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Sato & Co., LLC, et al v. Consolidated For All S&M Produce

March 19, 2012

SATO & CO., LLC, ET AL., PLAINTIFF,
v.
CONSOLIDATED FOR ALL S&M PRODUCE, INC., ET AL., PURPOSES WITH DEFENDANTS.
PRIDE OF SAN JUAN, INC., ET AL., PLAINTIFFS,
v.
S&M PRODUCE, INC., ET AL., 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

Currently before the Court are two motions for summary judgment, one filed by Plaintiffs Pride of San Juan, Inc., Classic Salads, LLC, Dayoub Marketing, Inc., Fru-Veg Marketing, Inc., Lakeside Produce, Inc., Natural Forest, Inc., Ruby Robinson Co., Inc., The Kinoko Company, The Mandolini Company, Inc., and Seashore West, Inc.'s (collectively the "PSJ Plaintiffs") [252] and the other by Defendant Donald J. Mided [268]. The PSJ Plaintiffs seek a judgment against individual Defendant Donald J. Mided in the same amount as the judgment previously entered by the Court against corporate Defendant S&M Produce, Inc. Defendant Mided has moved for summary judgment against Plaintiff Pearson Food Corporation and Intervenor Plaintiff World Wide Produce, Inc. and also has filed a cross motion for summary judgment against the PSJ Plaintiffs. For the reasons set forth below, the Court denies the PSJ Plaintiffs' motion for summary judgment [252] and grants in part and denies in part Defendant's motion for summary judgment [268]. Defendant's motion as it pertains to Pearson Food Corporation is denied as moot as its intervenor complaint does not allege a claim against Donald Mided individually. The motion as it pertains to the PSJ Plaintiffs and World Wide Produce, Inc. is granted.

I. Background

This case arises out of the Perishable Agricultural Commodities Act of 1930 (PACA"), 7 U.S.C. § 499a et seq., which was enacted to protect sellers of perishable agricultural commodities from unfair conduct by buyers of such commodities, including failure to pay promptly and fully for produce ordered. PACA creates a statutory trust in favor of sellers in produce sold to buyers (e.g., grocery stores and certain agents), under which the buyer holds the produce and any proceeds and receivables from the produce in trust for the benefit of the seller.

7 U.S.C. § 499e(c)(2). In this case, the PSJ Plaintiffs and Intervenor Plaintiff World Wide Produce, Inc. sold wholesale quantities of perishable agricultural commodities ("produce") to Defendant S&M Produce, Inc. ("S&M"), and S&M failed to pay for that produce.

On November 9, 2010, the Court entered a corrected judgment in favor of the PSJ Plaintiffs and against Defendant S&M. The judgment found the claims of each of the PSJ Plaintiffs to be valid and properly perfected trust claims under the Perishable Agricultural Commodities Act, 1930, 7 U.S.C. §§ 499a-499t (2009 & Supp. 2010) (the "PACA") in the amounts stated as follows: (1) Pride of San Juan $64,545.00; (2) Classic Salads,LLC $59,414.27; (3) Dayoub Marketing,Inc. $30,732.40; (4) Fru-Veg Marketing,Inc. $12,645.84; (5) Lakeside Produce, Inc. $17,593.18; (6) Natural Forest, Inc. $14,631.03; (7) Ruby Robinson Co., Inc. $2,808.58; (8) The Kinoko Company $10,024.25; (9) The Mandolini Company, Inc. $1,340.86; and (10) Seashore West, Inc. $5,541.85. Defendant Lance Mided, one of two owners of S&M and nephew to Defendant Donald Mided, filed a Chapter 7 bankruptcy petition and was dismissed from this action. The other owner, Donald Mided, admits that he is a "nominal stockholder of S&M Produce," but denies any day-to-day oversight of the company. His "nominal" holding is 53% of the shares of S&M, while Lance owns 47% of the corporate stock.

During the relevant time period, Defendant Mided was the president of S&M and was listed as one of two "Reported Principal(s)" on S&M's PACA license. The Illinois Secretary of State report provided by Plaintiffs lists only Lance Mided-as registered agent and secretary of S&M-and makes no mention of Don.*fn1 Don was one of two individuals who had signing authority on the S&M Produce checking account at South Central Bank & Trust in Chicago, Illinois, which "contained the proceeds of produce sales" from S&M's operations as a PACA licensee. Although Lance Mided typically deposited proceeds from S&M's sales into the S&M checking account, Don occasionally would deposit the proceeds if Lance was out of town. Defendant admitted in discovery responses that he "failed to make sure the Company's assets were used to make payment to Plaintiffs for the invoices at issue in this case," but denied that he had any obligation or ability to do so.

According to Don,*fn2 in 1998, he turned over all operational control to Lance (his nephew) and devoted his time to selling his computer software and services. Although Don continued to hold stock in the company, he had no duties or responsibilities for S&M after 1998 and made no decisions for or on behalf of S&M after he relinquished control. Don had no knowledge of how much produce was purchased, from whom, or who was paid and who was not, other than incidental knowledge as a result of handling checks when filling them out or signing them at Lance's direction. However, Don was regularly at the S&M office, as he operated his software company out of the office and answered phones and made deposits when Lance was out of town.

Lance traveled a good deal. When he was out of town, he would leave batches of checks, filled out and signed by him, with dates indicating when they were to be mailed. The bookkeeper prepared an envelope with the days' receipts, which Lance took to the bank unless he was out of town, in which case Don made the deposits. When Lance was out of town, the bookkeeper relayed the daily receipts to him, and if Lance decided the deposit was not sufficient to cover that day's batch of checks, he decided which checks to send and which were to be held for another day. According to Don, he executed checks only when Lance specifically directed him to sign a check to a specific person or entity in a specific amount.

After turning over day-to-day operations in 1998, Don did not attend any meetings of the board of directors or stockholders. Don did not hire, fire, or supervise employees and did not sign any corporate minutes. He did not open S&M's mail, even when Lance was unavailable, but left the task to the bookkeeper. He also claims that he did not review S&M's bank statements or the company's books and records, but reviewed reports to shareholders. Don did not receive distributions, dividends, or tax credits and did not have a company expense account. He also did not sign contracts, leases, tax returns, or other documents on behalf of the company during the relevant period.

On February 25, 2011, the PSJ Plaintiffs filed a motion for summary judgment. The motion was later stricken with leave to re-file instanter. On the same date that the PSJ Plaintiffs' motion was re-filed, Defendant Don Mided moved for summary judgment against World Wide Produce, Inc. and Pearson Food Corporation and also cross-moved for summary judgment against the PSJ Plaintiffs. Despite asking for, and receiving, a two-month extension of time to respond to Defendant Mided's summary judgment motion, the PSJ Plaintiffs failed to respond to Mided's motion. World Wide Produce, Inc., who brought an intervenor complaint against Donald Mided, also failed to respond. Pearson Food Corporation never brought claims against Donald Mided-Pearson's only claim was against S&M produce-so Defendant's motion for summary judgment as to Pearson is denied as moot.

II. Standard of Review

Summary judgment is proper if "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). On cross-motions for summary judgment, the Court construes all facts and inferences "in favor of the party against whom the motion under consideration is made." In re United Air Lines, Inc., 453 F.3d 463, 468 (7th Cir. 2006) (quoting Kort v. Diversified Collection Servs., Inc., 394 F.3d 530, 536 (7th Cir. 2005)); see also Gross v. PPG Industries, Inc., 636 F.3d 884, 888 (7th Cir. 2011); Foley v. City of Lafayette, Ind., 359 F.3d 925, 928 (7th Cir. 2004). To avoid summary judgment, the opposing party must go beyond the pleadings and ...


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