 2009, Defendant O'Neill, appearing pro se, acknowledged on the record that he owed a debt to Sunrise and that he had no dispute with the amount Sunrise claimed he owed. Then, on June 3, 2009, Defendant O'Neill filed a motion for partial summary judgment on all PACA claims asserted by Sunrise and Borzynski, which Defendant Pets Calvert was permitted to join on August 3, 2009. Sunrise responded to Defendants' summary judgment motion, but Borzynski did not. However, on August 3, Borzynski moved for summary judgment against Defendant Pets Calvert on Counts IV and V. Sunrise has not moved for summary judgment.

In order to clarify issues raised by the summary judgment motions, the Court held a telephonic oral argument on February 16, 2010. During the argument, the Court specifically asked the parties to clarify the relationship between this litigation and prior litigation in the Western District of Wisconsin between Sunrise and Pets Calvert, to which the parties referred in their briefs. The Court also requested that the parties clarify the nature of the PACA claims at issue. After the oral argument, the Court allowed supplemental briefing.

B. Factual History

1. Litigation between Sunrise Orchards and Defendants

Plaintiff Sunrise, a Wisconsin corporation that grows, harvests, and sells fresh apples ("produce"), sold produce to Defendant Pets Calvert Co. between November 2004 and January 2007. Pets Calvert, an Illinois corporation solely owned by Defendant Michael O'Neill, is a licensed "dealer" of perishable agricultural commodities within the meaning of the Perishable Agricultural Commodities Act ("PACA"), 7 U.S.C. 499 et seq. Pets Calvert buys and resells fruits and vegetables. Between November 2004 and January 2007, Defendants ordered, received, and accepted $116,669.00 worth of fresh apples on credit. The principal amount of $89,169.00 remains unpaid.

As of October 31, 2005, there was principal in the amount of $83,668.00 and accrued interest in the amount of $12,843.42 owed by Pets Calvert to Sunrise, with interest continuing to accrue at 1.5% month. After Defendants failed to timely pay for the produce delivered by Sunrise, Sunrise filed suit in the United States District Court for the Western District of Wisconsin, Case No. 3:05-cv-651-bbc ("Wisconsin lawsuit"). The lawsuit sought payment for fresh apples ordered, received, and accepted by Defendants from the period of November 19, 2004, through February 26, 2005. On December 21, 2005, an agreement to repay the debt was reached and memorialized by a stipulation filed in the Wisconsin lawsuit. Pursuant to the stipulation, Pets Calvert and O'Neill agreed to pay a principal amount of $83,668.00 and accrued interest of $12,843.42, plus attorneys fees and interest at 1.5% per month on the unpaid principal balance. The stipulation was approved by District Court Judge Barbara Crabb.

Defendants began making payments pursuant to the court order, but eventually stopped. On June 5, 2007, Sunrise filed a motion to reopen the Wisconsin litigation and for entry of judgment. On July 13, 2007, Judge Crabb entered judgment against Pets Calvert and O'Neill and in favor of Sunrise in the amount of $95,409.46, with interest at a rate of $41.26/day from June 2, 2007 through the date of judgment.*fn2

Between October 2006 and January 2007, Sunrise continued to sell produce to Pets Calvert. According to the evidence submitted by the parties -- which the parties confirmed during the February 16, 2010 oral argument -- the remaining balance on the produce sold outside of the Wisconsin litigation that remains unpaid amounts to $33,001.00.

2. Litigation between Borzynski Bros. and Defendants

Intervenor Plaintiff Borzynski, a Wisconsin corporation, also supplied produce to Defendants. Between May 20 and June 17, 2008, Borzynski sold seven loads of produce, worth $19,563.00, to Defendants. Borzynski and Defendants negotiated the price for each shipment, and Defendants accepted the produce delivered by Borzynski. The invoices provided for payment in ten days. Defendants failed to pay for the produce.

According to Defendants,*fn3 Borzynski and Defendants entered into an agreement in which Defendants would pay Borzynski $500/week for forty weeks to satisfy the outstanding debt. In an e-mail to Defendants on September 26, 2008, Borzynski stated, "Mike, Did you forget something? I think you are behind on our agreed upon schedule of $500/week. Let me know. (Nothing last week and nothing this week)." ...


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